'Not fully recovered but much better now'

The Indonesian Industrial Estate Association (HKI) has expressed concern over the slow growth of the country's industrial estates due to infrastructure and regulatory problems. The Jakarta Post's Tubagus Arie Rukmantara talked to HKI chairman Johannes Archiadi about the latest developments in the country's industrial estates.

Question: How do you perceive the recent developments in industrial estates? Answer: Despite the country's growing economy, industrial estates have not recovered to their peak performance in 1995, when they were so attractive to investors.

HKI has 81 members controlling over 25,000 hectares across the country. But only 6,000 hectares, or about 25 percent of their land, have been sold or rented, far lower than the ideal occupancy rate of 70 percent. This means growth in the estates is not satisfying.

On the other hand, we are facing global competition from Malaysia, Thailand and new emerging economies, such as Vietnam and Cambodia, which have attracted foreign investors to set up plants in their industrial estates.

What is needed to accelerate the growth of the estates?

There are several conditions needed to support the development of the estates.

First, Indonesia has to be a safe country with a conducive business climate. Investors want to see law enforcement so that legal certainty can be established.

Second, the infrastructure should be adequate. Some companies operating in industrial estates are facing ongoing problems, such as damaged roads and traffic jams that prevent them from delivering products on time. Many regional administrations say they cannot afford to fix the damaged roads because of a lack of funds. Meanwhile, the central government does not allocate funds to fix the roads. If this problems continue, industrial estates here will be very unattractive.

The government should also consider constructing railways leading to the estates to help accelerate and increase deliveries.

Third, the government should produce supportive labor regulations. We feel that the government is paying more attention to workers than employers. The government should also listen to employers because if employers are affected by regulations that do not side with them, they may move their factories to other countries.

Currently more than 5,000 companies are operating in our members' properties. They employ over 640,000 people. If they leave, our unemployment rate will rise significantly, creating more problems for the government.

Four, environmental problems should be managed thoroughly by the government through a focus on sustainable development. HKI members have set up waste management facilities in line with the government's blueprint on industrial estates. But after the implementation of regional autonomy, many administrations have changed their spatial planning to ban plants from being built in specific areas, causing mismanagement in the handling of industrial waste.

Another environmental problem is the lack of a center for processing dangerous and toxic industrial wastes (PPLI B3). Currently there is only one processing center, in Cileungsi, Bogor. The government should establish more centers to serve companies in industrial estates.

How does HKI propose to solve those problems? We made many recommendations to the government during our last national meeting in July. For example, we proposed that workers' salaries be paid based on work hours, not monthly, to allow employers to determine the number of people they can afford to pay. Many companies have shut down their plants because they cannot afford to pay full-time workers.

How do you collaborate with the government in solving existing problems?

We had a series of discussions with the Ministry of Industry to formulate a government regulation to replace Presidential Decree No. 41/1996 on industrial estates, which is out of date due to the implementation of regional autonomy.

The planned regulation, which we expect to be issued some time this year, will discuss matters such as government incentives for companies that are willing to move their factories to industrial estates and the establishment of a national committee for the development of industrial estates.