Tue, 28 Jul 2015

Indonesia’s ambition to massively develop industrial estates across the country may take longer than expected as it is hampered by inadequate infrastructure and vast geographical distances, an industrial official says.

Under the administration of President Joko “Jokowi” Widodo, Southeast Asia’s largest economy aims to build at least 14 industrial estates outside the main island of Java within five years to spur economic growth across the archipelago.

Industry Ministry’s director general for industrial estate development Imam Haryono recently said the construction of the designated industrial estates might take up to 10 years, longer than the five years targeted earlier.

“All those 14 industrial estates are still lacking basic infrastructure development,” he said, adding that the government was trying to find the best solutions to realize the planned investments in those areas.

Imam further emphasized the importance of basic infrastructure surrounding the estates, which he said could provide guarantees for the so-called “anchor industries” — core industries that will act as pioneer investors and potential operators of the industrially integrated region. He cited some progress in the Morowali Industrial Estate in Central Sulawesi as an example.

“There will be more progress if the anchor industries accelerate their investments,” Imam said.

The Morowali Industrial Estate is being constructed by local miner PT Sulawesi Mining, which is owned by the Bintang Delapan Group, and China’s Tsingshan Holding Group in two stages of development for a scheduled 2018 completion.

Aside from the infrastructure issue, the considerable distance between Jakarta and all the industrial estates had created another problem, adding more pressure to the developments as the government had pushed for a nationwide economy in a bid to distribute income more equally, Imam said.

He further pointed out that even the Tanjung Lesung Special Economic Zone (KEK) in Banten, despite its location only 180 kilometers from Jakarta, has only seen snail-paced progress.

“German researchers see that our target is ‘too fast’ because industrial estate development there takes between seven and 10 years. We must realize that even the BSD City [Jakarta’s satellite town Bumi Serpong Damai] needed many years to grow,” Imam claimed.

Despite the problems, the Industry Ministry is in intensive talks with industrial park builders and think tanks on feasibility studies and detailed engineering designs (DEDs) of the 14 estates in order to keep on track with the target.

Before the late addition of the Jorong Industrial Estate in South Kalimantan, the government aimed to finish 13 industrial estate projects, including ones in Teluk Bintuni (West Papua), in Buli in East Halmahera (North Maluku) and in Bitung (North Sulawesi), with estimated combined investments of Rp 192.44 trillion (US$14.25 billion) by 2019. Covering a total area of 22,484 hectares, they are expected to generate 930,000 jobs.

The government has planned to allocate Rp 55.45 trillion for basic infrastructure development like roads and seaports from state funds.

Meanwhile, Indonesian Industrial Estate Association (HKI) chairman Sanny Iskandar said that his business group had discussed solutions to address the existing problems, especially those related to regional regulations.

“We also expect that the government ensure optimum security for industrial estates, which have been regarded as vital installations,” he said.