2 September 2015

by Randi Eka

Opinions on Foxconn’s Canceled Investment

After being reported for negotiating with the government of Indonesia, Foxconn finally opted to draw itself from the talk and decided to establish its factory in Malaysia instead. This is as stated by KADIN’s Head Suryo Bambang Sulisto. It’s indeed too difficult for Foxconn to come and invest in Indonesia, as it supposed to bring along billions Rupiah of investment.

The establishment plan has actually been carried on since 2012. The initial value of it reportedly reached $1 billion, while the establishment would be completed by October 2014. However, the company finally canceled the plan due to the high cost set by the owner of Kawasan Berikan Nusantara (KBN), the location where the factory was to be built.

The government set too much of a rate, while Foxconn expected the land for free. According to Sulisto, it’s not a mistake for the government to grant Foxconn’s wish as it really has the potential to accelerate the national economic growth. He further added that Foxconn’s huge investment will help creating job vacancies as well as facilitating the local production of electronic devices.

Foxconn has yet given any confirmation regarding the cancellation. When being asked to give words, the team insisted that they still favor Indonesia as one of their investment receipts. Nonetheless, they also emphasized that it’s not impossible to see the money awarded to other countries, should they think that it’s not commercially attractive enough.

Between business negotiation and opportunity

From the public’s point of view, it was a difficult decision to make. Foxconn asked for a free land and the opportunity to strengthen the local industry. Foxconn’s diplomatic mission is to meet the vast growing demand for electronic products in Southeast Asia by investing heavily in Indonesia. It means that Indonesia was projected to be Foxconn’s center of production. The current government also keeps encouraging local productivity, as it has issued numerous policies on digital products so far. The decision would be on the hands of the Ministry of Industry this time.

On the other hand, other players of the industry are also preparing themselves for Indonesia. Arima became the latest one rumored to establish a factory in Indonesia. For Indonesia, this could mean a good investment. It’s a good chance to get people involved in the production process, although they must start from assembling the products.

Some might say, “Indonesia is rich of land, why not giving a little for product development?”. Well, the government must have its own assessment, including regarding the threat it may bring to local manufacturers.

Judging at the current economic condition, foreign investment is sorely needed by Indonesia, especially to add more foreign exchange. The import of raw materials, which later get assembled and distributed within fellow Southeast Asian countries, should be an added value for Indonesian export, that decreases during 2015.

One thing for sure, this cancellation has given Indonesia a negative image to carry.