High Land Costs at Industrial Estates Putting Indonesia at a Disadvantage
October 30, 2013 Leave a comment
High Land Costs at Industrial Estates Putting Indonesia at a Disadvantage
By Tito Summa Siahaan on 9:56 am October 29, 2013.
Soaring land price in industrial estates puts the country at risk of losing out to its regional competitors, an Industry Ministry official said. Dedi Mulyadi, director general for industrial zoning and development at the Industry Ministry, said that land price in industrial estates in Indonesia was among the highest in the region. “A square meter of land in industrial estate in Bekasi and Karawan was priced at $191, higher than Bangkok’s $119 and Manila’s $52 to $102,” Dedi said on Monday.Such conditions mean that opening a new factory in Indonesia’s industrial estates is not attractive enough for foreign investors.
“The main reason why the available space in industrial estates continues to be filled is because Indonesia’s strong domestic demand, ” Dedi said.
While the high land price is mainly attributed to the soaring demand amid insufficient space, Dedi said that the lack of government’s involvement in industrial estate development also played a part.
“In those countries, the land price can be managed due to strong government involvement,” he added. “The government must increase its share in industrial estate [development],” Dedi said, adding that both local and central governments only make up for 6 percent of the existing industrial space of 30,000 hectares.
He pointed out that in many countries across the region, the government’s involement in industrial estates was much higher. In Malaysia, the government controls 78 percent of industrial estates, while the Thai government makes up for 48 percent of available industrial estates in that country.
Dedi cited lack of coordination and flexibility of the regional government to expand beyond its border as main reasons.
“Many of the established state industrial estate operators are owned by regional governments, so when it comes to expansion moving their traditional border was out of the question,” he added. “We do have the money to spend on industrial estate development. This year alone, the Industry Ministry budget is Rp 3 trillion [$277 million[.”
The Industry Ministry estimated that goods produced from industrial estates generated exports valued at $52 billion a year, or 41 percent of the country’s non-oil and gas export by value. Last year, a total of Rp 29.9 trillion in domestic investment and $7.06 billion in foreign direct investment was being funneled to industrial estate across the country, mainly in the Greater Jakarta Area. The government collected around $938 million in revenue from industrial estates alone.
About bambooinnovator
Bamboo Innovator 