Polyethylene factory in Cilegon, Banten saves US$571 million

Polyethylene factory in Cilegon, Banten saves US$571 million
Illustration. (Photo by Patrick Hendry on Unsplash)

Jakarta (Indonesia Window) – In the road map on Making Indonesia 4.0, the chemical industry is one of the manufacturing sectors which get priority in the development programs because its products are used by many other sectors in the country.

“The chemical industry is categorized as the mother of industry, because it is able to produce products that can be utilized as raw materials by many other manufacturing sectors, such as those on the industries of packaging, textiles, household appliances, as well as automotive and electronics components,” Industry Minister Agus Gumiwang Kartasasmita said at the Inauguration of PT. Chandra Asri Petrochemical’s new polyethylene factory in Cilegon, Banten, Friday (Dec 6).

The new factory, valued at US$380 million (US$1=Rp14,026.25), is expected to reduce imports which have burdened Indonesia’s trade balance.

The new polyethylene plant will start commercial operations in December 2019 with a capacity of 400 thousand tons per year, and will reach a total capacity of 736 thousand tons per year.

Polyethylene products, among others, are used for raw materials supporting infrastructure, water pipes, electrical cables, food packaging, and household appliances.

“The new polyethylene factory is expected to substitute 400 thousand tons of imported polyethylene products per year. This will also potentially save foreign exchange up to Rp8 trillion (US$571.2 million) and has the opportunity to create new jobs in the downstream plastic industry of 17,500-25,000 people,” Agus Gumiwang noted.

The Minister of Industry said, domestic polyethylene needs currently reached 1.6 million tons per year. Meanwhile, polyethylene factories in the country have a total capacity of 780 thousand tons per year.

Chemical industry

During this time, the chemical industry is considered capable of making a significant contribution to the national economy, with the value of exports of chemicals and goods from chemicals reaching US$8.79 billion in 2018.
Meanwhile, the total investment in the industrial sector of chemicals and goods from chemicals amounted to Rp26.2 trillion.

In order to improve the competitiveness of the national industry, the Minister of Industry said that the government has made strategic efforts, including controlling imports and securing the domestic market, as well as optimizing the utilization of the domestic market and export market.

The government also implements the Domestic Production Improvement Program (P3DN), as well as providing fiscal incentives such as tax allowance and tax holidays.

“Regarding fiscal incentives, the government has issued Regulation of the Minister of Finance No. 128 of 2019 which provides an opportunity for the industry to get a tax reduction of up to 200 percent,” he said.

These incentives are given to industries that carry out work practices in the context of developing certain competency-based human resources. One tangible manifestation of this effort is industrial vocational activities.

For example, efforts to prepare competent human resources in the field of petrochemicals include establishing the Petrochemical Industry Polytechnic in Banten, which covers two hectares of land and has been granted by PT Chandra Asri Petrochemical.

New factory

Meanwhile, the President Director of PT. Chandra Asri Petrochemical Tbk, Erwin Ciputra said the new factory could absorb up to 25,000 local workers, including skilled workers.

The new plant will produce High Density Polyethylene (HDPE), Linear Low Density Polyethylene (LLDPE), and Metallocene LLDPE (mLLDPE).

According to Erwin, the completion of the construction work had reached 97 percent in April 2019 so the factory could start commercial production in the fourth quarter of 2019.

“The need for polyethylene raw materials in Indonesia is increasing rapidly in line with the pace of national economic growth,” Erwin said.

He added, the main focus of the new plant was to meet domestic demands.
“This new factory has also received a tax holiday policy from the government, a policy that has created a good investment climate,” he added.

Chandra Asri will develop a second petrochemical complex with an investment of around Rp60-80 trillion which is expected to be completed in 2024.

Reporting by Indonesia Window

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