Environmental Technologies Industries
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Environmental Technologies Industries
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| Water Resources Equipment in Indonesia |
I. SUMMARY
NOTE: Market projections in this report reflect mainly market conditions existing prior to the current Southeast Asian financial crisis. At least a two- to three-year period of economic recession or slow growth is expected before the economic conditions on which the projections herein are based are likely to resume. The impact of the current economic crisis on the environmental sector will be reflected in subsequent reports as the situation stabilizes and becomes more predictable. This report should be useful for an overview of the industry, a description of recent trends and trade volumes, and contacts.
The Indonesian market for wastewater pollution equipment reached about $246.3 million in 1996. It has grown at an annual rate of 20% to 25% in the past three years and is expected to continue to expand no less than 15% to 20% over the next five years.
A primary factor fueling these market dynamics is the strong growth rates of Indonesian industry, which have expanded about 11% to 12% annually. An additional important factor is the increasingly strengthened supervision and legal enforcement of government measures that do not allow polluters to continue production unless they commit themselves to instituting improvements over a given time span. The demand growth has been further stimulated by a number of environmental offshore soft-loan facilities provided by the Indonesian government. Finally, consumer awareness and demand for better quality and greener products along with increasing pressure for industries to meet ISO14000 and "eco-labeling" protocols also have spurred companies to incorporate pollution control equipment in their factories and plants.
The main users of wastewater pollution control equipment in Indonesia are the textile, pulp and paper, plywood, and rubber industries. Expected growth in the "best prospects" section of these industries includes aerator equipment, filter and filter presses, screens, sludge treatment equipment, pumps, oil separators, liquid-solid separators, and biological and chemical treatment products.
The demand for water filtration equipment has tended to rise, especially in the industrial sector, as a result of demographic and economic growth. The increase in the demand for industrial process water filtration equipment is caused by the rapid growth of many industries, most of which employ water filtration equipment of some kind. Total imports of water filtration equipment totaled $53.8 million in 1996 and have grown at an annual average rate of 46.3% in the past three years.
Major users of water filtration equipment are the State Water Municipal Corporation (PAM/PDAM), mineral water companies, hotels, hospitals, office buildings, and the many different industries that require water processing plants. The market for household filtration equipment also is beginning to show a growing potential, particularly in urban areas, because of degradation of groundwater quality and improvements in consumers' purchasing power. The demand is mainly concentrated in the Greater Jakarta Area (Jabotabek), where groundwater is often contaminated by E. coli bacteria and heavy metals such as Hg, Cr, and Pb from industrial waste.
In most cases, local suppliers of water resources equipment offer turnkey supplies of plants because a high level of expertise and experience is required in designing and installing such plants in an integrated manner. Services may include consultation, laboratory investigations, feasibility studies, process design,commissioning, construction and construction supervision, upgrading, supervision, personnel training, and after-sales service.
In Indonesia, two major institutions are responsible for various aspects of environmental control: the State Ministry of Environment (KLH) and the Environmental Impact Management Agency (BAPEDAL). KLH was formed in 1983, and one of its first tasks was to draw up the 1986 Environmental Impact Assessment Procedures (Amdal), which by law were made compulsory for all industrial and government projects that might have an impact on the environment. BAPEDAL was created by a Presidential Decree in 1990 to introduce better environmental management; to formulate and implement technical policies for the prevention and control of environmental pollution and deterioration; to provide technical assistance in such activities; and to increase community participation in improving environmental quality. KLH is responsible mainly for the coordination of environmental policy, while BAPEDAL acts as the legal enforcement agency.
II. MARKET HIGHLIGHTS AND BEST PROSPECTS
Environmental conservation and rehabilitation are high on the agenda of the Indonesian Government because they play a key role in achieving sustainable development of the country. Every year, Indonesia produces vast amounts of hazardous waste from industrial activities, as indicated below in a breakdown by sector:
Industry Sector | Volume (tons/year) |
| Textile | 19,900 |
| Pesticide | 12,300 |
| Iron and Metal | 12,200 |
| Oil Refinery | 10,300 |
| Pulp and Paper | 7,200 |
| Automotive and Components | 4,200 |
| Fertilizer | 4,300 |
In an effort to control surface water pollution, BAPEDAL has developed and implemented the Clean River Program (PROKASIH and PROPER) since 1989.
