Amidst the adverse economic condition in the USA and Europe, the
emerging economy of developing nations continued to bulge up and Indonesia was
one of them.
Today the inflow of foreign capital was mounting up. Last year the total
value of direct investment was posted at Rp300 trillion, this year it was
estimated to be around Rp350 trillion. In Asia, some countries with positive
growth were starting to spread their wings overseas including Indonesia through
direct investments.
Just to name a few China, Japan and South Korea. The two countries were
aggressively investing their capital in Indonesia. Japan was note worthy,
because they were just being pressed by recession for the past two decades.
The problem faced by Japan was not liquidity but over-valued Yen against
other currencies which made Japanese products less competitive in the
international market. Things were made worse by high wages in Japan which
lifted up production cost and made commodity process to be extremely high. By
theory, Japan was caught in a liquidity trap in the sense that liquidity was
strong, but could not be invested in Japan due to high index of production cost
in Japan.
Meanwhile South Korea was not less ambitious: they too were aiming at
other countries for business expansion where the market was prospective. In the
eyes of Japanese and Korean businesspeople, Indonesia promised good prospect
for marketing as well as recruiting workers of relatively low wages.
Increasing wages in China and Singapore also motivated business people
of the two countries to expand their business to Indonesia. Indonesia’s
comparative to invest their capital here.
Only trouble was, many investors expressed their grievances of so many
hindrances in doing business in Indonesia. One of the problems was industrial
sites. Today investors found it hard to find land for industry. Even if there
were any space at all, the price was extremely high. To quote data of the Japan
External Trade Organization, the average price of industrial estate in
Indonesia was posted at USD 191 per sq meter – this average price had the
potential to increase to USD 200 per sq M in early 2013.
In the market, some property brokers sold their industrial sites. For example
a space of 1.2 hectares in the Pulo Gadung Industrial Estate [JIEP], East
Jakarta, was offered at around Rp6 million or USD 630 per m3. Compare this
against price of 2010 which was still around USD 80 or USD 100 per m2.
Colliers Property Consultant International even specifically noted,
price of industrial land in Jabodetabek rose by 27% year on year [December 2011
– December 2012] this made price of industrial site in Indonesia the most
expensive in ASEAN.
In Bangkok, Thailand price of industrial site was still USD 119 per sq
M, in Manila the Philippines price was USD 52 – USD 102 per m2. Price of
industrial site in Malaysia was only USD 20 – USD 25 per m2. Meanwhile in
Singapore the price was around USD 189 – USD 651 per m2.
A condition as such must be watched on, because an over priced
industrial land could downgrade competitiveness of local industry. Indonesia’s
competitiveness level could be surpassed by other counters. However, in this vicious
circle high price was only a result. The essential problem was that high demand
for land was not balanced by enough supply. The result was price soaring up sky
high so this was purely a case of supply vs demand.
Colliers findings also showed that abnormal price of industrial put
brakes on transaction of sales of industrial land. Colliers note that in 2012 transaction
over industrial land was posted at 636.4 ha or only 51% of total transaction
2011. Naturally the solution would be to increase land areas.
However, the effort would still be obstacle by some regulations, such as
restriction on industrial site expansion by any developer in a certain province
which was restricted to 400 hectare per year at the most. This regulation was
still effective, although no longer relevant to the present condition. Ideally
development of industrial site was only economically accountable in the
increase was 1,000 hectare per year.
Price increase would even heighten when factories were relocated to the
regions. Lately there was news of some business people relocating their factories
from Greater Jakarta to Central Java and East Java in pursuit of lower wages.
What happened further was that price of industrial site which was still Rp850,
000 per sq M increased to Rp1.75 million per m2. Price increase was also evenly
spread.
It was the naturally instinct of business people to make the best of any
golden momentum. When many business people from Jakarta relocated their factory
site to the regions, land owners of the region took advantage of the situation
by increasing their price of land as high as they could.
There was no other choice for business people but to buy the land in the
regions whatever the price because in their calculation the price of land was
lower that the price in Jakarta and surrounding. Somehow the condition could
not go on and on the way it happened. Soon or late the operational burden of
business people would swell so the economic scale would lose its efficiency.
Competitiveness of their products would lessen while products made in China,
Taiwan and Vietnam would keep flooding in.
Under the circumstances the Government, through the respective
ministries must listen to business people’s grievances especially in terms of
reasonable land procurement. The Government should not be off guard because
there was the possibility that foreign investors in greater Jakarta would
relocate their factories not just to Central and East Java but also to
neighboring countries.
If that should happen, Indonesia would lose the opportunity to energize
their economy. The chances to open employment opportunities would diminish and
employment of workers would be limited. Unemployment figures would not lessen
but would swell instead.
Among the solutions was that the provincial Government procured
industrial land specially allocated for the industry. The price of land in the
industrial site must be controlled by the local Government. Even if land
ownership was in the hands of private companies, the provincial Government must
still monitor and control price of land.
In the event that there was unreasonable price, the provincial
Government must take action to keep law and order in pricing. The regional
Government only had to facilitate meetings between land owners and prospective.
Reasonable pricing of land would serve as incentive to business people
amids pressures from the increase of Provincial Minimum Wages. In the end
products prices would be competitive so company’s performance would be stepped
up the sustainable way. The key solution was good relations between the Central
Government, the provincial Government and local or national businesspeople who
would collaborate together for mutual benefit. (SS)
Business News - April 05,2013
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