FS Master Plan Kek CCCC PDF

Feasibility Study Report of
Special Economic Zone Bitung and North

Minahasa, North Sulawesi
(First Draft)
China Communications Construction Co., Ltd.

June 2015
Special Economic Zone Bitung and North Minahasa, North Sulawesi Feasibility Study
Table of Contents
Chapter I Overview ...................................................................................... 4
1.1 Profile of CCCC .................................................................................... 4
1.2 Project background ............................................................................. 6
1.3 Project components ............................................................................ 6
1.4 Methodology of the study ................................................................... 7
1.5 Conclusions ......................................................................................... 8
Chapter II Analysis of Investment and Development Environment ..................... 16
2.1 Macro‐social and macro‐economic environment .............................. 16
2.2 Country levels planning and political environment ........................... 26
2.3 Infrastructure conditions .................................................................. 36
Chapter III Industrial Analysis ............................................................................... 38
3.1 Development statue of regional industry .......................................... 38
3.2 Regional industrial development status ............................................ 39
3.3 Regional industrial development direction ....................................... 40
3.4 Suitability analysis of the SEZ ............................................................ 50
3.5 Industry selection of the SEZ ............................................................. 54
Chapter IV Market Analysis ................................................................................... 58
4.1 Industry market analysis ................................................................... 58
4.2 Market analysis of the SEZ ................................................................ 72
4.3 Market size forecasting ..................................................................... 75
Chapter V Engineering and Technology Programme ........................................... 90
5.1 Construction scale ............................................................................. 90
5.2 Overall layout ................................................................................... 90
5.3 Technical scheme on engineering ...................................................... 94
5.4 Environmental protection measures ................................................. 99
5.5 Investment estimation .....................................................................109
Chapter VI Business Model .................................................................................. 111
6.1 Cooperation contents ......................................................................111
6.2 Development and operation models ................................................111
6.3 Profit model .....................................................................................112
Chapter VII Investment Benefit Analysis .............................................................. 113
7.1 Evaluation basic ..................................................................................113
7.2 Basic assumption ................................................................................113
7.3 Cost benefit Analysis ..........................................................................114
7.4 Profit analysis .....................................................................................117
Chapter VIII Policy Demand and Support Guarantee ............................................ 121
8.1 Reference experience of Shenzhen Special Economic Zone .....................121
8.2 Preferential policies in development period ....................................124
8.3 Investment attraction policy ............................................................125
8.4 Labor employment policy .................................................................125
8.5 Tax policy .........................................................................................126
8.6 Service support ................................................................................126
8.6 Intellectual property protection policy .............................................127
8.7 Foreign exchange management .......................................................127
Chapter IX Risk Assessment ................................................................................. 128
9.1 Risk analysis .....................................................................................128
9.2 Risk management ............................................................................131
Chapter X Conclusions and Recommendations .................................................... 133
10.1 Conclusions ......................................................................................133
10.2 Recommendations ...........................................................................134
Chapter I Overview
1.1 Profile of CCCC

China Communications Construction Company Ltd. (CCCC), established on 8 Oct. 2006,
and went public in the Stock Exchange of Hong Kong on 15 Dec, is planning to participate
in the development of SEZ Bitung and North Minahasa project.
CCCC is the largest port design and construction enterprise as well as the third-largest
highway investment operator in China. It is also one of the leading enterprise in road and
bridge design and construction worldwide, top international dredging contractor, and the
largest container crane manufacturer in the world. CCCC was ranked No. 9 in ENR
among the 250 largest international contractors and ranked No. 187 among world top 500
enterprises in 2014.
¾ Business fields of CCCC covering the whole industry chain, with ability to
integrate the processes of preliminary planning, feasibility study, engineering
design, project construction, operation, and so on.
CCCC operates at over 120 countries covering businesses of engineering infrastructure,

financial investment, real estate development, urban operation, and so on. It offers to its
customers world-class business planning, urban planning, architectural design,
construction management and overall operation.
Table. 1-1 Brief business description of CCCC
Segment Introduction
Infrastructure 4 harbor engineering enterprises and 4 highway engineering
Construction enterprises
Infrastructure Design 13 design institutes
Equipment
The world's largest container crane manufacturer
Manufacturing
Dredging 3 dredging subsidiary companies
Large scale real estate and city comprehensive development.
Businesses covering real estate investment and development, and
Real Estate
management, infrastructure construction and investment, urban
development and operation, urban renewal, property management.
110 branches and offices throughout the world, businesses
Overseas
covering more than 120 countries and regions, with ongoing
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construction projects contracts value of about USD 15-20 billion.

At the end of September 2013, total investment value of about 310
Investment
billion RMB in the Group’s core businesses.
¾ Comprehensive regional development and operation capability
CCCC is committed to its “Five Core Businesses” strategy (namely engineering

contractor, urban complex development operator, real estate enterprise, investor of
infrastructure, marine equipment and port machinery manufacturing contractor and
system integrator). CCCC recently has undertaken a number of comprehensive urban
development projects, and participated in the primary land development, investment and
construction of municipal infrastructure and property development. Its business models
include BT, BOT, EPC, EPC & TOD, and PPP & EPC & land development. CCCC’s
achievement in these fields has been highly recognized by the relevant stakeholders.
With extensive experience of comprehensive urban development and professional facility

operation capability, CCCC will guarantee success for the development of the SEZ.
¾ Strong financing capability
CCCC possesses strong financing capability. At the end of 2013, the total assets of the
company were RMB 517.4 billion (around USD 84 billion) and had obtained a bank credit
line of RMB 754.9 billion (around USD 120 billion).
With such strong financing capability, CCCC could invest in this project, and hence
ensuring a smooth project implementation.
¾ Good external cooperation, a powerful guarantee to industry introduction and

investment promotion of the SEZ
CCCC has established good cooperation relations with professional terminal operators
and international shipping companies, which is conducive to opening up international
shipping routes and increasing freight volume for container terminal to be built. In addition,
CCCC keeps close cooperation with industrial associations, international chamber of
commerce of China, which is favorable for delivering of Chinese goods into Bitung and
North Minahasa SEZ, and gathering initial popularity and vitality for the SEZ. Furthermore,
CCCC has signed cooperation framework agreements with China local governments,
collaborative with industry associations and international chamber of commerce, CCCC
can lead some of Chinese manufacturing industries to the SEZ, and promote the
development of industrial processing in eastern Indonesia.
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1.2 Project background
Indonesia, member of ASEAN and G20, is the largest economy in South East Asia. In
recent years, the Indonesian society is relatively stable.The robust economic brings
Indonesia vitality with the GDP growth rate of 6% during 2009-2013. Indonesia has now
entered to the rapid industrial development stage and formed a series of advantageous
industries such as agriculture, mining, energy, processing and manufacturing, tourism,
marine transportation and communication etc, thereby Indonesia becoming a global
emerging country.
Indonesia, an important maritime state, acts as the main point of the throat between the
East Asia and Oceania. In 2013, its major port throughput exceeded 840 million tons. In
2014, the Indonesian government raised “Maritime Highway” and “Maritime Power”
development strategies, and planned eight SEZs including Sei Mangkei, Tanjung Api-api,
Tanjung Lesung, Mandalika, Maloy Batuta Trans Kalimantan, Palu, Morotai and Bitung to
promote Indonesia’s economic.
In Jan. 2015, China Communications Construction Company Limited (hereinafter referred

to as CCCC) and the North Sulawesi provincial government concluded and signed a MOU
on the special economic zone (SEZ) project of Bitung and North Minahasa. CCCC
undertook the cooperative development of the SEZ and completed the conceptual
planning of the Special Economic Zone Bitung and North Minahasa in March 2015.
Besides, it put forward the development orientation of the SEZ, i.e., the eastern regional
shipping hub of Indonesia, the eastern economic growth pole of Indonesia, the innovation
experiment base for national opening-up and cooperation and the environmental-friendly
hot spot for investment, with the addition of such functions as free trade, export
processing, industrial manufacturing, commercial logistics, bonded warehousing and
supporting service. The project further optimizes the international shipping environment
that drives up the international trade of Indonesia, and also assists Indonesia in
constructing the “Maritime Highway” and “Maritime Power” strategies and optimizes the
development pattern of Indonesia with improving the economics of North Sulawesi
Province and east of Indonesia, thereby brining vitality to the economic take-off of
Indonesia.
1.3 Project components
The scope of the project (covers 20 square meters) is Bitung and North Minahasa, North
Sulawesi, as shown in the figure below. A port and an industrial park are planned to be
developed and constructed within the designated scope.
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Figure 1-1 Sketch Map of Land Range

The study components include macroeconomic analysis, industrial analysis, market
analysis, technical scheme on engineering, business models, environmental protection,
investment estimation, analysis of financial benefits, risk analysis, conclusions and
recommendations, etc.
1.4 Methodology of the study
1.4.1 Industrial analysis
It’s required to analyze the industrial development status of Bitung; Based on the industrial
status analysis, Bitung industrial development direction is pointed out from four aspects,
i.e., domestic demands, international industrial transfer, resident consumption demand
and relevant planning; analyze the suitability of the park industries based on the features
of the SEZ and accordingly, propose the leading industry and industrial system of the
SEZ.
1.4.2 Market analysis
Comprehensively analyzing the market of Bitung SEZ from supply-demand structure,

competition pattern, target market and market strategies, then, the input-output balance
methods are adopted to evaluate the market size of the industrial park.
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The container throughput is predicted to comprise container production of the park,

container production of domestic and foreign trade. The prediction of the container
production of SEZ is based on the future output value of the park, and the reference to the
goods generation density of relevant regions. The prediction of domestic trade container
production during 2020-2030 is based on the development status of Bitung Port with
adopting the linear extrapolation method. Considering the current production load of
Bitung Port, the future newly increased part of domestic containers in the port will be
undertaken by the port of the project. For foreign trade container production, the dynamic
coefficient method of containers is adopted to predict the foreign trade container
production of Indonesia. On this basis, with the proportion of the foreign trade volume of
eastern Indonesia to that of the entire country, the foreign trade container production of
the project can be determined.
1.4.3 Technical scheme on engineering
By referring to the methods of port engineering feasibility and prefeasibility study of China,
the main technical scheme on engineering is proposed.
1.4.4 Financial estimation
It’s compiled by reference to the Economic Evaluation Methods and Parameters for
Construction Projects and relevant provisions of China. The cost and benefit of the project
are recognized to calculate the financial viability of the project and analyze the rationality
of project investment.
1.5 Conclusions
1.5.1 Development Orientation
(1)International shipping hub
Taking the advantages of port location and construction conditions, Bitung port shall be
developed into an international shipping hub with functions including collection,
distribution, transportation and transshipment, etc.
(2)Economic growth pole of Eastern Indonesia
Taking the advantage of special preferential policies, the SEZ shall be built as Eastern
Indonesia industrial center and Eastern Indonesia gateway to attract international
industrial transfer actively .Finally, the SEZ shall be developed into North Sulawesi’s or
even Eastern Indonesia’s economic growth pole.
(3)National innovation and testing base of international opening-up cooperation
Referred to international successful SEZ management model, to improve local business
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environment, the SEZ shall be developed into management system innovation and testing
zone and explore the experiences for Indonesia economic take-off.
(4)Environmental friendly investment hot spot
The SEZ shall emphasize environmental protection, create sound policy environment, and
improve the attraction of international investment.
1.5.2 Social and economic benefits
(1)Promoting balanced regional development
The future output value will be reach to $7.5-9 billion per year (worth GDP $1.5~1.75
billion).
Bitung port will seize the opportunity to be constructed as an international shipping hub in
the eastern Indonesia, which will lead international trade development.
(2)Supplying job and improving living standard
According to the experience of China's industrial park, the SEZ will create around 120-150
thousands job opportunities.
(3)Improving labor skills
The technology transfer can enhance the park’s production technology from production
equipment, management method, the concept of talent etc., also by improving the labor
skills, all factors will final drive up the production efficiency of the related industries not
only in the whole SEZ, but also in Indonesia.
(4)Growing the tax revenue
The future production value will be reach to $8-9.6 billion, and create $200-400 million in
tax revenue if all industries put into operation.
(5)Promoting urbanization, enhancing the city image
SEZ’s developement will turns some part of the agricultural labor to be engaged in the
production processing, manufacturing and services, etc., which leads to speed up the
local urbanization development process. In addition, it will be optimize the urban space
layout and totally improve the city image of Bitung.
1.5.3 The Necessity of the New Port
（1）The new port shall be as an indispensible part of the SEZ and the most important
transportation for the raw material and product for the SEZ.
（2）The new port shall accelerate logistics industry's development.
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（3）The new port shall be the gateway to drive the regional economic development and
enhance the relationship with other countries .
1.5.4 Industrial analysis
Based on the results of industrial analysis, a complete industrial system of Bitung is

constructed, including leading industries, the auxiliary industries and the basic industries.
The leading industries comprise food processing, manufacturing of light industrial
products, furniture & building material and port logistics industries. Port logistics acts as
a supplement to leading ports, thus shall be developed a comprehensive port service
system with integrating the covering functions such as warehousing, packing, bonded
support, processing, sales, wholesales, exhibitions, shipping transaction and information
management. Comprising electromechanical hardware manufacturing and ship repairing
& building, the auxiliary industries refer to the industries supporting the development of the
leading industries. The basic industries refer to the industries providing enterprises and
employees with basic services for the purpose of maintaining the park operation. The
basic services comprise park management, catering, retail, etc.
1.5.5 Market analysis
The development and construction contents of the project include the port, the
commercial service area, the logistics warehousing area, the processing & manufacturing
area and the comprehensive service area, and provide corresponding products and
services. The total area of the project is about 20 square meters, including 1,926.37
hectares of land for construction, which covers 93.6% of the total area, 1,138.69 hectares
of industrial land, 51.73 hectares of warehouse land, 104.23 hectares of land for
commerce & services facilities, 130.51 hectares of residential land and 246 hectares of
land for roads and traffic facilities. After all industries are put into production, the total
industrial output value per year will be USD 8.0-9.6 billion, and the total industrial output
value per year in the starting area will be USD 0.36-0.43 billion.
Table 1-1 Result of Market Size Prediction in the Park
Staring area Whole park

Industrial output value of the park $ 335-420 million $ 7.5–9 billion
GDP of the park $ 67-84 million $ 1.5-1.75 billion
Employed population of the park 6-8 thousand 120-150 thousand
Table 1-2 Result of Port Throughput Prediction
Short-term (2020) Long-term (2030)