In general, the poor water quality of many of Indonesia's rivers is caused by wastewater disposal originating from households and industries as a result of urbanization, improvements in the standard of living, and growing economic activities. PROKASIH is aimed at reducing pollution loads entering rivers, improving river quality, and increasing the effectiveness of institutions and their management of the environment and the quality of river water. PROPER is a business performance evaluation program under PROKASIH aimed at encouraging businesses and industries to comply with environmental impact management requirements, in part through an incentive awards program. The wastewater quality parameters monitored are biochemical oxygen demand (BOD), chemical oxygen demand (COD), total suspended solids (TSS), dissolved oxygen (DO), and flow and pH (acidity level).
However, because of BAPEDAL's institutional and financial limitations, the action plan has been carried out only in 17 of Indonesia's 27 provinces, and of the tens of thousands of factories operating in these regions, most not have any wastewater pollution control equipment installed. By the end of 1996, the number of PROPER participants was only 270, although the participation rate has been growing by 20% to 30% annually for the past five years. The pollution control program is currently focused only on medium and large-scale companies, which are the major contributors to environmental pollution. Of greatest focus are companies that discharge large quantities of hazardous wastewater into rivers that serve as water sources for clean water production, fisheries, and the tourism industry. Although household pollution is a major contributor to water pollution, especially in urban areas, it is not included in the scope of PROKASIH because the government has not yet allocated the vast funds needed to build sewage treatment facilities.
PROPER classifies companies into five levels of performance based on the degree of their compliance with designated environmental control standards. An evaluation conducted in March 1997 indicated that of the 270 PROPER participants, about 43% had not been able to meet the wastewater quality standards as specified by BAPEDAL, while 50% were able to meet just the minimum requirements; only about 5% were found to have well-operated and well-managed wastewater treatment plants.
However, as BAPEDAL continues to strengthen its supervision and legal enforcement, the market for pollution control equipment is expected to expand, not only as a result of new installations but, more important, also in relation to already existing companies that are currently operating without any pollution control equipment.
Market Size for Wastewater Pollution Control Equipment
All wastewater pollution control equipment and auxiliary parts are imported; none have been produced in Indonesia.
The Central Bureau of Statistics does not record figures on water pollution equipment separately under specific H.S. codes; each type of component is categorized within a class that also includes a variety of other equipment. Thus, the following total market estimates were drawn up based on data from BAPEDAL, the Department of Industry and Trade (Depperindag), and other sources:
Indonesian Imports of Wastewater Pollution
Control Equipment 1994-96 (in millions of US$)
 | 1994 | 1995 | 1996 | Est. Average Ann. Real Growth in 3 years |
| Imports | 165.5 | 201.9 | 246.3 | 20.0% |
| Local Production | --- | --- | --- | |
| Exports | --- | --- | --- | |
| Total Market Size | 165.5 | 201.9 | 246.3 | |
| Total Imports From US | 81.1 | 98.9 | 120.7 | |
| Exchange Rate | 2,200 | 2,308 | 2,340 | |
Note: US$ 1 = Rp.
Market Size for Water Filtration Equipment
In 1996, imports of water filtration equipment totaled $53.8 million, of which 18.96% ($10.2 million) came from the US. In the past three years, imports have grown an average of 56.3% per year, with imports from the US growing much faster than those from other countries.
Indonesian Imports of Water Filtration
Equipment 1994-96 (in millions of US$)
| 1994 | 1995 | 1996 | Est. Average Ann. Real Growth in 3 years |
| Imports | 59.9 | 57.1 | 100.2 | 35.4% |
| Local Production | --- | --- | --- | |
| Exports | 12.5 | 1.7 | 1.4 | |
| Total Market Size | 72.4 | 58.8 | 101.6 | |
| Total Imports From US | 7.7 | 9.6 | 23.2 | |
| Exchange Rate | 2,200 | 2,308 | 2,340 | |
Note: US$ 1 = Rp.
Factors Likely to Increase Demand
o BAPEDAL's Stricter Legal Enforcement
BAPEDAL has become more determined in the enforcement of its measures, especially since support from other, related government agencies has been stepped up significantly. Cases of violation are referred to the provincial governors; once three warnings have been issued within about seven months,more serious steps can be taken in the case of non-compliance and have in fact been executed, such as closing the polluting plants. The regional governments and the courts treat pollution cases as priority, and such cases are processed promptly. The Indonesian Investment Coordinating Board (BKPM) and the Department of Industry and Trade (Depperindag) do not issue licenses for industries that produce hazardous waste unless there is adequate assurance that proper treatment facilities will be installed. These agencies also can revoke the operating licenses of existing factories that breach environmental rules. The Ministry of Environment (KLH) also cooperates with the Indonesian police to assist in the execution of BAPEDAL's enforcement.
o Environmental Soft Loan Program
A common problem for national industries is the huge financial commitment required for the design, purchase, and construction or installation of pollution control facilities. Because of this burden, the Environmental Soft Loan Program was created by the Indonesian Government to help national companies that produce waste or have the potential to cause environmental pollution.
