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Following the government decision to raise industrial gas prices, APINDO arranged a press conference to provide a platform for the private sector to voice their opinions on this highly important issue. At the conference, a total of 31 industrial associations voiced their opposition to the government’s decision to raise gas prices by 55%. Such associations included the Textile Association of Indonesia, the Indonesian Footwear Association, Association of Indonesia Synthetic Fibre Manufacturers, the Garment and Accessories Association of Indonesia and the Indonesia Hotels and Restaurants Association among many others.
At the press conference, Chairman of APINDO Sofjan Wanandi highlighted the key issues of the price rise; "for those industries that use gas, the cost makes up approximately 15-20% of total production costs. Therefore, an increase of 55% would cause the price of production to balloon and reduce a company’s overall performance. This will directly impact Indonesia’s national industries in relation to international markets by reducing competitiveness. Companies will be forced to raise their prices and could cause consumers to switch to imported products which are cheaper. The option of reducing production capacity would also mean a reduction in employee numbers and would therefore contribute to unemployment while making the shift to alternative energy sources is a difficult process to undertake.”
A further issue at hand is that the supply of natural gas from state body PT Perusahaan Gas Negara (PGN) to industrial consumers has been inadequate. Food and beverage companies are supplied with only 63% of the gas they need for their optimal production capacity therefore reducing output. Other industries cited similar issues such as the Indonesian Textile Association which pointed out the impact of gas price increases on reducing the competitiveness of textiles produced in Indonesia. Therefore, a price rise would have a significantly negative effect on the country due to the high volume of people the textile sector employs. The Secretary General of the Indonesian Footwear Association revealed at the conference that the increase seen in exports of Indonesian footwear products from 1.6 billion in 2007 to 3.3 billion by 2011 would cease to rise with an increase in gas prices coupled with the recent increase in wages by 30%.
The press conference illustrated the common threat to all industries by the proposed gas price increase. The Cross Industry Forum therefore issued a position statement on the subject to represent the private sector as a whole. This stated a rejection of the gas price increases proposed by PT PGN; requesting a gradual increase over two years. In addition, the statement also asked that the government offers solutions to the problems being faced in gas supply by stopping gas exports and making national interests a priority in order to improve the competitiveness of domestic industries.
In response to the opposition to the price increase, following a cabinet meeting at the Presidential Palace, the Minister of Energy and Mineral Resources Jero Wacik announced that the price increase will be limited to 50% and will be conducted in two stages. The Minister of Industry M.S Hidyat made reference to government’s acknowledgement of the private sector’s concerns regarding Indonesia’s competitiveness but also pointed out the need to align domestic prices with that of the international market. In order to accommodate the increased production that typifies the holiday period before Idul Fitri, the price rise will only be implemented after this date. From 1st September 2012, the price of gas will rise by 35% and then by a further 15% on 1st April 2013.
APINDO - 2012
Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)
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