LG Electronics and LG Chemicals, Panasonic, Denso and many others to relocate $37B factories from China to Central Java

A logo of LG Chem Ltd. at its plant. (Yonhap) Sketched by the Pan Pacific Agency.

BATANG, Jul 2, 2020, Jakarta Globe. Seven companies from Japan, South Korea, Taiwan, and the United States set to begin plant construction at Batang industrial estate in Central Java with a total investment of $850 million, as Indonesia finally reap some benefit from multinational companies relocation from China, Jakarta Globe reported.

The largest economy in Southeast Asia has also received a commitment from at least 17 companies to relocate to the industrial area, with total investments estimated at $37 billion.

These companies are part of a growing number of multinational corporations seeking to move out of China to strengthen their supply chain amid growing tension between China and the United States, higher wages in China, and severe disruption brought by the Covid-19 pandemic.

Last year, President Joko “Jokowi” Widodo saw 33 companies ignored Indonesia and moved their factories to the neighboring countries. Since then, he has vowed not to miss such an opportunity again.

“There are 119 companies likely to relocate, and I do not want we can’t get even one of them. I don’t want to see last year’s [mistake] happens again,” Jokowi said when visiting Kawasan Industri Terpadu Batang (KIT Batang) industrial estate on Tuesday.

“I have told the head of BKPM [the Investment Coordinating Board] to take care of the investors’ needs from A to Z, so they feel being served,” Jokowi said.

“Just tell us what you want us to provide, whether it’s land, permit, electricity, gas, etc.. These kinds of service will improve our competitiveness and make the companies want to relocate their factories to Indonesia, “Jokowi said.

BKPM Head Bahlil Lahadalia said the companies don’t need to buy the land in KIT Batang, sparing them from having to solve land acquisition problems that have been the bane of investing in Indonesia.

“In KIT Batang, investors do not need to buy land. If the process of developing the Batang industrial estate starts next year, this industrial estate will be more competitive compared to Vietnam,” Bahlil said.

The Companies

Among the seven companies that were relocating their factories from China to Batang was South Korean electronic giant LG Electronics and CDS Asia, the subsidiary Alpan Lighting, a solar-powered garden lights manufacturer from the US.

Three Japanese firms were also moving their plant to Batang, including electronic component manufacturer Sagami Electric, automotive parts maker Denso, and electronics giant Panasonic.

Audio and video equipment maker Meiloon and tire maker Kenda Tire, both from Taiwan, are also joining the moves.

Industry Minister Agus Gumiwang Kartasasmita said among the 17 companies pledged relocation commitment was LG Chemicals with an investment plan worth $9.8 billion to build an integrated battery plant and nickel smelter in Batang.

Agus said the seven companies would provide 30,000 jobs to the locals while the LG Chemical project alone had the potential to open 14,000 new jobs.

The Industrial Area

KIT Batang is controlled and managed by a state-owned enterprise consortium led by Perkebunan Nusantara III. The company set to lease the complex long term to investors who find it difficult to purchase land anywhere else in Indonesia.

The industrial complex has 4,000 to 4,300 hectares of land ready for development. Today, KIT Batang has developed 450 hectares of the property.

Trans Java Toll Road connects KIT Batang with key container ports like Jakarta’s Tanjung Priok and Patimban, which is currently under development. Indonesia railway operator Kereta Api Indonesia (KAI) would also connect the industrial with rail track and a dry port.

State utility firm Perusahaan Listrik Negara operates 2,000 megawatts Batang coal-fired power plant and a 50-megawatt solar power plant that are ready to supply the industrial complex. State energy company Pertamina provides the gas and fuel lines.

“The SOE Ministry will concert the SOEs and region-controlled companies. Amid the increasingly fierce global economic competition in the era after Covid-19, our efforts in KIT Batang are imperative to improve Indonesia’s competitiveness,” SOE Minister Erick Thohir said.

Johnny Darmawan, a deputy chairman of the Indonesia Chamber of Commerce and Industry (Kadin), said KIT Batang should be able to showcase the advantage of investing in Indonesia to investors.

“Indonesia is rich with natural resources, and the people have good skills. The problem which, until now, has not been solved is the high-cost economy. But if someone wants to move here, that’s our opportunity,” Johnny said.

Share it

Exclusive: Beyond the Covid-19 world's coverage