Indonesia park to spearhead bid to lure China supply chains

In the wake of the U.S.-China trade tensions and the pandemic, companies have recognised that in the past 25 years they had become too reliant on China, said Yose Rizal Damuri, an economist at the Centre for Strategic and International Studies, a think-tank.

Damuri said while companies are likely to decide on restructuring supply chains by next year, Indonesia should "be ready before that as they are already making preparations."

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.

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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, 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.

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 Neumann.

Barring any changes, Fauzie Nur said the park's first stage should be completed by next year.

"We can't just be onlookers all the time."