Container 0.25 million TEU per year 1.0 million TEU per year
General cargo 0.35 million tons per year 0.45 million tons per year
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Bulk cargo 0.35 million tons per year 2 million tons per year
1.5.6 Technical scheme on engineering
(1) Construction condition
The project is provided with favorable natural conditions such as winds, waves and
currents，and beneficial conditions of water depth, geology and traffic within the project
area. However, it still needs to further improve the depending conditions such as electricity
and water supply system.
(2) Overall layout
The total construction land area of SEZ Bitung and North Minahasa is about 2,000
hectares. The layout structure of “One Center, One Axis, Three Corridors and Multiple
Groups” is planned to be formed.
The project construction will be divided into four phases. The total construction land area
of Phase I is 128.61 hectares (industrial part and port area), including 37.5 hectares of
port land area, with 2 newly-built 50,000 DWT berths. The construction land area of Phase
II is 658.55 hectares. The construction land area of Phase III is 844.19 hectares, and the
construction land area of Phase IV is 509.15 hectares, with 2 newly-built 50,000 DWT
berths.
(3) General layout of the new port
The port is arranged with three 50,000DWT container terminals and one 50,000DWT
multi-purpose terminal, with a total length of the quay line of 1,328m and a land area of
73.4 hectares. The width of the berth waters of the terminal apron is 65m. Considering the
future development and the reserved water depth of hydraulic structures, the bottom
elevation is between -14.2m CD and -15.7m CD. The diameter of the turning basin is
586m, and its designed bottom elevation is -14.5m, which is the same as the channel.
In phase I, it’s planned to construct one 50,000DWT container terminal and one
50,000DWT multi-purpose terminal, with a total length of the quayline of 680m and a land
area of 37.5 hectares. A revetment with a total length of 903m is planned to be built on
both the east and west sides of the terminal land area. The width of the front work zone is
70m. A 48,612 m2 loaded container yard, a 2,488m2 refrigerated container yard and an
11,450m2 empty container yard is arranged behind the berths. General cargos are
arranged in the northwest side of the yards, covering an area of 15,595m2. A 54446m2
reserved development area is arranged behind the yards. The auxiliary building zone for
living and production is located behind the yards. A gate is arranged in the port area.
(4) Handling process
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According to the annual throughput and types of different cargos in this project, the
handling process plan for containers: the quayside container gantry crane and the
multi-purpose crane shall be used for ship loading and unloading operation. The container
tractor with semi-trailer shall be adopted for horizontal transportation. RTGs shall be used
for handling operations in loaded container yards and reefer container yards. Containers
can be stacked with 5 layers in loaded container yards, and 4 layers in reefer container
yards. In empty container yards, the empty container handler shall be adopted for
handling operations, which can stacked with 7 layers.
Fork Lift shall be used for the handling operation in CFS.
The handling process plan for general cargos: the multi-purpose crane shall be adopted
for ship loading and unloading operation. Trailer with flat car shall be used for horizontal
transportation. In the general cargo stockyard, rubber-tired cranes and forklift trucks shall
be used for handling operations.
The handling function for bulk cargos will be added in the master plan. The hand handling
process plan for bulk cargos: the multi-purpose crane (with grab) and the portal crane
(with grab) shall be used for ship loading and unloading operation. The dump truck shall
be adopted for horizontal transportation. In the stackyard, mobile conveyors and front
loaders shall be used for handling operations.
(5) Marine structure
Compared with cast in situ bored piles scheme, the steel tubular piles scheme shall be
recommended in marine structure.
The pile platform is about 38m wide. Steel tubular piles of Φ1000 mm are provided as pile
foundation, the pile space along the apron is 8m. Each row includes nine steel tubular
piles. The precasted simply supported slab is adopted to connect the quay platform and
rear land reclamation area. The 1500kN bollards and SUC1450 rubber Fender (two drum)
are assembled on quay wall. Two rubber ladders would be assembled along the cope line.
Shore-connecting structure is shaped as slope with retaining walls. Land backfill earth and
stone materials are taken into the account in the land revetment structure scheme. It’s
planned to pave a rubble cushion, adopt 200-300Kg block stones as armor rock, outside
and arrange concrete retaining walls at the levee crown.
(6) Ground treatment
The vibroflotation method is recommended for the port land area foundation treatment.
The roller method is recommended for the SEZ foundation treatment..
(7) The project also comprises the design contents concerning port roads and yards,
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municipal roads, buildings, power supply, communication, navigation, water supply &
drainage, fire protection, fuel gas, etc. See the “Technical Scheme on Engineering”
for details.
Generally, the construction conditions of the project are basically good and technically
feasible.
1.5.7 Business model
The project will be jointly developed by CCCC and the North Sulawesi government. The
cooperation includes the park and the port, wherein, the park comprises primary and
secondary land development, industry import and operation; the port comprises port
construction and operation.
The park adopts concession mode.
The port will be developed by CCCC and the North Sulawesi government, with the
adoption of “SOT Mode”. The engineering construction of the park and the port will be
undertaken by CCCC with EPC model.
1.5.8 Financial estimation
(1) Investment estimation
Compilation range for estimation: the port area includes a series of works such as
dredging works, hydraulic structure works, process equipment purchase & installation
works, port work boats, ground treatment works, civil works, water supply & drainage and
fire protection works, environmental protection works, electrical works, control works,
temporary works, etc.; the park includes ground treatment works, housing construction
works, municipal road works, water supply & drainage and fire protection works,
environmental protection works, electrical works, landscape works, temporary works, etc.
According to relevant estimation, the investment estimation of the project is shown in the
table below:
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Table 1-3 Investment Estimation Table
Summary of total Cost
Item Unit Qty Total (US$)
New port Phase 1 length of berth/number 680/2 500,000,000
Long-term length of berth/number 648/2 600,000,000
Special Phase 1 ha 91.20 200,000,000

economic
zone Long-term ha 1908.80 2,200,000,000
Power Phase 1 Item 1 350,000,000

plant
Long-term - - 250,000,000
Total 4,100,000,000
(2) Financial benefit (starting area)
In accordance with financial calculation, as the concession fee is fixed in the port, its
investment profitability can meet the benchmark value of financial evaluation indexes for
overseas investment projects of CCCC, and the port possesses debt paying ability and
financial viability. The investment profitability of the park is below the benchmark value of
financial evaluation indexes, but the park possesses debt paying ability and financial
viability, if subsidies can be filled the funding gap. It is recommended to strive for support
from the following aspects so as to improve the project income level:
¾ Apply to the Indonesian government for subsidizing the accumulated surplus funding
gap, in the form of financial subsidies, land compensation, and development right of
certain islands etc.
¾ Lower the port concession fee, subsidizing the park with the aid of the port.
¾ Strive for a preferential policy.
Furthermore, due to the long cultivation period of the starting area, small rolling
development mode shall be adopted, i.e., lowering initial investment to increase project
yield and ease the repayment pressure of principals and interests.
1.5.7 Risk assessment
Combining such factors as project development environments and project characteristics,

the political risks, market risks, financial risks, external environment risks, engineering
technology risks, etc., shall be analyzed, then, put forward corresponding preventive
measures and suggestions.
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1.5.8 Problems and recommendations
(1) The feasibility study report will be improved according to the suggestion and
comment in this meeting.
(2) Geography Survey and soil investigation shall be carried out soon for finalizing
the feasibility study report .
(3) location, feasibility study, necessary scientific research and test works for industrial
park facilities, such as power plant, water supply, new port and commercial buildings
etc., shall be implemented.
(4) It is suggested to confirm the business model of the SEZ.
(5) It is suggested to confirm the approval authority of preferential policies for

Indonesia government and local government.( What policies can be formulated in
province, Which projects require state approval).
(6) It is suggested to confirm the land acquisition.
(7) The connection road between toll road and the SEZ shall be completed by North
Sulawesi government.
(8) It’s expected that North Sulawesi government can report to Indonesia government,
and get the supports from Indonesia government. CCCC and
North Sulawesi government can cooperate on promoting the SEZ’s development.
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Chapter II Analysis of Investment and Development

Environment
2.1 Macro-social and macro-economic environment
2.1.1 Development environment in Southeast Asia
(1) World’s fifth largest economic entity – Southeast Asia, located in Asian region
of the most vigorous economy in the world, is an emerging economic entity
with sustainable high economic growth.
Seated in the southeast of Asia, Southeast Asia includes Vietnam, Laos, Cambodia,
Thailand, Burma, Malaysia, Indonesia, Brunei, Philippines, East Timor and Singapore. In
2013, the population of Southeast Asia was 618 million; the GDP reached about USD 2.4
trillion and the foreign trade volume was about USD 3 trillion which accounted for 9% of
the world’s population, 3% of the GDP and 13% of the global volume of trade respectively.
Southeast Asia has become the world’s fifth largest economic entity (rank only behind the
European Union, the US, China and Japan), the fourth world’s largest import and export
trade area (rank only behind the US, China and Germany) and it is one of the main areas
for developing countries to attract foreign direct investment (FDI). In 2013, Southeast Asia
absorbed USD 116 billion FDI, which is considerably higher than USD 33 billion of the
South Asia and USD 38 billion of the West Asia in the same year.
In recent years, the rate of economic growth of Southeast Asia has maintained a growth
momentum and become an emerging area of world economic growth. The GDP increased
by 5-6% in 2013, which is far higher than 3.0% of the world average level. Relative to
some other key economies sluggishly growing in economy such as Europe (-0.4%), the
US (1.9%) and Japan (1.7%), the Asian regions like Southeast Asia, China and India have
become the world area with the most vigorous economic entity. The international
resources, capitals, funds, information, technologies and talents gather and flow in this
region and thus bringing numerous external development opportunities.
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The The US Japan Russia Latin India China Malaysia Thailand Philippines Singapore Indonesia
Europe
whole America
an
world Union
Data source: 2013 Economic Report of Indonesia

Figure 2-1 Comparison of GDP Growth Rate between Main Economic Entities and
ASEAN-5
(2) Establishment of ASEAN Trade Agreement and ASEAN-China Free Trade Area
builds a good investment environment for regional development
ASEAN countries are entitled to the preferential policies of ASEAN Trade Agreement. The
economic and trade cooperation among ten ASEAN members are tight and of long
standing. The total volume of trade among them in 2013 reached up to USD 730 billion,
accounting for 24% of the total foreign trade value of ASEAN.
Meanwhile, ASEAN-China Free Trade Area brings development opportunities for the
local. The trade area officially launched entirely on January 1, 2010. Trading between
ASEAN and China accounts for 13% of the world trading, thus ASEAN becomes a huge
economic entity covering 11 countries and 1.9 billion people whose GDP reaches USD 6
trillion. After the construction, it will become a free trade area of the most world population
and the largest one in the developing countries. After the free trade area is constructed in
China-ASEAN, the trade relations between China and ASEAN will be further developed to
realize the strategy of diversifying markets of each country, broaden export channel,
enlarge room for economic development, maintain steady and sound growth of regional
economy and be integrated into globalization and economic integration. After the
construction of free trade area, the tariff between member countries will be significantly
reduces and the non-tariff barrier will be reduced or canceled. According to the
commitments in negotiation between China and ASEAN’s WTO members, the tariff on
ASEAN goods will be decreased by 34-37% within 5 years, which is faster than the
average reduction rate of China. Moreover, China has its market further opened; and
especially the open of service trade will provide vast business opportunities for foreign
investors including ASEAN. Being the largest country in population and economy in
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ASEAN, Indonesia enjoys the great benefit.
Figure 2-2 Distribution Diagram of ASEAN Countries
2.1.2 Development environment of Indonesia
(1) Indonesia leads the Southeast Asia in social stability and economic aggregate
and has stepped in the rapid development stage of industrialization
Indonesia is the largest economic entity in Southeast Asia and the member country of
ASEAN and G20. In recent years, Indonesians have lived in a socially stable society and
the economy of Indonesia shows a good growth situation. The economic growth rate
during 2009-2013 was about 6%. Rapid economic expansion brings energy for Indonesia,
making it an emerging country in the world and step in the rapid development stage of
industrialization and thus, relatively preponderant industrial bases such as agriculture,
mining industry, energy sources, manufacturing industry, tourism, sea shipping industry
and telecommunications come into being. Heavy chemical industries like chemical
industry, machinery and transport and communication facilities develop rapidly. World
Economic Forum 2013-2014 Global Competitiveness Report shows that Indonesia ranks
the 38th among 148 most competitive countries and regions around the world.
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Indonesia Thailand Malaysia Singapore Philippine Vietnam Burma Brunei Cambodia Laos East
s Timor
Figure 2-3 2013 Total GDP of Southeast Asian Countries (hundred billion USD)
(Trillion IDR) Growth rate
Figure 2-4 2009-2013 GDP Growth Situation of Indonesia
In the meantime, Indonesia is a hot spot for attracting foreign capital investment. It was
one of the top 20 countries in attracting FDI in 2013 and ranked the second among
Southeast Asian counties. Indonesia ranked the ninth in China’s foreign direct investment
in recent years and the second in Asia.
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Table 2-1 2013-2013 Top 20 Economic Entities in Absorbing FDI (Billion USD)
Year Serial Year

Serial No. Country Country
2013 2012 No. 2013 2012
1 The US 188 161 11 The UK 37 46
2 China 124 121 12 Ireland 36 38
3 Russia 79 51 13 Luxembourg 30 10
4 HK, China 77 75 14 India 28 24
5 Brazil 64 65 15 Germany 27 13
6 Singapore 64 61 16 Netherlands 24 10
7 Canada 62 43 17 Chile 20 29
8 Australia 50 56 18 Indonesia 18 19
9 Spain 39 26 19 Columbia 17 16
10 Mexico 38 18 20 Italy 17 0
Table 2-2 China’s Foreign Direct Investment from 2005 to First Half Year of 2014
(Hundred Million USD)
Ranking Country Aggregate amount Number of items

1 The US 679.6 89
2 Australia 589.3 63
3 Canada 392.5 32
4 Brazil 284.1 28
5 The UK 234 30
6 Kazakhstan 165.2 8
7 Russia 164.9 24
8 Peru 164.5 10
9 Indonesia 133.2 22
10 France 206.4 11
(2) Indonesia has profound population resources, sufficient labor resources and
large consumer market
In 2013, Indonesia had a population of 248 million, ranking the first in Southeast Asia and
the only behind China, India and the US in the world. During 2000 to 2010, the population
of Indonesia kept an annual growth rate of 1.49%, which then increased to 1.65% during
2010 to 2014. On the whole, the demographic profile of Indonesia is very youthful and the
bonus of labors is abundant. In 2013, the per capita GDP of Indonesia reached USD
3,500. In accordance with the classification standard of the World Bank, Indonesia is a
fresh middle-income country whose middle class gets increasingly developed. With the
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rapid increase of economy and population and on the basis of large population size, a
large internal demand will be gradually expedited.
Table 2-3 1971-2014 Population Increase of Indonesia
1971-1980 1980-1990 1990-2000 2000-2010 2010-2014

