Import Substitution

According to our statistics, 95% of Indonesia imports are dominated by capital goods and raw materials. The strong import demand for these goods has coincided with increasing investment inflow to Indonesia since 2010 to 2014. Indonesia major import products are Iron and steel products, automotive components, electronic products, pharmaceutical products, chemical and petrochemical products, and machineries equipment.


In iron and steel sector. If we look at Indonesia Iron and steel Industry structure, we already has 4 types of upstream industry on iron and steel industries, but there is no industry that process iron ore and sand to concentrate as raw material for majority downstream industry. There is a “missing middle” on this sector. Until now, the domestic steel market is still in deficit. National steel demand has already reached 11 million tons per year, while the national steel supply are only 6.5 million tons. The rest, amounting to 4.5 million tons, supported by imports.


In petrochemical sector, Indonesia is still experiencing a huge shortage of supply of petrochemical products, such as ethylene, polyethylene, monoethylene glycol, propylene, polypropylene, and butadiene. To promote this sector, Government has established petrochemical clusters in 3 areas: Banten Province for Olefin Center, East Java for Aromatic Center, and East Kalimantan for Methane Center.


Raw material industry for pharmaceutical industry is also the sector that we encourage for investment in Indonesia. The main cause is due around 95% of raw materials for phamaceutical are still imported mainly from China and India. In other side, with a sizeable population of 240 millions and a rapid expansion of the middle class, Indonesia is poised to become a key market of growth for the healthcare industry by prowing 13.9 percent per year. Some government programs such as Indonesia’s Healthcare Card and Healthcare Insurance will contribute on increasing of Indonesia healthcare expenditure.