Could you share an overview of Ineos’ Aromatics business in Indonesia?  

Ineos came into the possession of the half-a-million-t/y PTA plant in Merak, Indonesia, back in 2021, as part of its global acquisition of BP’s aromatics. The plant has been active since 1996 under Amoco Mitsui PTA, and it was designed to serve the domestic market at a time when the Indonesian textile industry was booming. Since taking over, Ineos has not only invested in capacity additions, taking the plant from a capacity of 500,000 t/y to 575,000 t/y, but also in energy efficiency optimization, reducing energy consumption by about 15%/t following the updates in 2022. Today, the plant operates at capacity continuing to cater to the Indonesian market, where demand continues to rise in line with a population south of 280 million people.

What are the main trends in the downstream textile and plastics domestic markets?

In the polyester downstream value chain, 70% is represented by polyester fiber going into the textile industry, and the rest is PET, used primarily in plastic bottles. The textile industry is therefore the most consequential to demand trends. The irony is that, while local capacity is sufficient to cover domestic demand, we cannot avoid seeing imported products competing with local producers. This pattern is not only happening at the suppliers’ level – the textile industry too has suffered from more aggressive imports, especially as China’s economy softened. The double shock has rendered the textile sector in a crisis, with exports declining while imports continue to eat into the local market share. However, what matters more is that the sector provides direct employment to 1.1 million Indonesians. With so many people depending on the sector, the government has taken a more active role in protecting the local textile industry with a new policy to create some barriers to unjustified imports. 

Could you comment on the industry’s reception of the newly introduced restrictions on textile product imports?

The measure essentially requires importers for a clear reason to import a certain quantity in the country, according to a “commodity balance” mechanism – or the amount that can be made locally. How effective this will be, time will tell. But I believe it is a good step to try to revive the textile industry to its golden era. Industry leaders and the representing associations are optimistic.

In which ways do logistics play as both a challenge and an opportunity for Indonesia?

Indonesia remains massively dependent on imported products, including in the petrochemical value chain where the domestic capacity for almost every molecule is not yet sufficient. The geographical location of Indonesia creates a certain distance for the exporting country to reach here and supports the argument for more local production. It makes more sense to produce here rather than importing from further away at higher costs. We don’t just have the market here, but also natural resources, as well as logistics capability that is being improved by the government. The government has done a great job in recent years to develop the infrastructure for a more seamless movement of goods, even though there is always more work left to be done.

What is a challenge that Indonesia should address to become more attractive?

While the central government has been doing very well, the issue still lies in the lack of systematization at certain local government levels, with some regions needing to catch up to others (Java being a good reference). Investors need to know that wherever they choose to place their money, whether in Jakarta, Sumatra, or another area, they can count on the same level of good governance. We know that the government is continuing to address these challenges through targeted reforms and capacity-building measures to ensure a consistent standard of bureaucracy and good governance across all levels of government.

Do you have a final message?

Ineos is committed to the Indonesian market, and our assets remain consecrated to the needs of the domestic market. In the future, we may look beyond PTA into more downstream molecules. 

I believe people who are not familiar yet with Indonesia today have an outdated image of the country from 20-30 years ago but they must let go of that image and open their eyes to the manifold ways Indonesia is changing.