2.31% 1.98% 1.49% 1.49% 1.65%
At the same time, there’re 618 million people in Southeast Asian, which accounts for
nearly 9% of the global population. In consideration of the adjacent East Asian and South
Asian market, the population would accounts for over 50% of the global population. By
virtue of the advantage of spatial-contiguity, Indonesia is also facing a very large foreign
efficient market.
Figure 2-6 Schematic Diagram of Global Target Markets for Consumption of

Indonesia
(3) Indonesia curbs the east and the west strategic passage for shipping and its
international trade is well-developed
Indonesia is a very important maritime power which curbs the strategic passage of
shipping between the eastern and the western countries (East Asia and Oceania
included). Transport service is one of the industries that develop fast recently. Over 90%
international sales of goods are realized by marine transportation. In 2013, the throughput
of main ports exceeded 840 million tons. Confronting the construction of “Maritime
Highway” and “Maritime Power”, international logistics and shipping development will
bring enormous opportunity. With the rise of China and other East Asian areas, the trade
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contacts between the eastern and the western countries are pretty frequent. Indonesia’s
foreign trade grows rapidly on the whole and it presented a status of favorable balance of
trade in the past ten years. During 2005-2013, the annual import and export volume of
Indonesia maintained a quite rapid growth rate of 12% or 10%.
(4) Indonesia’s regional development shows a situation of being “Stronger in the

West than the East”. The regional development varies greatly
From the aspect of regional economic development pattern, Indonesia’s development

presents a situation of being “Stronger in the West than the East”. Main cities are located
in Java Island and Sumatra and the ten of the eleven cities with millions of inhabitants
throughout the country are in the west. The population of the west area accounts for over
85% of the total population and more than 80% of the economic output of the whole
country comes from this area. While the east area, where the North Sulawesi is located
mainly, lives on agriculture, forestry and fishery and is weak in industries. The overall
development level is inferior.
From the aspect of resources, Indonesia has profound natural resources. Its petroleum,
natural gas, coal, gold, nickel and tin play an important role in international market supply.
However, those resources are mainly gathering in the west area like Kalimantan and
Sumatra. The east area has relatively less mineral resources. Only in the southeast of
Sulawesi has rich nickel ores.
Figure 2-6 2013 GDP Proportion of Each Area in the Second Quarter of Indonesia
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Figure 2-7 Main City Distribution Pattern of Indonesia

2.1.3 Development environment of North Sulawesi and Bitung
(1) Development level of North Sulawesi is moderate but the development trend is
good
North Sulawesi occupies an area of 15,272 square kilometers and has a population of
2.39 million which accounts for 0.8% and 0.96% of the national level respectively. Its GDP
of 2013 was about USD 5.488 billion, accounting for 0.63% of the national level. The per
capita GDP of 2013 was about USD 2,215. On the whole, North Sulawesi’s economic
status is not very prominent in Indonesia because it has no big city as its backup and its
capital Manado only has a population of about 400,000. In addition to few mineral
industries, industries and LNG exploitation, the people at Sulawesi Peninsulas mainly live
on agriculture and fishery production.
However, the GDP growth rate over the last five years was 7.5% averagely, which is
higher than the development level of 6% of Indonesia. Its human development index only
ranks second to Jakarta in Indonesia.
(2) Bitung holds an advantage in geographic location, being adjacent to the

international routes
Located at the borderland of the west and the east area of Indonesia, Bitung and North
Minahasa is in the northeast end of North Sulawesi and about 40km away from Manado,
over 900km apart from Makassar, the economic center of Sulawesi Peninsula and about
1,500km away from the national economic center of Indonesia, Java Island. Due to be
adjacent to the international routes of Oceania, Bitung is of great potential because of the
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opportunities brought by maritime transport in the time when marine economy is more
prominent. Therefore, it is expected to be the hub of the eastern shipping of Indonesia.
Figure 2-8 Location of Bitung

(3) Bitung has a smooth and steady economic development and fast economic
growth
Although Bitung is weak in economy, its economic growth rate has increased steadily in
recent years. The growth rate of 2010 was about 6.88% and since 2011, the growth rate
exceeded 7%. In 2013, the growth rate was 7.96%, which exceeds the growth level of
Indonesia and North Sulawesi.
(4) Natural resources and space resources status of Bitung
Natural resources: the surrounding resources of Bitung are limited, but the marine
resource there is abundant. Bitung has over 350 fishes; the forest resources are sufficient.
The forest covered area in 2011 was up to 13,401 hectares.
Space resources: Bitung occupies an area of 313 square kilometers. Located in the south
of Bitung and the north of Minahasa, its special economic zone borders on the seas in the
south, adjoins Bitung Port and is next to the Bitung-Manado Expressway under
construction in the northwest, covering an area of 2,000 hectares. Most areas of this place
are available lands and the space resources are rich.
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Figure 2-9 Drawing of Geographical Location of the Project

(5) Labor resource supply pf Bitung
In 2014, there were about 240,000 in Bitung. The population density of Bitung is 764 per
square kilometer. From 2000 to 2014, the growth rate of population was 3%. Maesa, as
the population accumulation area of Bitung, has 19.19% of the total population of Bitung.
After it, Madidir has 17.84% of the total population of Bitung. For the population age
distribution there, the population of juvenile (0-15) constitutes a large portion. The
unemployment rate of Bitung in 2011 was about 11.30% and the base quota of labor force
is small and isn’t fully applied. There’re three colleges and two universities in Bitung
providing higher education. The people in North Sulawesi, who receive higher education,
accounts for 5% of the total population. With respect to the current labor supply, the
insufficient population resource of Bitung and North Sulawesi (2.39 million) brings some
challenges to the development of large-scale industries and the lack of high technicians
also restrict the industrial development.
Figure 2-11 1970-2014 Population Increase of Bitung (Unit: x1,000)
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2.2 Country levels planning and political environment
2.2.1 Guideline for national and local development planning
(1) Overall planning for the economic development of Indonesia（2011-2025）
2011-2025 Overall Planning for Accelerating and Expanding the Economic Development
of Indonesia, and the supporting Overall Planning for Accelerating and Expanding the
Economic Development of Indonesia are designed to speed up and expand the economic
development vision of Indonesia and to establish an independent, developed, fair and
flourishing Indonesia. The Plan states that Indonesia shall rank among developed
countries before 2025, realize the expected per-capita incomes from 14,250 dollars to
15,500 dollars and the GDP of 4 trillion to 4.5 trillion dollars. For this purpose, the actual
annual economic growth in future must continuously increases by 7% - 9%.
Therefore, the government hopes to improve the added value of primary economic
elements, to increase infrastructure construction and power supply as well as develop
human resource and science and technology, and to confirm such 22 kinds of primary
economic activities as information and communication technology, shipping, textile
industry, food and beverage, and iron and steel, to develop the regional economic
potential of such six economic corridors as Sumatra and Java, and to attract domestic and
overseas investment of 465 billion dollars. The government also issues relevant policies
to push forward the implementation of the General Plan.
GDP: Per-capita
income of 15 trillion
GDP: Per-capita -17.5 trillion dollars
income of 4 trillion Expected
-4.5 trillion dollars 44,500-19,000
Expected dollars (high-income
GDP: Per-capita countries)
income of 700 billion 14,250-15,500
dollars dollars (high-income
3,000 dollars countries)
Figure 2-11 Development plan for the GDP and per-capita income of Indonesia
Page 26
(2) Five-year (2015-2019) plan for the economic development and the “Maritime
Highway” construction of Indonesia
In the 2015-2019 medium-term reform agenda and economic development planning,

including the specific objectives for promoting domestic production, stimulating economic
growth and improving financial balance, the Indonesian government adopts brand-new
economic development mode and pays special attention to infrastructure construction
based on the ocean. It strives to realize the remarkable improvement of macro-economic
indicator in 2019, among which the economic growth speeds up by 6.7%—8.3% from 5%
in current year, inflation rate reduces to 2.5%-4.5% from 7.6% in current year and the
budget deficit decreases to 1% from 2.4% at present. It will increase the production of
such bulk commodity crops as food. In respect of infrastructure construction, it plans to
build 49 large-scale dams, develop 24 modern ports and newly build 15 airports, and
increase the installed total electricity of 3.5 GW. It will build more road transport
transportation infrastructure such as Expressway and railway, newly build Expressway of
1000 kilometers in next five years and the length of railway will increase to 8,692
kilometers from 5,434 kilometers. Annual industrial rate will increase to 8.8% from 4.7% at
present, and the contribution rate of industry to economic growth will increase to 21.6%
from 20.7% at present.
From 2015-2019, the Indonesian government will invest 699 trillion Indonesian rupiah
(about 57.4 billion dollars) in the implementation of “Maritime Highway” construction
planning. In the huge investment plan, the Indonesian government will spend 243.6 trillion
Indonesian rupiah to build 24 international commercial ports throughout the country, 198
trillion Indonesian rupiah to build 1481 non-commercial ports, 101.7 trillion Indonesian
rupiah to purchase ships, 7.5 trillion Indonesian rupiah to develop offshore transportation,
40.6 trillion Indonesian rupiah to update shipyard, etc. At present, the logistics cost of
Indonesia accounts for 23.5% of its GDP, so it hopes to reduce it to 19.2% in 2019. Some
capitals for these items are from national budgetary expenditures and the remaining
capitals are from the state-owned businesses and private sectors of Indonesia. The
Indonesian government also plans to build 15 industrial parks in next five years. The
“Maritime Highway” measures proposed by the Indonesian government to carry out also
include setting up a special fund for ships purchase financing, modifying the import tariff,
value-added tax and income tax of the shipbuilding industry and relevant fields, providing
more flexible bank guarantee for the shipbuilding industry and increasing the proportion of
local manufacturer of newly-built ships to 40%, etc.
(3) Development planning of special economic zones
As of 2014, the Indonisa government has set up 8 special economic zones. Among which,
Bitung is positioned as international shipping hub port, with fish processing industry,
Page 27
coconut and medicinal plant processing industry, and logistics industry as the
development direction. According to relevant provisions of Indonisa on special economic
zones, the investment enterprises at the special economic zones will enjoy such
preferential policyies as tax deduction and exemption, supporting infrastructure and
simplification of the investment procedure. As for special economic zones, the Indonesia
government expectes to introduce more advanced enterprises covering such industries as
logistics, industry, technology, tourism, power and export processing. The investment
enterprises may enjoy a tax exemption period ranging from 5 to 10 years. The Indonisa
government will provide open and flexible special policies, the capacity to going into the
international market (offshore port or airport), the location in the firat recource area for the
special economic zones so as to welcome the investment from individual and private
capitals in diversified cooperation models.
Table 2-4 Introduction to industries in 8 special economic zones of Indonesia
Special economic zone Industries

Palm oil processing industry and its extending industry,
Sei Mangkei
rubber and other industries, logistics and tourism
Rubber, palm oil processing industry, petroleum and
Tanjung Api-api
petrochemical industry
Tanjung Lesung Tourism
Mandalika Tourism
Maloy Batuta Trans
Palm oil processing industry and logistics
Kalimantan
Mining industry, cocoa processing industry, rubber, rattan
Palu furniture, sea grass, heavy equipment manufacturing,
automobile, electrical and electronic products and logistics
Fish processing industry, manufacturing, logistics and
Morotai
tourism
Fish processing industry, processing industry of coconut and
Bitung
medicinal plants, and logistics
Figure 2-12 Distribution diagram of 8 special economic zones of Indonesia
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2.2.2 Relevant policy environment
(1) Land policy: Foreign merchants are permitted to develop land within a certain
year limit
On the basis of private ownership of land of Indonesia, foreigners or foreign enterprises

cannot possess land, but foreign merchants can have three kinds of limited rights as
follows: right to build, that is, the foreign merchants are permitted to build buildings on
land, possess the buildings for 30 years and a extending period of 20 years; right to use,
that is, the foreign merchants are permitted to use the land for specific purpose for 25
years and enjoy a extending period of 20 years; right to develop, that is, the foreign
merchants are permitted to develop land for several purpose such as agriculture, fishery
industry and animal husbandry for 35 years and enjoy a extending period of 25 years.
It is easier to obtain (lease or purchase) land in Indonesia. Therefore, if foreign merchants

would like to purchase or lease land, they can directly apply to the BKPM for approval.
(2) Tax policy: Tax preference is provided for specific industry
The Indonesian government implements the central and local tax system, and the tax
legislative authority and requisition right are mainly bound to the central. The industry
under the support of the state may enjoy such preferential policies as tax exemptions and
reductions according to government regulation No. 1/2007, No. 62/2008 and No. 52/2011.
For instance, according to President Decree No. 52/2011, food, textile industry, leather
and shoemaking, papermaking, non-metallic mineral products, transportation equipment,
repair and maintenance machinery and equipment and waste treatment industry in the
North Sulawesi may enjoy the preferential policy of amount of tax exemption. Moreover,
according to the provisions in the Financial Minister Decreed No. 130/PMK. 011/2011, the
basic metal industries, petroleum refining industry with an invested amount of 1 trillion
Indonesian rupiah (about 0.112 billion dollars) or the industry refining basic organic
chemicals from petroleum and natural gas, machinery industry, renewable energy sources
industry and communications-equipment manufacturing may enjoy an exemption period
ranging from 5 to 10 years.
Page 29
Table 2-5 List of industries with amount of tax exemption in the North Sulawesi
Industry Specific industry Industry Specific industry

