spot_img
27.7 C
Philippines
Friday, March 29, 2024

Petrochem industry catches up

- Advertisement -

The local petrochemical industry is among the biggest drivers of the local economy—yet, it is also one that is in dire need of government support.  Serving as a link to upstream, midstream and downstream sectors, its breadth and scope is wide and encompassing, as it provides much-needed raw materials for packaging, adhesives, carpeting, cosmetics, paints, rubber, among other highly in-demand consumer products. 

Comprised of six players resulting in over $3 billion in state-of-the-art petrochemical plants, almost 3 million metric tons of production capacity for various resin products, annual tax payments of P2.5 billion and direct employment of over 5,000 Filipinos to date, the largest among them is JG Summit Petrochemical Corp., an industry pioneer and the largest polyethylene and polypropylene resin manufacturer in the country, with an annual production capacity of over 510,000 MT of resin products.

Plant workers at a petrochemical plant
Plant workers at a petrochemical plant

Playing catch-up

In a report by the KPMG Global Energy Institute titled Asia Pacific’s Petrochemical Industry: A Tale of Contrasting Regions, the professional services firm notes that Asia Pacific “has been the poster child of the global petrochemical industry” and how “a combination of favorable economic and demographic trends has stimulated a growing appetite for petrochemical products.” Furthermore, it is anticipated that in the next decade, two thirds of global petrochemical demand will originate from the region.

While this report paints a rosy picture of the petrochemical industry in the region, the opposite can be said of the Philippines, which is lagging behind and has a lot of catching up to do with its ASEAN neighbors, particularly Vietnam, Indonesia and Malaysia, all of which have embarked on aggressive expansions for their respective petrochemical industries. In fact, in the latest survey done by the 2020 World Competitiveness Yearbook, the Philippines ranked the least competitive of the five Southeast Asian countries.

- Advertisement -

KPMG notes that for the Philippines, “the domestic petrochemical industry is still in its infancy compared to that of North Asia and Singapore” and that a factor affecting the viability of the industry is the subject of incentives, both fiscal and non-fiscal that are made available to future plants. 

Other major problems hampering competitiveness—issues local petrochemical players have long drawn attention to—include direct and technical smuggling of competing petrochemical products, logistical concerns facing upstream-midstream-downstream facilities, trade agreements promoting tariff reductions for imported products and the need for more ease in doing business. 

Official government data indicate a surge in volumes of imported resins in recent years, with significant percentage coming from cost-advantaged origins that put the domestic petrochemical industry at a disadvantage. The influx of cheap competing resins, coupled with tariff reductions brought about by various trade agreements, undermine the long-term viability of this still-developing industry.

Even with the fiscal support not yet at par with other Southeast Asian neighbors, as well as other issues, growth in the domestic market is prompting Philippine petrochemical producers to nonetheless continue to invest into new builds or expansion projects to meet the growing industry demand.

Investments 

Despite the challenges facing the local petrochemical industry, JGSPC has ramped up expansion projects for its fully-integrated petrochemical complex in Batangas, towards increasing capacity and opening new production lines. This includes new aromatics and butadiene extraction units and a new bimodal PE plant, all of which are set for commissioning within this year. 

Representing over $ 1 billion worth of additional investment, JGSPC’s polymer production capacities will soon be 570,000 MT per annum of polyethylene and 300,000 MT per annum of polypropylene.

Government support 

With additional volumes and new downstream value-added products being a step towards product diversification of the Philippine petrochemical industry and thus foreseen to help strengthen the industrial value chain, the Association of Petrochemical Manufacturers of the Philippines has not been remiss in reaching out to the government for support.

The APMP has been active in consultations related to relevant bills and legislation—such as the Corporate Recovery and Tax Incentives for Enterprises Act and the Regional Comprehensive Economic Partnership Agreement—that affect the industry. 

The association has been calling for solutions towards the issue of smuggling and customs modernization, the strengthening of fiscal incentives for both new builds and expansion projects, shortening the processing time of Tax Credit Certificates, among other support structures urgently needed by the industry in order to survive and further increase its competitiveness versus imported resins. 

APMP and its members including JGSPC held several dialogs with the Board of Investments where it emphasized its goal of fostering industry self-sufficiency to fully develop the local petrochemical industry, and thus help with the over-all sustainable development of domestic manufacturing and of the Philippine economy.

- Advertisement -

LATEST NEWS

Popular Articles