18 Absorptive Industrial Estates Investment IDR 250 T

JAKARTA – The Ministry of Industry (Ministry of Industry) targets 18 industrial zones (KI) outside Java to operate this year. The 18 KIs are predicted to be able to absorb an investment of Rp 250 trillion and direct labor as many as 900 thousand people.

Of the 18 KIs, as many as eightIs are in the construction phase, namely in Lhoukseumawe, Ladong, Medan, Tanjung Buton, Landak, Maloy, Tanah Kuning, and Bitung. The 10 KIs are still in the planning stage, namely in Kuala Tanjung, Kemingking, Tanjung Api-api, Gandus, Tanjung Jabung, Tanggamus, Batulicin, Jorong, Buli, and Bintuni Bay.

Based on data from the Ministry of Industry, until November 2018, 10 KIs have been operating, including the National Strategic Project (PSN). The 10 KIs are located in Morowali, Bantaeng, Konawe, Palu, Sei Mangkei, Dumai, Ketapang, Gresik, Kendal, and Banten. Referring to Presidential Regulation No. 58 of 2017 concerning the Acceleration of the Implementation of PSN, there are 23 KIs which are designated as PSN.

During 2015-2017, sector investment in all KI reached Rp 126.5 trillion. The three-year investment consisted of foreign capital investment (PMA) of Rp. 103 trillion and domestic investment (PMDN) of Rp. 23.5 trillion.

Director of Industrial Territories Directorate General of Regional Resilience Access International Industry (KPAII) Ministry of Industry

Ignatius Warsito said, an investment of Rp 250 trillion also includes the construction of supporting infrastructure, such as electricity generation, water treatment, wastewater treatment plants (IPAL), land, and roads.

“We are targeting 18 KI to operate in the third quarter of 2019. God willing, it can be achieved, because we are pushing for accelerated development, “Ignatius told Investor Daily in Jakarta, last weekend.

He added, in the first quarter of 2019 there had been no investment from foreign investors to the new KI. The reason is that foreign companies are still looking for funding sources from their home countries. In addition, foreigners need land acquisition permits and a number of funds to buy industrial land.

“New foreign companies will invest, after there is a recommendation or permission from the KI manager. This happened in Morowali, Weda Bay, and Konawe, “he said.

Ignatius does not deny that the global conditions are still uncertain, the submission of business licenses for Online Single Submission (OSS) is not optimal, and the dualism of authority in Batam can be an obstacle for investors to enter new KIs. However, it is still optimistic in encouraging the development of Information Technology by ensuring land availability and rules for investors.

“Regional governments also do not bother investors, for example, regarding labor issues, not first. We will oversee the new KI project to create investment and employment for our people.We are also evaluating several KIs with the Coordinating Minister for Economic Affairs, “he said.

Ignatius explained, it was not only specific to hunting Chinese investors, who are currently driving investors in several KIs, including Konawe and Weda Bay, but also other countries, such as South Korea (Korea), Japan and Russia. They were invited to enter the new 18 KI.

In fact, he admitted, there were several foreign investors who collaborated with each other, such as in the Tanah Kuning International Industrial and Port Area (KIPI). In KI, Malaysian companies are working on power plants, while the port is done by South Korea and Japan.However, he was reluctant to name the companies.

KI of Bintuni Bay, West Papua, he said, is also expected to be able to get investment immediately, after the feasibility, location and price of gas are determined. “Then, I also saw yesterday in Jorong, Ladong, Lhokseumawe also walking. We also want to encourage Tanggamus so that investment can be quickly entered, “he said.

He added, halal clusters will also be built on the 18 KIs. It aims to attract investors and improve the development of the halal industry. Halal clusters can also be built by old KIs.

“If a halal cluster has been established, that means it has its own attraction for special products.This can also accelerate development. So far, most halal clusters have been established on existing Java, covering a total area of 10-30 hectares (ha) and will become sharia model areas such as abroad, “he explained.

For employment absorption, Ignatius estimates that the new 18 KI each absorb a maximum of 50 thousand people, bringing the total to around 900 thousand people. If coupled with indirect labor, the number could be 10 times greater or 10 million people.

“For example, KI Morowali, which currently has a workforce of 30 thousand people. Well, the multiplier effect can be 10 times to 300 thousand. “10 million workers are huge, if we talk about the current industrial workforce is only about 17 million people,” he said.

Prepare incentives

The Ministry of Industry, he said, has prepared five fiscal and non-fiscal incentives to attract foreign investment in the 18 KIs, including tax holidays, tax allowances, super deductible taxes for R & D and technology at 200-300%. He hopes, in the near future, the proposal will be approved by Finance Minister Sri Mulyani in the form of the Minister of Finance Regulation (PMK).

“These incentives can accelerate investment by around 20% more. I am sure business people have their own calculations. If the government commits to give 200-300% tax incentives, they will enter, “said Ignatius.

