US manufacturer Alpan moves production to Indonesia from China

California

ALPAN Lighting Products, a US manufacturer of solar lamps, is shifting production from China to Indonesia, joining droves of companies looking to escape higher tariffs triggered by the trade war with the US.

PT CDS Asia, a unit of Alpan, will invest US$14 million to build a factory in an industrial zone in Central Java, Indonesia's Investment Coordinating Board said in a statement. The export-oriented facility is scheduled to begin production later this year and may employee 3,500 people, it said.

Alpan decided to move its factory from Xiamen because of a 25 per cent tariff on exports, compared with zero charges in Indonesia, the board's investment promotion officer, Ikmal Lukman, said in the statement. The US company is among seven foreign businesses relocating from China to Indonesia, with a combined investment of US$850 million, according to the board.

Indonesia is trying to attract companies seeking to relocate from China after South-east Asia's largest economy was overlooked by firms shifting during the peak of the US-China trade war. President Joko Widodo last week promised potential foreign investors a hassle-free approval process and inexpensive land, gas and other facilities if they chose to move there.

Jokowi, as the president is commonly known, has ordered officials to ensure there was no repeat of companies bypassing the country as they did a year ago during the seismic shift in global supply chains triggered by the trade spat. None of the 33 global companies that relocated from China chose Indonesia, the president cited a World Bank study as saying.

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The investment board is actively pursuing proposals from 17 foreign companies that have shown interest in relocating to Indonesia from China, Mr Lukman said. The country is offering 4,000ha to potential investors in an industrial estate in Batang in Central Java, which is close to a deep-sea port, an international airport and has toll-road connectivity.

Indonesia has lagged neighbours Thailand, Vietnam, Malaysia and Singapore in drawing foreign investment. The reasons for the poor performance are well documented: inadequate infrastructure, particularly in transport; rigid labour rules; limits on how much foreigners can invest in several industries; and bureaucratic red tape.

The Alpan investment is "a clear proof that Indonesia can compete with China", Mr Lukman said. "We are optimistic that in the future there will be many other foreign investors who will relocate their investment to Indonesia." BLOOMBERG