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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 brought in some 15 tenants, including mining company PT Freeport Indonesia.
Choosing a foreign country as an 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 a jetty, piers, trestle, bridge, and seawater intake building.
JIIPE is a testament to Indonesia’s commitment to becoming an industrial nation. Having dedicated itself to providing investors with a more conducive investment climate, 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’s SEZs, as in which ones are achieving their investment targets and which ones are not developing as fast as hoped.
Based on the Council’s report, this year, JIIPE looks set to be one of the fastest-growing SEZs in Indonesia, dwarfing last year’s investment commitments of the three top-performing SEZs mentioned previously.
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’s capital Surabaya which covers five major cities in East Java, namely Surabaya, Gresik, Sidoarjo, Mojokerto, and Pasuruan. Together they form 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’s 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 park’s 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 installment 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’s incentive for investors, Investments at a minimum of Rp 100 billion benefits 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-rata 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 that intend to expand their business to Indonesia.