COST BENEFIT ANALYSIS OF ASEPTIC CARTON RECYCLING IN BANDUNG, INDONESIA

Abstract

Growing populations, rising incomes, and changing lifestyles contribute to severe waste management problems in many urban centers around the world. In low-income Asian countries, a majority of municipal solid waste is inadequately processed, leading to environmental problems that affect the health of humans and animals, and cause economic and welfare losses. However, in many countries there is neither infrastructure nor market incentives for managing household waste such as aseptic cartons usefully. This research explores the costs and benefits of recycling aseptic cartons at BBPK, a recycling facility in the Indonesian town of Bandung, and provides recommendations for improving the facility’s profitability.

The results of the cost benefit analysis from a business perspective demonstrate that the costs of operating the recycling facility generally exceed revenue. The negative operational cash flow occurs despite funding provided by aseptic carton-maker Tetra Pak to support BBPK’s purchase of raw materials. However, the cost benefit analysis demonstrates that under certain market conditions, recycling activities could become profitable. The prospects for such a scenario will ultimately depend on the sustained availability of external funding in the short to medium term, and capital investments in the facility’s recycling operations in the long term.

Hence, it is opportune for Tetra Pak to extend financial support to BBPK for the purchase of raw materials until market conditions for recycled pulp have stabilized. Working with BBPK, Tetra Pak could develop a roadmap that would envisage a gradual phasing-out of its funding subsidy. By demonstrating that BBPK can become financially viable by operating independently, Tetra Pak can demonstrate to other recycling facilities that aseptic carton recycling, despite its challenges, is worth considering in Indonesia.