After being stagnant for several years, the Indonesian chemical industry is starting to grow again. With a huge domestic market, low plastic consumption per capita, and high industry growth, the chemical industry offers promise but also faces several problems such as low utilization of production capacity, high prices for basic materials and high import prices. In addition, a lack of integration between the petroleum and petrochemical industries has become an obstacle to the industry's development.
Indonesia imported $8.6 billion worth of industrial chemicals in 2006. In 2007, the total import value of chemical products reached $9.9 billion. Imports of U.S products represented only five percent of the total import value. The actual import value of U.S. products could be higher than reported, because many U.S. products are imported to Indonesia through Singapore. The investment in chemical and pharmaceutical industries reached $1.3 billion and $589.5 million in 2005 and 2006 respectively. In 2007, this sector attracted $1.7 billion in foreign and domestic direct investment. In 2009, it is expected that there will be $2 billion investment in the chemical industry.
In 2007, U.S imports amounted to $454.9 million, broken down as follows: $65.6 million inorganic chemicals (HS 28); $98.3 million organic chemicals (HS 29); $20.5 million chemical pharmaceuticals (HS 30); $10.1 million other chemical fertilizers (HS 31); $10 million chemical dyes (HS 32); $27.9 million essential oils & perfumes (HS 33); $79.9 million other chemicals (HA 38); and $142.4 million plastic products and raw materials (HS 39).
U.S. suppliers face strong competition from other countries such as Singapore, Japan, China, South Korea, Thailand, Germany and the United Kingdom. International companies such as Dow Chemicals, Union Carbide, BASF, DuPont, LG, Hoechst, and Ciba Chemicals are among the significant industrial chemical players with manufacturing operations in Indonesia. In general U.S. products are well accepted, but they are perceived as high-priced products.
U.S. companies are strong suppliers of carbonates, epoxides, medicaments, ink, odoriferous mixture, make up, reaction initiators, insecticides, polyamides, polymers of ethylene, and polyethers
Currently, more than 50% of the raw material demand from various industries such as plastic, textile, pharmaceutical, electronics, automotive components, ceramics and glass is supplied by imported products. Besides facing the shortage of raw materials, the chemical industry in Indonesia faces a lack of infrastructure facilities, inefficient and small-scale operations, and limited financial resources. U.S. suppliers in this industry will have opportunities to supply raw material for those various industries and introduce new technology to develop petrochemical plants.