'Not fully recovered but much better now'

'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.