Industrial estates await supportive regulation

The Jakarta Post Jakarta

Having faced a business climate that has not been conducive since the 1997 monetary crisis, industrial estate developers are anxiously awaiting the government's new regulation in support of their development.

Chairman of the Industrial Estate Association (HKI) Johannes Archiadi told The Jakarta Post recently that a new regulation was necessary to support the development of more than 25,000 hectares of land already allocated for industrial estates.

According to HKI's report, there are 81 industrial estates located in 12 provinces across the country.

"We are expecting a government regulation related to the management and the development of the estates," he said recently.

Johannes said such a regulation would be needed because the present Presidential Decree No. 41/1996 on Industrial Estates could no longer serve as a legal basis after the implementation of regional autonomy in 2001.

"Regional autonomy has brought different perceptions among local administrations in managing industrial estates, which have often caused more burdens for developers," he said.

Many regional administrations, he added, have failed to improve their infrastructure due to a lack of funds.

"Most roads leading to industrial estates are in a bad condition, which can discourage investors from establishing factories there," Johannes said.

One of the companies complaining of poor infrastructure was LG Electronics Indonesia (LGEIN), which had complained about the badly damaged 11-kilometer road leading to its factory in Tangerang Banten.

The firm officials expressed concern that such a condition would discourage its South Korean principal to expand its business in the country.

Johannes concluded that poor infrastructure and legal uncertainty have been barriers for the industrial estates in offering land to new companies.

"Up to now, we have not been able to return to a condition where investment in industrial estates is lucrative. We are hoping that the present government notices the condition and realizes that developing the estates is vital to support economic growth," he said, adding that every 1 percent growth in industrial estates reflects a 1 percent growth in the economy.

At present, there are about 6,000 companies operating in industrial estates with about 600,000 workers.

HKI executive director Fahmi Shahab said the figure was too small considering that the association members occupied only 6,250 hectares, or only about 25 percent of the allocated land.

"The ideal percentage of the land usage should be 70 percent, while the remaining 30 percent could be used for other purposes, such as public facilities," he said.

He added that if this situation continued, foreign manufacturing companies could move their factories to neighboring countries that offer a better investment climate. (006)