Petrochemicals and plastics : policy analysis

These are, in turn, used to manufacture of a wide variety of industrial and consumer products such as plastics, synthetic rubbers, synthetic fibers, detergents, personal care products, and adhesives. With its abundant oil and gas resources, its 210 million-plus domestic consumers, and its strategic position astride the major sea-lanes between the Pacific and Indian oceans, Indonesia should be ideally placed to host a thriving petrochemical industry. The government needs to formulate a clear and consistent policy on the petrochemical sector, and to follow through by providing a supportive operating environment. On an ongoing basis, it should consult closely with the private sector, given that this is largely where the further development of the petrochemical industry will be funded. The lack of clear government policy and poor integration with the oil and gas industry have caused the petrochemical industry to develop rather haphazardly into one with numerous gaps in the production chain, whereby output of many important upstream (basic) and intermediate (semi-finished) products is insufficient to support their respective user industries. The government should involve the private sector as much as possible in building an integrated and efficient petrochemical industry. In so doing, it must provide incentives to attract investment, but must also try to ensure stability, law and order, and more predictable operating conditions in the country in general. (Author abstract)