Situated in the metro area of the country's second largest city of Surabaya, the Java Integrated Industrial and Port Estate (JIIPE) in Gresik, East Java, has bring in some 15 tenants, including mining company PT Freeport Indonesia.
Choosing a foreign country as investment location is not an easy task. There are numerous aspects to be taken into consideration, such as the location, the infrastructure and the regulatory environment. In this regard, JIIPE seems to check all the boxes if its growth rate is of any indication.
Officially inaugurated as a Special Economic Zone (SEZ) on June 28, 2021, JIIPE recently signed an agreement with PT Freeport Indonesia for the development of the 1.7 million metric ton Manyar copper smelter facility with a total investment value of around US$3 billion (roughly Rp 42.7 trillion). The deal includes an 80-year lease agreement and a shipment-docking infrastructure development complete with jetty, piers, trestle, bridge and seawater intake building.
This has resulted in faster growth rate than expected for PT AKR Corporindo Tbk. (AKRA), the company behind JIIPE. As reported by Investor.id, sales of fuel by the company rose 8.2% in the second quarter of 2021 compared to the second quarter of 2020, while the sales of chemical goods rose by 6.2% for the same period. The company has also managed to realize 47% of its land sale target for the first half of this year.
JIIPE is a testament to Indonesia鈥檚 commitment into becoming an industrial nation. Having dedicated itself to providing investors a more conducive investment climate, Indonesia has established 19 SEZs; from Arun Lhokseumawe in Aceh, North Sumatra, to Sorong in West Papua, with each SEZ designed to specialize in particular sectors. Tanjung Kelayang in Bangka Belitung Islands is designed to serve the tourism sector, while JIIPE in Gresik is designed to specialize in metallurgy, electronic, chemical, energy and logistic sectors.
The Indonesian SEZ National Council has mapped the performance of the country鈥檚 SEZs, as in which ones are achieving its investment targets and which ones are not developing as fast as hoped. According to data from the Council, as of the end of 2020, at least three SEZs, namely Galang Batang in Riau Islands, Mandalika in West Nusa Tenggara and Kendal in Central Java, are developing nicely. One SEZ, Tanjung Api-Api in South Sumatra is recommended for a revocation of SEZ status due to land procurement issues.
Based on the Council鈥檚 report, this year, JIIPE鈥檚 looks set to be one of the fastest growing SEZs in Indonesia, dwarfing last year鈥檚 investment commitments of the three top-performing SEZs mentioned previously. At the end of 2020, Kendal achieved an investment commitment of Rp 19.2 trillion, followed by Galang Batang with Rp 15 trillion, while Sei Mangkei achieved Rp 11.5 trillion.
What can investors expect from JIIPE? For one, Gresik is already one of the most developed and well-structured industrial cities in East Java. It is part of the metropolitan area of East Java鈥檚 capital Surabaya which covers five major cities in East Java, namely Surabaya, Gresik, Sidoarjo, Mojokerto and Pasuruan. Together they form the Ring 1, the most advanced area of industrial and economic development in East Java. Of the five cities, Gresik is the only industrial area that is directly adjacent to the sea off the island of Java. Ports for transporting goods are generally located in Gresik. Depending on the traffic conditions, the provincial capital can be reached in 1-2 hours.
In terms of infrastructure, Gresik is situated at the Madura Strait, which connects several waterways and offers direct access to the most important sea lanes in the region. By land, it can be reached by any mode of land transportation without facing significant obstacles due to adequate road, railway and bridge infrastructure. The infrastructure within JIIPE itself boasts an area of 3,000 hectares which is further divided into three main zones, namely an industrial zone stretching over an area of 1,761 hectares, a port zone that covers an area of 400 hectares and an 800-hectare residential zone.
A competitive advantage for JIIPE is its integration with a multipurpose deep seaport which is located only 3.5 km from the factory area, with a pier length of 6,200 meters and a final water depth of -16 meters low water spring (LWS), this port can serve ships up to 100,000 deadweight tonnage (DWT). The volume of cargo that can be handled is targeted to reach 6 million metric tons (MT) per year.
JIIPE鈥檚 facilities also include dry port integration, a 23-megawatt (MW) power plant, a wastewater treatment plant, fiber-optic telecommunication infrastructure and broadband internet as well as gas pipeline connection and distribution. Its state-of-the-art facilities ensure the parks readiness for Industry 4.0 and sustainable industry practices.
Finally, JIIPE offers comprehensive permit services related to land and infrastructure development and investment. Permits such as building permits, environmental impact analysis permits (AMDAL), and operational permits will be handled by JIIPE management under one roof. Business actors do not need to consult different authorities if they have received approval from the Investment Coordinating Board (BKPM). The purchased land can be completed with an agreed instalment scheme if the investor has applied for a land permit before starting production.
Owing to the integration of land and sea transport as well as domestic and international connectivity, the operator claims to be able to reduce logistic costs by 18 to 20%. Additionally, goods or products that reach the port for unloading ahead of schedule are also entitled to dispense or discount from the freight cost.
Furthermore, as part of the Indonesian government鈥檚 incentive for investors, Investments at a minimum of Rp 100 billion benefit from a 10-year corporate income tax exemption, whereas investments of at least Rp 1 trillion enjoy a lifetime exemption for corporate income tax. Furthermore, companies from designated industries are subject to a 30% reduction in net income of the total investment sum or 5% annually for six years on a pro-rate basis. Senior foreign nationals and foreign property holders within JIIPE can be awarded permanent citizenship as an additional incentive for foreign investors.
JIIPE offers a strategic and promising industry location for companies who intend to expand their business to Indonesia. EKONID Surabaya, as representation of EKONID operating in the East Java region, will gladly support German companies with information and active support measures in establishing or expanding their business activities in Indonesia, in East Java.