Why West Java is a hub for foreign investment
By Kyle Springer
After a private roundtable discussion with Ridwan Kamil, Governor of West Java, Perth USAsia Centre Senior Analyst Kyle Springer provides a series of brief observations on the current landscape in Indonesia’s most populated province and explains why it leads the country in its ability to attract foreign investment.
West Java, with a population of almost 50 million people, is a densely inhabited and centrally located province of Indonesia adjacent to Jakarta.
Situated on an island inhabiting nearly 150 million people, West Java is the most populated province, on the most populated island, in the fourth most populated country in the world. Combining this with its proximity to Jakarta, the nation’s capital, and with Indonesia’s standing as the largest economy in Southeast Asia, it makes sense that the province is a centre of economic activity. This economic activity, in turn, draws in foreign investment; foreign investment realisation was valued at USD 3.5 billion from January to September 2020.
A focus on infrastructure
West Java exhibits several important characteristics that make it attractive for foreign investment, of which one is infrastructure. In terms of physical infrastructure, the province is starting numerous cutting-edge projects. West Java is the location of a new seaport at Patimban, for example – designed to relieve the congested port of Tanjung Priok in Jakarta. The new seaport will be connected via a toll road to Karawang International Industrial City, into which there has already been a significant amount of Japanese investment. West Java attracts such a significant amount of foreign investment for this exact reason: the province couples its transport infrastructure with its industrial parks and special economic zones. This connectivity allows essential inputs and final products to move quickly, and quality infrastructure boosts the province’s overall competitiveness.
The regional government, as we discussed in our roundtable, is also focused on developing West Java’s digital infrastructure, investing in connected agriculture and aquaculture technologies. In 2019, nearly 400 public Wi-Fi units were installed throughout the province in areas previously without access to an internet connection.
There’s a big focus on accelerating the growth of e-commerce and the Governor is highly supportive of this trajectory. In late 2020, the Governor announced that Amazon will invest in a data centre for its cloud computing service.
Education & Good Governance
Another factor behind the province’s success is its human resources, which foreign investors look at as part of a region’s competitiveness. West Java has a well-educated and highly skilled workforce supported by the nearly 50 higher education institutions located in its largest city, Bandung. Bandung Institute of Technology, known as ITB, leads in engineering and is one of the country’s most prestigious universities. Other key institutions include Padjadjaran University, National Institute of Technology, Parahyangan Catholic University, and Bandung Islamic University, just to name a few. Graduates from these institutions have positive career prospects in the province, as investment creates jobs.
Good governance at the provincial level also increases West Java’s attractiveness to foreign investment, as the province has pursued pro-business policies and a streamlined bureaucracy. It has launched a number of programs to support business growth outside of its major cities and provides an e-commerce platform for farmers to sell their produce. The provincial government has prioritised resources for underdeveloped communities and villages. These pro-business and pro-development policies send encouraging signals to investors that the economy is stable and that the government is willing to take the steps necessary to foster a competitive environment.
Leading the way
Indonesia continues to need foreign investment to grow its economy and create jobs for its young population. West Java leads the way in this respect, and shows how a focus on infrastructure, fostering education and institutions, and good governance combine to make the province an ideal investment destination.
In 2021, the Perth USAsia Centre has a focus on Indonesia “Beyond Jakarta” and will be highlighting opportunities and profiling leaders outside of the nation’s capital.