Why Indonesia [probably] will fail in Implementing “Paid Plastic Bag” Policy? : A Casual Economics Review
Caution: It will be a long article, so I draw some illustration. However, still boring but mmm maybe not in a deathly level 🙂
Happy Earth Day, Planet Earth!
Earth Day special, I want to look like a real “Green-Economist” and based on some requests I will write about Paid-Plastic Bag Policy in Indonesia. I don’t want to stress you with crazy creepy economics terms, so I tried my best to make it as casual as possible.Ah! And sorry, in English… while I want to do “more” with the Indonesian version.
Well, here the news! Based on a paper written by Jambeck, et al (2015) , Indonesia became the second biggest plastic waste contributors in the ocean, just below China which was in the first place. Is it serious problem? Definitely, yes! Indonesia already experienced a huge drop in fish harvesting because of unsustainable fish-catching (e.g. using bomb, poison, etc), climate change, and now: waste, to be precise plastic waste. The details summarized in the graph below:
Every book, including history books, noted that environmental problem usually happened in lower-middle income countries which try to transform their economic structure. But who want to be trapped in the same trap? Indonesia also learns from the past. We love popularity but not as plastic waste contributor in this blue planet! Then, started from February 2016, Indonesia tries to implement “paid plastic bag” policy in 22 cities. Such an out-of-dated policy for some countries, but it is very new in my lovely country. How the policy works? In brief, you should pay 200 IDR (around 2 JPY or 0,02 USD) / plastic bag every time you do shopping in any modern retail stores.
Then what happened all around Indonesia? Lots of people reject this policy. Of course if I am a policy maker, I will realize that my policy will gain some critiques and that’s not my business to please everyone. My jobs are increase people wealth and create environment sustainability. Haters always gonna be haters, but haters sometimes give their most objective critics, so let’s analyze their critics points.
After 2 months, there is no significant reduction of plastic waste in Indonesia. Probably, it is even more plastic waste than anybody can predict!
I remember, once in television, my favorite writer Arswendo Atmowiloto said “Indonesia people made their own economics theories.” As economist I will give standing applause for this quote. Leave your economics textbook, because it is beyond our imagination.
To counter this point I just can say: This is too early to judge that this policy totally failed. Still 2 months! What you can do in 2 months? Like a baby, they just already started to see his parent clearly. In business terms it still “test the water” part.
But, can that point come true? unfortunately, I should say “Yes”.
I have several reasons:
First, we haven’s accustomed yet. No further explanation needed.
Second, There are no efforts from the shops to reduce the use of plastic bag. If today you go to any random retail store or supermarket in Indonesia and buy something there. Maybe you will find the cashier simply totaling your groceries plus your plastic bag even if you only buy a can of cola. “Oh, but I don’t want to use plastic bag” upss… sorry, but it’s already counted.
Third, Indonesian never really interested in collecting small change. Huh? Is it related to the topic? I will give you long explanation for this one.
In Japan, I really hate 1 yen and 5 yen in my pocket. But the good news is at least here I can make ATM machine busy enough to count and save my coins. Also all groceries are in prices which need 1 yen and 5 yen nominal.
In Indonesia? Nope! We even face difficulties to save our coins to the bank. Indonesia’s smallest nominal is 100 IDR. When I was kid I still can buy a candy with 100 IDR or using payphone, but today there are almost none with that nominal. So, if you have lots of 100 IDR coins, maybe you can keep it in your piggy bank, but it is also bring another problem. Once, my friend tried to bring her coins saving to the bank, she already counted that and she had around 500.000 IDR (around 50 USD or 5000 JPY) and this value is consisted by 5000 shinny 100 IDR coins!!! yes! around 5000 coins, maybe more.
