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Indonesia's downstream industries, from plastics and textiles to pharmaceuticals and building materials, are growing faster than the country's upstream chemical capacity. According to the Indonesian Olefin, Aromatic and Plastic Industry Association (Inaplas), the national petrochemical deficit rose from 7.32 million tonnes (US$7.1 billion) in 2020 to 10.5 million tonnes (about US$11 billion) in 2024. For investors, that deficit is a demand map: every product imported today is a market waiting for local production.
Where the supply gaps are
Figures presented by the Ministry of Industry and Inaplas in November 2025 show the largest shortfalls in:
|
Product |
Supply gap |
Used for |
|---|---|---|
|
Olefins (ethylene and propylene) |
Up to 800,000 t |
Polyethylene, polypropylene, organic chemicals |
|
Paraxylene |
500,000 t, with only 44% utilization |
PTA, polyester fiber and resin |
|
MEG (monoethylene glycol) |
400,000 t |
Polyester, PET bottles, antifreeze |
|
Plastic raw materials |
1,922 thousand t per year |
Packaging, auto parts, household goods |
The gap also shows in finished goods. Imports of finished plastic products reached 900,000 to 1 million tonnes a year over the past two years, according to Bisnis.com.
New capacity is arriving, but not enough
Lotte Chemical Indonesia's new naphtha cracker complex in Cilegon adds 1 million tonnes of ethylene, 520,000 tonnes of propylene, 350,000 tonnes of polypropylene, 140,000 tonnes of butadiene and 400,000 tonnes of BTX a year. Its feedstock, including about 2 million tonnes of naphtha, is still fully imported.
Inaplas's Petrochemical Industry Development Roadmap 2025–2045 sets four phases: capacity recovery in 2025, domestic supply sufficiency by 2030, high-value products by 2035 and full refinery-cracker integration by 2045. The government also plans to designate petrochemicals as a National Strategic Project (PSN) and is targeting a US$9.5 billion cut in petrochemical imports.
As basic olefins come online, the opportunity moves to the next layer: intermediates, specialty chemicals, fertilizers, resins and additives. The chemical, pharmaceutical and textile sector grew 5.92% in Q3 2025, faster than the national economy.
Incentives available in Special Economic Zones
Chemical plants are capital-intensive, so tax incentives are a core part of any feasibility study. In Indonesia's SEZs, businesses in the zone's main activities can receive a 100% corporate income tax holiday:
- 10 years for investments of IDR 100 billion to under IDR 500 billion
- 15 years for IDR 500 billion to under IDR 1 trillion
- 20 years for IDR 1 trillion and above
After the holiday ends, a 50% reduction applies for two more tax years. Non-core investments under IDR 100 billion can use a tax allowance scheme, and regional governments can cut local taxes and levies by 50% to 100%.
Why JIIPE for chemical investment
The Gresik SEZ at JIIPE combines those incentives with physical advantages that are hard to find elsewhere:
- A deep-sea port inside the estate, so imported feedstock and export cargo avoid long inland trucking
- Feedstock from neighboring tenants, including about 1.5 million tonnes a year of sulfuric acid from the Freeport smelter
- East Java pipeline gas, which the industrial gas users' forum reports is cheaper than the regasified LNG used in West Java
- An anchor project already underway: Golden Elephant's US$600 million melamine, ammonia and urea complex