By Ahmad Pathoni
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coming to Indonesia for the country’s inexpensive workforce, analysts say it will also have to consider the country’s outdated infrastructure before it starts making iPads and other gadgets here.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.