INDONESIA plans to build one of its largest industrial parks
on the north coast of Java island in a renewed drive to attract manufacturers
relocating out of China, Reuters reports.
The opportunities Southeast
Asia's biggest economy aims to exploit as it comes out of a Covid-19 lockdown.
But Indonesia must overcome decades-old hurdles including red tape, rigid
labour laws, and poor infrastructure to be able to move up the value chain.
This time, in its quest to
emulate rivals such as Vietnam, the government has shown serious intent in
bringing about change and is aiming to pass an ambitious omnibus bill later
this year to address some of the pressing foreign investor concerns.
Lin
Neumann, managing director of the American Chamber of Commerce Indonesia, welcomed any incentives the park and new
infrastructure offered but highlighted the importance of passing the bill, as well
as opening up more protected sectors to foreign investment.
"The omnibus bill should
impact the entire economy. That means the investment climate could change
nationwide," said Mr Neumann.
At the same time it is pushing
ahead with plans for a 4,000-
hectare (9,884-acre) industrial park,
an area equivalent to more than 5,000 football fields, in Brebes, Central Java - mainly targeting supply chains
relocating out of China.
"This is a pilot project for
Indonesia on how we can attract global investors heading out of China,"
said Ahmad Fauzie Nur, chief
operating officer of PT Kawasan Industri Wijayakusuma.
The
area's low minimum wage - US$1,200 - a month is another selling point, said Mr Fauzie Nur, who
believes the park can compete with Vietnam and Thailand, the region's winners
in attracting investors during the US-China trade war.
In a bid to avoid problems
securing land, the state-owned company avails itself of a law to acquire land
cheaply and ensure low rents at the park.
Taiwan's
Foxconn Technology Group had
reportedly been interested in building a factory in Indonesia in 2014 but
scrapped plans due to land issues.
The proposed park is located 270
kilometres east of Jakarta in an area dotted with fish and shrimp farms and
already has a road link to the capital and two nearby ports.
An official at Indonesia's
investment and maritime affairs ministry estimated the park's first phase would
cost IDR3.8 trillion (US$135.1 million).
In recent years, Indonesia has
attracted foreign funds in mainly resources, tech and other sectors such as
warehousing and logistics, but not so much in manufacturing.
President
Joko Widodo last year told his
cabinet "we
have a problem" with our
investment climate, citing an internal World Bank report that out of 33
companies relocating from China, 23 had chosen Vietnam while others picked
Malaysia, Thailand and Cambodia. None came to Indonesia.
In response, President Widodo has
prepared a flagship "omnibus" bill to replace around 80 overlapping
regulations hampering business, and improve the overall investment climate, but
the pandemic has slowed parliamentary deliberation.
Source : HKSG.
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