Slowly but surely: operation begins in Indonesia's first integrated industrial zone

Tuesday, 13 Mar 2018
Slowly but surely: operation begins in Indonesia's first integrated industrial zone
PT AKR Corporindo storage tanks (kontan.co.id/Carulus Agus Waluyo)

As Indonesia’s first and largest integrated industrial estate, the 3,000-hectare Java Integrated Industrial and Ports Estate (JIIPE) has garnered a lot of attention and interest since its development in 2013. 

Developed by PT Berkah Kawasan Manyar Sejahtera, a joint venture between chemical and petroleum distributor PT AKR Corporindo and state-owned operator PT Pelindo III, JIIPE has been identified as a national strategic project endorsed by the government, which sees it as a catalyst for accelerated growth in the manufacturing sector. The project has also received the benefit of a one-stop service and ease of construction (KLIK) by the Investment Coordinating Board (BKPM). 

The industrial zone has also appealed to many interested investors who are lured by its multimodal transportation facilities that are bound to significantly reduce logistics costs, which account for over 20 percent of the cost of production of Indonesian industries. 

According to the project’s master plan, the complex, located in Gresik, East Java, will contain a 1,761-ha industrial park, a 400-ha seaport and an 800-ha Grand Estate Marina (GEM) city. Grouped in a cluster-based system, the tenants of the industrial park will be able to enjoy independent power, water and waste facilities to further cut logistics and operational costs. 

This year, a few companies have started operations in JIIPE, after the park managed to complete the construction of some of its facilities such as a clean block cluster, a 23 MW power plant and the first stage of its 500-meter jetties with a draft of 14 m. 

In a recent interview with The Jakarta Post’s contributor Ardi Wirdana, PT AKR Corporindo Tbk president director Haryanto Adikoesoemo, explained the latest progress in the development and operation of JIIPE. Below are excerpts from the interview.

 

How much investment has JIIPE managed to obtain so far? How big of an effect has the KLIK policy had in attracting investment? What needs to be done to make investments in JIIPE easier?

The amount of investments booked by JIIPE has reached over Rp 5 trillion. KLIK has certainly been one of the incentives for investors to put their investments into the industrial zone, because it eases and speeds up the construction process. For example, in JIIPE a number of companies are currently building their factories after making use of the KLIK facility.

The government, at the moment, is working on attracting more investments in regions. Apart from providing ease in obtaining an investment permit (through the three-hour investment permit) and KLIK in a number of industrial zones, the ease of doing business must continue to be supported through consistent policies and regulations, while also supporting investors to run and expand their business in Indonesia.

 

Can you give an update on the latest progress in regards to land acquisition? Have all of the 3,000 ha been acquired? How does JIIPE handle the issues related to land, which is notorious for being a complicated hurdle for investment in Indonesia?

The acquisition process in the industrial zone from a total of 1,761 ha has reached 70 percent. Land clearance is a process that is not easy because it involves various parties with various interests, and is made more difficult by the complicated existing system. Before, the JIIPE area was an area of fish ponds, which were largely no longer productive. With the support from the Gresik and East Java administrations, as well as the ongoing communication with fish pond owners and village institutions, the problems have been reduced.

 

As of this moment, how many and which companies have entered JIIPE and started operation? How many have started construction and how many have shown interest?

As of the end of 2017, there are seven companies that have established their business in JIIPE. These companies are:
1. PT. Unichem Candi Indonesia (Salt Refinery and Washing Salt) In operation
2. PT. Tirta Bahagia (Water Bottling)
Construction preparation
3. PT. Clariant Adsorbent Indonesia (Bleaching Earth) In operation
4. PT. Mitra International Tunggal (Mixing Fertilizer) Construction process
5. PT. Adhimix Precast Indonesia (Precast and Concrete) Construction process
6. PT. Nippon Indosari Corpindo (Bread -- “Sari Roti”) Construction preparation
7. PT. Cahaya Maju Lestari (Castor Oil & Essential Oil) Construction preparation
Regarding the investment interest in JIIPE, at the moment there are potential investors that are waiting for placement in JIIPE, particularly those in the food, palm oil processing, chemical, packaging, smelter and warehousing industries -- both in the form of Foreign Direct Investment (FDI) or domestic investment, since we developed this industrial zone with the concept of industrial clustering.

 

Have each of the clusters started to be filled by tenants? Which cluster has attracted most interest? Which clusters have finished construction and are ready for operation?

Stage 1 of the Multipurpose Cluster, which occupies an area of 45 ha, has been fully occupied and has been in operation since 2016. This year, we are opening the first stage of a Clean Block Cluster on 50 ha and there are two tenants who will soon be carrying out construction at the start of January 2018. In line with the growing demand, we are currently preparing a Liquid Cluster on 60 ha and stage 2 of the Multipurpose Cluster on 150 ha. 

The word “interest” is actually not an important point in this matter because the need for investment in Indonesia varies so much and we created this clustering system in JIIPE to give synergy and efficiency to companies in our area to enhance their sustainability and reduce any potential negative impact to the companies in the future.

 

Can you give an example of existing tenants’ experience of how the clustering system can save operational or production costs for companies in JIIPE?

One of the main aims of the clustering system in JIIPE is to provide cost efficiency for companies that have chosen to build their facilities and expand their business in JIIPE. A simple example is the liquid cluster that can be used by investors in the field of CPO refinery and liquid chemical, in which distribution of raw materials and finished materials can be immediately transferred from the JIIPE liquid bulk port to the storage tanks using pipelines. 

