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.