Industrially profound Banten area expects more tenants
Industrially profound Banten area expects more tenants
By I. Christianto
The Jakarta Post, in cooperation with Banten West Java Tourism
Development Corporation, is presenting weekly issues on the
Banten region. This week's issue is on industry.
JAKARTA (JP): Despite lacking its own resources for hard
commercial activities, West Java's Banten area has been a popular
site for chemical-related industries due to its ideal location.
This can be seen from an increasing numbers of huge industries,
plants and factories operating in the area.
Situated some 80 kilometers west of Jakarta, Banten covers
more than two million hectares of land, about half of the West
Java province. It has four regencies: Lebak, Pandeglang, Serang
and Tangerang. Most of the large-scale industries are located in
Cilegon, Serang. There is also a big petroleum plant in Merak,
Serang, which is run by the state-owned oil company Pertamina. A
wide range of smaller plants and factories are located in
Tangerang.
The Ministry of Industry and Trade's Chief of Research and
Development on Resources, Industrial Zone and Environment, Kasru
Susilo, said that a particular place did not need an industrial
estate since it had potential market.
"Investors will automatically come to an area since they
understand it has good location and demand, crucial points in the
economy," he said.
This happened to Banten, he said. "The history of industry in
Banten was initiated with the operation of the state-owned steel
maker PT Krakatau Steel in Cilegon. It was developed with Russian
technology when (president) Sukarno was in power. Cilegon was
regarded as a feasible location as it has a good link to Sumatra,
an island which also has a potential market."
He said that at that time, a link for agronomic was,
originally, the major consideration as another steel factory had
been operating in Lampung, Sumatra.
"But the steel factory in Lampung used wood-based energy, so
it was not feasible. Cilegon was also not feasible for a steel-
based industry but the government provided protection. Therefore,
the industry is growing well. Fortunately, many steel-based
industries have been established there, because protection
violates the World Trade Organization arrangement," he said.
Susilo said that from steel-based industries, Banten was now
popular as the site for chemical-related industries.
"This happened in three phases. First, during the 1960s, when
the government launched incentives to attract foreign investors.
The phase lasted until the 1970s, when many industries purchased
semifinished materials to be assembled in Indonesia. Such
operations needed a lot of steel. This benefited Krakatau Steel."
The 29-year-old Krakatau Steel now exports its products to
Britain, China, India, Japan, Korea, Middle East and Southeast
Asian countries. The company employs over 6,000 personnel.
"In the second phase, during the 1970s and 1980s, Indonesia
began its export-oriented industry and set an outward looking
strategy. Many businesses eyed imported products to be resold,
including chemical and chemical-related goods, which were then
located in Banten. There are also certain industries developed
under government protection like PT Chandra Asri Petrochemical
Center," Susilo said.
He said the price of products of chemical-related industries
in Banten were relatively less competitive internationally. "It's
the duty of the local authority of West Java to create more
infrastructure, services and other supporting businesses, such as
banking, to lower the industries' production costs."
Starting in the 1990s, when the third phase began, Indonesia
returned to agronomic-based products, Susilo said.
"Unluckily, we sell the products to several developed nations,
where consumers are very keen to select quality. Our products are
not so well. This is another problem for Indonesia."
"Banten, however, has the chance to invite more industries
which offer products with good quality, including agronomic-
related commodities. Again, Banten has the advantage. Strategy
can't always be smooth, we have to keep on watching for any
changes," he said.
What kind of advantages does Banten have? According to Susilo,
Banten is an ideal location and attractive to foreigners as the
area also has good places for leisure and natural recreation
areas.
"Banten can develop as a site of intellectual or capital
intensive industries. It doesn't need labor-intensive industries.
The area's sustainability is poor as it does not have adequate
resources for clean water. The soil in Banten is nonporous. If
labor-intensive industries are designated for Banten, the local
authority must start thinking about developing dams, housing and
other amenities," he said, reiterating that Banten has a best
geographical location.
"In addition to Banten, there are four other industrial areas
in Indonesia, namely Bontang, East Kalimantan, Lhokseumawe, Aceh,
Palembang, South Sumatra, and Gresik, East Java," he said.
He said that Bontang and Lhokseumawe are homes to various gas,
LNG and fertilizer industries, while Palembang is for oil-related
industries and Gresik for cement plants.
"Most plants in Gresik have moved to Tuban as the first
location is too close to East Java's capital Surabaya, which is
highly populated," he said.
Banten remains, however, at the top as it is located near
Jakarta, the center of government, and situated in the hub of
Java-Sumatra crossings.
"The business climate in Banten is also more developed than
the other three locations. In addition, Banten has prospective
seaports. In the meantime, social capability to accommodate
industrial activities is much higher in Banten. Someday, it will
be able to become a place like Japan or Hong Kong, which are poor
in resources but rich in intellectuals.
Susilo stressed that nobody can ignore the impacts.
