Land for investors
Land for investors
In Indonesia, with a land area of almost two million square
kilometers, land is supposed to be one of the cheapest factors of
production. In reality, though, land transactions have been so
complex and risky that investors often consider land acquisition
one of the biggest difficulties they usually face in establishing
businesses. The government, therefore, has promoted the concept
of industrial estates, where investors can easily buy developed
industrial lots for their projects or lease standard factory
buildings from estate developers.
Industrial estates have been designed to make things much
easier for investors because estate developers are authorized by
the government to handle, on behalf of the investors, all the
permits needed for industrial plant establishment. However, the
realization of the concept has not been as smooth as it seems to
be on paper.
A recent study by the National Land Agency and the ministers
of industry and trade and investment development found that
developers had been able to acquire only around 17,995 of the
53,000 hectares of land they have been allocated for developing
industrial estates. Of the acquired land, only 6,370 ha have been
developed into industrial plots ready to accommodate industrial
plants.
The survey concluded that many investors still preferred to
establish their plants outside industrial estates, because they
considered the land prices charged by developers much higher than
those outside the estates. Many industrial estates have also
passed on the capital costs of basic infrastructures to
investors. Several industrial estates have apparently been
developed like isolated islands, without access roads.
These problems should not, however, be blamed only on
unprofessional developers. For one thing, the absence of an
organized land market in the country has long been identified as
one of the major sources of the difficulties in land acquisition.
The government seems to have been very slow in addressing that
problem. An efficient land market requires a reliable land
registry and a transparent information system, but these two
crucial factors are still in the early stages of development.
Adding to the complexity of land transactions are the numerous
regulations, both at the central and local government levels,
which govern land titles and administration, along with the large
number of different government institutions involved in land
administration and management. A study by the World Bank last
year identified almost 2,000 land-related laws and regulations
It is no wonder that land transactions, besides being very
complex, arduous and time-consuming, often set off conflicts with
land owners, especially in the absence of clear rules on the
resettlement of the people whose land is acquired for industrial
projects. Land disputes also often arise because of the vagueness
of the legal framework on the recognition of traditional property
rights.
Because the demand for commercial land in the cities and areas
around urban centers will continue to increase and its prices
will consequently rise steadily and sometimes astronomically,
land problems and disputes could worsen to become a potential
source of major conflicts.
The planned establishment of an inter-ministerial team by the
National Land Agency to look into the problems of land
transactions could be a small, yet good start towards solving the
complex and often delicate issues of land acquisition. But
whatever might be the findings of the study team, any efforts to
solve the problems should not be of an ad hoc nature or case by
case basis, but should focus on the development of an efficient
land titling and registration system. Only with such an efficient
and transparent system can the government set up a one-stop
permit system for all matters related to land and enforce
adequate protection of property rights.