By Sonia Adriaty, Industrial Park
Over the past decade, the world has entered a new phase of globalization—what Richard Baldwin (2016) terms the new globalization, and what other economists describe as post-globalization. This is no longer an era in which countries compete merely by lowering tariffs or liberalizing trade regimes. Instead, the defining challenge today is far more structural: nations must prove their industrial capacity to integrate into increasingly fragmented, standardized, and geopolitically influenced Global Value Chains (GVCs).
Participation in global trade alone is no longer sufficient. Countries must demonstrate that their industries, production systems, and supporting ecosystems are capable of meeting the operational, environmental, and governance standards demanded by global manufacturers and lead firms. This structural shift is evident in three major global trends.
- Fragmentation of Global Supply Chains
Multinational companies no longer rely on a single country for production. The COVID-19 pandemic, the US–China trade war, escalating geopolitical tensions, and recurring supply shocks have fundamentally reshaped corporate risk calculations. Firms are now actively seeking alternative production locations that are stable, measurable, and resilient.
This shift marks the rise of China+1, friend-shoring, and supply chain diversification strategies. Indonesia has entered the global radar, but it has yet to become a decisive choice. The real competition for relocated manufacturing investment is currently unfolding in Vietnam, Malaysia, Thailand, and India.
- Rising Trade Standards and Compliance Requirements
In the past decade, the architecture of international trade has evolved far beyond tariff reductions or quota liberalization. Products are no longer assessed solely on price competitiveness; they are increasingly evaluated based on how they are produced.
Global trade now operates in a landscape defined by compliance, transparency, and sustainability. One of the most significant shifts is the growing emphasis on carbon footprints. The European Union’s Carbon Border Adjustment Mechanism (CBAM), for example, links market access directly to the emissions intensity of production processes.
This reflects a paradigm shift: markets now assess not only what is sold, but how it is produced. Industries that still rely on fossil-based energy, outdated technologies, or inefficient systems face new barriers to export markets. Without clear and verifiable emissions records, firms will struggle to access premium global markets.
Beyond carbon, technical and quality standards have become instruments of trust. Certifications such as ISO, HACCP, SNI, and other safety- and quality-based regulations are no longer optional add-ons. They are now integral to modern trade flows, ensuring product safety, consistency, traceability, and ethical production. For many advanced economies, standards serve not only as quality controls but as guarantees of responsible production practices.
- The Changing Role of Government
Countries that succeed in industrial competition are not those with the lowest production costs, but those that effectively integrate trade policy, industrial policy, energy policy, and investment policy into a single strategic framework.
- Vietnam, for instance, has not only signed 16 trade agreements, but has also strategically designated industrial parks for electronics, automotive, semiconductors, and renewable energy manufacturing.
- Singapore links its trade diplomacy directly to overseas industrial parks such as Batam, Bintan, and Suzhou.
- India has positioned industrial corridors as the backbone of its trade agreements and its Make in India
The lesson is clear: trade does not stand alone. It must be supported by a strong, coherent, and forward-looking industrial park ecosystem.
Indonesia’s Missed Opportunity
Indonesia is, in many respects, uniquely positioned. With a large population, abundant natural resources, a strategic geographic location, and a strong domestic market, the country should be a primary destination for global industrial relocation. Indonesia has signed numerous trade agreements, yet many of its industrial parks still face fundamental constraints: fragmented spatial permitting, unreliable electricity and gas supply, insufficient green energy availability, inefficient logistics, weak intra-park supply chains, and limited financing for park infrastructure.
Industrial parks are, in essence, strategic national infrastructure—no less important than ports, airports, toll roads, or even trade agreements themselves. Yet this strategic role has not been fully internalized within national policymaking. Indonesia has moved swiftly in trade diplomacy and investment promotion, but far more slowly in strengthening the industrial park ecosystem. As a result, opportunities to integrate more deeply into global value chains are often underutilized.
This paper examines why industrial parks are central to Indonesia’s trade future, identifies the structural barriers constraining their potential, and outlines policy steps needed to ensure Indonesia remains competitive in an increasingly contested global landscape.
