Trans-Java toll road: Industrial Estate More Widespread

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Jalan tol Trans-Jawa: Kawasan Industri Makin Menyebar

25 January 2019

By Rivki Maulana 

 

Jakarta — The operation of Trans-Java toll road from Merak, Banten to Grati, East Java is said to be able to spur the spread of industrial estates and they will no longer concentrate in the western part of Java.

The presence of the toll road also creates opportunity for local governments to lure investors in order to drive the economy in their areas.

Public Works & People’s Housing (PUPR) Minister Basuki Hadimuljono said Trans-Java toll road has now spanned for 933 kilometres from Merak to Grati, Pasuruan.

In the past four years (2015 – 2018), the length of Trans-Java toll road being completed amounted to 616 kilometres.

Overall, the length of newly operating toll roads in the same period reached 782 kilometres.

Basuki explained that the presence of toll roads stimulates the appearance of new industrial estates. He recorded in Ngawi Regency and Nganjuk Regency, the local governments are processing permit for industrial estates with a total area of 400 hectares.

“With toll roads, industrial estate will be more widespread. For example, vendors no longer need to be in Karawang to supply the factories there,” he said, Tuesday (24/1).

From 2015 to 2019, the PUPR Ministry aims to build new toll roads that stretch for 1,852 kilometres. After that, the ministry plans to build new national roads spanning for 2,650 kilometres and 500 kilometres of access roads to 24 major ports, 60 ferry ports, and 25 national tourism strategic areas.

According to him, construction of new toll roads can reduce the travel time for the main logistics lines from 2.7 hours per 100 kilometres to 2.2 hours per 100 kilometres.

In addition, new roads are expected to cut the ratio of logistics costs to GDP from 24% to 20%.

Deputy Chairman of the Indonesian Chamber of Commerce and Industry in the Division of Economic Area Development, Sanny Iskandar, said the dynamics of industrial estates are indispensable to toll road operation.

He mentioned an example from industrial estates in Merak – Tangerang and Bekasi – Karawang – Purwakarta which grow thanks to the presence of toll roads.

New economic areas, including new industrial and tourism areas, will be popping up following toll road operation. However, it will depend on the readiness of local governments in luring investments, for instance, in terms of the ease of obtaining permit and availability of road access.

According to Sanny, several areas which have potential for new economic areas are Subang, Majalengka, Indramayu, and Cirebon in West Java, among others.

Besides those areas, the north coast area from Brebes to Semarang also possesses similar potential.

In East Java, Nganjuk and Ngawi areas will catch up already established economic areas, such as Surabaya and Sidoarjo.

 

More Selective

Nevertheless, Sanny who is also serving as Chairman of the Industrial Estate Association of Indonesia mentioned developers will be more selective in developing a new industrial estate.

He stressed that whenever possible, industrial estate development should not be done on fertile land.

“It creates opportunity for regional governments. Regional governments should respond by providing good services and not issuing counterproductive regulations,” he told Bisnis, Thursday (24/1).

Sanny acknowledged that the presence of toll roads will improve efficiency, especially due to lower logistics costs. However, industrial estates also need affordable energy resources.

Therefore, developers hope the price of industrial gases can be more affordable to improve the competitiveness of the products.

The Indonesian Logistics Association (ILA) reckoned that the change in infrastructure landscape directly affects logistics industries.

ILA Chairman Zaldy Ilham Masita said Trans-Java toll road will cause warehousing areas to move following the transition of industrial estates.

According to him, businesses in some industrial sectors have moved from industrial estates in West Java to Central Java and East Java due to lower wage rate.

“I believe the trend is not that industries are spreading, but they are moving because Indonesia’s industries are stagnant. Industries will always seek a location with cheaper HR (human resources) costs and logistics cost,” he told Bisnis.

 

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