Can Chinese firms muscle in on Japan’s presence in Indonesia?
    Category: Column By : Todd Lauchlan Read : 1992 Date : Monday, May 09, 2016 - 04:56:52

    We hear much about the Chinese “invasion” of Asia, with capital and tourists flowing out of the Middle Kingdom and filtering throughout the region. Hong Kong (of course), Japan and Australia have been major destinations for real-estate investment and for travelers keen to exploit weaker currencies that help their yuan go further. Malaysia has seen megaprojects such as that right on Singapore’s doorstep by Chinese developer Country Garden, a somewhat controversial plan to reclaim vast wetlands off Johor Baru.

    But in Indonesia, and indeed the rest of Southeast Asia, the Chinese wave has yet to wash ashore. Japanese companies are substantially more invested in the region. The Japanese companies in Indonesia have been here through good times and bad. The reason? They see markets such as Indonesia, Vietnam and the Philippines as a natural extension of their business and where the growth is.

    The tone is also different. Whereas Japanese multinationals are generally listed and independent, many large Chinese companies are state-owned or have state links. Most property developers are private—bar the aggressive Greenland group, which is a state-owned enterprise. This creates a political element to any investing overseas by those companies.

    In Indonesia, Japan’s Hitachi, Mitsui, Sumitomo and Tokyu Land have all been  developing real estate, while many Japanese multinational manufacturers have built their own production facilities. Kajima is particularly respected for its successful mixed-use development Sentral Senayan.

    JLL Indonesia in January launched a Japan desk. Shin Furuhata, formerly with Mitsui, joined the company to build a business with Japanese companies looking to do deals in Indonesia. It’s early days, but he is already discovering opportunities, and it’s a good direction for JLL. It just takes time. “The potential for more Japanese investment is still good,” says Furuhata.

    But Indonesia’s rising labor costs now make it hard for Japanese firms to fend off Korean rivals such as LG and Samsung, and Chinese rivals with even cheaper products aim to underbid the Koreans.

    One successful Japanese firm expanding into Indonesia is mall operator AEON. It opened one mall last year in Jakarta’s Tangerang, which booked around 12 million customers, not bad for just 12 months of operation. It plans to build three more by 2018 and is expanding in Vietnam and Cambodia, and may enter Myanmar.

    Another aggressive retailer is Uniqlo. But Indonesia requires retailers to take at least 2,000 square meters in Indonesia. Uniqlo can easily meet that requirement. A flurry of real-estate developers are also making inroads, with new projects announced in 2014 and 2015 from Mitsui, Mitsui Fudosan, Mitsubishi Estate and Sanko Soflan—an involvement likely to increase.

    JLL has a team in Beijing and Shanghai to aid Chinese companies in exporting capital. But the company doesn’t have Chinese nationals on the ground in Indonesia, a logical next step if Chinese companies, now looking at Indonesia, do start making sizeable deals. The Chinese are coming. But the only significant investment in Indonesia by a Chinese developer to date is a residential project in southern Jakarta by China Communications Construction Co. Korean companies are also exploring opportunities but have only carried out real-estate deals such as leasing a large shopping mall by Lotte. But for now, Japanese are far ahead—and they don’t carry political baggage.