Industrial Parks as the Backbone of Modern Trade
- Strategic Nodes in Global Value Chains
Global production is no longer country-based; it is cluster-based. Companies choose locations that offer production speed, low logistics costs, risk mitigation, green standards, and digital infrastructure. Industrial parks function as the nodes that connect these elements.
Without strong industrial parks, a country—regardless of its population or natural resources—will struggle to gain recognition within global supply chains. Vietnam and Malaysia’s success in electronics manufacturing was driven not by cheap labor alone, but by industrial parks designed to host global manufacturers.
- Structural Challenges Facing Indonesia’s Industrial Parks
Indonesia’s industrial parks face several systemic constraints:
- Policy Fragmentation: Spatial planning, energy, logistics, industrial development, exports, and investment are governed by separate institutions without a unifying framework, creating regulatory complexity and inefficiency.
- Misaligned Infrastructure: Many industrial parks lack optimal connections to modern ports, efficient logistics corridors, or stable energy supplies—key determinants of FDI attractiveness.
- Limited Digitalization: While global industry moves toward digital twins, IoT-enabled utilities, AI-based monitoring, and traceability systems, many Indonesian industrial parks remain in transition.
- Green Energy Gaps: Green energy is no longer a competitive advantage—it is a prerequisite. Without solar, biomass, hydrogen, or low-carbon energy schemes, Indonesian exports risk carbon-related trade barriers.
Strong industrial parks can catalyze sustainable manufacturing hubs, upgraded local supplier networks, new industrial cities, vocational education centers, regional GDP growth, and enhanced export competitiveness. Industrial parks are therefore not merely physical infrastructure, but long-term instruments of national development.
Seven Strategic Agendas for Transforming Indonesia’s Industrial Parks
- Integrating Trade, Industrial, Energy, and Spatial Policies
Enhancing national industrial competitiveness requires an integrated, cross-sectoral, and ecosystem-based policy approach. To date, Indonesia’s trade, industrial, energy, and spatial planning policies have largely operated within separate policy frameworks. As a result, strategic alignment and consistency of implementation at the industrial park level have not always been achieved. This fragmentation creates overlapping regulations, regulatory uncertainty for businesses, and inefficiencies in the provision of supporting industrial infrastructure.
To address these challenges, Indonesia requires an integrated cross-ministerial planning framework that systematically aligns international trade policy, industrial capacity development, national energy planning, and spatial planning. This integration is not merely intended to harmonize planning documents, but to ensure that all sectoral policies directly contribute to the creation of competitive industrial growth centers.
Within this framework, industrial parks must be designated as the focal point of national policy integration. Trade policy must explicitly consider the readiness of industrial parks to accommodate export-oriented investment and production. Energy policy must guarantee the availability of stable, affordable, and sustainable electricity and gas supply in priority industrial parks. Industrial policy must be directed toward building production clusters and interconnected supply chains across regions. Spatial planning policy must provide legal certainty over land availability and appropriate land use for the expansion and development of new industrial parks.
Through this integrated approach, industrial parks will function as well-planned economic growth centers supported by harmonized infrastructure, energy systems, logistics, and regulatory frameworks. The unification of cross-sectoral policies thus becomes a critical foundation for accelerating national industrialization, attracting higher-quality investment, and strengthening Indonesia’s position within global value chains.
- Designating Industrial Parks as Fast-Track Licensing Zones
One of the most persistent barriers to Indonesia’s industrial acceleration has been the lengthy, multi-layered, and fragmented licensing process. Investors are often ready to commence development, yet face delays caused by licensing procedures involving multiple institutions, repetitive requirements, and systems that are not fully synchronized. This condition undermines Indonesia’s attractiveness amid intensifying global competition.
For this reason, industrial parks must be designated as fast-track licensing zones, where all investment-related permitting processes can be conducted in a simpler, faster, and more predictable manner. Under this concept, industrial parks are not merely physical locations, but serve as gateways through which investors can directly enter Indonesia’s national production ecosystem.