The Environmental Soft Loan Program is funded by the ASEAN Japan Development Fund (AJDF) through the Overseas Economic Cooperation Fund for Pollution Abatement Equipment Loan Project (OECF-PAE Loan Project). The interest rates offered are based on a three-month average of Bank Indonesia Certificate Rate (SBI rate). It is a revolving fund, and repayment periods for loans range from 3 to 20 years, with grace periods of 1 to 5 years. The environmental soft loan can be used only to finance investments for pollution control, such as the purchase of pollution control equipment, procurement of wastewater treatment facilities, or payment for civil works and consulting fees related to the design of pollution control equipment and plants. The executing agencies for the Environmental Soft Loan Program are the Department of Finance, Bank Indonesia, and BAPEDAL.
In 1996, BAPEDAL approved applications for OECF funds of a total value of about Rp 120 billion, or $48 million (exchange rate: $1 = Rp 2,500).
o International Pressure From Importing Companies
Since the 1992 Earth Summit in Rio, which produced "Agenda 21," achieving cleaner production and meeting standards of pollution control such as ISO 14000 have become widely accepted goals in the global economic structure. The thinking behind this is that uncontrolled industrial development will erode sustainability not only of the environment but also of business. The foreign market for Indonesian products could decline substantially if producers do not adopt "eco-labeling" practices, because approximately 50% of Indonesia's total exports are targeted toward countries that already recognize and encourage eco-labeling criteria or plan to do so. Commodities that form the backbone of national exports include garments, textile and textile products, wood, footwear, and pulp and paper.
Statistics show that in 1996, the value of Indonesian exports that were sensitive to ISO 14000 standards totaled $16.1 billion, or 32.32% of total exports for that year ($49.814 billion).
| | Value ($US billions ) | Share (%) |
| Textile and Textile Products | 6.43 | 39.93 |
| Wood and Wood Products | 5.17 | 32.11 |
| Rubber and Rubber Products | 2.274 | 14.12 |
| Leather and Leather Products | .249 | 1.55 |
| Pulp and Paper | 1.38 | 8.57 |
| Plastic | 0.597 | 3.71 |
o High Industrial Growth Rate
As mentioned above, high growth rates of certain industries have spurred the expansion of those industries, necessitating additional plant equipment. Added capacity also requires adjustments in the pollution control equipment to handle the additional waste produced.
Best Prospects
Based on a random sample survey, the following wastewater pollution control equipment and water filtration equipment are most commonly used in Indonesia. Therefore, these categories of equipment constitute the best prospects for expected growth in the the wastewater pollution control industry. (The measuring devices usually come as part of the machinery itself or as auxiliary parts.)
Aerator Equipment
Filter and Filter Presses
Screens
Sludge Treatment Equipment
Pumps
Oil Separators
Liquid-Solid Separators
Biological and Chemical Treatment Products
It is the policy of Indonesian environmental authorities in general and of BAPEDAL in particular to concentrate their efforts primarily on industries with large large amounts of wastewater discharge in highly populated areas. By industry types, BAPEDAL focuses mainly on the textile, pulp and paper, plywood, and rubber industries. Others of importance are the sugar, palm oil, food and beverage, chemical, pharmaceuticals, tapioca, and vegetable oil industries.
Water filtration equipment is used to provide water for a wide variety of uses: industrial process water, drinking water, high purity water, aquaculture and hydrophonic water, fountains, and swimming pool water. The main users of water filters for drinking purposes are the Municipal Water Company (PAM), hotels, hospitals, mineral water companies, and the food and beverage industry. As for production processes, almost every industry uses water filtration equipment, including refineries and petrochemical, pulp and paper, leather tanning, fertilizer, textile, palm oil, sugar, and tapioca plants. Types of water filtration equipment expected to be best prospects over the next three to five years are:
Pumps
Sand Filters
Activated Carbon Filters
Reverse Osmosis Systems
UV Disinfectants
III. COMPETITIVE ANALYSIS
Japan, France, and Australia are considered very aggressive in marketing their products. For example, one well-known scheme for many industries in Indonesia is the Japanese-related OECF-PAE program, mentioned earlier, which allows industries to finance their pollution control programs. Aconsequence of their participation is the tendency to use mostly Japanese machinery.
In most cases, local suppliers of water resources equipment offer turnkey supplies of plants because of the high level of expertise and experience required to set up such facilities.
