This week, The Jakarta Post posted a story about Indonesia’s trash. Thanks to Indonesia’s entrepreneurs, much of that waste quickly turns into wealth for Indonesia’s blossoming recycling sector. As the story reports, Indonesian manufacturers produce 2.1 million tons of raw virgin polymers per year while producing 3.8 million tons of plastic final products per year. The remaining tonnage of raw polymers for production come from two sources: imports priced according to exchange rates and the global price of oil, and recycled polymers from local producers. Much like most developing markets, formal institutions haven’t caught up with the people they govern, leaving the all the action to the informal sector:
As domestic waste sorting — into organic, glass, paper and plastic waste — has yet to become common practice among Indonesians, the informal sector still plays a significant role in making recycling happen. These entrepreneurs and workers — among them trash pickers, waste sorters and middlemen bosses — form the longest chain in the industry.
The same story reports that there are 60 formal manufacturers that use recycled plastic for final production, tapping informal sector suppliers almost exclusively. Some informal recycling firms have even cultivated links to formal exporters, who send their recycled polymers to China and elsewhere. With better institutions to encourage formal business registration, these recycling firms could grow and serve larger markets and recycle more plastic. How much more plastic? Indonesia is the world’s fifth most populous country, with 240 million people and counting. That’s a lot of plastic waste producers. There could be more plastic waste recyclers. In fact:
….only about half of the plastic waste produced annually is being recycled. While plastic accounts for 13.9 percent of the waste in Greater Jakarta, only 6.5 percent is recycled, according to a World Bank pilot project on waste identification.
Besides potentially more plastic waste recyclers, less corrupt and better functioning institutions to encourage formal business registration would also encourage innovation in the industry such as better techniques and technologies for collection, sorting, and polymer production. Every recycling firm could improve on these processes. Such innovation is likely taking place already, but it remains handcuffed by a poor understanding of who entrepreneurs are and what they can do. Better institutions such as functioning contract enforcement, bribery-free operations, and reliable financial services would reward entrepreneurs for improving upon good ideas, including green ideas, like turning Indonesia’s waste into wealth.
Published Date: September 16, 2009