Despite the decline in both volume and value, Budi Susanto, Vice Chairman of the Aromatic, Olefin and Plastic Industry Association (Inaplas), said he believes Indonesia's plastics export realization in 2015 was actually pretty decent considering the difficult global economic context. He added that this decline in export will not affect the domestic plastics industry too much as Indonesia's plastics industry is supported by growing domestic consumption of various products (such as food and beverages) that require plastic packaging.

Susanto said the heavily depreciated rupiah exchange rate (against the US dollar) should make Indonesia's plastics exports more competitive. However, as this industry is still dependent on imports of raw materials, the country could not take advantage of a weak rupiah. Moreover, global demand was weak hence causing weakening exports. The dependence on imports of raw material is the key reason why Indonesia's plastics industry remains relatively uncompetitive and vulnerable to rupiah depreciation.

Although Indonesia's plastics industry can rely on solid domestic consumption of plastic products, growth of domestic plastic demand in 2015 fell to 3 percent (y/y), whereas the usual growth pace is around 7 or 8 percent (y/y). Weaker domestic demand also caused a 12.3 percent (y/y) decline in imports of plastic products into Indonesia to USD $6.83 billion in 2015 from USD $7.79 billion in the preceding year.

Projection for Indonesia's Plastic Industry in 2016

Susanto expects a better year for the domestic plastics industry in 2016 as economic conditions are estimated to improve (Indonesia's GDP growth is expected to accelerate to 5.3 percent y/y in 2016 from an estimated 4.7 percent y/y in 2015). Susanto targets a 6 percentage point growth in domestic plastic demand to 4.65 million tons this year accompanied by a rise in prices up to 10 percent. Domestic demand for plastic in 2016 will primarily be supported by the country's food and beverage industry as well as the agribusiness sector, according to Susanto.

Meanwhile, Inaplas Secretary-General Fajar Budiono said he expects a 5 percentage point growth in revenue in Indonesia's plastics industry to USD $6.7 billion in 2016 on the back of the nation's growing food and beverage industry as well as on government-led infrastructure development.