CAP : Chandra Asri Petrochemical

Unemployment in Indonesia higher compared to its peers

As a slowdown in economic growth the unemployment in Indonesia rose. The unemployment population in Indonesia is commonly higher than its peers in ASEAN’s country. Indonesian is at 5.9 % of total population in 2014, Malaysia, Singapore and Thailand is 3.1 %, 1.9% and 0.8 %, respectively. The solution of this situation is opening new job vacancy through entrepreneurship.

Based on data from related ministry the entrepreneur rate in Indonesia is only 1.56 % of total population, and it is lower compared to Singapore and Malaysia which have rate of 7 % and 5 %. Based on experts the ideal number of unemployment rate is 2 % of total population, this country is still behind in developing entrepreneurship to create job.

In Indonesia bureaucracy is a bottle neck for entrepreneur in proposing loan, the debtor has to have experience at least 5 years. It is regulated by the central bank of Indonesia. On other hand, there is same condition for investing procedure, especially for foreign investment. For foreigner, there are hundreds of approvals which have to be available for establishing new company in Indonesia. 

Company Analysis

The only naphta cracker producer in domestic

The company is the only naphta cracker producer in Indonesia, this factor may be as the key success factor for this company. The company evolved to expand its production capacity to capture the demand both domestic and foreign. In domestic the company has no competitor and it plans to expand its cracker production in the future.

The company hired key person who has experience in similar industry, and they commonly recruited from international company such as Shell and etc. The company also has partnership in maintenance technology with SCG chemical, a chemical company from Thailand, which is also its share holder. SCG is also supplying naphta to the company. Then the naphta is manufactured to produce naptha cracker, polypropylene, olefin, polyethylene, butadiene and etc which are used as raw material of several industries such food and beverage, automotive and etc.

The company is owned by Barito Pacific as the biggest share holder which has more than 50 %. The second is SCG chemical company which has more than 30 % of total share.

In 2014 the company’s sales declined 1 % compared to sales in 2013. The fluctuation of crude oil price and the naphta cracker product such as polypropylene might inflict the fluctuation in its sales price. There is also the slowdown in economic growth which affected several industries related to its product such as automotive sector. According to annual report there was a slightly decline in its sale volume from 1672 KT in 2013 in to 1649 KT in 2014.

For advancing the supply chain, the company developed several warehouses in places at java in order to accelerate its delivery time. The company is also having supply chain infrastructure such as pipe line for transferring the ethylene directly to the customer in Cilegon and Merak district. In order to support the production process, it built own 53 MW power plant for naptha cracker production.

In 2014 the company added its ownership in Synthetic Rubber Indonesia, its subsidiary which produces synthetic rubber. The company has spent more than USD 8 million to purchase additional share. SRI is its joint venture with Michelin, foreign company from France.

In addition, the company has stopped its crude C4’s export in 2014 in order to create value on its product. The crude C4 recently uses as raw material for its new butadiene extraction plant. 

On other hand, the fluctuation of exchanger currency rupiah to USD could be a serious threat for the company. If the oil price increased the company would face the increase of raw material cost, interest expense and operating expense. It is necessary to build additional tank storage of crude oil deposit to anticipate the increase of oil price. The company’s revenue in 2014 was dominated from domestic sector which was more than 77 % of total revenue.