Amidst the escalating tensions between Iran and Israel following Israel’s strikes on Iran, domestic industry players are apprehensive about the repercussions on the Middle East conflict. This situation has prompted the government to advocate policies supporting manufacturing productivity.
Minister of Industry Agus Gumiwang Kartasasmita said that the global geopolitical tensions provide a timely opportunity for the industry to secure the sustainability of the specific natural gas price program (HGBT) or affordable gas prices for industries.
“The risk of energy price hikes can impact the decline in productivity and competitiveness of industrial subsectors. Therefore, HGBT policies are crucial to enhance production competitiveness,” Agus said on April 19, 2024.
There are at least three impacts generated by the Middle East conflict: energy price hikes, surging logistics costs, and the depreciation of the rupiah against the US dollar. These three impacts have become consequences for the global economy and supply chain.
According to Agus, the certainty of HGBT sustainability can boost industrial confidence levels to drive production. Moreover, HGBT policies are greatly beneficial to business players.
In 2023, tax increases from HGBT using industries reached 32 percent compared to 2019. Additionally, by 2023, investments totaling IDR 41 trillion had been realized, a 34 percent increase compared to 2019.
Furthermore, there is potential investment in the petrochemical, steel, ceramic, and glass sectors amounting to IDR 225 trillion (US$13.9 billion). Other positive impacts from 2020 to 2023 include an increase in exports by IDR 84.98 trillion, an increase in tax revenues by IDR 27.81 trillion, an investment increase of IDR 31.06 trillion, and a decrease in fertilizer subsidies amounting to IDR 13.3 trillion.
The continuity of HGBT amid the Iran-Israel conflict is crucial for production smoothness. According to the Chairman of the Indonesian Ceramic Industry Association (Asaki), Edy Suyanto, the affordable gas policy rescued the industry from the pandemic’s effects. On the other hand, the escalating and potentially ongoing Iran-Israel conflict will negatively impact the ceramic industry, particularly regarding the depreciation of the rupiah.
“Especially considering that on average, almost 50-60 percent of purchases or production costs are in USD currency, such as payments for gas use to PGN,” Edy said as quoted by Bisnis.com on April 19, 2024.
Therefore, Edy said, it is necessary to review and reconsider using the rupiah for domestic industrial gas payments. He also expressed concerns about the increase in world oil prices that could affect the state budget deficit and fiscal deficit, with the most feared being the increase in subsidized fuel prices that will directly affect people’s purchasing power.
