Business Climate Policy Analysis of Flat Steel Industry in Indonesia

Authors : Rizky Aditya Wijaya

Volume/Issue : Volume 8 - 2023, Issue 10 - October

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The steel industry in Indonesia has undergone substantial growth, driven by the expansion of the national infrastructure and construction sector. However, this sector faces multifaceted challenges, including escalating raw material prices, elevated energy and transportation expenses, and intense competition from imported steel. The emergence of the COVID-19 pandemic further disrupted the steel supply chain and reshaped demand patterns. The ease of access to international steel products in the domestic market significantly influences the utilization of domestically produced steel. To foster sustainable and competitive growth, the Indonesian Government has instituted various policies and regulations for industry improvement. Although there is potential for sustainable growth in the national steel industry, it is imperative to acknowledge and effectively address the prevailing dynamics and challenges. This research endeavors to provide a comprehensive analysis of the steel industry, specifically focusing on the sheet steel segment in Indonesia. Employing system dynamics simulations, this study seeks to estimate the trajectory of developments, challenges, opportunities, and shifts in the supply and demand for domestic sheet steel products. Four dynamic hypotheses within the system are proposed and rigorously examined. The current model structure suggests that augmenting steel mill capacity and introducing regulations on steel product imports lead to an upsurge in domestic flat steel production. Furthermore, providing tax incentives and tariff adjustments presents a promising avenue for mitigating price differentials between flat steel and its raw materials within the country. The findings of this research hold the potential to provide valuable insights for policy recommendations aimed at propelling the progress of the flat steel industry in Indonesia.

Keywords : Flat Steel Industry, Steel Production Supply and Demand, Dynamic System Simulation, Tax Incentives, Industrial Competitiveness.


Paper Submission Last Date
31 - December - 2023

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