Indonesia will receive a major boost if Foxconn, the world’s largest device manufacturer, makes good on a commitment to set up operations in the country.
Andrew Hsia, the head of the Taipei Economic and Trade Office in Jakarta, said that Taiwanese firms were looking to relocate to Indonesia, as the nation offered reduced labor and operating costs compared to other nations.
“The Chinese National Federation of Industries [CNFI] representatives have mentioned that approximately 10,000 member [companies] were considering entering other countries, in particular Indonesia,” Andrew said after a meeting between CNFI representatives and the Association of Indonesian Employers (Apindo).
A memorandum of understanding (MoU) between CNFI and Apindo was signed at the meeting to strengthen trade and economic ties.
CNFI representatives declined to name the interested companies, although Apindo chairman Sofjan Wanandi said Foxconn was the most likely firm to come to Indonesia.
Foxconn, or Hon Hai Precision Industry Ltd., produces 40 percent of the world’s electronics for global brands such as Apple and Dell, The New York Times reported.
The company, established by billionaire Terry Gou in 1974, is headquartered in Taiwan and runs factories in the Americas, Europe and Asia. The company is China’s largest private employer, with 1.2 million workers.
“They will establish not only one plant, but are looking to build the necessary facilities in the area where their plant would be,” Sofjan said.
Meanwhile, Industry Minister M.S. Hidayat said that Foxconn’s presence in Indonesia, which would likely come with a US$1 billion investment, would translate into a huge number of new jobs in the nation.
“If they invest outside Java, I will grant them incentives in the form of tax holidays and allowances,” Hidayat added.
Bilateral trade between Indonesia and Taiwan grew a robust 35 percent to $10.84 billion in 2011, which was attributed in part to the government’s tax incentives.
Meanwhile, foreign direct investment from Taiwan in Indonesia increased by more than 400 percent to $243.2 million in 2011, compared to 2010.
Trade Minister Gita Wirjawan said that he had discussed the investment with Foxconn representatives during a visit to Taiwan last month.
“We are reviewing the prerequisites [for Foxconn’s entry], such as those regarding the site, electricity and gas supply, workforce needs and the market,” Gita said.
Darwin Lie, a market analyst for the International Data Corporation (IDC), said Indonesia’s geographically strategic position between Asia and Australian as one factor that was likely to draw the attention of Foxconn.
“Indonesia can be a hub for Asia and Australia, as well as South Asia and East Asia,” Darwin said.
In addition, the nation’s record-breaking levels of foreign direct investment and its continued economic growth amid the global downturn also made a strong case for Foxconn to establish a factory here, Darwin said.
He added that Foxconn’s presence could have a widespread effect on the local device industry as it was likely to develop the first major manufacturing plant in Indonesia specializing in devices, which might potentially bring the prices of certain devices down.
However, questions on the safety and political stability of Indonesia make the nation a less desirable location for the firm, Darwin added.
Labor issues continue to be thorny. Earlier this year, factory production slumped due to prolonged protests by workers demanding higher minimum wages.
Natalia Subagyo, an expert on China relations from the University of Indonesia (UI), pointed out that labor issues were indeed a concern.
Foxconn is infamous for poor relations with workers. Numerous Foxconn workers in China have committed suicide or died in reported sweatshop-like and hazardous working conditions, including long work hours and paltry pay.
According to Natalia, the Indonesian government would welcome investment from Taiwan, given that Indonesia needed investment and had always “maintained close economic relations with Taiwan” amid the government’s one-China policy.
However, Foxconn must abide by local laws and regulations on labor protection to prevent incidents such as those that have occurred in China, Natalia said