Jakarta.  An analyst recently warned against the flood of imported petrochemical products from the United Arab Emirates (UAE) following the implementation of a bilateral trade pact. 

The Indonesia-UAE Comprehensive Economic Partnership Agreement (IUAE-CEPA) has been in force since 2023. The pact is expected to trigger a flood of imported Emirati petrochemical products. 

Under the IUAE-CEPA, the import duty tariff for petrochemical goods has dropped to 2 percent, and will eventually go down to 0 percent in 2026. By that year, new petrochemical companies in the UAE will begin operating. As production capacity grows, so does the likelihood of petrochemical good imports from the UAE, prompting calls for a revision of the agreement or at least setting limits on the volume of imports allowed.

Mohammad Faisal, the executive director of think-tank Core Indonesia, acknowledged the low import duty that Indonesia imposed for Emirati petrochemical goods. 

"This takes a toll on the market share of the local petrochemical industry,” Faisal recently told Investor Daily. 

Faisal said that the agreement also hampers petrochemical industrialization, especially in the upstream sector. He said industrialization policies should be followed by policies in the trade sector and others. The not-so-stringent surveillance at ports could also prompt a surge in imported petrochemicals. 

The excessive import could mean lower use of domestically produced petrochemicals. 

Faisal also called for a linkage between the downstream and upstream sectors if the government wishes to promote the domestic petrochemical and plastic industries. 

In addition to the anti-dumping policy, the petrochemical industry needs a more sustainable, long-term, and permanent approach. This is to maintain the competitiveness and sustainability of the petrochemical industry.

The Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas) previously gave some recommendations to the government on how to protect the industry from import. The association nudged the government into implementing anti-dumping import duties and safeguard import duties for plastic raw materials, such as PP and linear low density polyethylene. 

In 2017, the government imposed anti-dumping duties on imported biaxially oriented polypropylene (BOPP) in the form of films, sheet plates, foils, and others from Thailand and Vietnam. The tariff imposed reached 28.4 percent for BOPP produced by Thai companies other than A.J Plast Public Company Limited and 3.9 percent for those produced in Vietnam. 

Industry Ministry’s spokesperson Febri Hendri Antoni Arif said that safeguarding the plastic industry from imported goods was also necessary. 

"But the policy is not on anti-dumping, but a limited ban or import restriction," he said.

According to Febri, the plastic industry is under threat due to the lack of ban and restrictions. Indonesia also does not have that many trade barriers compared to other countries like the US and China. 

“If we export manufactured goods to China, there are more than 3,000 types of restrictions, as well as in the US. We only have around 100 restrictions," said Febri.

The government is currently designing some regulations aimed at limiting imported downstream goods so local products can remain competitive. However, the policy is limited to textiles and textile products, ready-made garments, ceramics, electronics, cosmetics, finished textile goods, and footwear.

“Hopefully, these sectors can be a game changer to improve industrial performance as seen in the industry confidence index and a purchasing managers’ index,” he said.