Indonesia Industrial Park: An Economic Booster and Efficient Business Industry for All

As the slowdown of global economic creates issue in national economic growth, government and industrial business try to find alternative solution to boost the economy. One of the promising areas is the emergence of industrial park in Indonesia. This industry is mentioned on Government Relation Number 24 Year 2009, as a centralized industrial area which is developed and managed by industrial estate companies. It then attracts investors due to fully support of the facilities and infrastructure provided by the estate managements. Therefore, it becomes very efficient for the investors as they do not have to be burdened on the cost of infrastructure development.

Also, Indonesia government offers incentives such as the provision of electricity, gas, and other facilities as the businesses operate on the same area. This is very beneficial for the government since all the main sources will be distributing only in one location. Preventing to have a sporadic development, Industrial Estate Association assists the government to regulate the growth of those industries in one zone. While the state government regulates the industrial area, local government still has responsibility to review and approve the master plan.

Since 2016, Industrial Estate Association noticed that there is a progress number of industries in vehicle spare parts, food and beverages, and consumer products beginning to build their businesses in industrial zones. It means there will be more land occupied and the growth target of industrial estate in Indonesia will be achieved. On the same year, Indonesia’s Investment Coordinating Board noted that there were 99 industrial estate in the nation. 80% of them had been developed as industrial sites, while the rest of them were still under construction.

Tracing back to the early development of industrial estate in Indonesia, during 1970-1989, it started with some state owned and local government owned companies. The study continued to make an Industrial Zone Development Plan in Cilacap, Central Java. However, Jakarta, as the capital city launched its first industrial zone, Pulogadung Industrial Estate in 1970. It had 500 ha area with 50 percent of the land owned by the state, and the rest was owned by Jakarta provincial government.

Later, there were other state and local government owned industrial estate. Some were established in Java: PT Surabaya Industrial Estate Rungkut in Surabaya, East Java; PT Kawasan Industri Cilacap, Central Java; PT Kawasan Berikat in Jakarta, and PT Krakatau Industrial Estate in Cilegon Banten. Two others were developed in Sumatra, such as PT Kawasan Industri Medan in North Sumatra and Register I Waypisang Industrial Park in Ketapang, Lampung. In 1989, Indonesia government issued Presidential Decree Number 53 Year 1989 which gave opportunity for private companies to join the game on industrial estate business. From then, the industrial estates were becoming bigger and reaching golden period on the year 1989-2009.

In the era of Presiden Joko Widodo, industrial estate development is becoming more promising. He ruled out several economic policy packages to improve the business. For example, the government shortened the period of issuing licensed business permits from 3 days to 3 hours. These permits are: Land Booking Certificate, Deed of Company Establishment, Company Registration Permit (TDP), Taxpayer Identification Number (NPWP), Importer Identification Number (APIP), Customs Office Identification Number (NIK), Foreign Workers Recruitment Plan (RPTKA), Expatriate Work Permit (IMTA). Through Indonesia Investment Coordinating Board, President Joko Widodo also simplified the process of construction permits and investment licenses. Therefore, the investors who are still in the process of aiming construction permits, but holding investment permits already, could start to develop the factories.

Another economic policy package is granted tax incentives in relation the forming group of Industrial Development Zone (WPI). This zone is divided into four regions: Java, southern Sulawesi, eastern Kalimantan, northern Sumatra (except Batam and Karimun). The amount of tax incentives and the period of the applied term are based on how developed the zone are. On the other side, Industrial Development Zone in Papua and West Papua investors will receive more tax incentives with longer period because they face more challenges than the ones in larger islands. All WPI investors potentially get reduction of local government taxes such as fees for Acquisition of Rights to Land and Buildings, tax of Land and Building, Street Lighting Tax, fees for Issuance of Principle Permits, fees for Industrial Zone Permit, and fees for Industrial Zone Extension License.

All in all, these economic policy packages by Indonesia government creates more interests from the domestic and foreign investors to put the money on Industrial estate in Indonesia. The state then hopes that the industrial park in Indonesia can become the main economic booster as it creates more effective businesses with huge turn over as profit for the investors.