Dewanti A. Wardhani, Jakarta – The recent closure of a number of major factories across China amid the economic slowdown and worker protests has Indonesia gearing up for the potential relocation of factories to the country.
The Industry Ministry's director general for industrial area development, Imam Haryono, said the government was prepared for a potential influx of manufacturers relocating from China.
"This is a good opportunity, so of course we're ready. Any industrial development would need investment," Imam said in a telephone interview on Friday.
He said, however, that the government would carefully select those seeking to set up shop in the country based on several requirements.
For instance, the government will examine companies' business sectors and proposed locations using the 2015 master plan on national industrial estate development.
According to the plan, there are 10 priority sectors, such as food; pharmaceuticals, cosmetics and medical devices; shoes, textiles and leather; transportation; and electronics and telematics.
Data from the ministry showed that non-oil and gas industries accounted for 18.2 percent of gross domestic product (GDP) in 2015. Food and beverages were the major contributors with 5.61 percent, followed by metallic goods with 1.96 percent and transportation with 1.91 percent.
In terms of locations, the government has determined four categories of industrial zones, such as in Java, northern Sulawesi and Papua. "Their choices of sector and location must be in accordance with our master plan," Imam said.
It will also assess the types of products to be manufactured and their choice of market location. "If these requirements are fulfilled, then they are most welcome. Investors stand to receive incentives if they choose to establish factories in less developed zones and develop cutting-edge technology.
Meanwhile, Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman Chris Kanter said national businesses welcomed potential cooperation with both foreign and domestic firms relocating from China.
He said Indonesia offered a large market and competitive production costs, two important factors that investors sought when establishing factories in China years ago.
Kadin, however, insists that Indonesia is looking for new investment focusing on technology, rather than those relying on labor. "We want firms to invest long-term," Chris said.
Separately, Indonesian Institute of Sciences (LIPI) economist Latif Adam warned that luring companies to relocate from China would not be straightforward. He pointed to neighbors Vietnam and the Philippines, both also hungry for foreign investments.
He said the government had the right tools in its deregulation packages, but they had done little so far except inject positive sentiment for businesses. Whether the government is ready to lure investors and handle an influx of investment could depend on its commitment to fully implementing the packages.
"I worry that this positive perception won't last long if the government does not take real steps as soon as possible to realize the packages," Latif said, adding that the packages served as a quick fix to lure investors.
Source: http://www.thejakartapost.com/news/2016/05/14/ri-braces-influx-factories.html