Three Reasons Why Central Java Becoming ‘Primadona’ for Investors

August 10, 2020

After rapid development in the capital city, Jakarta, and favorable tourist destination, Bali, Indonesia government targets other cities in different regions to attract investors. For the past five years, Central Java has been prepared to join the hype business of Industrial Park in Indonesia. There are at least two CentralJava industrial estate(s) which have been developed and promoted to both domestic and foreign investors. Apart from reform strategy by Central Java government, the region itself has already becoming the main selling to the investors. The history, geographical and demographic bonus are more than enough as reasons to invest the business in Central Java.

As a capital city of Central Java, Semarang has long history on becoming a port city. Since 18th century, during Dutch colonialization, Dutch authorities in Indonesia made the city as headquarter of Java Northeast Coast. It means that VOC, as the Dutch East India Company had been granted to do trading from the Port of Tanjung Emas in Semarang. On his book, titled ‘Commodities, Ports, and Asian Maritime Trade Since 1750’, Gerrit Knaap wrote a chapter on the development of Central Java through the trading establishment in Semarang during Dutch Colonialization. He noted, perfect access of the port to the Java Sea, which can directly be headed to Pacific Sea, made Semarang a favorite city for doing main role on VOC’s intra-Asian maritime network. It gradually became the 3rd VOC ‘provincial ranking’, after Batavia (Jakarta) and Ceylon (Srilanka).

Continuing to the geographical background, Semarang has advantage on the location area. It is strategically lied between Jakarta and Surabaya, two busiest cities in Java which are the indicators for ease of doing business index in Indonesia. Different from these two cities, Semarang can provide more competitive benefits for the cost of productions, distributions, and incentives from the local government. Related to the other potentials, Semarang has been the leading city for agriculture, trade, and industrial sectors in Central Java. Not only in the capital city, but also there is one new special economic zone in Central Java, Kendal Industrial Park which is located in Kendal. With the target of finishing the first phase in 2021, this industrial zone has attracted foreign and domestic companies with total investment of 4,3 trillion rupiahs (US$ 331,7 million).

Another reason of investors becoming attracted to Central Java is the demographic benefit. Half of the total population in Indonesia lives in Central Java. It is spread not only in the capital city, Semarang, but also in different cities which can be potentially developed based on the city characteristics. With the wages ‘only’ half from the minimum wage in Jakarta and the land cost for only one third compared to Jakarta, business owners can have more effective financial budgeting for their manufacturers. With all these four reasons, there is no wonder that Central Java is becoming the ‘primadona’ of investors.