Through a fast-track licensing scheme, industrial parks function as integrated licensing service centers. Investors no longer need to navigate multiple government agencies separately; all processes related to spatial compliance, environmental approvals, construction permits, and operational licenses can be processed through a single, streamlined channel. Procedures that previously required months can be reduced to days or weeks, provided that investors operate within government-designated industrial parks.
This policy must be supported by the integration of the OSS–RBA system with industrial park databases, enabling automatic verification of location, land size, legal status, utility facilities, and infrastructure readiness. Tenants operating within industrial parks would therefore benefit not only from licensing facilitation, but also from certainty that industrial park data has been validated by the central government and integrated into national systems.
- Developing an Industrial Park Energy Map
The availability of stable, affordable, and sustainable energy is a fundamental prerequisite for improving national industrial competitiveness. Consequently, industrial park development cannot be separated from a well-planned, long-term energy system strategy. In this context, Indonesia must develop a comprehensive Industrial Park Energy Map as a basis for cross-sectoral planning and decision-making.
This energy map should include projections of electricity and gas demand for each industrial park, taking into account sectoral characteristics, energy intensity, and expansion plans over the next 10–20 years. In addition, the energy map must incorporate clean energy integration strategies through a green energy roadmap, including communal solar power plants (PLTS), renewable energy-based Power Purchase Agreements (PPAs), and other energy transition schemes.
To enhance efficiency and transparency in energy utilization, industrial parks should implement smart metering systems and digital energy monitoring platforms that enable real-time consumption tracking, peak load identification, and optimization of utility infrastructure. The government should also provide energy efficiency incentives to encourage the adoption of energy-saving technologies, regular energy audits, and the use of low-emission production equipment.
The Industrial Park Energy Map is not only intended to meet operational energy needs, but also to serve as a strategic instrument supporting export-oriented industries facing global environmental standards such as the Carbon Border Adjustment Mechanism (CBAM) and green energy regulations imposed by trading partners. As such, energy mapping ensures not only supply reliability, but also enhances the competitiveness, sustainability, and international compliance of Indonesia’s industrial parks.
- Comprehensive Digitalization of Industrial Parks
The integration of digital technologies—through digital twins, IoT-based utilities, energy monitoring systems, and logistics visibility platforms—is a strategic step toward building modern, resilient, and competitive industrial parks in Indonesia. Digital transformation not only improves operational efficiency, but also ensures that industrial parks meet global standards and are fully integrated into international supply chains.
Indonesia requires a structured, integrated, and forward-looking digitalization policy to ensure that industrial parks genuinely function as engines of national economic growth.
- Establishing National Industrial Corridors
Indonesia is too large, too diverse, and too resource-rich to be developed through a uniform industrial approach. The country therefore requires regional industrial corridors, each with its own characteristics, competitive advantages, and long-term industrial future. These corridors are not merely lines on a map, but long-term economic narratives defining what Indonesia will produce and where its production centers will be located.
By establishing national industrial corridors, Indonesia clarifies which regions will serve as export engines, which will support supply chains, and which will become bases for emerging technologies. This step is not only about efficiency, but about defining Indonesia’s economic identity.
Five primary corridors that could serve as the foundation of Indonesia’s industrial future include:
- Batam–Bintan: electronics and logistics
- Karawang–Bekasi: automotive and electric vehicles
- Subang–Patimban: logistics and export-oriented manufacturing
- Gresik–Surabaya: petrochemicals and maritime industries
- Sulawesi: batteries and downstream mineral processing
- Policy Sandbox for Priority Industrial Parks
To elevate Indonesia’s industrial parks to a truly competitive level, regulatory reform alone is insufficient. Indonesia requires safe spaces to experiment, test innovative policies, and resolve bottlenecks without waiting for lengthy national regulatory processes. This is where the concept of a Policy Sandbox for Priority Industrial Parks becomes highly relevant.
