JAKARTA –While electronics giant Foxconn Technology Group is thinking of coming
to Indonesia for the country’s inexpensive workforce, analysts say it will also
have to consider the country’s outdated infrastructure before it starts making
iPads and other gadgets here.
Indonesian Industry Minister
Muhammad Hidayat said earlier this week that the Taiwanese company – which
makes Apple’s popular phones and other gadgets – is considering investing up to
$10 billion to build a tech hub which could grow to become the Silicon Valley
of Indonesia in Southeast Asia’s largest economy. Foxconn said in an emailed
statement to Dow Jones Newswires that it was “exploring a number of
opportunities” but that its policy was to only make announcements following the
receipt of relevant approvals, and that it hadn’t yet submitted project
proposals.
While wages in Indonesia are
lower than those in China, Indonesia in many areas lacks the infrastructure
crucial to a company as massive as Foxconn, China’s largest exporter. The
archipelago’s clogged roads, frequent power disruptions and overstretched ports
all get in the way of producing and delivering products cheaply and on time.
“Logistics is a weak link in
Indonesia and we know that Foxconn is a company that commits itself to having
zero inventory and on-time delivery,” said Poltak Hotradero, an economist and
the head of research at the Jakarta Stock Exchange. “Foxconn’s clients are the
top tech companies like Apple who are unforgiving if products are not delivered
on time.”
Minister Hidayat said that
Foxconn – which is the world’s biggest contract electronics manufacturer by
revenue, employing more than 1 million people in China alone – was already
looking for 1,000 hectares of land on the island of Java to be the site of its
potential manufacturing investment.
Latif Adam, an economist at the
Indonesian Institute of Sciences, said acquiring 1,000 hectares of land will
not be easy and that reliable access to electricity, water and public
transportation for workers will also be a problem.
“Indonesia is weak in these areas
and there needs to be serious preparation if this is ever going to become a
reality,” he said.
Some other analysts said
Indonesia shouldn’t be so quick to court Foxconn. While the electronics giant
could create jobs and help bolster the country’s exports, it will also try to
keep wages low to bolster its bottom line, said William Hickey, a professor of
energy and human resources at Solbridge International School of Business in
South Korea, in an opinion piece in the Jakarta Post.
“This is a huge mistake for
leaders to embrace this ‘race to the bottom’ type of employment,” he said. “It is especially galling considering the
huge natural resource reserves that Indonesia has that could be utilized for
its people skills advancement.”
Foxconn operates Chinese
factories that build products for electronics companies including Apple,
Hewlett-Packard Co. and Microsoft Corp. The company’s working conditions have
come under fire after a spate of employee suicides in 2010 and an explosion at
a plant last year that killed four.
Ahmad Pathoni
Business & Investment Opportunities
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