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View all search resultsJakarta, W. Java too costly for biz
Doing business in Jakarta and West Java demands the highest costs for operation in the country because of high minimum wages and land prices, according to a study conducted by an influential business lobby group, which suggests expansion and relocation should start in Central Java and spread across the archipelago afterwards
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D
oing business in Jakarta and West Java demands the highest costs for operation in the country because of high minimum wages and land prices, according to a study conducted by an influential business lobby group, which suggests expansion and relocation should start in Central Java and spread across the archipelago afterwards.
The Indonesian Employers Association (Apindo), which has submitted policy recommendations
to President Joko 'Jokowi' Widodo, sees labor-intensive industries as being able to create 3 million jobs in the next five years to spur the 7 percent economic growth rate targeted by the President for his five-year tenure.
- Minimum wages, land prices already too high in Jakarta, W. Java
- Apindo recommends C. Java as pilot project
- Labor-intensive industries could create 3 million jobs in next 5 years
'We will push [factory] developments into Central Java, where the minimum regional wage [UMP] is still low, while unemployment remains high. There are other regions as well, but Central Java is the right place for a pilot project,' said Apindo chairman Sofjan Wanandi.
Minimum wages in Central Java range from Rp 910,000 to Rp 1.42 million per month, compared with Rp 2.44 million in both Jakarta and Karawang, West Java.
Business expansion beyond Jakarta and West Java has been promoted for a long time to better distribute income and population across Southeast Asia's largest economy since citizens continue
to migrate to the already high-density Jakarta and West Java in search of work.
Vivien Harsanto, head advisor at Jones Lang LaSalle Indonesia, said that development of industrial areas in the Greater Jakarta area had slowed down since the end of last year because of expensive land prices prompted by a shortage of plots of land larger than 20 hectares in size.
'The current average price of industrial areas in Greater Jakarta is unattractive for manufacturers because it can increase their operating costs,' she said.
Jones Lang LaSalle's Surabaya office head Joseph Lukito added that East Java and the area surrounding its capital city Surabaya had attracted manufacturers in the past few years because of improved infrastructure and low labor costs. 'Jombang [a small town in East Java] is opening up a new industrial area.'
Apindo expects that its proposals to improve the condition of infrastructure around industrial zones and to ease the granting of legal permits will help the government attract foreign investors who are willing to start projects, Sofjan said.
The certainty of energy supplies and the improvement of infrastructure, such as toll roads, seaports and airports, would provide significant evidence of economic feasibility to investors, he added.
Other incentives that could attract investors include an assurance of low minimum wages and taxes, as well as a benign inflation rate for the next five or 10 years.
Asian companies, such as those from South Korea and Taiwan, are eager to start labor-intensive industries in the country, with Sofyan commenting that 'such industries should be pushed, rather than only expecting investments for machine-based refinery facilities that only require 100 workers at the most.'
Indonesia's total direct foreign investments in the third quarter of this year grew 16.9 percent year-on-year to reach Rp 78.3 trillion (US$6.4 billion), based on the Investment Coordinating Board's (BKPM) data.
DBS Bank economist Gundy Cahyadi said on Thursday that the prospect of direct foreign investments in Indonesia would be brighter in the future if the new government had the political will to improve labor laws, reform bureaucracy, streamline legal requirements and resolve land-acquisition issues.