For the non-fiscal, he asserted, the Ministry of Industry is encouraging each industrial area to be determined as a vital object, thus giving investors a sense of security and comfort. “We are working on a memorandum of understanding (MoU) between the Minister of Industry and the National Police. “The scheme, in each region, will be secured by the local police chief,” he said.

Encourage equity

Minister of Industry Airlangga Hartarto said that the development of KI outside Java was aimed at promoting infrastructure and economic equality throughout Indonesia. The development, he continued, is believed to be able to increase the value of investment in Indonesia. In fact, with the establishment of the factory, it will absorb a lot of local labor.

“This is one proof of the multiplier effect of industrialization activities. We project a 60% increase in the contribution of the non-oil and gas processing industry sector outside Java compared to Java, “Airlangga said.

Until November 2018, he said, 10 KI PSN had been operating, namely Morowali, Bantaeng, Konawe, Palu, Sei Mangkei, Dumai, Ketapang, Gresik, Kendal, and Banten. He explained, KI in Java would be focused on developing certain types of industries, while the development of new KI outside Java was directed at natural resource-based industries and mineral processing.

He gave an example, Sei Mangkei and Kuala Tanjung will be a cluster for the development of agro and aluminum-based industries, because there is Inalum and the CPO processing industry.”This is also a step for the Ministry of Industry to spur the downstream industry. “Inalum has produced aluminum ingots that can be used by the automotive sector for engine blocks,” said Airlangga.

Meanwhile, the industrial estate in Morowali has succeeded in downstreaming nickel ore into stainless steel. For nickel ore, it sells for around US $ 40-60 per ton, whereas for stainless steel the price is above US $ 2,000 per ton.

“We have been able to export from Morowali for US $ 4 billion, both hot rolled coil and cold rolled coil to the United States and China,” said Airlangga.

Integrated KI

Deputy General Chair of the Industry and Trade Chamber (Kadin) in the field of Johnny Darmawan reminded that the government must prepare an integrated KI equipped with supporting infrastructure, such as power plants, water, ports and hotels or residences. That way, the new KI being developed can be successful and attract a lot of investment. This has been included in the Kadin study and the National Economic and Industrial Committee (KEIN) and has been submitted to the government.

“At present, the development of KI initiated by the government is running in pieces. For example, in one area there are oil and gas resources, then an industrial area is created, but the port is not there or take electricity from other regions, this is just a lie. All facilities should be built in one area so that logistics costs are cheap, “Johnny said.

According to him, the investment value of Rp 250 trillion for the construction of 18 regions is enough to build infrastructure. Because, after the facility was built, KI can be directly offered to investors, both local and foreign who are interested. The new KI managers can be BUMN or private.

One of the ideal industrial areas, according to Johnny, is Morowali, Central Sulawesi. KI has integrated and complete infrastructure. “Industrial estates like this should be successful,” Johnny said.

He welcomed the Ministry of Industry’s plan to build a halal industry cluster in 18 new industrial zones. The reason, this is becoming a world trend. Moreover, Indonesia is a country with the largest population of the world, so halal products become Indonesia’s trademark.

However, he warned, before the government seriously worked on KI halal, understanding halal questions must be equated domestically and abroad. Don’t let, continued Johnny, later when importing goods from Malaysia that are halal, the contents are still checked in the customs area. This can lead to a feeling of distrust between the business world

and the government.

“So, the definition and boundaries must be clear first. The definition of halal is a combination of hygiene, so it does not have to be complicated. If it’s complicated, the price of halal products can actually be expensive, because there is a fee for processing the certificate. Over time no one wants to wake up, because it can go bankrupt, “he said.

Meanwhile, Chairperson of the Indonesian Industrial Estate Association (HKI), Sanny Iskandar, said that regulation of the halal industrial estate is being discussed. “Later, the halal cluster is adjusted to the preferences of each KI. If there are developers who see the potential needs of the halal industry, he can prepare the cluster, “he said.

Sanny added, 18 new KIs initiated by the Ministry of Industry would certainly be able to attract investors, if the location was in accordance with existing resources. For fiscal policy, he assessed, it depends on the policies of each region.

“So, there are fiscal policies for certain regions, especially outside Java. But, in general, fiscal and non-fiscal policies have been given quite a lot to manufacturing industries located in industrial estates, “said Sanny.

He responded positively to the Ministry of Industry’s plan for each new KI to be designated as a national vital object. The reason is, KI does need special security. “KI is made with the aim of encouraging increased economic needs, so that it must be naturally safeguarded,” Sanny said.

Sanny added, KI sales in Jabodetabek and Karawang are targeted to reach 300 hectares (ha) this year, up from last year’s 150-200 ha. However, it has not been able to predict KI sales outside Java. This depends on how much the industry is entering.

“Once there is a large industry entering, sales can be very high. At present, there are many KIs outside Java, including in Sumatra, Sulawesi and Kalimantan, so it is rather difficult to predict how much sales will be. But, I don’t think it’s far from Java, “he said.

Source: Ministry of Industry Republic of Indonesia