Petrochemical industry needs $8b investment

JAKARTA (JP): A US$8 billion investment is needed in Indonesia's petrochemical sector during the current five-year development program to reach the projected annual growth rate of 15.73 percent, a government official said here yesterday.

Director General of Metal, Machinery and Chemical Industries, Effendi Sudarsono said investment needed to be directed towards the development of priority products for local and foreign markets.

Effendi's speech was presented at a conference on the Asia- Pacific Petrochemical Industry by director of chemical industry, Ahmad Gazali.

Priority products are those that have the potential to grow in local markets, reduce imports and raise exports, accelerate the transfer of technology, and strengthen the structure of industry.

They include, among other things, acetic acid, benzene, ethylene, methanol, paraxylene, polyethylene, polyol, polypropylene, polystyrene, propylene, styrene monomer, polycarbonate, and toluene.

In his speech, Effendi said that the demand for the priority products grew faster than the supply.

He cited as an example the demand for methanol which grew an average 15 percent a year over the past three years. Last year, the demand reached 503,426 tons while the supply was stable at 330,000 tons.

Effendi said that the ethylene supply was stable at 522,000 tons last year, while demand jumped from 413,670 tons in 1995 to 565,577 tons last year.

Annual paraxylene supply was maintained at 270,000 tons during the last three years, while demand grew 167 percent from only 186,445 tons in 1994 to 498,894 tons last year.

"In order to meet the increasing local demand, we have to import petrochemical products," he said.

The imports had been increasing during the last few years. In 1990 petrochemical imports were $1.78 billion. It was $3.5 billion in 1995, he said.

But he said Indonesia's petrochemical exports during the period increased from $129.4 million to only $604.2 million. The country exported, among other things, alkyl benzene, ethylene dichloride, polyester chips and nylon tire cord.

Effendi said that a number of obstacles stood in the way of developing the petrochemical industry.

They include high dependency on raw material imports; poor quality of human resources in the sector; poor condition of partnership and inter-linkage among the upstream, intermediate and downstream; poor condition of research and development; and limitation of local investment and higher local interest rate.

"Indonesia's petrochemical development could also be hindered by a stronger competition among ASEAN countries to attract petrochemical investment from developed countries," he said. (bnt)