Coconut edible oil industry Pulp industry
Edible oil and other plant
Culture paper industry
and animal fat industry
Various flours: rice, grain,
nut, potato and other Marketable securities
Food similar industries Papermaking
industry and paper
Sugar industry Special paper industry
products
Coffee and tea processing industry Corrugated paper and
industry cardboard industry
Container and carton and
Cocoa industry
cardboard industry
Textile fiber production
Household paper industry
industry
Textile Basic precious metals
Carpet and carpet industry
industry processing industry
Non-metallic Non-ferrous metal
Non-woven fabrics industry mineral processing industry
products
industry Non-ferrous metals milling
Leather-making industry
industry
Leather and
leather Shoemaking industry Cement industry
products
and Other
shoemaking transportation
industry Sports shoes industry and Shipbuilding industry
equipment
industry
Repair and
Waste maintenance
Treatment and disposal of Maintenance service for
treatment machinery
non-hazardous waste ship and floating buildings
industry and
equipment
(3) Financial policy: Financial control is strict and exchange rate risk is high
The Indonesian government implements the relatively free foreign exchange control
policy, the Indonesian rupiah can be exchanged freely and the capitals cane be
transferred freely. Indonesian bank adopts the exchange rate pricing method of a basket
of currencies, decide the foreign comparison on the special drawing rights of the
exchange rate policy for principal trade partners of Indonesia and announce its exchange
rate every day. The exchange rate of 2013 (average price throughout the year): 1 dollar =
10,500 Indonesian rupiah; on July 9, 2014, 1 dollar = 11,620 Indonesian rupiah; and in
March 2015, 1 dollar = 12,950 Indonesian rupiah. The Indonesian rupiah devalued greatly
Page 30
in recent years, so attention shall be paid to exchange rate risk in case of investment.
In 2010, the Central Bank of Indonesia issued new provision on requiring the Merchants
Bank to control the loans and deposits ratio (namely the ratio of issued loans to deposits)
between 78% - 100%, and the Merchants Bank whose loans and deposits ratio is lower
than 78% or higher than 100% shall pay additional deposit reserves. In addition, the
Central Bank of Indonesia required the Merchants Bank to publish its basic rate for loans.
For a long time, the Merchants Bank of Indonesia has more loans and deposits and the
loan rate stays at a high level, therefore the Indonesian government is to encourage the
Merchants Bank to increase loans and keep away from the risks of excessive loans.
(4) Trade policy: Except a few commodities limited by license and quota, most of
commodities are permitted to be operated freely.
According to Trade Law, Customs Law, Law for Construction of World Trade Organization,
Industry Law, Treasury Law, Law against Monopoly, and Improper Trade Competition
Law, the Indonesian government sets up sound trade policies. Except a few commodities
limited by license and quota, most of commodities are permitted to be operated freely.
[Import administration] The Indonesian government adopts quota and license methods for
import administration. ① Quota administration is applicable to alcoholic beverage and
direct raw materials including alcohol and the quota is only issued to domestic enterprise
with approval. ② License administration is applicable to industrial salt, ethylene and
propylene, explosives, motor vehicles, waste and hazardous goods, and the enterprise
with the aforesaid license can only use it in its own production. Among which, the
automation license administration is mainly applicable to such imported products as
chlorofluorocarbon, methyl bromide, hazardous goods, alcoholic beverage and direct raw
materials including alcohol, industrial salt, ethylene and propylene, explosives and its
direct raw materials, waste and used clothes; and the non-automation license
administration is applicable to such imported products as syzygium aromaticum, textile,
iron and steel, synthetic lubricating oil, sugar and farm-oriented instruments.
[Export restriction] The export goods must be with the TDUP/SIUP or commercial
approval issued by the Technology Department according to relevant laws and registration
certificate. The export goods are divided into four categories including the controlled
export goods, monitored export goods, prohibited export goods and export goods
exempted from inspection. ① The controlled export goods include coffee, rattan, forest
products, diamond and rod-like lead. ② The monitored export goods include dairy cattle
and buffalo, mud eel's skin (wet blue), wild animals and plants, Napoleon young fish,
Napoleon fish, palm kernel, petroleum and natural gas, pure gold/silver, steel/iron scraps,
stainless steel, copper, brass and aluminum scraps. ③ The prohibited export goods
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include young fish, gold arowana, etc., raw rattan and raw materials, semi-finished
product of natural raw rattan, log, train iron rails or wooden rails and saw timber, natural
sand, sea sand, cemented soil, topsoil (including surface soil), lead ore and its compound
and powder, residuals containing iron, metal or other compounds as well as mainly
containing white lead, gem (excluding diamond), unprocessed rubber and raw hide
conforming to quality standards, wild animals and plants under the protection of the state,
ironware scraps (excluding that from Batam Island) and antique. ④ Other export goods
exempted from inspection, excluding the aforesaid controlled, monitored and prohibited
export goods.
In addition, the Indonesian government executed the Energy Mineral Minister Decreed
No. 7 on refining and processing raw ore to improving product’s export vale in May 2012,
collect export tax of 20% on 65 minerals exported and carried out other control measures,
reconfirmed to prohibit the export of raw ore and encourage the foreign investors to invest
and set up smelting and processing plant in Indonesia. Since January 12, 2014, the
Indonesian government prohibited the mineral company to export mineral and ore
products and required the mineral company to work on refining and processing activity in
Indonesia.
The trade tariff of Indonesia was increased to some extent. According to the information at
the website of China's Ministry of Commerce, the current average import tax of Indonesia
is 6.8% which is lower than other that of emerging countries including China (9.6%), Brazil
(13.7%) and India (13%). The average tax for the industrial finished products is 6.6%
which is lower than China (8.7%), Brazil (14.2%) and India (10.1%). The Indonesian
government is evaluating the feasibility to increase the import tax of some industrial
finished products covering 741 tax numbers among 10,000 current tax numbers, mainly
including the tax number of textile, downstream chemical products, basic metals, vehicles,
etc. According to the Agreement on Trade in Goods of the Framework Agreement on
Comprehensive Economic Co-operation between China and ASEAN, China and
Indonesia will gradually cut down the tariff level of the trade in goods.
(5) Investment policy: gradually broadening the foreign capital investment field
and increasing the degree of policy support
On July 4, 2007, Indonesia issued derivative rules of Investment Law (No. 25), namely
Presidential Determination No. 76 of Standards and Conditions on Conditional Closed and
Open Investment Industries in 2007 and Presidential Determination No. 77 of Lists on
Conditional Closed and Open Investment Industries in 2007. In accordance with these two
determinations, 25 industries were declared as the industries forbidding investments and
they can be only operated by the government.
Page 32
The industries with forbidden investments include: hard drug plantation and
transaction, fishing industry of protected fish, building materials made of corals or coral
reefs, alcoholic beverage industry, quicksilver chlor-alkali industry, chemical industry
polluting the environment, CBW industry, type numbers of engine-driven motorcycles and
periodic inspections, sea transportation communication or supporting facilities, ship-based
traffic communication systems, air navigation services, wireless electricity and satellite
orbit radio wave command systems, wagon balance stations, public museums, historical
and cultural heritages and historical sites, monuments and gambling industry. Besides,
foreign investors can establish individual proprietorship enterprises, but referring to
Catalogue of Prohibited and Restricted Investment Industries, they shall belong to
industries not prohibited or restricted with a foreign shareholding prohibition by the
Catalogue. Foreign investors can also establish joint venture enterprises with individuals
and companies in Indonesia within the specified range, stocks of the listed companies can
be purchased through open market operation but they are limited by investment laws with
respect to the restrictions in stipulations related to open industries of foreign investments.
To facilitate the development of related industries, the Indonesian government broadens

the conditions for foreign investors to enter into the following fields in accordance with
Investment Law: ① foreign capitals are allowed to enter the saccharin industrial sector
not opening to the outside world in the past; ② in the industry of building and public
engineering, the maximum limit of the equity ratio of foreign capitals is promoted from
55% to 67%; ③open foreign capitals enter into film service industry in the field of culture
tourism (including film studios, film treatment labs, dubbing equipment, film processing
and duplicating). The equity ratio of foreign capitals shall be no more than 49% to the
highest extent; ④ the equity ratio limit of foreign capitals in hospital service, specialist
clinics and clinical test rooms shall be increased to 67% from 65%. The operating places
of foreign capitals shall not be limited and foreign investors are allowed to carry on
business within Indonesia; ⑤ power industry. Foreign investors are allowed to take part
in the development of the power generating project of 0.1 and ten thousand KW by means
of cooperation; the equity ratio of foreign capitals shall not be more than 95% for power
generating projects above ten thousand KW.
In 2011, the Indonesian government denoted that it will further increase the degree of
policy support, attracting investors to develop infrastructure construction of special
economic zones with capital rewards and provided auxiliary equipment. According to the
government regulation (No. 147), if investing in special economic zones, the foreign
investors can enjoy a privilege relieving from 30% of income taxes within five years.
Meanwhile, incentives of taxes were introduced, mainly including: ① import tariffs and
expenses are not are not charged with self-using mechanical equipment, spare and
Page 33
accessory parts and auxiliary equipment as well as other capitals, goods and materials;
② import tariffs and expenses are not charged with raw materials used by foreign
enterprises themselves for 2 years; ③ import tariffs can be returned for raw materials
producing export products; ④ employed foreign personnel shall be unlimited for 65% of
product exporting of foreign enterprises in eastern Indonesia; ⑤ the expenditures of
foreign enterprises used for research and development, scholarships, education and
training as well as waste treatment can be listed into costs withholding from gross income;
⑥ for the key fields encouraged by the government can be supplied with loss carry-over
for 8 to 10 years or the depreciation rate of equipment and buildings can be promoted; ⑦
land and building taxes can be levied reducing by half within eight years if investing in the
eastern Indonesia; ⑧for the investment in innovative industries, corporate income tax
can be undertaken for 10-12 years by the government; ⑨ the government also gave
some preferential treatments for foreign investments of tariff-free zones and
comprehensive development areas set up in 15 nationwide districts.
In December, 2013, Indonesian official investment planning body publicized a newly

revised negative list in investment. Indonesian government broadened the limitation of
permission for foreign investment through revising the negative list in the investment field.
It can be shown in: on one hand, it has expanded fields of foreign investment and opened
some former industries only limited to the local investment; on the other hand, the
requirement for the shareholding ratio of foreign capitals was broadened and some
industrial foreign merchants could hold stocks. The main revised contents are as follows:
(1) The first category is a field more open to foreign capitals, foreign capital shareholding
ratio of was broaden from zero to 49%, which were the two largest industries with the
maximum broadening range for this time. Other two industries were pharmacy and
financial risk investment industry. The foreign capital shareholding ratios were
adjusted to 85% from the original 75% and 80%. The foreign capital shareholding
ratio in advertising was also broadened from zero to 49% but it was only limited to
ASEAN countries.
(2) The second category was a newly set field of foreign equities and the foreign capital
shareholding ratios were respectively 65%, 65% and 49% in immobile
communication, multimedia comprehensive network telecommunication, and
multimedia service suppliers.
(3) The third category is an infrastructure project field with a public-private partnership,
among which the foreign capital shareholding ratios were respectively 49%, 95% and
49% in operation and management for airports, ports and land way transportation
passenger stations (including railways) together with water supply (95%), toll roads
Page 34
(95%), power generating plants below 10 megawatt (49%), power generating plants
above 10 megawatt (100%) and power transmission and power distribution
(respectively 100%). Besides, the negative list for this time also tightened several
fields with foreign capital shareholding ratios such as distributed trade and
warehousing industry for goods were reduced from 100% to 33%. Since the foreign
capital shareholding ratio of the agricultural field shall be matched with the
stipulations of Gardening Law enacted in 2010, reducing from 95% to 30%.
(4) There are completely prohibited industries in detailed lists at present such as some
chemicals, special transport facilities, gaming industry and so on. Partly prohibited
industries include sugaring, mining industry, medicine and so on.
As a whole, Indonesia gradually open foreign investors’ investment fields in Indonesia.

Except prohibited industries, foreign investors can invest the vast majority of operating
departments and the proportion of part of industries with foreign shareholding can be also
gradually broadened. The government meanwhile implemented preferential policies such
as land and tax revenue to attract foreign businessmen to invest in eastern Indonesia.
(6) Labor policy: strictly protecting local labors and opening for the employment
of foreign labors with a limited degree.
Wholly speaking Indonesian payroll cost is comparatively lower (basically Indonesian

government shall increase the minimum wage standards every year according to laws. In
2013, the minimum monthly wages of workers in the industrial parks around capital
Djakarta of Indonesia is about 220 dollars. And each province and city sets its own
standard in accordance with national minimum wage standards. So the price of
Indonesian labors is competitive in the Asian areas). But the homeland labors are rather
strictly protected by the Labor Law, so as to the foreign labors with very severe utilizing
requirements, and the requirement to issue a work visa is also rather high. Except senior
management positions and senior technical staffs, no foreign labors are permitted if the
homeland labors are adequate to this job. And if there is employee turnover, the company
shall pay severance payment or compensation payment, even if workers are on a strike,
as long as in legal procedures, the company shall also pay their salaries.
Since November 2011, Indonesian government requires all the enterprise shall obey the
Labor Laws promulgated in 2003, which stipulates that except a minority of workers such
as cleaner, security guard, driver, mine field services, no labor outsourcing shall be
permitted in any enterprise, and that enterprises shall raise the minimum wages
significantly. At present, considering the main businesses of China-invested enterprises
are contracted projects in Indonesia, which requires greater local labor needs, this act
shall increase enterprises’ labor cost and therefore affect the whole benefits of
Page 35
enterprises.
2.3 Infrastructure conditions
2.3.1 Comprehensive transportation
(1) Roads
The external land transportation of Bitung now depends on two-lane roads with a lower
grade. Two highways under construction are connected with the downtown of Bitung and
Manado, the capital of North Sulawesi (39 km). The urban roads of Bitung are about 51.71
km, among which asphalt roads are 6.15 km. Lembeh Bridge connecting Bitung and
Makassar is also being planned and constructed.
(2) Railway
The railway connecting Bitung and Makassar is being planned.
(3) Airport
Bitung uses Sam Ratulangi International Airport as foreign aviation connection

transportation at present and the airport is only over 20 km away from Bitung. As one of
the main tourism air ports in Indonesia, Sam Ratulangi International Airport is also called
as “Manado International Airport” located 13 km away from northeastern Manado in North
Sulawesi owning an international terminal of 4044 m2 and with a yearly passenger
throughput of about 183000 people. Pavements of Sam Ratulangi International Airport in
Manado have been planned for upgrading and extension already currently.
(4) Port
Being the largest port of northwest Surawith Konsomboon area, Bitung port has 1100m
quay line and nearly 10 berths,including container berths,oil berths,etc. Of which the total
quay line in the west side and north side is 455m, water depth of wharf is 5.18m; the rest
length of the jetty reaches 682m, water-depth of wharf apron 4.88~10.67m. In addition
,water-depth of 500m offshore in the southern area can reach 20m.
The throughput of Bitung port in 2011 reaches about 5.5 million t, with 5594 ships inward
and outward the whole port in 2012, and the container annual throughput reaches nearly
0.20 million TEU, with 286 container-ships berths. Most of goods in Bitung comes from the
domestic trades, with about 3.79 million tons of cargoes imported and exported in the
domestic trades throughput in 2012, of which the main exports are agricultural and local
products such as copra, coconut oil, and coffee, and the main imports are petroleum,
general merchandise, import steel of foreign trades, cement and pitch, etc. the percentage
of both amount and value of Bitung port cargoes imported and exported is less than 1% of
Page 36
those of the whole nation’s ports in Indonesia.
Figure 2-1 Comprehensive transportation