A random sample indicates that US manufacturers hold a big proportion of the total market share for pollution control equipment in Indonesia (49%), while European products constitute a 28% share; the remainder comes from Australia, Japan, and Taiwan. Local production of such products is too small and insignificant to include; it mainly involves simple equipment and services, such as the welding of tanks.
Several factors help to explain the dominance of US manufacturers. They were the first to penetrate the Indonesian market, and they have a reputation for quality. In addition, they often operate through consulting service companies, which usually also act as their sole agent, or through establishment of a representative office. And US experts often are hired for government projects involving the transfer of technologies.
Price is the dominant competitive factor for the sale of pollution control equipment In Indonesia. Price sensitivity is linked with the size of the manufacturing plants. Small companies, for example, usually have little capital, which forces them to buy cheaper equipment.
Water Pollution Control Equipment
This equipment is not recorded as a single category by the Central Bureau of Statistics, but BAPEDAL estimates that the industry expenditure for this type of equipment is usually 2% to 3% of total investment in a project. Sales of this equipment have good prospects over the long term inasmuch as 50% of industries in Indonesia have not yet installed any pollution control equipment.
Imports of Water Filtration Equipment
The Central Bureau of Statistics classifies water filtration equipment under two HS codes: HS-8421.21.000 (Machinery for Filtering/Purifying Water) and HS-8421.29.000 (Other Filtering or Purifying Water).
Value (in thousand US$)
Country of Origin | 1994 | 1995 | 1996 |
| USA | 7,693 | 9,620 | 23,162 |
| Germany | 14,132 | 4,528 | 9,872 |
| France | 1,140 | 2,177 | 1,280 |
| Japan | 12,009 | 10,158 | 6,656 |
| UK | 2,393 | 709 | 7,582 |
| Belgium and Luxembourg | 354 | 1,066 | 307 |
| Taiwan | 2,753 | 3,956 | 6,835 |
| Italy | 3,035 | 3,139 | 1,079 |
| Australia | 3,597 | 1,031 | 2,184 |
| Finland | 0.5 | 148 | 315.5 |
| Denmark | 1,685 | 1,332 | 1,275 |
| Singapore | 1,745 | 2,733 | 4,626 |
| India | 2,470 | 2,251 | 2,700 |
| Malaysia | 415 | 1,833 | 5,857 |
| China | 495 | 999 | 2,932 |
| Others | 6,063 | 11,460 | 23,567 |
| Total | 59,979 | 57,140 | 100,230 |
IV. END-USER ANALYSIS
The main user of wastewater pollution control equipment in Indonesia is the textile industry, which accounts for about 26% of the total; it is followed by the pulp and paper industry (11%), the plywood industry (10%), and the rubber industry (9%). Other major users are the palm oil, sugar, chemical, food, pharmaceuticals, tapioca, and petroleum-processing industries. The major users of water filtration equipment are PAM, mineral water companies, hotels, hospitals, and office buildings.
Main Users of Water Filtration Equipment
1. Municipal Water Corporation
Existing clean water facilities are unable to satisfy the ever-increasing requirement for clean water in many of Indonesia's large cities. To help meet this shortcoming, the government continuously seeks the involvement of the private sector in developing clean water installations and distribution networks. Three major factors are responsible for this approach.
First is the immense growth of Indonesia's major cities, caused by rising population and urbanization, which in turn had led to huge surges in the demand for clean water. For example, the Greater Jakarta area, Jabotabek (Jakarta-Bogor-Tangerang-Bekasi), currently has 23 million inhabitants, more than 10 million of whom reside in Jakarta. Yet the city currently has a capacity of only 17,000 liters of water per second, while analyses have indicated the need for at least another 15,000 lt. per sec as soon as possible.
Major clean water shortages also exist in other cities, such as Surabaya, which has a current production of 5,200 lt. per second but requires another 3,000 lt. per sec in the short term. Other large cities that urgently need improvements in clean water services include Lhokseumawe, Medan, Pekanbaru, Palembang, Bengkulu, Serang, Semarang, Ujung Pandang, and Denpasar.
Second, the investment required to construct clean water facilities is very high, with total funds needed exceeding $10 billion. Because this amount of money cannot be raised over the short term by the Indonesian Government, participation by the private sector is seen as the best solution to help overcome the country's current problem of insufficient clean water.
Finally, groundwater in many locations, especially Jakarta, has been abused through the excessive use of jet pumps. Major consequences include depletion of groundwater, emergence of cavities, and increasing penetration of seawater into the ground. In many locations, an increased number of groundwater wells has caused the soil to sink, endangering building safety.
