Rising Plastic Prices Squeeze Small Businesses in Indonesia

Small businesses in Indonesia are facing significant challenges due to a surge in plastic prices, which have increased by 40 to 100 percent since February 2026. This price hike is attributed to global supply disruptions linked to the ongoing conflict in the Middle East, particularly the United States-Israel war on Iran. The rising costs are affecting essential packaging materials such as plastic bags, containers, and wrapping, which are crucial for micro and small enterprises.

Kepri UMKM Struggle: Rising Plastic Prices Squeeze Small Businesses

Street vendors and small-scale producers, including tofu and tempeh manufacturers, are particularly hard-hit. Yayat Ruchyat, a producer from Parepare, South Sulawesi, expressed the dilemma of either raising prices, which could deter customers, or absorbing the increased costs, which would further erode profit margins. Similarly, food vendor Masri from Meulaboh, Aceh, noted that maintaining hygiene and convenience through plastic packaging is essential, yet the soaring costs are forcing vendors to make difficult operational decisions.

The Straits Times

In response to the rising costs, many vendors are implementing various cost-saving measures. These include limiting the number of plastic bags provided per transaction and phasing out multi-layer plastic wrapping. Some sellers are reverting to traditional materials like banana leaves, although these alternatives can also be more expensive. The situation has prompted a shift in consumer behavior, with an increasing number of customers bringing their own reusable bags.

The Straits Times

Cooperatives and Small and Medium Enterprises (SMEs) Minister Maman Abdurrahman highlighted that the surge in plastic prices is due to disruptions in the supply of naphtha, a petrochemical derived from crude oil, which is essential for plastic production. He noted that approximately 70 percent of the global naphtha supply comes from Gulf countries, and the conflict has led to shortages, forcing domestic producers to reduce output.

The Straits Times

The Indonesian government is actively seeking alternative naphtha supplies from countries such as Africa, the United States, and India as a short-term solution. Minister Abdurrahman also mentioned exploring long-term alternatives, including the use of seaweed as a potential base material for plastic production, which could help stabilize costs if developed at scale.

The Straits Times

Despite these efforts, small business owners are calling for more immediate government intervention to stabilize plastic prices and support vulnerable enterprises. The rising costs of plastic packaging underscore the interconnectedness of global events and local economies, particularly for small businesses in regions like the Riau Islands.

Kepri UMKM Struggle: Rising Plastic Prices Squeeze Small Businesses

Critics argue that the government's response has been slow and insufficient to address the immediate needs of small businesses facing financial strain. Many vendors feel that without timely support, their operations may become unsustainable, leading to broader economic repercussions in local communities.

Kepri UMKM Struggle: Rising Plastic Prices Squeeze Small Businesses

“Raising menu prices is difficult because current prices are already what customers consider standard.” — Masri, Food Vendor

The Straits Times

“The disruption has led to raw material shortages, forcing domestic plastic producers to cut production volumes,” — Maman Abdurrahman, Minister of Cooperatives and SMEs

The Straits Times

“If we shift from naphtha to seaweed, operational and production costs could actually be reduced,” — Maman Abdurrahman, Minister of Cooperatives and SMEs

The Straits Times