"There are two kinds of bad impacts, social-economy-cultural
and environmental impacts. I believe there won't be much cultural
shock when more newcomers start flooding to Banten. First, it's
because Banten is close to metropolitan Jakarta, and, second,
Banten has tourism activities which have attracted lots of
visitors," he said.
He said that Banten became a unique place by having industrial
as well as tourism potency.
"Everyone, therefore, must be very careful to maintain Banten.
Industry can affect the environment, which is crucial for
tourism. On the other hand, tourism is alive due to the
industries which hire many expatriates. High-quality tourist
facilities prepared to serve foreigners and local travelers from
Jakarta also want to taste the services. So the tourism is
lively," he said.
Such a condition allows the local authority to attract more
investors, Susilo said. "Don't focus only on huge chemical-
related industries, but also the supporting businesses, including
financial and banking, entertainment and port management. If
necessary, collaborate with foreign investors."
Publicly listed PT Tri Polyta Indonesia (TPI) which produces
polypropylene, shared a success story in operating its business
in Banten. There are three industries making polypropylene in
Indonesia, TPI is the largest. The other two are located in
Palembang and Balongan.
The company's director and executive vice president of
finance, Suryandi, said that TPI had several reasons for opening
a factory in Cilegon.
"We understand that the government has planed to develop the
Cigading seaport in Banten to anticipate the potential congestion
at Tanjung Priok Port in Jakarta. Therefore, we are sure that
Banten will be a great area with its own container port. Second,
the shore in Banten is also great in that private jetties can
perfectly accommodate containers," he said.
He said that from a chemical-related angle, TPI is a high-risk
industry, so it must be away from any dense area. "Our industry
site is located away from populated areas."
From the point of location, Banten is indeed great, he said.
"The raw materials for chemical-related industries are gas, so
the industries are not supposed to be situated in the greater
Jakarta area. In the meantime, the down stream industries are
mostly located in West Java, this means transportation cost can
be reasonable," he said.
He said that TPI had not faced significant barriers during the
development in 1990. "We could download and take various hardware
close to the site as we operate our own jetty."
As a matter of fact, Banten has over 30 seaports, most of
which are jetties owned by private companies in the business
lines of propylene, oil and gas, detergent and other related
industries.
"Electricity really became reliable starting in 1992, when the
plant started to operate. Prior to that, it was poor. Luckily we
had not began operating yet," said Suryandi.
The state-owned electricity provider PT PLN in Banten operates
14 main stations in the region, located in Cilegon, Cikande and
Labuan. PLN Banten covers five operation areas -- Cilegon,
Cikande, Rangkas Bitung, Pandeglang and Labuan -- with a total
installed power of almost one million kilo-volt-amperes. In terms
of electrification, PLN has covered 100 percent of all villages
in Cilegon, 99 percent in Cikande, 79.66 percent in Rangkas
Bitung, 97.83 percent in Pandeglang and 86.96 percent in Labuan.
Suryandi said that land transportation had also greatly
contributed significant support for various industries in Banten.
"Before the toll roads were develop, it took four hours to get
to Cilegon from Jakarta. But now it takes only 1.5 hours at the
most. The government has done a very good job," he said.
Banten region, claiming to have a wide range of tourist
attractions, has been a popular site for huge factories and
industries. Access to get into the area has been very easy since
the operation of the Jakarta-Merak toll road, which includes a
26-kilometer toll road linking Jakarta and Tangerang, a four-
kilometer Ciujung toll road and a 8.4-kilometer Serang toll road.
This infrastructure totals more than 100 kilometers in addition
to common roads in the area.
Railway services remain a favorite facility. The railway
operator PT Kereta Api operates passenger trains, while the
railway network can be used for container cars as well.
"We can use the railway service in the last two years. It's
very useful, particularly during the riots and violence which hit
Jakarta last year. We use the railway service to reach Semarang
and Surabaya," Suryandi said.
He said that to reach Sumatra, TPI expended less costs since
Banten was very close to Lampung, Sumatra's major entry point.
"There was a time when several employees had hardships
realizing they were assigned in Cilegon. They thought that the
city was remote with no entertainment facilities. This doesn't
occur anymore," he said.
According to Suryandi, since more people are working in
Banten, the area needs to have more hospitals offering modern
facilities.
TPI's executive vice president corporate support and human
resources, Edi Prabowo Soebandi, said the company had absorbed
many local people.
"Out of some 500 employees at the plant in Cilegon, 15 percent
are local people. At the beginning, in 1992, local people were
working at the lowest level but they have gradually improved,
including the new employees. This is because Banten has a diploma
program petrochemical school at the University of Tirtayasa."
"Now, some local people work at the supervisory level," he
said, adding that TPI has also created good loyalty from its
employees.
"When there were many layoffs, lots of workers in the Banten
area held protests, but not at TPI. Based on self-conducted
research, this was due to the belief that TPI hired an adequate
number of local people. TPI is involved in various social
activities, including extending various educational support," he
said.
Soebandi said TPI extended contracts to local vendors and
suppliers in various smaller deals to boost local businesses.