Slowly waking up from its slumber

Slowly waking up from its slumber

Burhanuddin Abe Contributor Jakarta

The after-effects of the national economic crisis, the current unstable political situation and weak national security are some of the reasons behind the "wait and see" attitude of most foreign as well as domestic investors toward industrial estates.

But the situation is not totally bleak. Some analysts are predicting that things will pick up and that even in less than five years, the country's industrial estates will be thriving again. Some industrial estates, like Jababeka and Hyundai (developed and managed by the Lippo group) are starting to enjoy better sales.

The period prior to the economic crisis, before 1997, was indeed the golden era for most businesses in the country, including industrial estates. Demand was high, so land was cleared and estate after estate was developed. With certain connections, acquiring permits to develop the land for these lucrative estates was relatively easy then.

However, when the economic crisis hit the country, along with rising cost of raw materials and production and huge unpaid loans, this business sector was also flattened by the storm. A further blow came from foreign investors who were no longer enthusiastic about the country's business prospects. The result was the supply -- the available industrial plots -- has far exceeded the dwindling demand.

According to data compiled by the Association of Industrial Estates (HKI), the number of registered companies in this business is 65, but only just over 40 are actually operating. Nine are state-owned, 10 belong to foreign investors and 23 are owned by local companies.

Geographically, industrial estates have only been developed in certain areas of the country. The latest data gathered by PT Capricorn Indonesia Consult Inc. (CIC) indicates that the total area of industrial estates is 24,185 hectares in nine provinces: Jakarta, West Java, Central Java, East Java, Riau, North Sumatra, West Sumatra, South Sulawesi and East Kalimantan.

West Java ranks number one with 39 industrial estates on 16,337 hectares of land. Some of them are located close to Jakarta, such as in Bekasi, Tangerang, Serang, Bogor and Karawang.

Next on the list is East Java. Here nine industrial estates on 2,376 hectares are already in operation. Central Java has seven industrial estates located on 1,504 hectares of land. Jakarta is number four with three estates covering 1,037 hectares of land. Meanwhile, Riau is the last in the top five with three industrial estates on 643 hectares. The other provinces have comparatively smaller industrial estates.

The pioneer of industrial estates in Indonesia is the state- owned PT Jakarta Industrial Estate Pulogadung (JIEP), which was established decades ago, in 1973. Located in the Pulogadung area, East Jakarta, its 433-hectare area is occupied by 430 manufacturers of various products, like automotive parts, garments, cosmetics, electric appliances and plastic-based products among other things.

The other bustling state-owned industrial estates are PT Surabaya Industrial Estate Rungkut and Pakuwon Industrial Estate (both in Surabaya), Medan Industrial Estate (KIM), Makassar Industrial Estate and Cilacap Industrial Estate.

Among the privately owned industrial estates, one of the oldest, established in 1991, is PT Kawasan Industri Jababeka Plc with its 1,520-hectare Cikarang Industrial Estate where 648 factories, mostly Japanese and South Korean, are operating. This industrial estate also boasts a housing estate, Kota Cikarang Baru.

Another top performer is PT Lippo Cikarang Plc of the Lippo Group that has developed and is running the 614-hectare Lippo City industrial estate.

Other major players in the business are PT Megapolis Manunggal, PT Bekasi Fajar Industrial Estate, PT Besland Pertiwi, PT Suryacipta Swadaya and PT Langgeng Sahabat.

Another trend noted by PT Capricorn Indonesia Consult Inc. (CIC) is that Jakarta and other areas surrounding it, like Bekasi, Karawang and Serang, are enjoying better sales. North Sumatra, especially in Medan, is relatively successful in its sales.

Citing the high demand for plots in Lippo City as an example, business analyst F.X. Hadi Tjokrosusilo said that the high sales figure is attributable to some of its plus features, like its strategic location and the facilities that include abundant electric power and telephone lines, waste management facilities, air cargo handling and freight forwarding, just to name a few.

Likewise, Hadi said, the success of Kota Bukit Indah industrial estate, belonging to PT Besland Pertiwi, can be attributed to the same reasons. Almost 90 percent of its 800- hectare plots are sold out mostly to foreign companies that manufacture electronics, automotive parts, cables, textiles, electrical appliances and garments. Another important feature, Hadi added, is the quality of security of both industrial estates. This aspect is most crucial especially with recent developments in the country.

Cikarang Industrial Estate, owned by PT Jababeka Plc, is also enjoying robust sales as close to 90 percent of its 900-hectare plots are already sold out. Agus Kani, its corporate manager for the industrial estate division, said that more than 600 companies occupied the estate with 70 percent being major foreign corporations, like Unilever Indonesia Plc, PT Metroda Espindo and PT Samsung Electronic.

Outside Java, the Medan Industrial Estate is also eyed by many investors. Its director, Papo Hermawan, said that among its superior features is the location that is close to Belawan Port and only about one kilometer from Medan. Its close proximity to Singapore and Malaysia is another plus. This estate now boasts some of the world's leading companies, such as Seagate Industry, Samsung, LG, Intel and Matsushita.

Hadi agreed with CIC's report that while, macroeconomically, the country is showing indications of recovery, the industrial estate business will need some time to reach the level it enjoyed in the pre-economic crisis days. Another two to three years to say the least, he said. "A conducive economic and political situation in the country, including security, will be among the most urgent prerequisites for all businesses in the country to get back on their feet. The current good performance by some of the players in this industry, though again only in a limited number of regions, is indeed a welcome sign. Hopefully, this healthy climate will also spread to other areas in the country in the not-too-distant future," he concluded.