November 18, 2016
SINGAPORE/ SEMARANG — With spiralling wages in Jakarta and frayed labour relations in parts of the Batam-Bintan-Karimun economic area, the new Kendal Industrial Park in Semarang in Central Java presents an attractive alternative for Singaporean companies, said experts from both Indonesia and Singapore. However, the infrastructure at the 2,700-hectare park must be able to meet the growing demand from manufacturers, logistics firms and other tenants. To this end, Sembcorp Development plans to revive a disused port on the premises into a feeder port to the main Tanjung Emas Port in Semarang. A Sembcorp spokesperson confirmed it is in talks with the local government to turn the on-site Kendal port into a feeder port. Tenants will then be able to bypass the road to Tanjung Emas Port, which gets congested during peak hours.
“We have only started talks with the local government on this. There is no timeline yet on when or if this is going to happen. Once the authorities give the go-ahead, we will dredge the port to a depth suitable for container cargo,” added the spokesperson. On Monday, Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo officially opened the Kendal Industrial Park, also known as Park by the Bay, a joint project between Sembcorp and Indonesia’s Kawasan Industri Jababeka. Ahead of Mr Lee’s visit, Indonesian Industry Minister Airlangga Hartarto said there are plans to develop the Kendal port once the take-up rate for the park reaches 40 per cent. In his remarks at the opening ceremony, Mr Lee noted that Singaporean companies have recently been investing in non-traditional regions in Indonesia such as Central Java, demonstrating the firms’ confidence in Indonesia.
Speaking to TODAY, Jakarta-based analyst with Concord Consulting Keith Loveard said there is “clearly a lower cost” in setting up firms in Central Java, where the minimum monthly wage is about 1.37 million rupiah (S$145) compared to Batam’s 2.36 million rupiah. “Batam also has a very poor history of labour relations and many companies are leaving,” he said. Meanwhile, besides providing lower-cost labour, Semarang will be able to supply skilled manpower. Dr Wahyu Widodo, an economics professor at Diponegoro University in Semarang, said the neighbouring areas will be able to provide talent from various academic institutions to maintain sustainable research and development activity for the Kendal Industrial Park.
CIMB Private Banking economist Song Seng Wun noted that Kendal Industrial Park will attract firms with different manufacturing activities when compared to Sembcorp’s other industrial park in Batam. Some firms would choose Batam for its proximity to Singapore while others would pick Semarang for its larger pool of manpower from Central Java, he said. Mr Lee Wo Fun, the Singaporean founder of furniture maker PT Ebako which has operated from Semarang since 1997, said the area is “quite a good place” for the furniture trade, citing easy access to wood supply and lower labour costs compared to other parts of Indonesia.
Mr Lee, whose firm is one of the 20 that has invested in Kendal Industrial Park, said he did so after looking into Sembcorp’s track record of managing industrial parks. He plans to move from his current premises at Terboyo Industrial Park by 2018 because of problems he is facing there, such as the flooded roads whenever there is a downpour.
“Compared to the park I’m in now, it’s really a world of difference,” said Mr Lee.