2.3.2 Municipal infrastructure
Due to lacking of water and electricity facilities in the most Indonesian areas, the
government offers great support to construct the water and electricity facilities to ensure
the water and electricity supply in this SEZ. There will be planing sewage treatment plants
and water transportation and distribution pipelines, and multipurpose reservoir will be
constructed in Minahasa Utara. In addition, there will planning a capacitance upgrading
program and an upgrading project of main substations and transmission power grids.
Page 37
Chapter III Industrial Analysis
3.1 Development statue of regional industry
3.1.1 Development Orientation
(1)International shipping hub
Taking advantage of Eastern Asian and Australian shipping rountes , developing new
shipping rountes and relying on the excellence of port-building conditions, Bitung Port
shall be developed into an international shipping hub with functions including collection,
distribution, transportation and transshipment, etc.
(2)Economic growth pole of Eastern Indonesia
Taking the advantage of special preferential policies, the SEZ shall be built as Eastern
Indonesia industrial center and Eastern Indonesia gateway to attract international
industrial transfer actively .Finally, the SEZ shall be developed into North Sulawesi’s or
even Eastern Indonesia’s economic growth pole.
(3)National innovation and testing base of international opening-up cooperation
Referred to international successful SEZ management model, to improve local business

environment, the SEZ shall be developed into management system innovation and testing
zone and explore the experiences for Indonesia economic take-off.
(4)Environmental friendly investment hot spot
The SEZ shall emphasize environmental protection, create sound policy environment, and
improve the attraction of international investment.
3.1.2 Main Function
• Free Trade
• Export Procession
• Industrial Manufacturing
• Commercial and Trade Logistics
• Bonded Warehousing
• Supporting Service (Residential, Business Office, Finance, Catering,

Entertainment, Hotel, Hospital, etc.)
Page 38
3.2 Regional industrial development status
3.2.1 Being the initial stage of industrialization for Bitung, with a higher agricultural
percentage
,With a higher agricultural percentage Bitung is in the initial stage of industrialization. In

2012, the average GDP is 1900 dollars, and major industries are formed such as
agriculture, industry, architecture industry, and transportation industry, the GDP
percentage of which above is respectively 19%, 22%, 15%, and 21%, so the agricultural
percentage is higher and the whole industry is in the initial stage of industrialization.
Agriculture
Others
Transportation
industry
Industry
Architectur
e industry
Figure 3-1 industrial structure of Bitung in 2010

3.2.2 Agriculture is an important foundation for the industrial development
The agricultural resources in Bitung are relatively abundant, which lays good foundation to
the industrial development. In 2011, rice planting area reaches about 500 hectares with
approximately 3000t of output, and the annual output increase speed of peanuts, hot
pepper, mung beans and vegetables reaches to more than 10%. In addition, fish industry
of Bitung is competitive, and the marine fishery yield in Bitung in2012 reaches159 tons,
with an 8.33% increase over 2011, and the marine aquaculture industry yield is 164t.
3.2.3 Fishery processing, wood processing, coconut product processing and ship
building and repairing industry has a certain basis, but industrial system still
remains to be optimized and improved.
Due to the weaker industrial foundation in Bitung, the development of industry in Bitung is
still in a relatively lower stage. From the perspective of the analysis on the industrial
distribution of main enterprises in Bitung, the main enterprises concentrate on the
agriculture and agricultural products processing industry such as fishing and fish
processing, wood processing, coconut product processing, so the industrial development
is in a lower stage.
Page 39
Table 3-1 Main Enterprises Conditions of Bitung
Industry Enterprises (unit) Staff (number)
Ship building and repairing 6 314
Fish processing 4 4564
Fishing 43 7950
Coconut process 13 1829
Wood processing 7 775
To sum up, though the fishing and fish processing, wood processing, coconut product
processing and ship building and repairing industry has laid a certain foundation.
However,the overall whole industrialization is in a relatively initial degree, with
comparatively simple industrial structures and a lower stage of industrial development,
and the industrial system still remains to be optimized and improved.
3.3 Regional industrial development direction
The project is one of the eight national special economic zones and endowed with a
relatively great mission of development, so the overall status of the park is relatively high.
As for the discrimination of regional industrial development direction, the existing industrial
advantages will be developed based on the existing industrial foundation. Go through
strategies of import substitution and export substitution, on the one hand to meet the
regional and domestic demand. Thus, the import demand will be reduced; on the other
hand, the competitiveness of the industries in the park will be reinforced and the regional
industrialization process will be promoted through the opportunity of international
industrial transfer. Therefore, the future development direction of the industries in the area
will be discussed from the following aspects.
3.3.1 Guided by the opportunity of international industrial transfer,inititative to

introduce foreign investment
(1) There is a new round of industrial transfer in the world and Southeast Asia is
expected to be the next undertaking place for the traditional industrial transfer
The world is facing a new round of international division of labor and industrial transfer.
Due to the factors of economic slowdown and labor cost inflation, Chinese
manufacturing industry is getting less attractive to foreign direct investment. According to
the Ministry of Commerce of China, from Jan. to July 2014, the actual utilized FDI value of
China is USD 71.14 billion (about RMB 438.1 billion), falling by 0.35% year-on-year
(excluding the data of banking, security, insurance, similarly hereinafter), among which
Page 40
USD 25.2 billion is the actual utilized FDI value of the manufacturing industry, falling by
14.26% year-on-year. With the advantages of cheap labor force and land resources as
well as the increasingly perfect infrastructure construction and preferential policies, the
manufacturing industries of the developing countries in South Asia, Southeast Asia and
Latin America are getting stronger. 2013 Global Manufacturing Competitiveness Index
points out that in 2013, 5 countries in Southeast Asia enter top 20 in the rank of global
manufacturing competitiveness index; among which Indonesia ranks 17th and is expected
to rank 11th 5 years later. The international standing manufacturing industry of Southeast
Asia is rising. By far, part of manufacturing industry including textile and garment, tyre,
electronics, machining is transferred to Southeast Asia. More of them are expected to be
transferred in the future. Southeast Asia is expected to be the main undertaking place.
Table 3.2 Ranking of Global Manufacturing Competitiveness Index of 2013 and the
Prediction of 2018
2013 2018 (prediction)

Index
index analysis
analysis
method
Ranking County/region method Ranking County/region
10=high; 1=
10=high; 1=
low
low
1 China 10 1 China 10
2 Germany 7.98 2 India 8.49
3 America 7.84 3 Brazil 7.89
4 India 7.65 4 Germany 7.82
5 South Korea 7.59 5 America 7.69
6 Taiwan 7.57 6 South Korea 7.63
7 Canada 7.24 7 Taiwan 7.18
8 Brazil 7.13 8 Canada 6.99
9 Singapore 6.64 9 Singapore 6.64
10 Japan 6.60 10 Vietnam 6.50
11 Thailand 6.21 11 Indonesia 6.49
12 Mexico 6.17 12 Japan 6.46
13 Malaysia 5.94 13 Mexico 6.38
14 Poland 5.87 14 Malaysia 6.31
15 Britain 5.81 15 Thailand 6.24
16 Australia 5.75 16 Turkey 5.99
17 Indonesia 5.75 17 Australia 5.73
Page 41
18 Vietnam 5.73 18 Poland 5.69

Czech
19 5.71 19 Britain 5.59
Republic
20 Turkey 5.61 20 Switzerland 5.42
Data source: 2013 Global Manufacturing Competitiveness Index of Deloitte

(2) “Going Global” strategy will facilitate domestic enterprises to invest in
oversea markets
Xi Jinping, General Secretary of China, put forward the strategic ideas of building “New
Silk Road Economic Belt” and “20th Century Maritime Silk Road” respectively in
September and October 2013, stressing that the countries shall forge a “community of
interests” with mutual interests and a “community of destiny” with joint development and
prosperity. "One Belt and One Road" strategy starts from China, goes through Central
Asia, Southeast Asia, South Asia, Western Asia and part of Europe. It concerns the
Asian-Pacific economic circle to the east and influences the European economic circle to
the west. There are almost 60 counties along the road, and most of them are emerging
economies and developing countries with a population of about 4.4 billion and an
economic aggregate of USD 21 trillion, accounting for 63% and 29% respectively of that of
the world. It is the longest economic corridor and largest market in the world. The
countries along the corridor are generally in the period of economic rising, and are
provided with a broad prospect for mutual beneficial cooperation. Thus, it will generate a
large number of opportunities.
Most of the countries along "One Belt and One Road" are in the early stage of
industrialization. Many countries economy development are highly depend on resources
industries such as energy and mining, while China is capable of providing various
machines and transportations to them and ranks relatively high in the industrial chain. In
the construction of "One Belt and One Road", China will develop industries of “three
outsides” including energy outside, resources outside and market outside, thereby
promoting the export of products, equipment and labor, which will facilitate the
development of oversea emerging markets.
Guided by "One Belt and One Road" strategy, Chinese enterprises will become the hard
core of the strategy and play an important role in it. With the further implementation of the
strategy, more and more Chinese enterprises will go out to the world.
In addition, China encourages clothing, hardware, toy, shoemaking, packing, ceramics,

cement and other building material industries, furniture industry, paper-making & paper
product industry, secondary metal smelted product, nonferrous metals alloy smelting,
pressure casting and other non-ferrous metal industries, IT products manufacturing,
Page 42
household appliance manufacturing, plastic products, coating, painting and other

petrochemical industry, craftsmanship toys, audiovisual products manufacturing, food
production, agricultural product processing to transfer abroad.
3.3.2 Guided by international and domestic direct investment, trace popular

investment industry
According to the industry-classified statistical data of direct investment at home and

abroad of Indonesia in 2014, food processing industry, mining industry, electricity, natural
gas and hydraulic supply, communication and transportation, storage and communication,
chemical industry and pharmaceutical industry are the popular investment industries of
FDI and DDI. FDI tends to invest in mining industry, food processing industry,
transportation industry, storage and communications, chemical industry and
pharmaceutical industry; while DDI prefers to electric power, natural gas, hydraulic supply,
and food processing industry, transportation industry, storage and communications,
chemical industry and pharmaceutical industry come second.
FDI industries DDI industries
Figure 3-2 Industrial Investment both at Home and Abroad of Indonesia in 2014
3.3.3 Realize import substitution in order to meet domestic import demand
Page 43
(1) The import demand of Indonesia maintains steady growth in the recent 10
years
Throughout the development situation of import trade of Indonesia in the recent 10 years,
the import demand maintains comparatively fast growth in overall. The amount of import
reaches USD 186.6 billion in 2013 from USD 46.5 billion in 2004. The rate of growth in the
recent 10 years remains 17%.
Import amount (billion USD)
Figure 3-3 Growth of Import Amount of Indonesia during 2004-2013

In addition, according to the growth of import volume and import value indexes of
Indonesia during 2005-2013, the import demand of Indonesia is increasing with stability.
The import value index and the import volume index of Indonesia (the year 2000 = 100)
were 173.7 and 133.6 in 2005 and reached 429.8 and 218.2 in 2013.
Import value index (year 2000=100) Import volume index (year 2000=100)
Figure 3-4 Growth of Import Value Index and Import Volume Index of Indonesia
during 2005-2013
Page 44
(2) Foreign dependence degree of Indonesia’s manufactured goods is high
From the structure of imported goods, foreign dependence degree of Indonesia’s

manufactured goods is relatively high. The amount of import of Indonesia in 2013 is USD
186 billion, among which manufactured goods account for 59.7%, fuel and mineral
products account for 27.5%, agricultural products account for 11.5%. By comparison, as
for exported products, manufactured goods account for 37%, fuel and mineral products
account for 38.8%, and agricultural products account for 22.3%. According to the structure
of specific imported goods, the imported goods of Indonesia in 2013 mainly include
mechanical equipment, oil and gas and other mineral products, metal products, transport
and communication facilities, chemicals, plastic and rubber, accounting for 25%, 23%,
10%, 9% and 5% respectively.
Figure 3-5 Structure of Imported Goods of Indonesia in 2013

(3) Indonesia mainly imports from East Asia and Southeast Asia areas
Indonesia imports are mainly concentrated in East and Southeast Asia areas, where
China is a major importing country. It mainly imports from such countries as China, Japan,
Thailand, Singapore, the US, South Korea and Malaysia. In 2013, the import volume of
Indonesia from the above countries is 21%, 14%, 8%, 7%, 6%, 6% and 4% respectively,
accounting for 66% of its total volume of import.
Page 45
China
Others
Taiwan, China Japan
Germany
Australia Thailand
The US
Malaysia
Singapore
South Korea
Figure 3-6 Structure of Import Trade Countries of Indonesia in 2013

Indonesia mainly imports mechanical equipment, mechanical and electrical products,
rolled steel, base metal and organic chemicals from China. In 2013, the volume of imports
of the above goods is USD 17.67 billion, accounting for 59.2% of its totoal volume of
imports from China. Apart from the above mentioned goods, it also imports plastic
products, fertilizer, dry and fresh fruits, inorganic chemicals, cotton, aluminium products,
audio equipment and so on. In the ten kinds of import goods, mechanical and electrical
products, metal products, textile, furniture, chinaware are in a dominant position.
3.3.4 Guided by upper planning, respond to the regional development demand
(1) Shipping logistics, textile industry, agricultural and mineral processing

industries are listed as the national key industries to be developed
According to the 2011-2025,Overall Planning for Accelerating and Expanding the

Economic Development of Indonesia, 22 economic activities concerning information and
communication technology, shipping, textile industry, food & drink, steel, national defense
equipment, palm oil, rubber, cocoa, animal husbandry, wood, petroleum and gas, coal,
nickel, copper, alumina, fishery, tourism, food and agriculture, transportation facility,
Jabodetabek region and Sunda Strait strategic areas will be promoted, making Indonesia
a developed country before 2025 and become top 10 global economic entities and a
maritime power, a main supplier of foods, the center of global farming, fishery and mineral
product processing and logistics.
Page 46
Table 3-3 22 Economic activities for State Planning and Development of Indonesia
Shipping Rubber Bauxite

