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Industrial estate development to promote manufacturing in Indonesia
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President Joko “Jokowi” Widodo observes the development of the Batang Integrated Industrial Park during his visit to the park in Batang, Central Java, on June 30, 2020. (Agus Suparto via Kompas.com/-)
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he future of Indonesian manufacturing lies in the development of industrial estates to support the growth of the sector. Such estates provide more efficient use of infrastructure and manufacturing facilities to enhance production while minimizing environmental impacts.
However, industrial estate development in Indonesia has multidimensional challenges that require proper planning.
In recent years, the government has been very supportive of the growth of industrial estates. The Job Creation Law requires manufacturing activities in an industrial estate. The law also demands a certain area for small and medium enterprises (SMEs) so that industrial estates can benefit local economic activities.
Moreover, under the Medium-Term National Development Plan (RPJMN) for 2020-2024, the government will facilitate 27 additional industrial estates throughout Indonesia. It should be noted that the latest data from the Industry Ministry shows there are 135 industrial estates, and that number is expected to increase following massive investment in the manufacturing sector.
The proliferation of industrial estates is in parallel with the growing demand for manufacturing. Data from the Investment Ministry from January to September 2022 showed that foreign direct investment and domestic direct investment in the manufacturing sector were around US$18.1 trillion and $6.8 trillion, respectively, under the assumption of Rp 15,500 against the greenback. The figures were growing significantly by 52.4 percent and 66.5 percent year-on-year.
We believe that industrial estates in Indonesia will continue to prosper as they provide several advantages.
In the short term, the massive amount of investment in regions for the construction of industrial estates and their supporting infrastructure will jumpstart regional economic activities.
