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Thursday, December 12th, 2019

Central Java manufacturing base

by November 16, 2016 General

Central Java is poised to become a major production base for labor-intensive industries with the inauguration on Monday of the first stage of the development of a 2,700-hectare industrial estate at Kendal, near the provincial capital of Semarang and its largest seaport Tanjung Emas.

The development of almost 1,000 ha of the Kendal Industrial Park (KIP), a joint venture between Indonesia-based Jababeka and Singapore-based Sembcorp, is scheduled to be completed within the next four years with all the necessary infrastructure and other supporting facilities needed for the smooth operation of modern industrial estates such as those in China, Vietnam and Thailand.

The experiences of most major industrial estates already operating in major Indonesian cities like Jakarta, Bandung, Surabaya, Medan and Batam show how such well-planned industrial zones, supported by adequate infrastructure, such as easy access to airports and seaports, power, bonded warehouses, training facilities and residential and commercial areas, have contributed greatly to speeding up the growth of manufacturing industries.

The next advantage is that industrial estates also assist the government in regulating the growth of specific industries in one zone, so the industry grows in an orderly manner through the development of clusters and not sporadically.

The KIP is one of the largest industrial estates developed in the country over the last few years. Domestic investors and those from Malaysia and Singapore have entered the KIP, building 20 labor-intensive manufacturing plants to produce textiles and garments, furniture, food and steel with a US$320 million investment and 4,000 employees.

There are several factors behind the smooth development of the KIP. The primary one is that both investors are the largest and most experienced developers of industrial parks in their respective home countries. In fact, Sembcorp has experience in developing industrial parks in Batam, Bintan, Vietnam and China.

 Another important ingredient is the enthusiasm and determination of Central Java Governor Ganjar Pranowo to turn his province into a new base for labor-intensive manufacturing companies, a sector that has so far been dominated by Jakarta and Surabaya and their surrounding areas. He went the extra mile in the effort to expedite all the local permits and land appropriation procedures for the KIP.

Yet more crucial is the full support Ganjar has received from President Joko “Jokowi” Widodo. The Investment Coordinating Board (BKPM), on Jokowi’s instruction, has pledged to complete most of the permits needed by investors to operate in industrial estates within three hours.

Certainly, investors should be attracted to the KIP because they need not bear the infrastructure costs. Land costs are also about a third of the cost of land in Jakarta and so too are the labor costs. Although Jakarta and the surrounding West Java industrial zones are better connected, their ports and roads have increasingly become congested and port facilities are severely stretched.

We hope the KIP development model can be replicated in other provinces to spread more growth centers outside Java.