Realizing the precariousness of the present situation, the government is aware that urgent action must be taken to prevent a major water crisis in Indonesia. Authorities are determined to gradually reduce reliance on clean water taken from the ground, but to achieve this goal there is a serious need for processing facilities that provide drinking water from surface water.
According to the Department of Finance, all 48 municipal cities of Indonesia will have clean water installations by the year 2005, at an investment cost of US$ 9.7 billion for a capacity of 5.1 million liters. The following table shows the planned additional clean water installation outputs until the year 2005 in the whole of Indonesia.
Currently, 11 projects, requiring an estimated investment of $2.6 billion (for 1.4 million liters), have already been approved in cooperation with the municipal water corporation; for the remaining 37, which will require approximately $7.1 billion (for 3.7 million liters), permits are still pending. Bandung, Bekasi, Tangerang, Deli Serdang, and Bangkalan are the regions with greatest investment needs.
Table 1. Clean Water Plants to be Built Until 2005
A = Approved
P = Pending
A = Airport
B = Business
H = Harbors
I = Industrial
P = Ports
R = Residential
T = Tourism Sector
| Province/District (with Pop.) | Main Consumers | Volume (in liters) | Estimated Value (US$) | Status |
| ACEH | | | | |
| Kodya Banda Aceh (201,165) | R | 13,575 | 4,823,750 | P |
| Lhokseumawe (628,856) | R | 22,500 | 7,851,050 | A |
| NORTH SUMATRA | | | | |
| Deli Serdang (1,790,592) | R,I,B | 278,751 | 605,811,069 | P |
| Binjai (183,000) | R | 27,507 | 58,137,658 | P |
| RIAU | | | | |
| Pekan Baru (1,492,658) | P,B,I | 64,187 | 101,652,209 | P |
| Tanjung Pinang (82,054) | R | 65,592 | 138,365,476 | P |
| WEST SUMATRA | | | | |
| Padang (82,054) | R,T,I | 76,252 | 103,605,998 | A |
| JAMBI | | | | |
| Jambi (384,856) | R,B | 31,429 | 24,160,819 | A |
| BENGKULU | | | | |
| Bengkulu (231,000) | R,B | 26,448 | 59,096,934 | P |
| LAMPUNG | | | | |
| Bandar Lampung (727,760) | R,B | 104,004 | 199,216,364 | P |
| SOUTH SUMATRA | | | | |
| Palembang (1,150,000) | R,B | 163,978 | 170,407,937 | P |
| WEST JAVA | | | | |
| Bandung (1,819,858) | R,B | 260,963 | 249,983,291 | P |
| Bandung (3,390,000) | R,B | 419,452 | 924,395,037 | P |
| Bekasi (2,637,489) | R,B,I | 334,219 | 695,362,946 | A |
| Bogor (572,516) | R,B | 36,093 | 37,252,572 | P |
| Cirebon (648,558) | R,B | 79,991 | 172,863,346 | P |
| Indramayu (239,570) | R,B | 29,953 | 73,698,901 | P |
| Kerawang (230,100) | R,B | 182,329 | 379,562,424 | P |
| Serang (379,250) | R,T,I | 191,058 | 399,869,038 | A |
| Tangerang (562,900) | R,I,B | 331,961 | 659,481,628 | A |
| CENTRAL JAVA | | | | |
| Cilacap (247,881) | R,I | 26,986 | 45,684,585 | P |
| Semarang (1,379,000) | R,B,A,H | 122,604 | 237,326,795 | A |
| Surakarta (531,377) | R,A,I,B | 55,744 | 73,087,764 | A |
| Tegal (787,584) | R,H,I | 100,264 | 207,305,583 | A |
| YOGYAKARTA | | | | |
| Yogyakarta (459,606) | R,T,B | 42,744 | 55,424,238 | P |
| EAST JAVA | | | | |
| Gresik (873,849) | R,I | 114,151 | 242,519,097 | P |
| Magetan (668,754) | R,I | 193,128 | 450,554,464 | P |
| Malang (700,000) | B,H,R | 69,521 | 37,043,072 | P |
| Surabaya (2,700,000) | R,B,H,I | 334,259 | 273,228.894 | P |
| Sidoarjo (428,970) | R,I | 178,463 | 365,345,466 | P |
| Tuban (229,932) | R | 25,591 | 52,905,758 | P |
| Lamongan (143,554) | R,I | 823 | 586,364 | P |
| Bangkalan (742,349) | R,H,I | 16,651 | 481,701,663 | P |
| BALI | | | | |
| Gianyar (199,577) | R,T | 39,941 | 85,329,775 | P |
| Tabanan (153,252) | R,T | 47,016 | 109,399,836 | A |
| WEST KALIMANTAN | | | | |
| Pontianak (816,798) | R,H,B | 126,571 | 278,267,618 | P |
| Sambas (761,375) | R,H | 113,207 | 241,377,221 | P |