ICT Cocoa Fishery
Textile industry Animal husbandry Tourism
Food and beverage Wood Food and agriculture
Steel Oil gas Jabodetabek
Civil air defense
Coal Sunda Strait strategic area
facility
Palm oil Nickel
Transportation
Copper
equipment
Investment Index of Main
Economic Activities (trillion
IDR)
Steel
industry
Food and
Textile
equipment
Transportation
Shipping
Nickel
Copper
Bauxite
Palm oil
Rubber
agriculture
Food and
Tourism
ICT
Coal mine
Oil gas
Jabodetabek
strategic area
Sunda
equipment
Alutsista/defense
Animal husbandry
Wood
Cocoa
Fishery
activities
Investment index of main
Infrastructure
Total investment indexes

beverage
Strait
Figure 3-7 Investment Index of Main Economic Activities of Indonesia

(2) Sulawesi economic corridor is positioned as a production and processing
center of agricultural and mineral resources; Bitung is positioned as an
international navigation hub
According to the 2011-2025 Overall Planning for Accelerating and Expanding the
Economic Development of Indonesia, Indonesia will strongly promote the development of
its national economy by forging 6 economic corridors. Sulawesi economic corridor is
positioned as a production and processing center of grain planting, tropical plantation,
fishery, petroleum and gas and mineral resources. Priority will be given to food and
agriculture, cocoa, fishery, nickel minerals and petroleum and gas.
Page 47
Table 3-4 Plan Positioning of the 6 Economic Corridors of Indonesia
Economic corridor Development positioning

, Production and processing center of national energy
Sumatra economic corridor
reserves and natural resources
Java economic corridor National industry and service supply actuator
Production and processing center of national mineral
Kalimantan economic corridor
industry and energy reserves
Production and processing center of national
Sulawesi economic corridor
agriculture, planting, fishery, gas and mineral industry
Bali - Nusa tenggara economic
Portal of tourism and national food aid
corridor
Papua - Maluku Islands Food, fishery, energy and national mineral industry
economic corridor development center
Figure 3-8 Function Layout Planning of Sulawesi Economic Corridor
Page 48
3.3.5 Based on the consumer demand of the regional residents, adapt to the change
of consumption structure
Experience of developed countries shows that the expenditure of daily necessities such
as food, clothing and shoes is the major part when per capital GDP is between USD 1,000
and 3,000; and accordingly, labor-intensive light manufacturing industry is developed in an
all-round way.
After per capital GDP reaches USD 3,000, the expenditure share of daily necessities
descends and that of durable consumer goods increases; and accordingly, household
appliances consumption grows rapidly and durable consumer goods develop towards a
high-end level and are upgraded rapidly. There is a brisk market demand for TV sets,
refrigerators, air-conditioners, motorcycles, cameras, phones and water heaters, with
accelerated development of electronics, machine manufacturing, steel and plastics.
In 2013, per capital GDP of Indonesia was USD 3,500 dollar, and that of North Sulawesi
Province was USD 2,215; in 2012, per capital GDP of Bitung is USD 1,900 dollar.
According to the international development experience, the demand for durable consumer
goods is increasing in Indonesia. In North Sulawesi Province and Bitung, daily necessities
remain the major expenditure item and the demand for durable consumer goods is
increasing gradually.
3.3.6 Brief summary
According to the above presentation of the potential development direction, the

preliminary potential industrial development direction of the project is obtained as follows:
Table 3-5 Potential Industries Development Direction of the Project
Industrial
development Alternative industries
direction
Clothing, hardware, toys, shoemaking, packing; ceramics, cement and
other building materials, furniture, paper making and paper products,
secondary metal smelting products, nonferrous metals alloy smelting
Undertake
and casting products; IT production industry, electrical household
industrial
appliances manufacturing, plastic products, coating, painting and
transfer
down-stream product of petrochemical industry, art toy, audiovisual
products manufacturing, food production and other industries,
agricultural product processing industry.
Trace popular Food processing industry, mining industry, electricity, natural gas and
industry hydraulic supply, communication and transportation, storage and
investment communication, chemicals and pharmaceutical industries
Mechanical equipment, mechanical and electrical products, steel, base
Realize import metal and products, organic chemicals, plastic products, fertilizer, dry
substitution and fresh fruits, inorganic chemicals, cotton, aluminum products and
audio equipment
Page 49
Meet the needs Food, clothing and shoes; TV sets, refrigerators, air-conditioners and
of consumers other household applications
Respond to the
guide of Production and processing center for agricultural and mineral resources
planning
Follow
Fish processing, wood processing, coconut product processing and
industrial
ship repairing and building
foundation
3.4 Suitability analysis of the SEZ
3.4.1 General location factor of industrial sectors
Simply from the market behavior, the location of a factory shall choose place where have
obvious advantages to maximum profits with the lowest cost of production. As are different
industrial sectors have different production process, characteristics, input factors and
compositions of the cost of production, the leading factor of location selection is different.
According to different location orientations, industrial sectors can be roughly classified as
follows:
Table 3-6 Major Location Factors of General Industrial Sectors
Category Basic principle of location selection Representative sector

For this kind of industry, whose
Sugar industries related
consumption of raw materials is far more
to bee, sugarcane,
than the weight of products, or whose
Raw material processing industry
raw material is difficult to be transported
oriented industry related to vegetable and
and is perishable, it shall be close to the
aquatic product, iron
places of origin of raw materials as
manufacture
possible.
The industry, whose transportation cost
is high, and products are not suitable for
Furniture, printing, beer
Market oriented long distance transportation, or the
and daily necessity
industry products shall be adjusted frequently
industry
according to the change of the market
demand
For this kind of industry with large Heavy industries such
Power oriented proportion of the energy cost in the unit as aluminum
industry product cost, it shall be close to place metallurgy, metallurgy
where the energy source is cheap and chemical industry
For this kind of industry, which will need
a large amount of labor force with a
large proportion of salary in the cost of Textile and garment,
Labor force oriented
the product, with the same conditions in shoemaking, bags and
industry
other aspects, it shall be located in the electronic assembly
area with abundant labor force and at
low salary level
Technology oriented For this kind of industry, which has high Integrated circuits and
industry technical requirements, it shall be close precise instruments
Page 50
to the area with higher education and

developed technology
3.4.2 Location conditions of the project
The report will analyze the location conditions of the project from the following aspects:
Table 3-7 Location Conditions of the Project
Far away from the economic center, the location of the project belongs
Economy to the economic marginal area with small radiation of central cities and
poor city supporting.
Far away from the consumer market, the location of the project does not
locate in the population agglomeration region. The population size of the
Population city where the project is located is small, and the quality of labor force is
low, but the potential resource of labor force is abundant and the cost of
labor force is cheap.
Bitung City adjoins the international airline between East Asia and
Oceania and the development of the existing Bitung Port has certain
foundation. Terminals will be built in the project, which will be the
shipping portal in Eastern Indonesia with the existed foundation and
shipping location.
Transportation
At present, the expressway connecting Bitung downtown and the
provincial capital Manado is being built for the project. It will greatly
shorten the time and distance between the project site and the central
city and the Manado International Airport after completion. The
transportation location of the project has good development potential.
As a national special economic zone, the project can enjoy more policy
Policy
bonus in such aspects as revenue and administrative licensing.
Bitung City has rich fishery resources, and plants commercial plants
Resource
including cocoa, coconut, etc.
3.4.3 Industrial suitability analysis
Basis on the project's own geographic conditions, combined with the general location
factor of industrial sector, we conduct the suitability analysis of the alternative industrials,
to finalize that the industries suitable for the project include: food processing (agriculture,
forestry and fishery product processing), daily-use and light industrial product
manufacturing (textile and garment, small household appliances), electromechanical
hardware products manufacturing, household building materials industry, shipbuilding and
ship repairing and port logistics. See the table below:
Page 51
Table 3-8 Major Recommended Industries of the Project
Table 3-8 Major Recommended Industries of the Project
Industrial location Specific recommended

Selection result Selection basis
and orientation industry
Raw material
oriented industry
Fishery processing, coconut
is apt to be close z Bitung City has rich agriculture resources; products processing,
Food processing to the place with
z It has a certain development foundation. vegetable processing and
rich raw materials
grain processing
and convenient
transportation
z It meets the present daily necessities
Labor intensive consumption demand in local and
industry is apt to domestic markets brought by
be close to the consumption structure;
area near z Traditional labor intensive industries like
Textile and Textile, garment, shoemaking,
markets, with garment and shoemaking are transferring
garment bag and toy manufacturing
intensive labor to Southeast Asia;
force and z With low labor cost, high unemployment
Daily-use and light convenient rate and surplus labor supply, the lowest
industrial product transportation. salary level in Bitung City is $165 per
manufacturing month.
Marketoriented z It meets the increasing durable goods
industrials needs consumption demand in local and
Small a certain amount domestic markets brought by
Small household appliances
of capital input consumption structure upgrading, and
household like televisions, refrigerators,
which makes meanwhile depends less on importing and
appliances air-conditioners, etc.
them apt to be promote the industrialization of the local
close to the area area;
with strong market z It has cheap labor resource and needs a
Page 52
demand. certain amount of capital input;

Raw material z It can takes fully use of the existed forest
oriented industry resources in Bitung City to reduce the cost
Papermaking and is apt to be close of raw material transportation; Pulp manufacturing,
paper products to the area with
z It can provide paper packing for papermaking and paper
rich raw material,
manufactured goods in the industrial park, products manufacturing
intensive labor
and convenient increase the industrial cooperativeness
transportation. and enhance the agglomeration benefits.
Capital intensive z It meets the development demand of

industries needs a producing, depends less on importing and
promotes the industrialization of the local Communication devices,
certain amount of motorcycles and agriculture
capital input, area;
vehicles;
which makes z It is Indonesia’s major products imported
Electromechanical Transformers, motors,
them apt to be from China. It can attract investment from
manufacturing industrial boiler, plastic
close the area Chinese enterprises, which can achieve
with abundant local production and reduce the machinery, compressor,
Electromechanical labor and transportation cost; refrigeration, pumps and
hardware convenient draught fans
z It has cheap labor resource and needs a
products transportation. certain amount of capital input;
manufacturing
z It depends less than importing and
promotes the industrialization of the local
area;
z It provides industrial raw materials for Metal parts manufacturing and
Traditional labor
Metal products mechanical and electrical product daily metal products
intensive industry
manufacturing and cooperatively develops manufacturing
with other industries;
z It has cheap labor resource and needs a
certain amount of capital input;
The enterprises z Building material industry is a “ever-green Wood processing , furniture
specializing in raw industry” in the society, and its demand manufacturing and new
Household building materials industry
materials such as will be enlarged gradually with the building material
steel, cement and development of urbanization; manufacturing
Page 53
wood are z Building materials industries whose raw

basically raw materials are metal and plastic will have
material oriented lower requirements on the location
enterprises, due condition;
to large volume of z The existing wood processing enterprises
raw materials and in Bitung can provide industrial raw
high materials for furniture making.
transportation
cost. The
enterprises
specializing in raw
materials such as
metal and
plastics, have
high flexibility of
site selection
It is close to the
port and needs a z It has port resources and already has
Ship repairing and building Ship repairing and building
certain amount of development basis.
capital input.
It relies on the z It has good shipping location; Storage, packing, processing,
port and has high sales, wholesale, exhibition,
Port logistics z It has port resources and rich land
requirements on shipping exchange and
policy. resources; information management
3.5 Industry selection of the SEZ
3.5.1 Selection of leading industries
The selection of leading industries shall consider from the points of the contribution of the regional development goal and the competitive
capacity of the industry. Combining with the industry suitability, the leading industries and the specific analysis of the project are as follows:
Page 54
Table 3-9 Scoring Criteria of the Assessment on Major Industries
Level of the effective

Driving effect on related Promotion effect on
Export potential use of regional Competitiveness Suitability
industries regional employment
resources
1: Small 1: Low 1: Small 1: Small 1: Small 1: Low
2:
2: Small 2: Comparatively low 2: Comparatively small 2: Comparatively small Comparatively 2: Comparatively low
small
3: Medium 3: Medium 3: Medium 3: Medium 3: Medium 3: Medium
4:
4: Comparatively 4: Comparatively
4: Big 4: Comparatively big 4: Comparatively big Comparatively
high high
big
5: Big 5:High 5: Big 5: Big 5: Big 5:High
Table 3-10 Assessment result of major industries
Categories Suitability
Comprehensive Effective use Promotion effect Competitiveness
Export Driving effect on
strength of regional on regional
potential related industries
resources employment
Weight Weight 20% Weight 20% Weight 15% Weight 25%
20%
Food processing 4.2 4 5 4 4 4 5
Daily-use light industrial 4.6
4 5 4 5 5 5
product manufacturing
Household building 4.15
4 4 4 5 4 4
materials
Electromechanical 3.7
3 4 4 5 3 4
hardware manufacturing
Ship repairing and building 3.6 3 5 4 3 3 4
Port logistics 4.4 4 5 5 4 4 4
Page 55
Daily-use light industrial
Industrial suitability
product manufacturing
Electromechanical
hardware manufacturing
Port logistic
Food processing
Household building
material
Ship repairing and building
Comprehensive strength of
industry
Graph 3-9 Matrix distribution of industrial analysis and recommendation in the project
According to the analysis result, the leading industries of the project are food processing, daily-use and light industrial product manufacturing,
household building materials and port logistics.
Page 56
3.5.2 Establishment of industrial system
According to the result of industrial analysis and recommendations, establish the

complete industrial system in Bitung City, including leading industrials, assistant
industrials and basic industrials.
The leading industries include food processing, daily-use and light industrial product
manufacturing, furniture building material and port logistics, among them, port logistics is
the complementary of the frontier port, and it will develop a comprehensive service system
with the feature of covering all links of the logistics industry chain, and it will promote the
integrated development of various links like storage, packing, bonded support,
processing, sales, wholesale, exhibition, shipping exchange and information
management.
Auxiliary industries refer to the industries providing support for leading industries,
including electromechanical hardware product manufacturing and ship repairing &
building.
Basic industries refer to the industries providing basic services for enterprises and
employees to sustain the operation of the industrial park, including industrial park
management, restaurants and retail.
Table 3-11 Industrial system of the project
Industrial system Recommended industry

