The West Java and Central Java administrations are leading efforts to lure investors with their respective governors touring business forums and investment summits recently as President Joko “Jokowi” Widodo’s administration embarks on regulatory reforms to boost investment.
For West Java, which has historically connected itself with global trade and economy, Governor Ridwan Kamil differentiates his effort by preparing what he calls an “investment menu” for investors. The menu consists of the region’s strategic projects up for grabs, including transportation, drinking water management, waste management and regional development.
“We are practicing door-to-door marketing for West Java, not store-keeping […] Store-keeping means waiting for people to come and buy,” Ridwan said on the sidelines of the West Java Investment Summit in Bandung on Oct. 18.
Apart from the October investment summit with business leaders and embassies, Ridwan has also visited several countries in the last few months as part of the regional administration’s efforts to lure investors, namely the United Kingdom in July as well as South Korea and Japan in November.
Central Java Governor Ganjar Pranowo has been branding his region as an ideal place for investment because of the low minimum wage, land availability and simple licensing process.
“The minimum wage of Rp 1.9 million [US$134.84] has made [the region] more attractive to investors than East Java, West Java, Banten and Jakarta. We must keep this condition and the [good] relations between the local administration, businesspeople and labor,” he said.
Realized investment into Central Java reached Rp 47.4 trillion from January to September this year, which represents 7.8 percent of nationwide realized investment and the third-highest investment flow in Indonesia. West Java came in first with Rp 102.1 trillion, followed by Jakarta with Rp 95.6 trillion (15.9 percent).
West Java and Central Java’s moves to lure investors are being made as Indonesia pushes efforts to boost investment, create jobs and stoke economic growth that has slowed to the lowest level in more than two years at 5.02 percent in the third quarter.
Jokowi’s administration is currently finalizing regulatory reforms that would open up sectors previously closed to foreign investors by revising the negative investment list, streamlining all business licenses under the Investment Coordinating Board (BKPM) and relaxing taxes for corporate income, expatriates and dividends, among other things.
More deregulation efforts include revoking at least 40 ministerial regulations and relaxing the requirements for building permits (IMB) and Environmental Impact Analysis (Amdal).
The West Java Investment Agency’s head of control, Diding Abidin, said the central government’s regulatory reforms would not affect investment processes that were handled by the regional government. “Licenses for [investments] coming through the BKPM need to be handled by the central government. There are also several licenses that can be directly handled by regional governments.”
The latest investment pledges for West Java include a US$1.5 billion automotive plant of South Korean giant carmaker Hyundai in Bekasi, Amazon Web Services and a petrochemical company from Taiwan. “The value reaches around Rp 100 trillion,” said Ridwan.
Ridwan also offered United States businesspeople 209 projects in West Java worth $60 billion, as he mentioned a lack of awareness among US investors of the ability to work directly with regional governments than with the central government.
“There are two doors to invest [in Indonesia], namely through central government projects and administrative region projects,” he told US businesspeople in Jakarta on Nov. 21. “We are inviting more US businesspeople because investors in West Java are mostly from East Asia, so it lacks balance.”
US investors are also ready to be involved in projects that would be auctioned by the West Java administration under the public-private partnership (PPP) scheme, such as waste incineration site Legok Nangka, Bandung’s LRT system and the Bandung-Cilacap toll road project, according to Ridwan.
For Central Java, BKPM head Bahlil Lahadalia wanted to champion the furniture sector as Jepara district is widely known for its high quality furniture and carvings by local sculptors and craftsmen.
Central Java’s Manpower, Transmigration and Population Office acting head Susi Handayani said there was a workforce of more than 18 million in the region, 17 million of which have gained jobs.
“It means that we still have enough labor resources to accommodate new investors because there are 814,347 workers available.”
Central Java One-Stop Integrated Services Agency head Ratna Kawuri said there were 10 big foreign investors in the region, including Taiwan, which had invested $47.25 million since 2015 in several sectors namely textiles, electronics and health.
University of Indonesia rector Arie Kuncoro said Central Java had a relatively low living cost as well as a better regulation and licensing process for business, which made the region attractive to investors.
He suggested that West Java focus on boosting investment in non-manufacturing industries or industries with higher value-added to prevent companies leaving the region.
By: Adrian Wail Akhlas, Arya Dipa and Suherdjoko