| EAST KALIMANTAN | | | | |
| Samarinda (440,325) | R,I,B | 44,341 | 73,010,640 | P |
| Balikpapan (401,512) | R,H,I | 32,520 | 52,757,664 | P |
| Bontang (103,340) | I | 9,819 | 16,770,983 | P |
| SOUTH KALIMANTAN | | | | |
| Banjarmasin (487,241) | R | 61,191 | 82,396,258 | A |
| NORTH SULAWESI | | | | |
| Manado (320,273) | R,B,H,A | 34,985 | 26,813,171 | P |
| Gorontalo (541,288) | R,I | 91,255 | 173,780,459 | P |
| Bitung (109,086) | R,I,H | 10,615 | 16,770,983 | P |
| SOUTH SULAWESI | | | | |
| Ujung Pandang (1,150,626) | R,B,A,H | 140,325 | 193,707,917 | P |
| WEST NUSA TENGGARA | | | | |
| Lombok Timur (870,820) | R,T | 136,501 | 290,555,410 | P |
| Lombok Barat (869,545) | R,T | 129,749 | 270,613,757 | P |
| Lombok Tengah (706,967) | R,T | 110,886 | 234,286,239 | P |
Table 2. Growth of Water Supply Establishments of PAM, 1991-95
| 1991 | 1992 | 1993 | 1994 | 1995 |
| Total Number of Companies | 402 | 416 | 420 | 422 | 445 |
| Total Number of Workers | 28,359 | 30,893 | 32,295 | 33,931 | 35,601 |
| Employment Costs (000,000 Rp) | 66,618 | 89,250 | 111,037 | 125,931 | 166,772 |
| Quantity of Sanitary Water Run to Customers (000,000 M3) | 814 | 892 | 1,014 | 1,067 | 1,158 |
| Input Costs (000,000 Rp) | 107,582 | 131,542 | 165,805 | 208,716 | 222,323 |
| Value of Gross Output (000,000 Rp) | 277,149 | 423,829 | 569,925 | 715,222 | 873,069 |
| Own Generated Electricity (MWH) | 35,917 | 46,700 | 53,886 | 69,060 | 51,520 |
2. Mineral Water Companies
There has been rapid growth in the industry that produces drinking water in packaging (AMDK). AMDK in Indonesia is usually referred to as mineral water, although it is actually just ordinary water made available in containers. According to the official definition of the Department of Industry and Trade, AMDK is water that has been processed and packaged and is safe to be consumed directly.
Drinking water in packaging was first produced in Indonesia in 1973 by PT Aqua Golden Mississippi (AGM). Rapid sales growth has encouraged other investors to set up new plants for producing packaged drinking water, and today the number of producer companies has grown to 205. Yet a few large producers who are also the pioneers in this industry dominate the market. Two of them, AQUA and ADES, have about 70% of the market share in Indonesia.
In 1992, AMDK production was 1.3 billion liters. In 1996, the production rose to 2,215 billion liters, for an average annual rise of 13.9%.
3. Hotels
The hotel industry is one of the most attractive industries in Indonesia. Each year many new rated and non-rated hotels begin operation in Jakarta, Bali, and other places in Java, North Sumatera, Riau, S. Sulawesi, and W. Nusa Tenggara. The number of hotels in Indonesia has risen in line with the growing number of foreign visitors to the country from year to year, and the growth has been even across almost all classes of hotels. According to the Hotels and Restaurants Association, the total number of hotels in Indonesia at the end of 1995 was 8,405, with a combined total of 185,878 rooms.
BAPEDAL's study of 38 hotels (3- and 4-star) in 1993-94 found that only 39% (15 hotels) already have pollution control equipment. Only 40% were found to meet standards for liquid waste.
Main Users of Wastewater Pollution Control Equipment
1. Textile Industry
The textile and garment industries were among the fastest growing industries in Indonesia in the past two decades. Since the mid-1980s, the textile and textile products industry has been one of the main sources of foreign exchange earnings from the non-oil sector, and the
contribution of this sector has continued to increase each year. The number of companies also has continued to grow, with 1,916 in 1989 and 2,383 plants by the end of 1995.
