Industrial Estates Boost Trade Activities

KOMPAS/PRIYOMBODO

Customers wait for their turn to process licenses at the online single submission (OSS) service Sept. 9 at the One-Stop Integrated Service (PTSP) of the Investment Coordinating Board (BKPM) in Jakarta. The implementation of the OSS system is expected to smoothly provide fast online business licensing services, including for foreign investment.

JAKARTA, KOMPAS - The development of economic zones or industrial zones outside Java is intended to encourage inter-island trade activities.

Investors will have to consider a number of things before deciding to develop an economic or industrial area outside Java. The consideration includes the availability of natural resources based on agriculture, mining, minerals, energy and marine products.

In the second quarter of 2019, the Indonesian economy grew 5.05 percent, of which household spending contributed 2.77 percent. Java Island contributed the most to economic growth, reaching 59.11 percent, followed by Sumatra, with 21.31 percent.

Investors will have to consider a number of things before deciding to develop an economic or industrial area outside Java.

According to Sanny Iskandar, the vice chairman of the Indonesian Chamber of Commerce and Industry (Kadin) for the development of economic zones, investors considered, among other things, the availability of cheaper land compared to what is in Java.

"For example, [what is being considered is] the potency of the nature, culture and skills of people in locations that will be developed into tourist destinations," he said on Thursday.

Sanny said that the activities of the manufacturing industry would have an impact on the local economy and potentially increase inter-island trade. "Adequate sea transportation and port facilities will support the continuity of the supply chain of the industry," he said.

KOMPAS/PRIYOMBODO

Workers produce clothing made from batik cloth at the micro small and medium enterprise (SME) Dewi Sambi in Larangan, Tangerang city, Banten, on Saturday (14/9/2019). Dewi Sambi is capable of producing up to 1,000 pieces of various types of batik clothing, which is sold to the Singapore and Malaysia markets.

The development of new economic growth, particularly in the manufacturing industry, is part of the 2015-2035 National Industrial Development Master Plan. The program would be realized through the establishment of industrial estates focused on the processing of natural resources, including alumina, nickel and crude palm oil.

"[What] has to be prepared in establishing new centers of economic growth outside Java is to develop infrastructure and utilities in an appropriate and integrated way," said Sanny.

Human resources would also be prepared, as well as the establishment of a simple, integrated and fast licensing process through online platforms.

[What] has to be prepared in establishing new centers of economic growth outside Java is to develop infrastructure and utilities.

Investment

According to data provided by the Investment Coordinating Board (BKPM), investment realization in Indonesia in January-September 2019 reached a total of Rp 601.3 trillion, which accounts for 75.9 percent of the government’s target of Rp 792 trillion this year. Of the total, domestic investment accounted for Rp 283.5 trillion and foreign investment contributed Rp 317.8 trillion.

Regarding the role of micro, small and medium enterprises (MSMEs) in the economy, the head of organizational affairs at the International Council for Small Business (ICSB), Samsul Hadi, said the government should issue regulations and facilities to promote MSMEs.

MSMEs, said Samsul, must also be assisted in using the technology to improve product quality and expand market. "Potential MSMEs must be helped so that they can enter export market. For those who cannot export, they must also be encouraged to produce products with export quality even though they will be sold in the domestic market," he said.

KOMPAS/SYAHNAN RANGKUTI

Fresh palm fruit bunches are loaded onto a truck at the oil palm plantation of PT Ramajaya Pramukti in Kampar regency, Riau, on Wednesday (2/10/2019).

Standards are needed so that MSME products can compete with imported products. "It could be meaningless if we work hard to pursue the export market while our domestic market is dominated by imported products," Samsul said.

The chairman of the Indonesian e-Commerce Association, Ignatius Untung, said that the quality of products, services and price consistency could encourage MSMEs to become a mainstay in the economy.

The global value chain

The Asian Development Bank (ADB) and the Islamic Development Bank (IsDB) through their study, "Evolution of Indonesia\'s Participation in the Global Value Chain", said that Indonesia\'s participation in the global value chain fell in the period 2000-2017. The added value of Indonesia\'s exports fell from 31 percent in 2000 to 17.6 percent in 2017.

It could be meaningless if we work hard to pursue the export market while our domestic market is dominated by imported products.

The contribution of the added value of exports to Indonesia\'s economic growth fell from 27.8 percent in 2000 to 15 percent in 2017. Activities of primary sectors in encouraging other sectors to produce semi-finished products to be able to export finished products to other countries (forward linkage) fell from 21.5 percent of exports to 12.9 percent.

The activities of primary sectors that require products with added value from foreign countries also fell from 16.9 percent to 10.1 percent.

"Limited participation in the global value chain shows that Indonesia is not benefiting as much as that of its Asian neighbors, both from global trade growth and from the trade war between the United States and China," said ADB vice president for knowledge management and sustainable development Bambang Susantono.