The Importance of Kendal Industrial Park for Manufacturing in Indonesia

The Importance of Kendal Industrial Park for Manufacturing in Indonesia

  • InCorp Editorial Team
  • 21 January 2025
  • 6 minutes reading time

Manufacturing in Indonesia assumes great importance in attracting foreign investments as it contributes to almost a quarter of the national GDP and employs over a fifth of the working population.

Prompt Manufacturing Index – Bank Indonesia (PMI-BI) which is a composite indicator of manufacturing sector performance in Indonesia, indicated that manufacturing activities have increased in the first quarter of 2021 to 50% as compared to 47.29% in the fourth quarter of 2020. It is further expected to reach 55.25% in the second quarter of 2021.

The government has mandated* industrial businesses to operate their activities in industrial estates in order to promote equal economic growth in the country. There are now 87 industrial zones in Indonesia, covering an area of about 86,000 acres.

These industrial parks, such as Kendal Industrial Park (KIP), help industrialists to focus on their core manufacturing processes rather than worrying about infrastructure development and other ancillary services.

Kendal Industrial Park (KIP) is a government-to-government project between Indonesia and Singapore and has attracted many international investors to set up their manufacturing units in KIP. 

Here are some advantages offered by KIP and similar industrial estates: 

Advantages of Kendal Industrial Park

Infrastructure

  • Easy availability of electricity and water
  • Access to ports and major transportation routes for goods distribution and logistics
  • The Industrial Waste Disposal system is also provided to the tenants. 

Financial

  • The corporate income tax is reduced ranging from 30% to 100% for a time period up to 15 years, depending on Industrial Estates Development categories that investors opt for.
*This mandate is excluded for companies with the following criteria: (1) Companies operating in the region that do not have industrial estates or its industrial estates have been fully occupied; (2) Small and medium-sized companies that do not cause environmental impact; (3) companies that process special raw materials and/or whose production processes require a specific location.
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Manufacturing in Indonesia: Opportunities in Kendal Industrial Park 

Kendal Industry Park (KIP) happens to be the largest industrial township development in Central Java covering over 2,200 hectares of area. It has already attracted over 61 tenants from different industries such as food manufacturing, furniture, stationery, building materials, warehousing, export-oriented business, and so on.

As Central Java manufacturing hub, KIP offers significant opportunities for manufacturing businesses, leveraging its strategic location, integrated facilities, and growth potential. The park provides convenient access to Central Java’s major transportation networks, including toll roads, seaports, and airports. Additionally, KIP features modern infrastructure development tailored to support manufacturing operations, such as ready-built factories, customizable industrial plots, and essential utilities like electricity, water, and wastewater treatment facilities.

For investors focused on sustainability, KIP has implemented eco-friendly initiatives, including energy-efficient systems and waste management practices, to support green businesses. Through its collaboration with a Singaporean company, KIP brings international management expertise and standards, ensuring reliable and efficient manufacturing operations for both local and foreign enterprises.

Perks of Setting Up A Manufacturing Unit in Kendal Industrial Park

Owing to government support, KIP presents itself to be a lucrative target for investors looking to invest in Indonesia. Some factors contributing to its optimistic outlook include:

Sembcorp Involvement 

Sembcorp Development is a renowned Asian developer with over 30 years of industrial park development expertise. The engagement of a reputable company like Sembcorp instills trust in both local and international investors. 

SEZ Incentives 

As part of the Indonesia Special Economic Zone (SEZ), KIP offers an additional benefit to those who wish to set up their business. Following is the comparison between regular Industrial Estates and KIP incentives:

Industrial Estates Incentives

KIP (SEZ Incentives)

Developing Industrial Estates (Located in Java Island)
  • 30% net Income Tax reduction for 6 years (5% per year)
  • Value Added Tax (VAT) exemption
  • Import Duty Exemption
Fiscal Benefit:
  • 30% net Income Tax reduction for 6 years (5% per year)
  • Value Added Tax (VAT) exemption
  • Import Duty Exemption
  • Tax holiday up to 20 years depending on investment value
  • 50%-100% local tax and retribution reduction

Non-Fiscal Benefit

  • Visa on Arrival for 30 days, extendable for 5 times
  • KITAS for foreign investors is valid for five years and extendable up to 15 years
  • Establishment of a Special Wage Council and Special Tripartite Consultation
Potential Industrial Estates Category I (Located in South Sulawesi, East Kalimantan, North Sumatera)
Potential Industrial Estates Category II (Located in Papua and West Papua)
  • 10-100% Income Tax reduction for 5-15 years
  • Value Added Tax (VAT) exemption
  • Import Duty Exemption

Integrated Infrastructure

KIP is connected to all major cities of the island via The Trans Java toll road. Moreover, The Ahmad Yani International Airport is 21kms from KIP with direct international flights available round the clock. Seaports, train access, and easily accessible ring roads contribute to KIP’s well-integrated infrastructure. 

Competitive Wages 

Kendal has a lower minimum wage as compared to other industrial cities in Indonesia. KIP’s minimum monthly wage in 2020 and 2021 recorded as US$ 156 and US$ 164 respectively. In comparison, the minimum monthly wages of other industrial parks in Bekasi, Surabaya, Bogor, and Semarang recorded a much higher figure of US$ 337, US$ 303, US$ 297, and US$ 198 respectively. 

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Human Resources Availability 

With approximately 14,232 students graduating from colleges, universities, and vocational schools every year, the availability of qualified and skilled human resources is abundant in Central Java. Moreover, new investments in KIP have lowered Central Java’s unemployment rate. All these aspects combine to make KIP an ideal location for investors to set up their business and leverage untapped opportunities available in the manufacturing sector.

Start Your Manufacturing Business in Kendal Industrial Park with InCorp

Setting up a business in a foreign country comes with its own share of challenges. With services like market research, company registration, legal advisory, business licensing, and business process outsourcing, InCorp can assist you in establishing your manufacturing unit at Kendal Industrial Park while you focus on your core business. 

Why Incorp?

  • Expert Assistance: Our experienced consultants deliver valuable insights and guidance, helping you navigate the complexities of company setup in Indonesia with confidence.
  • Time-efficient Process: We streamline the process to ensure a smooth and hassle-free business journey, saving you time and effort.
  • Comprehensive Support: We offer a one-stop solution to simplify your business operations, enabling you to thrive in Indonesia’s dynamic business environment.

To know more please fill out the form below or speak with an expert on our chatbot to learn more about how InCorp’s solutions can assist you in making investments in Indonesia.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.