Money is money, she confident that Bank will be kind enough to accept her coins. She came to the Bank and TADAAAAA…Bank rejected it. With a sad face she just asked me “What should I do with this? Make it for weight-lifting?” Trust me, that’s a true story. If you don’t trust me you can read another story here [Indonesian only]
This physiological tendency then used by some supermarket and convenient store to ask “Do you want to make donation with your small changes? “ and with a lazy tone, almost all of us just simply said “Ok” without even ask where that exchange will go (another reason why recently there are high report about “small corruption” by the cashier).
Thanks to “paid-plastic bag” policy, trend will be slightly changed then!
If, for example, the exchange is 400 IDR, then an Indonesian see there are many things she already bought, of course it is rational decision for her to pay for 2 plastic bags than should donate it somewhere she never know. Even if she just needs one plastic bag, she still chooses to buy 2 plastic bags, one for her stuff, another one? Well… she will need it (although in fact no one ever re-use it, who need lots of plastic bag?). Even! If she don’t need plastic bag at all but then she heard the exchange will be, for example, 200 IDR! She probably say “Mmm…Oh okay, with one plastic bag please!” and she will feel she made a genius deal! How stingy Indonesian! Oh, no… that’s the most rational economic decision everyone probably take. In behavioral economics there is a statement that we, human, prefer something that gives exact utility for ourselves in the near future. We looking a way to fulfill our needs first before other people’s needs, even that’s a silly thing called plastic bag.
If this thing always happened then plastic industry will be so happy, yes! Why? 1. While there is no clear explanation where the money goes, let’s assuming it goes back to plastic bag producer, probably it can cover their production cost. 2. While demand of plastic bag are not changing (or even accidentally increased!) and there are no specific requirement from the government about plastic bag price, then voila! It is a great business for plastic company (sst… don’t say it to plastic company, please). I want to look cool here, let me draw you a curve to explain it.
Using the curve above, assuming accidentally plastic bag demand increases (say because the price is very affordable and the increase of income of Indonesian) .Economy start in EQUILIBRIUM state and give us price of plastic bag in in Peq and quantity sold in Qeq. If the demand INCREASE (D shifted to the right become D’) then Qeq become Q’. If government kept the price of plastic bag still in Peq, capturing the opportunities in the market, plastic company will INCREASE supply of plastic bag (S shifted to the right become S’).
In the other words, plastic company will produce more plastic bag to fulfill market’s need. It is also means an increase in plastic waste. It is undeniable. Of course maybe it is “too extreme” case. However, I want to show that as long as the price is below or same with equilibrium price, plastic bag still promising product for the plastic company.
So, what should we do if we want to decrease the quantity of plastic sold by the market?
Again, economist should draw a lot of curves!
Assume we want to decrease Quantity sold until Q”, in economics one variable that can be modified is Price! Let’s make government firm enough to regulate the Price on P” which is above Peq. Supply curve always sticky enough to be changed (I mean we can’t force the company to reduce their benefit? Remember, in classical theory, company never care anything except maximizing their profit). But we, consumer… we sensitive with price :D. Consumer will think twice to buy that plastic bag, why should we waste money for such low quality plastic? Ewww…Go away plastic, our wallet really hate you! Right after that comes into consumer mind, demand will decrease until D”. Plastic bag also will not profitable enough for the company and for sure they will decrease their production. What a news! we save the planet then!
Enough with curve, still some points to explain.
Forth, “Monthly shopping” culture. If you go to Indonesia… you probably will see that people will buy huge amount of groceries! In our culture (based on my experience as 100% Indonesian!) we buy something for monthly needs. Here in Tokyo, I found that people buy groceries for weekly or daily so one small or medium size shopping bag will be enough. I can show you how small Japan’s shopping bag is:
Once a high-middle income families go to supermarket they will buy everything! One sack of rice, 5 boxes of noodles, soap, cooking oil, sandals, clothes, pencil, hairdryer, Venus, Mars, Jupiter, Saturn, everything! How many shopping bags do we need then? Even me, researcher on climate change field and also an economist, I will pay for plastic bag for this. While the plastic bags also cheap! Only 200 IDR… and based in the news I conclude that this price is below equilibrium price. Then we face excess demand of plastic!
