Taiwanese state-owned oil refiner CPC Corp. is committed to investing US$22 billion for the development of the Balongan petrochemical refinery - Photo: Special.

JAKARTA (TheInsiderStories) – Indonesia is targeting to bring in investment of US$31.5 billion in the chemical industry until 2023 in line with the government’s plan to reduce the sector’s imports by 40 percent, officials said on Thursday (01/30). The government expects to reap the benefits of several new chemical plants that are currently underway.

Currently, Southeast Asia’s largest economy has several large projects in the chemical industry such as expansion by PT Chandra Asri Petrochemical Tbk (IDX: TPIA) in Cilegon. The producer spent $380 million to build the factory with total capacity production 400,000 tons per annum. Then, PT Titan Lotte Petrochemical Tbk (IDX: FPNI) with a $3.5 billion new petrochemical plant in Banten, according to Muhammad Khayam naphtha cracking plant, industry ministry’ director-general of the chemical industry, as quoted by Bisnis.

Furthermore, the coal gasification project of PT Bukit Asam Tbk (IDX: PTBA) in Riau Island and naphtha cracking plant in Balongan by state-owned oil and gas holding PT Pertamina and its Taiwanese partner CPC Corp. Khayam expects several projects gives a major impact on the country trade balance until 2023.

Indonesia saw a slight drop in foreign direct investment in 2019 but breakthroughs in some high-profile investment during the year’s last quarter fueled optimism for a recovery in 2020. The Investment Coordinating Board announced on Wednesday that the country booked a total of $28 billion in foreign direct investment (FDI) last year, down 3.7 percent from $29 billion in 2018. Foreign companies brought in $7 billion in direct investment in the fourth quarter, down 5.4 percent from the same period a year earlier.

President Joko Widodo made investment his top priority when he was sworn into office for a second term in October. The president has ordered his ministers to clear up bureaucratic bottlenecks that have caused hundreds of billions of dollars in FDI commitment to get stuck in local institutions and regional governments.

Khayam believes the investment will be driven by improved regulations and bureaucratic reforms prepared by the government such as online submission system and omnibus law which are expected to be acceptable to investors because of the ease of licensing and the offer of incentives provided.

“We have upgraded the incentive packages to become tax holidays and tax allowances. That is, our existing investors or companies are expected to expand new factories,” Khayam said, adding that chemical imports in 2023 could potentially decrease around 30 percent – 40 percent.

As is known, the current value of chemical goods imports is more than $20 billion. Industry Minister Agus Gumiwang Kartasasmita has pledged to reduce imports of consumer goods and to promote import-substitution industrialization to reduce the country’s current account deficit, which has continued to increase in recent months because of the country’s sluggish exports.

The country trade deficit narrowed to $3.2 billion last year as consumers and producers took a punt on a brake on imports, Statistics Indonesia data showed. The country’s total exports fell 6.9 percent to $168 billion, while imports shrank 9.5 percent to $171 billion.

Kartasasmita said he is planning to develop more economic and industrial areas and also looking to strengthen inter-ministerial coordination in a bid to remove bureaucratic hurdles in executing the government’s programs.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com