Update COVID-19 in Indonesia: 55,092 confirmed infections, 2,805 deaths (29 June 2020)
29 June 2020 (closed)
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Sales of industrial estates in Indonesia rose 33 percent year-on-year (y/y) in the first half of 2017. Sanny Iskandar, Chairman of the Industrial Estate Association (HKI), said sales of industrial land in the first half of this year reached 120 hectares. That figure exceeded total sales of 90 hectares in the same period one year earlier.
Most industrial estate sales occur on Java, the island that dominates the Indonesian economy and politics. In particular those areas around the capital city of Jakarta such as Bekasi, Karawang, Tangerang, and Bogor is where most industrial land is sold.
The realization of sales of Indonesia's industrial land was recorded at 180 hectares in full-year 2016, significantly down from 350 hectares of industrial estate sales in the preceding year. As such, the first semester of 2017 shows there has been an improvement.
However, this increase in sales cannot directly result in rising activity in the country's manufacturing industry because it will require time for companies to establish factories at these estates. It could very well be that companies are now purchasing land in industrial zones because prices may rise more steeply in the period ahead as domestic economic growth has started to accelerate, something which should attract foreign competitors as well. But despite investing in the land, these investors may not want to construct a factory yet.
Indonesia's Industry Ministry has been focused on the development of industrial zones outside the island of Java in an attempt to make the economy of Indonesia more balanced. In 2016 three new industrial zones started operations, namely Sei Mangkei (North Sumatra), Morowali (Central Sulawesi) and Bantaeng (South Sulawesi).
Seven other industrial zones are targeted to commence operations within the next three years, to wit Tanjung Buton, Dumai, Berau, Tanah Kuning, Gresik, Kendal and Wilmar Serang. To encourage the development of industrial zones outside Java, the government needs to invest in infrastructure around these zones in order to make it more attractive for investors to establish their businesses in the zone. Currently Indonesia is still plagued by weak hard and soft infrastructure, hence connectivity is relatively weak, implying that logistics costs rise, while businesses' competitiveness is low.