INDONESIA: Local businesses want crumb rubber off-limits for foreigners

Rubber industry players have called on the government to cancel its plan to wholly open the crumb rubber industry for foreign investors, saying such a move threatened the local industry.

Indonesian Rubber Council (Dekarindo) head Azis Pane said that he had filed a proposal with related ministries to exclude the crumb rubber industry from a list of sectors to be fully opened for foreign investment. “[The government] got it wrong, and both the Industry Ministry and Trade Ministry have asked the Office of the Coordinating Economic Minister to take it off the revised list,” he said.

Industry Minister Saleh Husin said previously that opening the crumb rubber industry for foreign investors was a right decision, as the domestic crumb rubber industry had not been fully developed. He previously said the local crumb rubber industry could absorb only 700,000 tons of raw rubber from local farmers, a statement that Dekarindo deemed unfounded.

The opening of the crumb rubber industry for foreign investors could lead to an oligopoly, in which foreign investors might acquire local crumb rubber businesses, as national raw rubber output was fully absorbed by local industry, Azis said.

According to Dekarindo’s data, Indonesia’s crumb rubber plants can absorb up to 5.2 million tons of rubber when running at full capacity. Meanwhile, Indonesia can produce only around 2.8 million tons of rubber a year. Azis said it would be better for the government to open foreign investment in the downstream industry. Crumb rubber is an intermediary product to produce end products like tires, trails and playground surfaces.

Trade Ministry secretary general Srie Agustina said her ministry had been informed by Dekarindo on the matter and was now reviewing the issue in search of a solution.

In Feb. 2016, the government announced its 10th stimulus package, which is the revision of the negative investment list (DNI). Under the revision, as many as 35 sectors (including crumb rubber) are set to be fully open for foreign investors on the grounds that they are still under-developed.

President Joko “Jokowi” Widodo is set to issue a presidential regulation on the revised DNI to replace the DNI regulation issued in 2014 during the administration of Susilo Bambang Yudhoyono. On the previous DNI, rubber manufacturing was reserved for local small-to-medium-sized businesses. The revised DNI has been previously reported as finalized, following several rounds of discussion with concerned stakeholders. Investment Coordinating Board (BKPM) chief Franky Sibarani expressed confidence that the DNI revision could boost investment in the country by around 50 percent this year.

Investment commitments to Indonesia hit Rp 1.8 quadrillion (USD137 billion) last year, a 45 % surge from Rp 1.2 quadrillion in 2014.

Source: Daily “The Jakarta Post”, Jakarta; 21 Mar 2016
(Syed Rashid Ali, Karachi, Pakistan)