BKPM Studies the Development of Olefin Industry in Aceh as a New Investment Opportunity and Import Substitution

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BKPM Studies the Development of Olefin Industry in Aceh as a New Investment Opportunity and Import Substitution

BANDA ACEH - The petrochemical industry is a strategic industry at the upstream level that is the capital and main prerequisite for developing industries at the downstream level, such as plastics, fabrics, textiles, packaging, electronics, automotive, medicines and other important industries. The petrochemical industry is one of the priorities of the National Industrial Development Master Plan (RIPIN) for 2015-2035, including the group of industries that are directed to be developed in the Nusantara Capital (IKN), as stated in the IKN Master Plan, including upstream petrochemicals, organic chemicals, fertilizers, resins and plastics, synthetic rubber and other chemicals.

The current national industrial capacity of petrochemical products is around 7.1 million tons per year. However, imports are also still very significant, reaching 4.6 million tons in 2020. According to the Ministry of Industry of the Republic of Indonesia, petrochemical products that are still imported a lot are Ethylene, Propylene, BTX, Polyethylene (PE), and Polypropylene (PP). Ethylene and propylene are two types of olefin industrial products that are most important as raw materials for various petrochemical industries. Generally, ethylene and propylene production uses naphtha as a raw material obtained from processing petroleum and natural gas.

To achieve self-reliance in this sector, the Indonesian Government needs more private investment with a number of stimuli and incentives in order to support the petrochemical industry, including industrial gas prices of USD 6 per MMBTU, increased domestic production (P3DN), tax holidays , etc. in order to support the competitiveness of the industry and achieve the target of stopping imports of petrochemical products in 2027 by exploring and empowering Indonesia’s natural resources potential in an environmentally friendly manner, starting with a Study on the Development of Olefin Industry as an Import Substitution.

The FGD on the Study on the Development of Olefin Industry as an Import Substitution was conducted by a team from the Investment Coordinating Board (BKPM) consisting of Tria Hesti Saptari and Eka Fitri Laeli in collaboration with Researchers from Bandung Institute of Technology (ITB), Giovanni at the Office of Investment and Integrated Services Agency (DPMPTSP) Aceh.

The Head of DPMPTSP Aceh, Marthunis, ST, DEA, represented by the Head of Planning and Integrated Services Division, DPMPTSP, Rahmadhani, M.Bus welcomed the visit of the BKPM and ITB team to provide an update on investment opportunities in the olefin-based petrochemical sector in Aceh.

“Aceh has a variety of natural resource potentials, both in the agricultural sector , forestry , and mining that have high selling and export value , but need to be managed in an environmentally friendly manner in order to support Aceh’s economic growth. The Study on the Development of Olefin Industry conducted by the Team from BKPM and ITB is expected to be a new investment opportunity for Aceh , as well as supporting the performance of manufacturing industries which ultimately encourage Aceh’s economic growth,” Rahmadhani said when leading the meeting (Tuesday / 05/08/2023).

Rahmadhani also added that this study meeting also discussed the development of petrochemical industry , especially olefin in Indonesia as an import substitution and formulated follow-up proposals , strategies , policy recommendations to Ministries / Institutions related to accelerating investment realization in petrochemical industry , both in Aceh and Indonesia.

Also present at the FGD study were representatives from various related elements as focal points , such as Bappeda Aceh , Department of Industry and Trade (Disperindag) Aceh , Department of Energy and Mineral Resources (ESDM) Aceh and Department of Public Works and Spatial Planning (PUPR) Aceh.

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These investment incentives and scheme is specifically designed to encourage potential investors and thus reap the positive effects of foreign direct investments (FDI).

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