Fishery processing, coconut
Food processing product processing, vegetable
processing and grain processing
Garment, shoemaking, bag, toy
Daily-use and light
manufacturing, small household
industrial product
appliances, papermaking and
manufacturing
Leading industry paper products manufacturing
Household building Furniture manufacturing and new
material building material manufacturing
Storage, packing, processing, sale,
wholesale, exhibition, shipping
Port logistics
exchange and information
management
Electromechanical Light transportation vehicles like
hardware product metal products, mechanical parts,
Auxiliary industry manufacturing motor device, electronic assembly,
motor trucks
Ship repairing & building Ship repairing and building
Public services
Basic industry
Business services
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Chapter IV Market Analysis
4.1 Industry market analysis
4.1.1 Food processing industry (agricultural and sideline product processing)
(1) Market demand analysis
¾ Fish processing
In recent years, Indonesian domestic demand for fishery products has been increasing
year by year with huge consumption needs. The per capita consumption of fishery
products in the country increased from 28.57kg in 2010 to 30kg in 2011 and to 30.47kg in
2012, showing a growing consumption demand year by year. Its large population of
approximately 248 million also leads to a huge demand for fishery products.
With the globally increasing demand for fishery products, the fishing industry of
Indonesian expands gradually its oversea market. In 2013, fishery products have been
export commodity with an export value of 4.19 billion USD. The main fishing business
partners of Indonesia are American and European countries, Japan, Southeast Asian
countries, etc. It should be noted that with the increasing consumption level and the rapid
development of the food industry, China has an increasing demand for fishery products
and its import of such products from Indonesia is increasing year by year. In 2009, China
imported 149,000 tons of fishery products worth 97 million USD from Indonesia, and in
2013 it increased to 336,000 tons worth 409 million USD. The imported products include
tuna, shrimp, seaweed, crab, clam, and fish oil, etc.
It is predicted that global demand for fishery products will enjoy sustainable growth.
Particularly due to economic development of Indonesia and its neighboring countries like
China, the demand for the medium and high-end fishery products will also maintain
growth. In the future, offshore fishing and aquaculture will gain a vast market.
¾ Other agricultural and sideline product processing
According to statistics from ICCO (The International Cocoa Organization), America and
Europe are the major consumers of cocoa, accounting for 2/3 of the global consumption
market. Currently, the global demand for cocoa beans is 3 million tons, and the demand
potential is still growing, with an annual growth rate of 2-4%.
Indonesia is the third largest cocoa exporter after Ivory Coast and Ghana. Most of its
cocoa is exported to the US, Singapore, Malaysia, and Brazil, etc., among which Malaysia
is the top importer. Indonesia plans to reach a production capacity of cocoa of 2.5 million
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tons in 2025 with an export value of about 6.25 billion USD so as to satisfy the growing
market demand. In addition, Boediono, Vice President of Indonesia, said that the
Indonesian government will make great efforts in building cocoa processing industry to
achieve the goal of being the world’s largest cocoa producer. He added that the
government will be committed to altering the export ways of cocoa. Instead of being
exported in the form of raw materials and processed in foreign countries, cocoa will be
processed domestically so to increase its added value.
Cocoa planting in Sulawesi Economic Corridor covers a total land area of 838,037
hectares, accounting for 58% of domestic cocoa planting area. There will be a broad
market for cocoa.
Some foreign investors start to show willingness of investing in processed coconut

products produced in Sulawesi Province, such as processed pure coconut oil and healthy
cooking oil. Farming products in Bitung City mainly include coconut, clove, nutmeg, coffee
beans, vanilla, and planting and processing of those agricultural products will also have
development prospects.
Table 4-1 Export Places of Processed Fish Products in 2013
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Table 4-2 Export Places of Cocoa and Coffee in Indonesia in 2013

(2) Market competition pattern
According to statistics from Bitung Statistics Department, the output of fish products in
Sulawesi Economic Corridor reached 14.86 million tons in 2012, among which Bitung
occupied 160,000 tons worth IDR16.9 billion. As for global market competition pattern,
neighboring countries, compared with Indonesia, adopt more advanced and efficient
manufacturing technologies to process fishery products. As for domestic market
competition pattern, Sulawesi Economic Corridor is the fisheries production and
processing center of Indonesia with resource and policy advantages.
According to 2011-2015 Overall Planning for Accelerating and Expanding the Economic
Development of Indonesia, although cocoa in Sulawesi Economic Corridor has great
potential, it lost the market opportunity of an estimated production of 600, 000 tons cocoa
worth approximately USD 360 million. It means that cocoa processing in the area does not
have obvious advantages.
(3) Target market
Lack of processing technologies of fishery products and other agricultural and sideline
products in Sulawesi is a challenge and at the same time an opportunity. In addition to the
domestic market, fishery products will be mainly oriented to the areas with higher demand
for them such as Europe and America, Japan, Southeast Asia and so on by enhancing
and extending the current industrial chain.
Processed products of agricultural products like cocoa, coffee, coconut, etc., will also be
oriented to America and Europe, and Southeast Asia.
(4) Market strategy
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Develop offshore fishing and inshore aquaculture: An Indonesia national aquaculture

processing center may be built within the surrounding seas nearby Bitung. This center can
be used to foster high-tech marine breeding and seafood processing that help to improve
production value of marine products.
Develop fishery products with features and high added value: For example, shrimp
farming with high value can be launched in the Sulawesi Economic Corridor. Selling price
of shrimp farming will be higher than that of the current major seaweed farming.
Improve added value of products by extending the processing industry chain of

agricultural products and changing the export forms such as raw material or rough
processing: Improvement of the added value of agricultural products is conducive to gain
a vaster market and higher profits. For example, processed cocoa products have higher
value than cocoa beans, thereby having higher profits and vaster market.
4.1.2 Daily-use and light industrial product manufacturing
(1) Current development situation
¾ Textile and garment
With a new round of international division of labor, Southeastern Asian countries become
the major destinations for the new round of international industrial transfer. As the
manufacturing industry status of Indonesia constantly increases, foreign investors has
been gradually enlarging their investment in Indonesia. At present, parts of traditional
manufacturing industries have been transferred to Indonesia. And daily-use and light
industrial products such as household appliances, textile, garment, etc. have occupied
more and more market shares. The scale of cotton spinning, weaving and garment
production capability is larger, and fancy yarns and garments are competitive to a certain
degree in the international markets.
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Figure 4-1 Export Places of Textile in 2013

According to the statistics of the National Statistics Bureau of Indonesia, the number of
large-medium textile and garment enterprises now reaches about 4,000 with 1.8 million
employees and 5 million indirect employed people. These enterprises mainly distribute in
the surroundings of West Java, Central Java, and Djakarta, taking up 88% with an annual
production value of approximately IDR 120 trillion (about RMB 100 billion) and an annually
industrial added value of IDR 40 trillion.
The textile and garment enterprises of Indonesia are mainly distributed in West Java,
especially in Bandung and Djakarta. And the garment industry in Bandung develops best
in Indonesia. According to some estimation, the annual production value of garment in
Bandung accounts for more than 40% of that in the whole nation. In recent years, due to
the increase of labor cost, parts of large-scale garment enterprises in West Java and East
Java choose to move to Yogyakarta, Central Java, etc.
¾ Consumer goods of household appliances
According to the data of the Ministry of Industry, there exist 250 electronic products and
parts manufacturers in Indonesia. And international brands dominate the high-end digital
electronic zone. International brands establish joint venture enterprises with the local
manufacturers. The native manufacturers mainly import parts from abroad, then assemble
them in Indonesia, and finally sell them to the overseas markets. Those products include
LCD TV, air conditioners and refrigerators, etc.. By ways of the modern and traditional
retail networks to establish distribution systems, various international brands such as
Toshiba, LG Electron, Sony, Panasonic Indonesia and Samsung Indonesia have been
known in the whole Indonesia.
The brands competitions of medium and lower-end household appliances in Indonesia are
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rather fierce in the domestic markets, such as electric irons, electric rice cookers, gas
stoves and fans. Based on the respective core advantages, local primary household
appliance manufacturers and brands such as Maspion Group, Polytron, Denpoo Mandiri,
Sanken, Xingyu Group and Quantum have developed specific market segment strategies
and put the strategic focus on the research input, thereby having sufficient strength to
participate in the market competition. Those innovation types of household appliances
produced conform to Indonesian life-style demands and the purchasing power of mass
markets.
¾ Papermaking
At present, with the constant needs for pulp and paper in the international markets, world
timber industry is gradually transferring from North Hemisphere to the region of
Asian-Pacific so Indonesian timber industry maintains its rapid growth. Due to the unique
climate advantages, trees planted in Indonesia as the pulp raw materials can grow up
within 5~6 years. At the same time, located in the southeastern Asian market where the
pulp needs continuously increase, Indonesian pulp and paper products are superior in the
international markets. But in recent years, the export of Indonesian paper products shows
a decrease trend. The export amount of Indonesian paper products has decreased from
USD 4.2 billion in 2010 to USD 3.7 billion in 2014, with an annual increase rate of -3.2%;
and the export amount of paper products in 2014 account for 2.5% of the total export
amount of the nation, with a year-on-year decline 4.15%.
(2) Market supply and demand pattern
Though Indonesian industries such as textile & garments and household ware are capable
of export sales, the export volume is still less than import volume due to the tremendous
domestic demands and insufficient supply to completely meet the market demands.
For the household appliance consumption, residents have changed their needs from
originally survival types to the life styles such as furniture, TV, refrigerators and washing
machines. According to Indonesian Electronic Association, 57% of Indonesian population
possesses TV, 19% refrigerators and 5% washing machines. Only 1% of population
possesses air conditioners, and the annual need grows at a speed of 15%, with annual
average growth rate of 10% ~20%, so there is a rather great development space in the
market.
Now the paper demands in the world reached 394 million tons, and in 2020 it will rise to
490 million tons, in which the developing countries’ paper demands will have an annual
average increase of 4.1% and the developed counties will annually increase 0.5%, so the
developing counties have greater market space for paper products. In 2014, Indonesian
paper production reaches 10.70 million tons, 4.49 million tons of which is used for export,
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but the domestic consumption need is 7.70 million tons, so it still relies on the import to
meet the domestic consumption needs.
(3) Target market
The household appliance development in Bitung special economic zone mainly relies on
the import substitution to meet the Indonesian domestic staple merchandise needs, and
with the scale economy enlargement and competitive power increase, it will gradually
spread to Western Asia, Africa, etc.
Textile and garment manufacturing has become a competitive industry in Indonesia, which
will not only meet the domestic daily consumption needs, but also export to those
countries with stronger consumptive power like European and American countries, and
Japan. .
Based on domestic market, papermaking industry mainly focuses on Southeast Asian

markets whose quantity demands continue to increase.
(4) Market strategy
For investment attraction, the Park may give priority to those enterprises with price
advantages; open up the eastern markets of Indonesia and avoid fiercely competitive
areas, and at the same time introduce the famous brand and enterprises to enlarge its
popularity and influence in the market, and to increase the competitive status in the
market.
Indonesian textile enterprises generally are faced with the aging equipment problem and
the capital problem, so the enterprises hope to update the existing aging equipment in
order to enhance the productivity. Considering the extensive range of textile industries,
advanced equipment and low price and maintenance cost in China, which are easier to be
accepted by Indonesian enterprises, Chinese textile enterprises with strength can invest
in Indonesian enterprises and become their shareholders to participate in the equipment
updating and improvement, so that both parties can complement each other’s advantages
and increase competitiveness.
4.1.3 Electromechanical hardware manufacturing
(1) Market demands analysis
In recent years, the electromechanical hardware industry of Indonesia shows a favorable

developing trend, becoming one of the biggest foreign capital influx industries, only
secondary to water, electricity and gas industry, transportation vehicles manufacturing
industry, and mining industry.
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The domestic demands for electromechanical hardware is comparatively large, with

annual import amount of metal products of USD 15~20 billion and export amount of nearly
USD 10 billion. But mechanical and electrical products have always been the largest
import commodities. For example, among the main export commodities from China to
Indonesia in 2010, mechanical and electrical products always ranked first; and according
to statistics of China customs, the export amount of Chinese mechanical and electrical
products to Indonesia reached USD 10.5 billion, with a year-on-year increase of 39.4%,
accounting for 51.5% of the total export amount to Indonesia. The major export products
are communication devices, LCD display boards, phones, motorcycles and parts, etc. And
the import amount of the mechanical electrical products from Indonesia to China in 2010
reached USD 2.09 billion, with a year-on-year increase of 17.1. If Indonesia becomes the
third largest motorcycle market behind China and India when motorcycles are the main
vehicles for transportation among Indonesian ordinary people, and consumer group
belongs to the middle class, it is conservatively estimated that more than 1.5 million
motorcycles are needed every year.
From the perspective of the future development, electromechanical hardware products

still have great growth space in the process of fast industrialization development in
Indonesia or even in the southeastern Asian areas. With the increasing expansion of
urban construction and middle class, the demands for some communication equipment
devices, mechanical and electrical products, low-duty transportation facilities, etc. are
becoming increasingly bigger, and so the future capacity of markets is still comparatively
great.
Table 4-1Import Situation of Industries Related to Electromechanical Hardware in

Indonesia (USD 0.1 billion)
Export 2009 2010 2011 2012

Metal products 96.12 137.92 171.39 209.18
Motor transportation vehicles with
0.41 0.68 1.39 1.66
two or three wheels
Electronic instrument 119.69 162.56 188.30 196.90
Table 4-2 Export situation of Industries Related to Electromechanical Hardware in

Indonesia (USD 0.1 billion)
Export 2009 2010 2011 2012

Metal products 71.73 98.77 118.54 93.04
Motor transportation vehicles with
0.42 0.58 1.09 1.98
two or three wheels
Electronic instrument 85.69 109.48 115.46 111.57
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The development of electromechanical hardware manufacturing is relatively mature in

