Foreign firms snapping up industrial land

-Photo: ISTOCKPHOTO

JAKARTA - From US food giants such as Kraft Foods to Singaporean fish breeders, foreign investors are snapping up industrial land across Indonesia to expand their businesses.

Last year, Indonesia's largest industrial developer, Jababeka, sold 107ha of land, the size of 150 football fields, outside Jakarta, for a total of 824 billion rupiah (S$112million). That was more than four times what it sold in 2010, while the total value was three times the sales it booked in 2010.

Besides Kraft Foods, the buyers were toy-maker Mattel, Japanese motorcycle-maker Yamaha, and local firms looking to set up plants to make car spare parts and electronics.

In Indonesia as a whole, as much as 897ha of industrial land sales were transacted in the first nine months of last year, compared with 543ha in the same period in 2010, according to property consultant Colliers.

The industrial land boom is fuelled by foreign investment, aggressive bank lending and rising incomes - all factors that have drawn more investors. Foreign investors coming into the automotive, electronics, consumer and other manufacturing industries contribute about 50 per cent of an industrial estate developer's sales.

Despite a sluggish global economy, Jababeka remains bullish. Said its corporate secretary Muljadi Suganda: 'Jababeka is confident it can continue to sell 100ha of land a year over the next few years, and plans to raise prices by 20 to 25 per cent this year.'

Industrial estate developer Lippo Cikarang has also seen land sales pick up. It is seeking another 1,000ha, to top up the 130ha it now holds. Said Lippo Cikarang director Ju Kian Salim: 'The economy's picking up, but available land is limited and shrinking.'

The surge in demand for industrial land has caught developers by surprise as there were previously no signs of the pickup in demand. Developers are scrambling to find land to develop and sell in a thriving economy growing at 6per cent a year.

Equity broker CLSA's analyst, Ms Sarina Lesmina, noted in a report: 'Due to a lack of supply of land, developers are at an advantage to increase their prices further.'

Yamaha, for example, bought land to build a second plant in Karawang after its existing plant in the same area hit its maximum annual capacity of 3.7 million units.

Singapore-listed fish breeder Qian Hu, a newcomer in Indonesia, started exporting ornamental fish out of its plant six months ago. It will start selling to the local market from early next year.

'Indonesia politically has been a bit more stable. Most of the decisions that the government has made as far as foreign investment is concerned are reasonable,' said its chairman and managing director, Mr Kenny Yap. 'Indonesia itself is a big market. All this has enticed foreign investors to look at Indonesia very seriously.'