Mon, 10 Aug 2015

The Central Java administration should address seriously the defrauding of two South Korean investors intending to set up garment and shoe factories in the province, otherwise its campaign to woo labor-intensive industries away from Jakarta and West Java, where minimum wages have risen substantially, will end in failure.

Franky Sibarani, chairman of the Investment Coordinating Board (BKPM), revealed last week that the two investors were cheated in land-acquisition deals. One was deceived by middlemen into buying an industrial plot in the middle of nowhere, while the other was misled into acquiring a piece of land in an area not zoned for industrial use.

Sibarani did not give further details as to the size of the losses. But whatever amount the losses might have been, these cases, if not immediately tackled, could severely damage Central Java’s concerted campaign to make it the best alternative to Jakarta and West Java for labor-intensive manufacturing operations.

But potential losses are much higher as the two investment projects planned to employ 24,000 workers. Had the two projects come onstream, they would have generated two major new sources of national and local tax revenue.

The duping of the two Korean investors also raises questions as to why, instead of using the provincial investment office (BKPMD) as the gateway or guidepost to processing all the necessary local permits and to get basic information they needed, they used the services of middlemen and land speculators.

The BKPMD, anywhere in the country, is supposed to be the institutional gateway for investors into a province where they can get all the basic information on how to obtain all the necessary local permits, on land zoning and land acquisition, labor regulations etc. Central Java Governor Ganjar Pranowo should take the provincial BKPMD to task as regards the misfortune endured by the Korean investors.

Ganjar has been wooing domestic and national investors to set up labor-intensive manufacturing facilities in the province, as its minimum wages are among the lowest in the country, local trade unions are not as militant and radical as those in Jakarta and West Java and land prices are still relatively low. And the campaign has produced some results.

Singapore Sembcorp Development is building a 2,700-hectare industrial park in Kendal, complete with its own power plant and three water sources. It is a joint venture between Sembcorp and Jababeka, one of Indonesia’s largest industrial estate developers, which owns and manages, among other things, the Jababeka industrial estate and dry port in Bekasi, West Java.

The local administration should see to it that the Kendal industrial project runs smoothly. Such facilities, as well-designed industrial estates in major cities as Jakarta, Bandung, Semarang, Surabaya, Medan, supported with adequate infrastructure such as ease of access to airport or seaport, power, bonded warehouses, training facilities and residential areas, have contributed greatly to speeding up the growth of manufacturing industries.