Indonesia park to spearhead bid to lure China supply chains

KAWASAN INDUSTRI - JAKARTA. 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 as Southeast Asia's biggest economy comes out of a coronavirus-induced lockdown.

Yet, despite its low wages and huge domestic market Indonesia must overcome decades-old hurdles including red tape, rigid labour laws, and poor infrastructure to be able to move up the global manufacturing 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.

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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 state company due to operate the park.

In a bid to avoid problems securing land, the government would use a law to acquire land cheaply and ensure low rents at the park, said Fauzie Nur.

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 km (168 miles) 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.

The area's low minimum wage of 1.9 million rupiah ($135.14) a month is another selling point, said Fauzie Nur, who believes the park can compete with Vietnam and Thailand, the region's winners in attracting investors during the U.S-China trade war.

An official at Indonesia's investment and maritime affairs ministry estimated the park's first phase would cost 3.8 trillion rupiah ($275 million).