Indonesian industrial park firms thrive on FDI boom

* Land prices in industrial parks up 50 pct this year

* Tax holiday seen as an investment boost

* Poor infrastructure, red tape seen as major threats

* Internusa's shares up 55 pct this yr, Jababeka 16 pct

By Janeman Latul

JAKARTA, Sept 30 (Reuters) - Indonesia's industrial park firms are enjoying a revival in demand for new plots, with sales already up more than 50 percent this year compared with 2010 at over $4 billion as foreign investment surges in Southeast Asia's biggest economy.

The world's fourth most populous country drew in a record $9.6 billion in foreign direct investment (FDI) in the first half of 2011, attracted by its relatively stable politics and economy since the 1998 financial crisis, plus abundant resources and huge consumer spending power.

That trend is expected to continue as global firms look for low-cost bases and alternatives to China, where growth may be slowing and labour is increasingly expensive, analysts said.

China's Geely Automobile Holdings wants to make Indonesia its car production hub for Southeast Asia and the government has said that South Korea's Hankook Tire will build a $1.2 billion factory.

Industrial parks can barely keep up.

"We're in a race against tremendous demand ... Therefore, we're now looking to buy new land banks to benefit from it," said Sonny Satia Negara, head of investor relations at Surya Semesta Internusa .

Property firm Internusa owns the country's second-biggest industrial park, the 1,400 hectare (3,450 acre) Surycipta Swadaya in Karawang, West Java.

Indonesia has about 55 industrial park firms providing land and services such as road access, power, water and security.

The sector languished for years after the Asian financial crisis, when companies shifted to resources from manufacturing.

But Negara said his firm's land sales had jumped to 36 hectares last year from an average of 10 to 15 hectares annually since the late 1990s.

"Our target this year actually was 70 hectares but by August we'd already received commitments for around 200 hectares," he said, adding that new tenants included Japan's Daihatsu and Nestle Corp , which plan to build new factories.

Reflecting such demand, Internusa's share price has risen 55 percent this year, while Indonesia's biggest industrial park developer, Kawasan Industri Jababeka , has risen 16 percent. The stock market index has lost 4.17 percent.

Internusa's 12-month forward P/E ratio is at 9.2 while Jababeka is at 10.2, a level that looks attractive and cheap, given its promising growth, said Ferry Budiman Tandja, president director at Jakarta-based Ciptadana Securities.

TAX BREAKS

Growth prospects have been given another boost by the government's offer of a tax holiday to big manufacturers investing more than $100 million. ID:nL3E7JF0JZ]

Planned investments include a $6 billion joint-venture steel plant by South Korea's POSCO , the world's third-biggest steelmaker, a $4.5 billion petrochemical complex by South Korea's Honam Petrochemical Corp and a new oil refinery for $8-$9 billion from Kuwait Petroleum Corp.

"I'm confident the industry will grow at least 30 percent per year as more investment is coming in," said Hendra Lesmana, chairman of Indonesia's Industrial Estate Association, adding that land prices had skyrocketed 50 percent from last year.

But Lesmana warned that poor infrastructure could halt momentum, and called for changes to land clearing regulations and less red tape.

"New sea ports, roads and power plants are a non-negotiable necessity. We can't just rely on Tanjung Priok," Lesmana said, referring to Indonesia's biggest sea port.

Some developers aren't waiting for the government.

Leader Jababeka plans a 130 megawatt power plant worth $141 million and is launching a feasibility study for a new sea port near its area.

Jababeka has around 1,500 existing tenants, including Japanese motorcycle producer Yamaha Motor , South Korea's Samsung Electronics and Unilever .

"Investors favour us now, but if we fail to deliver infrastructure development across the country, we're not going to see the same excitement as this in the future," said Mulyadi Sugandha, Jababeka's corporate secretary. (Additional reporting by Fathiya Dahrul; Editing by Alan Raybould)