Industrial estate business begins to look up

Sudibyo M. Wiradji, The Jakarta Post

Signs of a revival in investor confidence has brought fresh hope to the country's many industrial estates, which have been in the doldrums since the crisis hit the country several years ago.

Activities in many of the industrial estates, especially those located near Jakarta, have picked up. Many of them are improving their infrastructure in a bid to take advantage of the increase in business confidence.

Although the flow of FDI remains low, there has been a sharp increase over the last several months.

According to the latest data from the Investment Coordinating Board (BKPM), foreign investment approvals rose 80 percent to $6.63 billion (949 projects) from January to July of this year, from $3.71 billion (713 projects) in the same period last year, while domestic investment approvals surged to Rp 31.51 trillion (136 projects) from Rp 28.71 trillion (120 projects) previously.

The value of realized foreign investment from January to July soared by 95 percent to US$4.9 billion, compared to $2.49 billion in the same period last year.

Industrial estate developers are upbeat that the revival of business confidence will encourage the setting up of more companies.

At least 40 industrial estates are currently operating in the country, of which 32 are located in Java. Of the remainder, three are on Batam Island, one is on Bintan island, three are in Sumatra and one is in Makassar, South Sulawesi.

PT Jababeka Industrial Estate, which operates a 3,000-hectare industrial estate in Cikarang, Bekasi, for instance, is currently developing the Jababeka Central Business District (JCBD) on a 16- hectare plot of land following the completion of other facilities, such as a residential estate, malls, shopping centers and education parks.

The JCBD is complemented by stores offering a wide range of necessities from fashion and beauty products to cellular phones and banking facilities.

Apart from the Jababeka Central Business District, the estate is also constructing the Capitol Business Park, including an executive club, an international hospital and a police headquarters.

The existing tenants will be able to take advantage of the new facilities and, hopefully, they will also help attract prospective investors to set up their companies in Jababeka, said PT Jababeka's marketing general manager, Agus Canny.

The estate recently started marketing new industrial plots of between 5,000 square meters and 50,000 square meters each, complete with standard electricity supply, telephone connections, water supply, and wastewater treatment facility.

In addition to the industrial plots, the estate also offers factory buildings of different types and sizes for light and medium-scale companies.

PT Jababeka, established in 1989, has succeeded in persuading leading national and multinational corporations to set up factories in the estate. Investors include those from the United States, Japan, Korea, China, Malaysia, Singapore, Norway and Sweden.

Most of the companies are involved in the automotive, spare parts and consumer goods activities.

While efforts to attract investors continue, the Jababeka estate has also boosted its services to existing tenants to make them feel at home as, generally, prospective investors seek input from those already doing business in the estate before setting up operations there, Canny said.

Tenants, for example, are always facilitated if they need such things as additional electricity connections, telephone lines or water supply.

Other industrial parks that are well-known among investors and industrialists include Lippo Cikarang in Bekasi, Surya Cipta Swadaya in Karawang, West Java, the Cilandak Industrial Estate in South Jakarta, Pluit Distribution Center in North Jakarta, Kawasan Berkat Nusantara, Balaraja Industrial Park, Taman Tekno Bumi Serpong Damai in Banten and the Krakatau Industrial Estate Cilegon (KIEC) in Banten.

Lippo Cikarang, a self-contained satellite city located about 40 kilometers east of Jakarta, is also improving its residential and industrial facilities.

Lippo Cikarang has been developed in such a way as to allow residents to work there, go to school there, do their shopping there and enjoy recreational facilities available both indoors and outdoors, including the sports center at the Hotel Sahid Lippo Cikarang and "Water Boom", a water sports theme park.

The self-contained city has a number of industrial parks, such as Delta Silicon, Delta Technology Center, California Technology Center and Multiguna Building, which provide different sizes of offices and factories to both local and foreign investors.

Meanwhile, PT KIEC is pushing ahead with its infrastructure construction projects at its expanded industrial area in Tegalratu and Randakari villages, Cilegon, West Java, aside from improving the existing infrastructure and facilities in the industrial park. The infrastructure under construction includes roads, drainage system, water supply system, and electricity and telephone lines.

The KIEC's industrial expansion project, which covers some 74 hectares, started in 2002. "Two companies are already in operation," said KIEC's head of public relations, Ike Nikita.

He said that although the infrastructure construction projects in the expanded industrial park were still underway, several domestic and foreign investors had expressed interest in setting up plants on the site. "Negotiations are still underway," he said, adding that the names of the prospective investors remained confidential.

The KIEC is expected to attract more investors when the Bojonegara international seaport, now under construction, is ready for operation, said Ike.

The facility, located about 20 kilometers from the industrial park, is expected to replace Tanjung Priok seaport. The construction of the new port is scheduled for completion in 2007.

The KIEC, which was established in 1982, is a subsidiary of PT Krakatau Steel. The industrial park covers an area of some 624 hectares, with 54 companies having set up shop there. Of these 54 companies, 50 percent are multinational companies. Most of them are engaged in the upstream and downstream steel industry, and the chemical and petrochemical industries.

Like other industrial estates, the KIEC also sells industrial plots and factory buildings. The plots on sale range from 2,550 square meters to 470,100 square meters.

Investors have the option of purchasing or renting. "Following the purchase of the land, we provide support and assistance to investors to obtain land use permits (HGB) for 30 years, that can be extended for another 30 years and then 20 years," he said.

The KIEC 's standard factory building (SFB) units have an area of between 1,600 square meters and 2400 square meters. The buildings are designed for production activities, including fabrication, assembling of electronics products and electro- plating.