Sustainable Development Impacts of Investment Incentives: A Case ...

trade knowledge network
Banten area (Table 11). Few companies employ foreign employees for specific management positions. One
fully-fledged FDI company employs local citizens right from bottom to top managerial level positions, with
only one expatriate serving as vice president. The Indonesian government requires FDI companies to employ
local people, a regulation that is often difficult to fulfill due to the lower skill and competence levels of local
workers compared with foreign manpower. However, companies often carry out job training before the job
placement and employ local citizens as outsourced employees in positions that lie outside production processes.
Table 11. Labour source
Labour sources Number Number of companies Respondent percentage (per cent)
Local (Banten area) More than 50 per cent 1 16.7
Less than 50 per cent 5 83.33
Domestic More than 50 per cent 5 83.33
Less than 50 per cent 1 16.7
International More than 10 per cent 0 -
Source: in depth interview
Less than 10 per cent 6 100.0
Regarding wages, work opportunity, work leave, career opportunities and gender equality, research
findings indicate that chemical companies in general are performing well. The wages of FDI companies
are also higher than regional minimum wages. In light of that, chemical industries in Banten have a
vitally important influence on improving socioeconomic conditions of the community. People living in
surrounding areas regard chemical companies as beneficial to their community as they provide muchneeded
employment opportunities. As a result, people who were farmers prior to the establishment of
the chemical factories have had the opportunity to become employees in manufacturing and service
industries. Moreover, the local people have had to seek higher education to qualify for educational
requirements demanded by the factories. Community income has risen, as remuneration in the chemical
industry is higher than in agriculture. Thus, there is no doubt the chemical industry has made a positive
contribution to the well-being of the society in the study area.
5.1.2 Trade aspect
Based on in-depth interviews, most inputs are imported goods (five of six respondents say that they use
more than 50 per cent imported input), while only very few are from local surrounding production
(Table 12). The imported input dependency in chemical industries makes imported tariff incentives an
important aspect in the development of the chemical industry.
Table 12. Input source
Input location Proportion Number of Companies Respondent percentage (per cent)
Local None 2 33.33
Less than 50 per cent 3 10.00
More than 50 per cent 1 16.67
Domestic None 1 16.67
Less than 50 per cent 5 83.33
More than 50 per cent - -
Import None - -
Source: in depth interview
Less than 50 per cent 1 16.67
More than 50 per cent 5 83.33
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Sustainable Development Impacts of Investment Incentives: A Case Study of the Chemical Industry in Indonesia