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Economic 360 for Indonesia: Growth Prospects and Emerging Opportunities in the Chemical Industry
Frost & Sullivan, March 2011, Pages: 85
Indonesia is a politically stable, democratic country whose policy focus hinges on maintaining economic resilience. Demand for chemicals is increasing driven by economic and industrial growth. The National Industrial Development Policy initiated by the government identifies chemical industry as one of the key industries in the country. Petrochemicals and Fertilizers are two major chemicals expected drive the growth during the forecast period. Growing demand for plastics is to create substantial demand for petrochemical products. Opportunities in the chemical industry exists in urea fertilizer, polypropylene, polyethylene, ethylene, decorative paint segments.
Research Overview
The chemicals industry plays a vital role in the economic development of any country, as it is an integral part of heavy industries. The chemicals industry broadly covers the sectors of petrochemicals, fertilisers, basic chemicals, pesticides, industrial chemicals, pharmaco chemicals and consumer chemicals. The key global participants in this space are the European Union, the United States and Japan, while Asia has been staking a claim to the global stage since the early 2000s, with India, China, Brazil, the Middle East and Southeast Asia emerging as competent players. Governments have been implementing new regulations such as Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH) and are encouraging initiatives to produce low toxic and eco-friendly chemicals. Further, with the rapid growth in population, there has been a corresponding rise in demand for chemicals (detergents, paints, synthetic polymers). Regulations, the economy, infrastructure, labour skills and cost, feedstock availability and price, energy cost and environmental pressures also play a critical role in the development of the chemicals industry.
Indonesia’s political stability and its membership in the G-20 community have helped it grow into a global economic power. Currently, it ranks third in the world in terms of gross domestic product (GDP) growth rate. It has considerable domestic demand and is emerging as an attractive market for consumer and industrial goods. Indonesia’s chemicals industry is one of the ten priority industries that can help drive the growth of the manufacturing industry and therefore, the Government has introduced numerous incentives to lure foreign participants to the domestic market. Real foreign interest rate is considered one of the major factors determining the level of foreign direct investment (FDI) flowing into the chemicals industry. The high entry barriers such as huge capital investments may restrict competition to some degree but government backing in the form of subsidies and protective regulatory framework will offset some of the challenges.
Indonesia has the largest fertiliser industry in Southeast Asia. Hence, Government policies stress that fertilizer producers should give preference in the procurement and distribution of subsidised fertilisers to the farm sector. The petrochemicals sector is another major industry in the country and is on the path to recovery after the downturn of 2008. However, the low availability of raw materials needed for petrochemical production is hindering the growth of the industry. A National Industrial Development Policy has been instituted to promote competitiveness by establishing industry clusters in the country. There are abundant growth prospects for urea fertiliser in the fertiliser industry, and polypropylene, polyethylene, ethylene, and naphtha in the petrochemicals industry. Overall, a favourable policy environment, hike in demand for fertilisers and petrochemicals and the availability of a large labour pool are likely to pave the way for a well-developed chemicals industry in Indonesia.
Frost & Sullivan’s Chemicals & Materials Country Industry Forecast service provides vital inputs for evaluating the attractiveness of a country and its chemicals and materials industry. Apart from enabling decision makers to assess the impact of non-market forces, it also helps in identifying new market opportunities. This service provides a strong base for preparing contingency plans. In addition, investors can assess industry-specific risk factors as well as conduct a more in-depth micro research.
Benefits
The following benefits are offered by this research:
Identify New Market Opportunities
The trends of the economic environment of Indonesia have been analysed along with their impact on the chemicals industry. This analysis will provide valuable information to industry participants on opportunities in specific segments of the industry.
Comprehend Future Industry Trends
The research service gives an insight into Indonesia’s chemicals industry, discusses its dependence on the prevailing economic scenario and describes the upcoming developments in the industry. This will enable participants to gauge the future direction of the market and help them to devise appropriate strategies to improve market share.
Understand the Economic Environment
A detailed analysis of the economic framework in Indonesia offers insights into the economic parameters as they exist and their future direction. This is particularly beneficial in the case of the chemicals industry, as it is has been identified as one of the core industries in the Indonesian economy. The performance of these economic indicators forms an important criterion for industry performance.
Devise Country Entry Strategies
The research service provides an insight into the incentives provided by the Government to attract foreign participants to the chemicals industry. In addition, it discusses valuable information on the strengths and weaknesses of the economy of Indonesia. This is particularly useful in devising country entry strategies for industry participants.
Evaluate Industry Segment Potential
This research service provides both country and industry trends and forecasts for major variables and is an excellent tool for companies that plan to enter new geographic markets. This will help corporate planners in developing accurate business plans and enhance credibility to planning company resources.
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