A policy sandbox provides a controlled environment with simplified, flexible, and supervised regulations to test specific policy instruments in selected industrial parks before nationwide implementation. This approach is widely used in financial services, technology startups, and renewable energy sectors across many countries, and can be applied effectively to industrial parks in Indonesia.
Potential policy experiments include:
- Bolder and More Flexible Green Incentives: Industrial parks should be the first testing ground for green economy incentive schemes, such as reduced electricity tariffs for tenants using renewable energy, lower licensing fees for factories installing rooftop solar systems, accelerated environmental certification processes, and subsidies or tax rebates for low-carbon technologies. Within a sandbox, such incentives need not wait for full national harmonization.
- E-Logistics Policy Innovation: Logistics costs remain one of the largest cost components for Indonesian industry. Within a sandbox framework, industrial parks can pilot paperless digital gate passes, logistics data integration with customs and ports, real-time IoT-based cargo tracking, supply chain visibility platforms connecting tenants, trucking operators, ports, and logistics providers, and automated warehousing systems. Successful models can be replicated nationwide to reduce logistics costs and dwell time.
- Measured and Industry-Friendly Carbon Pricing Schemes: Carbon pricing is often perceived as a burden on industry. However, without a clear carbon framework, Indonesian products risk additional tariffs in markets such as the European Union. Sandboxes enable the testing of flexible mechanisms, including production-line-based emissions accounting, reduced obligations for firms using renewable energy, internal carbon credit trading among park tenants, and incentive mechanisms for year-on-year emissions reduction.
- Ultra-Fast Licensing Mechanisms: Licensing remains one of Indonesia’s weakest points in investment competition. Sandboxes can pilot default approvals for specific permits, cross-ministerial digital integration limited to priority parks, elimination of irrelevant procedures, and simplified AMDAL requirements for clearly categorized low-risk industries. Successful models can serve as national prototypes.
- Zone-Based Economic Diplomacy
Indonesia’s economic diplomacy has expanded rapidly, marked by the signing of numerous trade agreements (FTA/CEPA/RCEP) and international MoUs. However, their impact remains limited because they are not directly linked to physical locations, industrial capacity, or implementation timelines.
To ensure that international commitments translate into real investment, export growth, and job creation, Indonesia must adopt a Zone-Based Economic Diplomacy approach. This aligns with UNIDO (2022) recommendations on location-based industrial diplomacy, which emphasize that trade cooperation must correspond with the capacity of industrial zones ready to absorb investment.
Under this approach, every trade agreement must explicitly link:
- Target industrial parks, aligned with land and infrastructure readiness (PP No. 20/2024 on Industrial Zoning);
- Priority sectors, consistent with national industrialization objectives (RPJMN 2025–2029);
- Investment realization timelines, as recommended by the World Bank Investment Policy Review (2021).
This approach transforms economic diplomacy into an operational, measurable, and results-based framework, consistent with OECD (2022) guidance on effective trade facilitation and ADB (2023) recommendations on regional investment integration. Diplomacy thus moves beyond political documents and becomes directly connected to industrial parks as centers of implementation.
Determining Indonesia’s Future Through Industrial Parks
Indonesia does not lack opportunity; it lacks preparedness. The global economy is moving decisively toward green, digital, and standards-based production. Countries that can offer modern, integrated industrial parks will win the competition.
Industrial parks are the real test of whether Indonesia can graduate into a global manufacturing power. The country’s future will not be determined by what it negotiates abroad, but by what it builds—today—within its industrial parks.
Sources
- Skylight Analytics Hub
- Baldwin, Richard (2016). The Great Convergence: Information Technology and the New Globalization. Harvard University
- Gary (2018). Global Value Chains and Development. Cambridge University
- (2022). Industrial Development Report 2022: The Future of Industrialization in a Post-Crisis World. United Nations Industrial Development Organization.
- Asian Development Bank. (2023). Regional Investment Integration Framework: Strengthening Industrial Collaboration in Asia.
- (2022). Effective Trade Facilitation for Competitive Economies. OECD Publishing.