The rapid growth of the textile and textile products industry in Indonesia is the result not only of the improving economy and standard of living but also of increasing demand for the products in the export market, although in the last three years the strength of the domestic textile market segment weakened somewhat.
In 1996, textile exports totaled $6.8 billion. This is projected to reach $7.8 billion for 1997 and $10 billion in 1998. Domestic sales are projected to account for 55%. To raise the target of textile products exports in 1997, investment has been projected to increase by $1 billion compared with 1996. In 1998, an extra $2 billion would be needed and in 1999 an additional $3 billion.
2. Paper and Pulp Industry
The Government of Indonesia has decided to treat pulp and paper as one of the 10 major categories of export commodities from the industrial sector. There are currently 17 pulp producers perating in Indonesia, with a combined production capacity of 4.4 million tons per year, and 74 paper producers, with a combined production capacity of 7.24 million tons per year.
Indonesia's pulp industry has been growing rapidly, as can be seen from the fact that its production capacity has increased from 1.7 million tons a year in 1993 to 4.4 million tons a year in 1997.
The pulp industry is relatively new in Indonesia. Although its output has continued to grow, it has remained smaller than what is demanded by the domestic paper industry. In 1993, domestic pulp production rose to 1.3 million tons, or by 58.9%, the highest rate of growth for the period of 1992-96. In 1996, it rose further to 2.3 million tons. For the same period, domestic pulp production grew at an average annual rate of 31.4%.
With the growth in domestic demand, Indonesia's paper production has continued to increase rapidly. In 1991, domestic production of various types of paper reached 1.6 million tons; this rose to 4.0 million tons in 1996. Thus, for the period 1991-96 paper production grew at an average annual rate of 19.9%.
With the domestic paper consumption projected at 6.7 million tons for the year 2001, the domestic production capacity, which is 7.2 million tons per year, will not be able to fulfill domestic demand. Because Indonesia currently exports 1.1 million tons per year and because the export demand for paper is expected to continue increasing, the current production capacity of the paper industry needs to be stepped up. From the viewpoint of market opportunities as described above, it is clear that the pulp and paper industry has good prospects for growth.
3. Plywood Industry
The level of timber estate cultivation to ensure the continuity of timber supply is still relatively low. Apart from this, timber estate development is expected to support mainly the pulp and paper industry, whereas all tropical timber products from Indonesia must conform to eco-labeling (sustainable forest management) requirements as of the year 2000. In preparation for a new world trade system that calls for adherence to practices of nature conservation, Indonesia needs a substantial investment. The Research and Development
Board of the Department of Forestry estimates that in the 1996-2000 period, Indonesia will require a total investment of about Rp 7.8 trillion.
It is thought that the Reforestation Fund could be used for preparations to enter the eco-labeling era, along with revenue from countries that purchase large supplies of tropical timber from Indonesia. However, the Reforestation Fund is seen as viewed as not being used effectively and in a transparent manner.
The number of plywood mills in Indonesia has not changed significantly in the past five years. The Government of Indonesia no longer issues permits for new mills, except for projects in Irian Jaya. However, new investment projects in Indonesia's easternmost province have not yet been completed. At present, there are 123 plywood mills in the country, with a total production capacity of about 11
million cubic meters per year. Many of the existing plywood mills also produce blockboard as a byproduct, with a total capacity of 2.2 million cubic meters per year.
Plywood production in Indonesia fluctuates as a result of the instability of demand in export markets and the declining supply of timber. According to the Directorate General of Forest Exploitation, plywood production in the 1994/95 fiscal year had dropped by 18.7% in the year before but then rebounded in the following 1995/96 fiscal year to 9.12 million cubic meters. While Indonesia's plywood industry has waned somewhat in recent years, it was predicted to improve in 1997.
4. Rubber Industry
Indonesia is one of three largest producers of natural rubber in the world, along with Thailand and Malaysia. Together these three countries account for 80% to 85% of the world's production of natural rubber. The natural rubber industry is long established in Indonesia and has grown in line with the development of rubber plantations, constituting a major export earner for the country for many
years. Indonesia's output has increased consistently, although at somewhat minor growth rates. From 1990 to 1996, Indonesia's rubber production grew at an average rate of 3.79%, rising to a total of 1,578,000 tons in 1996.
The rubber processing industry developed from traditional enterprises, and in 1994 the country's overall production capacity totaled approximately 2,047,000 tons, from 609 factories. Of these, the major producers are PT. Adei Plantation and Industry, PT. Bakrie Sumatra Plantation, PT. Goodyear Sumatra Plantation, PT. London Sumatra Indonesia, and PT. Jambi Waras.
