Assessing the Importance of the Indonesian Plastic Waste Imports to Industrial Growth and the Environment

The impact of international trade on industrial development and economic development has in general been positive (Kee, Nicita, Olarreaga, 2009; Disdier, Fontagne & Cadot, 2015; Fajgelbaum, Grossman & Helpman, 2011; World Bank, 2020). In the Indonesian case, studies have shown that international trade helps alleviate poverty (Kis-Katos & Sparrow, 2015) and support industrialization through improved access to markets of both final goods and intermediate products (Pane & Patunru, 2022). Along with poverty alleviation and development can come challenges in mitigating the environmental effects of new economic activity. The World Trade Organization (2022a) has turned its attention to understanding this relationship. One way this can manifest is that intensifying trade can increase emissions coming from shipping and manufacturing activities (Qalati et al., 2023; Kartal & Pala, 2023; Li et al., 2022; Xu et al., 2023; Shahbaz et al., 2017). In developing countries, the increased plastics use that comes with industrialization also leads to increased ocean pollution (Ullah et al., 2023). Plastic recycling can, in theory, mitigate some of the problems created by excessive plastic waste. Typically, the plastic recycling industry involves collection and sorting, shredding, polymer separation, washing and extrusion. One of the key problems with plastic recycling is at the collection and sorting stage, which can be costly and labor intensive. This creates an opportunity in exploiting comparative advantage in labor-abundant countries such as Indonesia, which encourages international trade. The plastic waste trade is the global trade in recyclable plastics. These plastics generally flow from developed countries to developing countries, with the intention that they be recycled in the developing countries. Bai & Givens (2021) provide perspective about the plastic waste trade in developing and developed countries. In developing countries, plastic waste imports are correlated with wealth, as measured by GDP per capita. Among developed countries, those with lower GDP per capita are more likely to export plastic waste. Bai & Givens (2021) also find that developed countries export the environmental harm of the plastic waste trade and developing countries bear the environmental burden. Indonesian plastic consumption is high. With an estimated population of 270 million people in 2019, Indonesia’s plastic consumption was estimated to be more than 6.2 million tons, 65% of which came from food and beverage packaging (Ismawati, Septiono & Proboretno, 2022). Indonesia also imported around 200 million kg of plastic waste in 2022, mainly from developed countries. Major increase of plastic waste imports to Indonesia began in 2010, when the government started to allow plastic waste import. It increased again in 2018 when China started to restrict plastic waste imports. Unfortunately, Indonesia’s plastic waste management is heavily under capacity (Ismawati, Septiono & Proboretno, 2022; World Bank, 2021). Indonesian plastic waste management must be able to bear the burden of the plastic waste in the country, or the burden will be borne by the environment.