The continuing turbulence in the world economy does not seem to worry Ko Chao Chih, a Taiwanese investor. An owner of a textile and garment factory in Cimahi, West Java, Ko has long shifted his business focus from exports to the United States and European countries to domestic sales as demand here continues to rise significantly.
“Before 1998, the overseas market was better, with our firm exporting 80 percent of output while allocating 20 percent for the local market. But now, 60 percent of the output is sold in Indonesia and only 40 percent goes for export,” said Ko, whose factory produces spandex and materials to make cloth and sports shoes mostly for local manufacturers, and garments for export.
Being upbeat about Indonesia’s robust economic growth, the 68-year-old businessman said that the firm would maintain its presence in the country despite a key problem — surging labor costs.
“Indonesia has a huge market, which still has enormous room to further expand. Meanwhile, the workforce is also more abundant compared to other countries in the region like Vietnam or Thailand,” said Ko, who employs about 800 workers at his factory.
According to Andrew Hsia, the representative of the Taipei Economic and Trade Office for Indonesia, a sizeable amount of investment from Taiwanese firms will soon enter Indonesia, not only in the sectors where investment is already ubiquitous, such as textiles, garments and footwear, but also in the high-technology industry.
“These days, people are talking about Foxconn. It’s just one of them. There are many others that are negotiating,” Hsia said in an interview. He declined to specify the names of companies other than Foxconn.
Foxconn Technology Group, a subsidiary of Taiwan-based Hon Hai Precision Industry Ltd., reportedly plans to establish a manufacturing base in the Modern Cikande Industrial Estate in Cikande, Serang, Banten.
Another Taiwanese giant, the world’s biggest contract laptop and personal computer (PC) maker, Quanta Computer Incorporated, is currently studying the feasibility of setting up a factory in the Bintan Free Trade Zone in Riau Islands.
Taiwan has been one of the biggest foreign direct investors in Indonesia, with accumulative spending to date reaching US$14.68 billion, according to the Investment Coordinating Board (BKPM). During the first half of this year, Taiwanese firms invested $109.85 million in Indonesia, up 73 percent from the same period last year.
Taiwan is the ninth-largest foreign investor in the country, driven by the existence of big firms like Acer, Chinatrust Bank, Evergreen Group, Pao-cheng Shoes Co. and President Food.
Bilateral trade has also grown at a fast pace, surging last year by 16.52 percent to $12.27 billion from a year earlier, according to Taiwanese trade statistics.
Jakarta Taiwan Entrepreneur Association president director Sung Pui-Man said that a number of Taiwanese firms would probably enter a wide range of industrial sectors — agriculture, food and beverages, pharmaceuticals and automotive spare parts — apart from the traditional sectors — textiles, garments and footwear.
Sung said that significant increases in labor costs and inadequate energy supplies were primary concerns for Taiwanese companies.
Taiwanese businesses, particularly labor-intensive ones that can employ up to 100,000 workers, experienced a major blow due to a jump in monthly wages that cost them up to 30 percent more this year.
Indonesia’s labor costs, however, are still lower than that of China and Thailand, but higher than
Indonesian Institute of Sciences (LIPI) senior economist Thee Kian Wie said that as Taiwanese investment might shift progressively to areas other than labor-intensive industry, Indonesia would face a predominant issue — human resources.
“We still need to improve the quality of our human resources. At present, most of our workers are low-skilled, and this can avert potential investment [from Taiwan] in the technology-based industry,” he said.