Of course in our clustering planning, there are value added benefits that can be enjoyed by investors.
This is just a small example of the facilities we have prepared, because in the future there are plans for the construction of a few supporting infrastructure such as direct toll road access and a double-track railway to support the distribution of goods on the island of Java. Furthermore, independently managed utilities and ports with a depth of 16 LWS, which can be used for inter-island and international distribution, will help companies achieve logistics cost efficiency.

 

Has the 23 MW power plant started supplying electricity to manufacturing plants in JIIPE? How many companies will the power plant be able to power? At what stage is the construction plan for the next power plant?

The 23 MW power plant is the first stage of the JIIPE power plant and, since November 2017, it has started operating by supplying the electricity needs of operating tenants. Looking at the estimate for the total electricity needs of the tenants who have occupied the industrial zone, the 23 MW capacity will soon reach 60 percent. Therefore, JIIPE is currently getting ready for the preparation of the second stage of power plant construction. 

JIIPE has obtained a permit for the construction of a 515 MW power plant. The first stage of this power plant, which uses gas-fueled dual fuel with a capacity of 23 MW, has started operating. The next stage that is being prepared is 2 x 250 MW gas turbine power plant. The last stage will be a 660 MW capacity eco friendly coal-fired power plant that we are still looking at.

 

One of the things mentioned in the JIIPE master plan is the construction of dams in the industrial zone. What is the purpose of these dams and how can they enhance the performance and efficiency of the companies?

Gresik is a region where water sources are hard to come by particularly for industrial activities, as companies are not allowed to drill their own groundwater wells. Therefore, JIIPE will build a water management facility managed independently to fulfill the tenants’ water needs. There will be seven of these artificial dams with a total area of 42 ha, and they will function as containers of rain water that will be used as alternative raw material and also for water recycling. We plan that 60 percent of water consumption will come from recycling and the collection of rainwater in our reservoirs

 

Regarding the jetties, what is the latest development in the operation of Jetty I? Has it been used optimally? Is it true that there will be an extension to this jetty?

The Jetty stage I is functioned for dry bulk and general cargo, and has now entered the second year of its operation. In its first year, the loading and unloading activities on the JIIPE jetty reached around 450,000 tons. And for 2017, the capacity has reached 1.3 million tons.
Next, an extension, which will be 500 m long, will be built onto the dry bulk jetty, followed by a 500-m long liquid bulk jetty.

 

What is the plan with the other three jetties? What facilities will be built on the jetties?

JIIPE will build up to 6,200 m of jetties that will be constructed in stages, starting from the stage 1 dry and liquid bulk jetty with supporting facilities in the form of a conveyor system and pipeline from the jetty to the port and industrial zone. Stage 1 construction is finished and started operating in 2016.
This will be followed by the development of the second jetty for Dirty Dry Bulk to accommodate dry bulk that needs special areas and facilities such as conveyors. There will also be the development of a storage tank facility for gas and liquid, as well as the addition of the third jetty for the fishing industry, complete with a cold storage facility and an offshore maintenance facility. The final stage will be the construction of the fourth jetty for containers, complete with open yard areas, as well as supporting facilities in the form of international standard container conveyance.

 

Does JIIPE carry out studies or evaluations to ensure that cost efficiency can really be achieved by the presence and use of jetties in JIIPE?

Of course the study has been done. With the logistics cost in Indonesia still fairly high, the concept offered by JIIPE with its 16-m LWS deep-sea-port and four jetties with a total length of 6.2 kilometer integrated with the industrial zone and the support of toll and railway infrastructure, is sure to cut the logistics cost significantly 

Apart from the ease provided by its jetties, how else are the companies in JIIPE facilitated in importing raw materials? Are there any incentives from customs and excise on this matter?
The JIIPE port is a public port, and so our ports can be used both by our tenants as well as by external parties. Of course, to support the loading and unloading activities, the presence of the customs department around the port vicinity is very important in order to provide ease in customs-related facilities in accordance to the needs of respective tenants. JIIPE will also have other bonded facilities such as a Bonded Logistic Center, a Bonded Warehouse and a Bonded Zone for Production to facilitate exports and imports.

 

What is the latest development on the construction of other transportation access to JIIPE, such as a railway and a toll toad, to improve JIIPE’s connectivity?

We will continue to make efforts to improve connectivity for the domestic and international market. With the National Strategic Project status given by the government, JIIPE will receive the support of the government for infrastructure acceleration; in this case, the most important will be the direct toll access and the double-track railway system.

 

It has been said one of the aims of JIIPE is to be a “hub of East Indonesia.” Can you explain what is meant by this statement?

We all know that the delivery of goods to east Indonesia has always gone through Tanjung Perak as the main port of East Java, despite the port currently still experiencing congestion. At the moment, the government is carrying out the distribution of welfare through economic development programs to the eastern areas of Indonesia. Of course, various facilities that will support the economy and industries in the east of Indonesia are being prepared, and JIIPE, as an integrated zone in East Java, which has a public port with a multipurpose concept, is ready to support programs to push Indonesian industrialization forward.

 

How is the development and sale of residential properties in Grand Estate Marina City (GEM City)getting along? What facilities are being offered to GEM City residents?

At the moment, GEM City is in its second stage of development. In the first stage of development around 1,000 lots have been sold, with the handover to be done in 2018. Currently, the development of the CBD area is being done to accommodate the market need for a business center in the GEM City residential area. 

GEM City is an independent city-based residential area that combines the concept of business and leisure, in which all of the supporting facilities such as hotels, apartments, a Central Business District (CBD), a shopping mall and an educational district (from elementary to university), golf course, theme park and a marine area are present. GEM City also provides facilities in the form of houses for employees to support companies in the Industrial Zone.