As one of the world's major suppliers of natural rubber, Indonesia still has the potential to increase the production of rubber products for domestic and export markets, such as for the the growing automotive sector and for industries that produce capital goods and electronics.
In 1994, exports of rubber products - including tires, rubber gloves, rubber thread, and industrial and household rubber goods - reached about $164.17 million, while for 1997 the comparable value is expected to reach $240 million. For 1998, Indonesia has established a target of increasing its exports to $278 million, an increase of 15%.
5. Other Users of Water Filters and Wastewater Pollution Control Equipment
| Industrial Sector | Annual Production for 1996 (in Tons) |
| Sugar | 2,150,000 |
| Palm Oil | 4,923,000 |
| Food and Beverage | 6,989,000 |
| Chemicals | 18,678,000 |
| Pharmaceuticals | 9,720 |
| Tapioca | 812,700 |
| Crude Oil | 91,250,000 |
| Cosmetics and Toiletries | 254,600 |
V. MARKET ACCESS
Import Climate
Except for water filtration equipment, the Central Bureau of Statistics does not record figures for water and wastewater pollution control equipment separately under specific HS codes, but some types of components might be categorized within a particular product class that also includes a variety of other equipment.
| HS Code | Description | Import Duty (%) | VAT (%) |
| 8421.21.0 | Machinery for Filtering or Purifying Water | 0 | 10 |
| 8421.29.000 | Other Equipment for Filtering or Purifying Water | 5 | 10 |
Articles falling under HS-8421.21.000 are exempt from an import duty but are subject to the 10% value-added tax. Items under HS-8421.29.000 require a 5% import duty and the 10% VAT. No import duties are imposed on the first category because it includes water filtration equipment used for the construction of PAM's clean water projects, which are high on the government's list of priority projects. Likewise, no import duties are imposed on wastewater pollution control equipment, to help stimulate the installation of pollution control equipment. Only the VAT, which applies uniformly to all imports, is applicable.
Technical and Safety Standards
With regard to technical and safety standards, Indonesia has adopted the international norms and there are none particular to this country.
Distribution Channels
The principal company appoints a sole agent as its representative and sells products either directly to customers or through the branches of that agent. It is also usual for environmental contractors or consultants to act as representatives for certain products. However, a few end-users directly import the equipment from the country of origin.
Financing and Payment Practices
The "buy or lease" financing option is the most common practice by which manufacturers get new machinery and equipment. Another option is through the use of an irrevocable letter of credit for equipment, which is ordered directly from outside the country. Yet another alternative for financing the cost pollution control equipment is through soft loan schemes, such as the OECF program.
If equipment is purchased through a local supplier or agent, the common practice is to make a 30% to 50% down payment, with the balance paid off in 3- to 6-month installments.
Trade Organizers
1. Organizer: PT. Jakarta Hilton Center
Premises: Jakarta Hilton Convention Center
Phone: 62 21 572 6000
Fax: 62 21 572 6005
Contact: Mr. Ajib
2. Organizer: PT. Jakarta International Tradefair Corp.
Location: Jakarta International Fair Grounds
Phone: 62 21 421 6147
Fax: 62 21 421 6147
Contact: Mr. Teddy
Key Contacts
1. Badan Pengendalian Dampak Lingkungan (BAPEDAL)
Environmental Impact Management Agency
Address: Gedung Arthaloka, 11th Fl.
Jl. Jenderal Sudirman No.2
Jakarta 13410, Indonesia
Tel.: 62 21 251 1578, 251 1540, 251 1549
E-mail: pipl@bapedal.go.id
Fax: 62 21 251 2525
Contact: Mr. Heru Harnowo, Mr. Margana
2. Kantor Menteri Negara Lingkungan Hidup (KLH)
State Minstry of Environment
Address: Jl. DI Panjaitan Kav. 42 Kebon Nanas
Jakarta 13410, Indonesia
Tel.: 62 21 851 7181, 851 7185, 858 0067-69
Fax: 62 21 851 7184
Contact: Dr. M. Edi Armanto
Companies
1. PT. Envitech Perkasa
Address: Wisma Kemang, 2nd Fl.
Jl. Kemang Selatan No. 1
Jakarta 12560, Indonesia
Tel.: 62 21 781 7041-45
Fax: 62 21 781 7046
Contact: Mr. Gunawan
2. PT. Waste Management Indonesia
Address: Bimantara Building, 17th Fl.
Jl. Kebon Sirih No. 17-19
Jakarta 10130, Indonesia
Tel.: 62 21 310 0900
Fax: 62 21 314 8605
Contact: Mr. Patrick Heinenger
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