“Hei! But who can beat custom and even culture?.” This one is a difficult part.
But I remember, I am such a bookworm, and can’t help with it. Every time I go to the bookstore, I can empty my wallet and buy a mountain of books, some of them are very thick. Then I realize one thing… here in Japan, no matter how heavy my books are, they will provide me with paper bags. At first I am really worry about it, and the only English sentence written there was “This bag made by recycled paper”. I thought it will be broken just 3 steps after I left the book store. However, I went around Tokyo bringing that paper bag with full books inside and it kept my books safe until home. I don’t know exactly about total production cost of “strong” recycled paper bag is, but if it is cheap enough I hope Indonesia can try to that’s one.
Fifth, No garbage separation policy in Indonesia. In Indonesia, you can throw any garbage anytime (and anywhere). Some places already try to separate garbage into organic and non-organic, however that’s “useless” because there are no separated garbage truck between organic and non-organic garbage. So, why Indonesian should separate it if then it will mix again on the truck? Why? Tell me…WHY!?
Hey! But why is it related to the number of plastic waste? Before answer that, let me tell you my story.
I am living in a town where there is no policy about paid-plastic bag. So, every time I buy my groceries (while I am Indonesian, I love to buy something for at least for two weeks ahead :p), I get lots of plastic bag. But only in a week, there are no plastic bag left in my home.
Why? Because here, I am struggling to separate waste! On “Recyclable garbage” day I should separated them into 8 type of garbage: Newspaper, leaflet/books/magazine, cans, pet bottles, card boxes, milk/ beverages boxes, food tray, and glasses jar. Assume there is a day I have all of these Recycled garbage types, then I need 8 plastic bags to separate them!
In another day, there will also “burnable garbage day” and “Non-burnable garbage” day… of course I need another plastic bag to separate them carefully. Bye plastic bag…
I can assure you that my home is free from any form of plastic waste.
I also can’t randomly throw my garbage without following the rule; the truck will never take your garbage if the garbage is not fit with the schedule. Such a hassle, but we happy because no garbage everywhere and ministry of environment also happy while it is easier for them to process all garbage.
I think plastic consumption in Tokyo is higher than any other place in Japan, but the waste management is very good also so it is not such a big burden for Japan.
Back to Indonesia… as I told you before, we love buying something in huge amount for monthly stock, then we get lots of plastic bags and have no idea what we can do with them after that. Some people keep it and assume they will need it later; some people just throw it away. But in another month we do the same thing again… again… and again…
The story will different if Indonesia has a good waste management system. I think it is too early (and too crazy) to follow Japan waste separation system (they start to apply this system from Meiji period actually). Maybe try to separate organic and non-organic waste will be a good start. In that time, at least Indonesia can recycle the garbage better! Not only pile everything on the landfills!
To be honest! I think the main reason why there are lots of plastic waste in Indonesia is not only because we use so many plastics in our daily life, but also because government still have no idea what should they do with all of the waste!
Personally (really… this is personal thought), without any disrespect to Indonesian government efforts in reducing plastic waste, applying paid plastic bag policy before applying good waste management system is like learn how to make an airplane before learn basic physics. Or if you are an economist, it is like learn applied econometric before learn math. I mean, it is possible to work but will take time… so much time! It is possible, but somehow not efficient.
Well, that’s it…
I hope I give a friendly explanation about everything and give you some idea how to criticize this topic smartly 🙂
Good luck, Indonesia.
Good luck, all Indonesian.
let’s make Jambeck et al revise their research result soon 🙂
 Jenna R. Jambeck, Roland Geyer, Chris Wilcox, Theodore R. Siegler, Miriam Perryman, Anthony Andrady, Ramani Narayan, Kara Lavender Law, Science 13 Feb 2015: Vol. 347, Issue 6223, pp. 768-771.