April 19, 2016

Japanese companies in Indonesia have been here through good times and bad.

We hear much about the Chinese “invasion” of Asia, with capital flow and tourists flowing out of the Middle Kingdom and filtering throughout the region. Hong Kong, Japan and Australia have been major destinations for real-estate investment opportunities and for travelers keen to exploit weaker currencies that help their yuan go further. Malaysia has seen megaprojects such as the somewhat controversial plan, Chinese developer Country Garden, 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 and it is the Japanese companies, who have endured through good times and bad, which are substantially more invested in the region. These corporates see markets such as Indonesia, Vietnam and the Philippines as a natural extension of their business, one with enormous growth potential.

There are other fundamental differences. Whereas Japanese multinationals are generally listed and independent, many large Chinese companies are state-owned or have links back to the state although most property developers are private—bar the aggressive Greenland group, which is a state-owned enterprise. This creates a political element to any overseas investment.

“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,” explains Shin Furuhata, Head of JLL Indonesia’s Japan desk. “The potential for more Japanese investment is still good.”

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

One successful Japanese firm expanding into Indonesia is mall operator AEON. Since opening its mall in Jakarta’s Tangerang last year, it has seen 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 even enter Myanmar.

“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,” says Furuhata

The Chinese are indeed coming. But, as yet, the only significant investment in Indonesia by a Chinese developer is a residential project in southern Jakarta by China Communications Construction Co. For now, the Japanese remain ahead—and they don’t carry political baggage.


Shin Furuhata
Head of JLL Indonesia’s Japan desk


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