The country's plastics industry may post almost zero exports this year as the global economic downturn weakens demand for plastics, says the Indonesian Plastic and Olefin Association (INAplas).
In addition to weakening global demand, Indonesia's direct rivals in China, Vietnam and Thailand are taking bigger risks by offering lower prices, hurting the prospects of domestic manufacturers' even more, Yoesoef Santo, an INAplas director, said Tuesday.
"Exports of plastics, particularly those produced by downstream manufacturers, have experienced a free-fall since October because of our uncompetitive prices, among other reasons," he said.
Normally, exports of plastics amount to between US$400 and $500 million with an average growth of 5 to 6 percent per year.
"Manufacturers in China, Vietnam and Thailand can afford to charge prices 10 percent to 15 percent lower than ours to (buyers) in the United States and Europe since US and EU governments provide numerous subsidies," said Santo.
"By contrast, our government does not provide us with subsidies that can help improve the industry's competitiveness, but instead they burden us with negative policies," he added, without elaborating.
As a result, he said, buyers had since diverted most of their order placements from Indonesian manufacturers to producers in the three countries offering subsidies.
He said the industry's rather low competitiveness was attributable in part to poor infrastructure and also to illegal fees charged at ports on exporters, which tended to push up the cost of doing business.
Downstream manufacturers are also suffering from high costs of raw material, including polyethylene and polypropylene, which they have to buy from upstream producers.
The prices of other raw materials have also risen by up to 15 percent since the fourth quarter of 2008.
Meanwhile, Felix Hamidjaja, chairman of Indonesian Flexible Plastic Packaging Association (Rotokemas Indonesia), said the plastic packaging industry might have to cut output by up to 30 percent if government imposed import duties on plastic film - the raw material for plastic packaging production.
"Manufacturers won't be able to process raw materials if production costs are too expensive," Felix said. "This would eventually result in a shortage in the supply of plastic packaging in the domestic market."
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