The surge in plastic raw material prices due to the Middle East conflict has put Micro, Small, and Medium Enterprises (MSMEs) under increasing pressure. Reports indicate that plastic prices have risen by as much as 100%.
Responding to this issue, UGM economist Dr. Wisnu Setiadi Nugroho explained that the increase in plastic prices is not merely an operational problem but an additional burden amid consumer purchasing power that has not fully recovered. According to Dr. Nugroho, this situation serves as an alarm for MSME resilience. If not mitigated through swift adaptive strategies, the risk of declining MSME output or even business closures becomes very real.
“We must realize that Indonesian MSMEs are highly dependent on plastic, from food packaging to shopping bags,” he said on Thursday (April 16).
As context, around 60% to 70% of the cost structure of MSME culinary products is often influenced by raw materials and packaging costs. The rise in plastic prices, therefore, significantly erodes MSME profit margins.
Dr. Nugroho explained that the increase in plastic prices is caused by a domino effect along the petrochemical value chain. First, there are logistical disruptions in the Strait of Hormuz, a vital route for global oil trade. Tensions in this region have driven up global crude oil and gasoline prices.
Next is the issue of plastic as a derivative raw material. Plastic is produced from polymers such as polyethylene and polypropylene, which are derived from petroleum and gasoline. When the prices of these primary raw materials rise, the production costs of plastic resin automatically increase. The final factor behind rising plastic prices is the prioritization of energy for transportation fuels and heating over other petrochemical derivative products.
“In conflict situations, many oil-exporting or processing countries prioritize fuel availability for transportation and heating rather than other petrochemical derivatives. This leads to reduced supply and scarcity of plastic resin in the international market,” he explained.
Furthermore, Dr. Nugroho noted that the impact of this phenomenon on MSMEs is highly systemic to their cost structure. MSME operators are experiencing a surge in COGS (Cost of Goods Sold), as packaging components that were previously inexpensive now weigh heavily on profit margins. The rising cost of plastic packaging materials also creates pricing challenges.
Given that consumer purchasing power remains fragile, raising product prices could backfire, as consumers may switch products or reduce overall consumption. As plastic packaging costs continue to rise, MSMEs may experience cash flow deficits. Many may choose to cease operations rather than continue incurring losses with every production cycle.
“Often, economic shocks that end in business closures take even longer to recover from,” he added.
To cope with rising plastic prices, Dr. Nugroho suggested that MSMEs must quickly adopt strategic adaptations. These include exploring alternative packaging materials with more stable prices or locally sourced options, such as paper, bamboo baskets, or cassava-based packaging that is more environmentally friendly.
Another approach is redesigning packaging by reducing plastic thickness or size without compromising product safety. MSMEs can also innovate their business models by implementing a “bring your own container” system, offering small discounts to customers. This approach has been widely adopted in many coffee shops.
“This method can reduce dependence on single-use plastics,” he said.
However, Dr. Nugroho emphasized that the government’s presence is equally important through comprehensive policies, not merely appeals. The government can promote fiscal policies by providing tax incentives for directly affected MSMEs or temporarily eliminating import taxes on alternative non-plastic raw materials.
In addition, the government can implement cross-subsidy programs or buffer stock mechanisms. Through relevant state-owned enterprises, the government can intervene in the market to stabilize domestic plastic resin prices so they do not fluctuate excessively in line with global prices.
Finally, the government must intensify public outreach regarding alternative packaging. This includes encouraging research and facilitating MSMEs’ access to environmentally friendly packaging producers, whose prices are often still higher than those of plastic. Dr. Nugroho added that this effort must also be accompanied by cost management assistance.
“Through relevant agencies, MSME operators should be provided with training on financial management and pricing strategies during an energy crisis,” he concluded.
Author: Fatihah Salwa Rasyid
Editor: Gusti Grehenson
Post-editor: Rajendra Arya
Photo: Freepik