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Jakarta Post

Agro-industrial estates outside Java in pipeline

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Thu, March 12, 2015   /  05:57 am
Agro-industrial estates outside Java in pipeline

The government is set to start construction on three agro-based industrial estates outside Java to bolster industrial growth in Southeast Asia'€™s largest economy.

Development of two estates, to be located in Palu, Central Sulawesi, and in Bitung, North Sulawesi, may begin by mid-year, to serve as centers of coconut and fishery processing and the manufacturing of cocoa derivatives and rattan-based products, respectively.

Another estate, to be situated in Kuala Tanjung, North Sumatra, and concentrate on palm-oil-based industries, will be built next year, according to industry officials.

The head of the evaluation and report program at the Industry Ministry'€™s directorate general for industrial estate development, Heru Kustanto, said that the government, both at the central and regional levels, would play a dominant role in the three industrial estates projects from the very initial phase, from land acquisition to estate management.

Industrial estates are normally developed by the private sector, with the government playing a small role in developing industrial estates, lagging behind its peers in Southeast Asia.

The government'€™s minor stake in industrial zones has contributed to uncontrollable land prices and rents nationwide.

'€œRight now it is hard for us to control the price of land in industrial estates owned and run by the private sector. Land issues are often a major deterrent to new investment,'€ he told reporters on the sidelines of an agro-industry meeting. The central government would cooperate with regional administrations to execute the projects with a possibility of jointly managing the zones once they were operating, Heru added.

The Indonesian government is involved in 6 percent of existing industrial estates in the country, a far cry from the 78 percent engagement by the Malaysian government and 48 percent by the Thai government.

The three new agro-based industrial estates are among 14 planned to be established by 2019 outside Java '€” where most industrial estates are located '€” with the majority of finance coming from private investors.

The government has earmarked Rp 6.15 trillion (US$465.90 million) to build all the zones by 2019, and for this year, the Industry Ministry has allocated Rp 867.41 billion to develop some of them, including the three planned sites. The funds will partly be spent on land acquisition and construction of basic infrastructure.

The agro-based industry, which is expected to grow by 7.5 percent this year, is the key contributor to gross domestic product in the non-oil and gas sector with a share of 46 percent.

Industry Ministry director general for industrial estate development Imam Haryono said that several of the 14 estates, such as Jorong industrial estate and one in Landak, West Kalimantan, had already seen investment coming in. Imam described the investors as '€œanchors'€.

'€œOur move to determine the 14 estates as our quick wins have triggered the regional administrations to take some action,'€ he said, citing the example of Lhokseumawe city administration in Aceh Special Province, which had already offered an area totaling 2,000 hectares to be developed as an industrial state.

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