Indonesia. At present, the majority of the electromechanical hardware market shares are
occupied by European & American countries, China, Japan, etc. Some overseas-funded
enterprises also take advantages of the Indonesian domestic labor to manufacture
products and then to export. A large quantity of electromechanical hardware factories exist
in Java and Djakarta, but considering that the electromechanical hardware is the
large-scale consumption products in the process of industrialization, Bitung can still
choose the industry of differentiation development as the breaking point.
(3) Target market
Give priority to the needs of Indonesian domestic economy development and at the same
time give considerations to the overseas markets. Especially for those African countries
that are in the process of agricultural modernization and industrialization, and treat them
as the main export places.
(4) Market strategy
Due to the wide coverage of electromechanical hardware, make a further investigation

and research about the structural gap of this industry to achieve differentiation
development such as transportation vehicles used in agriculture.
Pay attention to the upstream and downstream industry chains, and bring in the
cluster-type development enterprises such as spare parts manufacturing and assembly in
the transportation vehicle industry.
4.1.1 Ship repairing & building
(1) Analysis of market demand
There are over 17,500 islands in Indonesia. Shipping business is essential for the
development of its economy and 90% of its cargo transportation relies on shipping
transportation. In recent years, with the fast economic development of Indonesia, the
demand for inland shipping of industrial and agricultural products and energy resources
like coal, oil, natural gas and metal has been rocketing and bringing great opportunities for
the country’s inland shipping industry. According to the data of Indonesian National
Ship-owners’ Association, in 2005, there are 6,410 cargo ships, totaling 5.67 million DWT
in Indonesia. In 2012, the number of cargo ships reached 12,000 totaling 19 million DWT
nearly doubling when compared that of 2005. Although in face of a global economic
slowdown, the inland shipping industry maintains growth thanks to the strong domestic
demand of Indonesia. In 2013, Indonesian shipping companies increased about 600 new
cargo ships and cargo shipping has been increased by 20% from 1 trillion tons in 2012.
Money spent in buying ships has been rising, reaching USD 14 billion during 2005-2014.
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The Industry Department of Indonesia estimated that Indonesian demand for various
ships will reach 4,000 in the next decade.
However, Indonesia lacks technical capabilities in its domestic ship building companies
(including shipyards and dockyards), and has an urgent need in developing its
shipbuilding industry. According to the statistics of the Indonesian Ship Building
Association, the country has about 250 shipyards (including ship repairing yards). Most of
them can only build or repair cargo ships at the level of 500-1000 tons, only a few
shipyards can build or repair cargo ships lower than 5kt level. No more than 10 shipyards
and 20 ship repairing yards can deal with cargo ships above 5,000-10,000 tons level, and
only one national shipyard (PT.PAL) can build ships of 50,000 tons and repair the ships of
150,000 tons. In 2006, Indonesian shipbuilding occupied 0.17% share of the world ship
building market. Today, the country ranks 18th in world ship building industry, far behind
China (first), Korea (second), Japan (third), and other Asian countries. In 2013,
Indonesian had a ship building capability of about 900,000 DWT and repairing capability of
about 12 million DWT.
Deadweight (10kt) Cargo ships
Figure4-4 Increase of Number and Deadweight of Indonesian Cargo Ships
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National shipping capabilities

(repair)
Installed
capacity
Number of
ships
Production
Installed capacity Installed Quantity of ships with

5: National shipping capacities (gross ton) capacity (DWT) shaft (No )
(maintenance) Source: 2011: IPERINDO
National shipping (building)

capabilities
Installed
capacity
Number of
ships
Production
National shipping capacities Installed capacity Installed Quantity of ships with
(gross ton) capacity (DWT) shaft (No )
(newly-built) Source: 2011: IPERINDO
Fighre4-5 Indonesian Shipping Capabilities
With the new government taking office and the proposal of building a maritime power,
Indonesia will further develop its marine economy including shipbuilding. Indroyono
Soesilo, Minister of the Marine Overall Planning Ministry of Indonesian said that the
Indonesian government is making fiscal and taxation and non-fiscal and taxation incentive
policies to develop its shipbuilding industry. Fiscal and taxation policies include lowering
value-added tax of the shipbuilding industry, accelerating import tax rebate process of ship
equipment and components, and conducting differential tax policies for old and new ships.
Non-fiscal and taxation policies include speeding up the process for shipyards to rent
state-owned enterprises’ land and providing ship design for shipyards. The planned
“Maritime Highway” measure to be implemented by the government also includes
establishing special funds for financing ship purchase, to amend policies regarding import
taxation, value added tax, income tax of the shipbuilding industry and related industries, to
provide more flexible bank guarantees for the industry, to raise local participation in
building new ships to 40% and so on. Through the above policies and measures, the
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investment of Indonesian shipbuilding industry in 2015 may be over 30 trillion Indonesian

Rupiah (about USD 2.5 billion).
According to the 2010—2015 Indonesian Ship Building Industry Development Roadmap

authorized by the Industry Department of Indonesia, in 2020 the domestic shipbuilding
industry of Indonesia can build all kinds of ships, with a maximum deadweight of 200,000
tons and repaired ships with a maximum deadweight of 200,000 tons; in 2025, its
maximum shipbuilding capability can reach 300,000 DWT. Its medium-term goal is to have
the capability of building 85,000 DWT ships and repairing 150,000 DWT ships in 2015.
Developing shipbuilding industry is one of the urgent needs of Indonesian growing

shipping business. Neither the number nor the technology of domestic shipyards is
enough to support the development of its domestic shipping. Over 250 shipyards are
mainly distributed in Batam, Kepulauan Riau of Western Indonesia, Tanggamus of
Lampung, Surabaya and Rembang of Jawa Timur, Jakarta Province and so on. Most of
them are small and medium-sized and far away from Bitung. Although Indonesia opens to
foreign investment in the shipbuilding industry, only 2 foreign companies (Korean) have
invested in its shipbuilding industry.
Therefore, while facing the Indonesian market, the market share is enormous, but there
are only a few companies, and the overall competition in shipbuilding and repairing
industry is not intense. Market shares can be occupied, especially by the establishment of
shipyards in the east of Indonesia.
(3) Target market
On the base of international shipping development, the favorable prospect of Indonesian

domestic shipbuilding and repairing market and the existing shipbuilding and repairing
foundation of Bitung, there are broad prospects in developing shipbuilding and repairing
industry in the special economic zone Bitung. On the one hand, existing shipbuilding and
repairing markets of Bitung are oriented to the country, especially setting the building and
repairing of small and medium-sized ships as the main target market in the process of
developing middle and eastern areas. On the other hand, the market also provides daily
repair and maintenance services for ships of the East Asia-Oceania international route by
way of Bitung.
(4) Market strategy
The major shipbuilding and repairing countries in the world are China, Korea, Japan and
other East Asian countries, which are adjacent to Indonesia. Bitung should attract direct
investment of these countries based on its own shipbuilding and repairing foundation. The
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recent special economic zone construction can utilize foreign capitals and technologies,
lying foundations for the development of Bitung shipbuilding and repairing industry,
preempting Indonesian eastern market and eastern international routes. And with the
emerging of scale merits, the zone can be expanded and become a regional shipbuilding
and repairing base.
4.1.5 Home building materials
(1) Market demand analysis
On the one hand, with economic development, Southeast Asia has become a global
emerging economy. Most of ASEAN countries have been committed to constructing
infrastructure, improving domestic investment environments, thereby pushing the demand
of the building materials market. According to data from ASEAN, in the first half of 2013,
steel demand of ASEAN had increased by 17% year-on-year, in which the demand of
Indonesia had increased by 35% year-on-year, reaching 7.6 million tons. As a result,
Indonesia became the country with the fastest demand increase in the area. In recent
years, Indonesia announced its new infrastructure construction plan which costs billions of
dollars, committing to building or rebuilding existing ports, dams, roads, power facilities,
airports and so on. The enormous infrastructure construction plan also fueled the increase
of the country’s home building materials demand.
On the other hand, according to international classification standard, the per capita GDP
of Indonesia has reached the level of middle income countries. The country is at the stage
of the fast development of industrialization, which will also push forward the development
of urbanization. During 1970 to 2010, Indonesia had achieved an average urban
population growth of 4.2%, doubled its urbanization and trebled its overall per capita GDP.
It surpassed India and Philippines and became one of the fastest urbanization countries in
Asia. Today, Indonesian urbanization rate is around 44%. Its urban population is estimated
to increase from the current 110 million to 200 million in 2030, with over 70% urban
population. The process of urbanization will speed up economic and urban construction,
and promote the development of home building materials market. So the demand of
Indonesian market for home building materials is huge.
Under the prospect of a huge demand in home building materials market, there is even a
more huge demand for environmental-friendly and new home building materials.
According to statistics from the Export Development Bureau, the Trade Department of
Indonesia, in 2012 Indonesian furniture export reached USD 1.41 billion, with a
year-on-year increase of 5.63%. In 2014, the figure reached USD 1.83 billion. With the
consistent recovery of furniture production including wooden, rattan, plastic and bamboo
production, and the rising demand of international market. Various furniture has become
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one of the superior export products for Indonesia. In addition to exporting to traditional
markets in the US, France and Japan, Indonesian furniture industry also regards China as
its key exporting target country and increase its export to China, from USD 60 million in
2012 to the planned USD 150~200 million in 2015. According to the research of CSIL, the
world furniture production reached about 422 billion dollars in 2013. Currently, the market
share of Indonesian furniture is small in the word, about 2%; while that of Chinese wooden
furniture is 30%. Indonesian Asmindo believes there is a huge potential of the increase of
its furniture industry. Under the guidance of policies the furniture industry can be
increased to USD 5 billion in the next five years and occupy 5% of world furniture market
in the next ten years. As new building materials are outperformed traditional materials in
high efficiency, environmental-friendly feature, convenience and other features, they
gradually become important building materials of urban construction. The world witnessed
a fast development of new building materials, for example, the new building materials
industry of the US maintains its fast growth, with an annual rate of 11% and its output
value will reach USD 86.6 billion in 2017. The annual building materials exhibition of
Indonesia has been drawing foreign investment. In 2014, there were 470 exhibitors, in
which 258 were from Indonesia and 212 were from China, Malaysia, Taiwan, Korea,
Japan, Singapore, Thailand, Australia, Pakistan, the United Arab Emirates and other
countries. The exhibition greatly increased the development of Indonesian building
materials industry. Main categories in the exhibition are stones (marbles granites),
potteries, household adornments, shaped bricks, steel products, nonferrous metals,
wooden products, cement, concrete, glass, plasters, sealing materials, floor boards and
blankets, wall papers and inlays, garden adornments and so on. The number of new
plastic products, new materials and the demand for them are also increasing.
The domestic furniture competitor is the competent Kalimantan economic corridor. The
competition of furniture exporting is intense, as Southeast Asian nations, China and Japan
are all the furniture exporters and occupy enormous market shares, including
competitions from domestic furniture industry. According to the tendency of new building
materials, Indonesian and even the world’s demand surpasses supply, and developing
countries in Southeast Asia just started their new building materials industry and only
occupy a few market shares. Indonesia, especially middle and east regions of Indonesia
need substantial building materials in the urbanization process which means the market is
so large that the market competition is little.
(3) Target market
The object of home building materials is to fulfill the needed building materials in
Indonesian fast urbanization. The target market of developing home building materials in
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Bitung special economic zone is the domestic market, especially east region of Indonesia,
and the market will gradually radiate towards oversea market.
(4) Market strategy
To develop the new building materials industry, the industrial park should introduce the
companies with new materials and environment protection technologies, follow the trend
of the world’s new building materials development, orientate towards Indonesian
urbanization construction, avoid competition with traditional materials companies before
the maturity of Indonesian new building materials industry, speed up to new segment
markets and gradually expand its market shares. The furniture industry should avoid
competition with East and Southeast Asian regions, implement differentiated development
strategies, and utilize local advantageous resources like rattan furniture to occupy the
market. The special furniture can be exported to East Asian regions, which have
enormous markets.
4.2 Market analysis of the SEZ
4.2. Competition pattern
Bitung plans to develop an industrial park to introduce industries and boost the economic
development, but it is faced with the complex competition pattern due to that their
advantageous conditions are not so prominent.
On the one hand, the production factors such as resources, capital, technologies and
talents in Indonesia are highly centralized in the western area like Djakarta and so on,
which are stronger in resource competition than the eastern area, thereby capable of
holding back market shares of domestic and foreign investment. Under the more effective
and mature conditions, the Bitung industrial park has more difficulty in inviting investment
than the western area.
On the other hand, from the same level, the Industry Department of Indonesia
concentrates on developing 13 industrial parks, of which 7 are in the eastern area of
Indonesia, to attract the investment at home and abroad and promote the balanced
development of different regions in Indonesia. Although different industries have different
work division, most countries have the similar resource isomorphism and preferential
policies, thereby broadening the competition between industries. The Industry Department
of Indonesia said that the construction of industrial parks depends on the local advantages
of resources to make distinctive upstream and downstream industrial chains and take the
sustainable development path. The 13 industrial parks are the Teluk Bintuni industrial park
in West Papua, which prioritizes petrochemical industry, the Halmahera Timur industrial
park in North Maluku, which prioritizes nickel smelting industry, the Bitung industrial park
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in North Sulawesi, the Palu industrial park and the Morowali industrial park in Middle
Sulawesi and the Konawe industrial park in East Sulawesi, the Bantaeng industrial park in
South Sulawesi, the Batu Licin industrial park in South Kalimantan, the Ketapan and the
Landak industrial park in West Kalimantan, the Kuala Tanjung and the Sei Mangke
industrial park in North Sumatra Utara and the Tanggamus industrial park in Lampung.
The Palu industrial park in Middle Sulawesi, the Bitung industrial park in North Sulawesi,
the Morotai industrial park in North Maluku, located in the east of Indonesia, are special
economic zones, aiming at promoting the economic development of eastern Indonesia.
Besides, the main purpose for Indonesia to set up eight special economic zones is to
explore the way to economic development by tests with the special support given by the
government. At present, the special economic zones are too many in Indonesia, which
have decentralized the rare policy resources. Without any special advantage, Bitung will
have more pressure of competition. Moreover, the Morota special economic zone and the
Palu special economic zone, having the similar industrial development positioning with
Bitung special economic zone, are the direct competitors of this project.
Table 4-3 Basic Profile of Eastern Special Economic Zones
Morotai Bitung Palu

Location Morotai, North Bitung, North Palu, Middle Sulawesi
Maluku Sulawesi
Area (ha) 1,101.76 534 1,500
Industry Fish processing, Fish processing, Mining industry,

positioning manufacturing, agricultural product agricultural product
logistics, tourism processing, logistics processing,
transportation facilities
processing, logistics,
electronic product
processing
Predicted 30,000 34,710 97,500
Number of staff
Land Preparation 300 114.96 187
(ha)
Infrastructure Roads, electric power, wastewater treatment plants

Regional Roads, electric National highways, Roads, head waters,
infrastructure power, Leo Bitung Port, Sam Pantoloan port and
Wattimena Airport, Ratulangi Airport Pearls Airport
Daruba Port and
Wayabula Port
Policy support Duty-free policy and relaxation of the conditions for license
examination and approval
Existing investors 1.Taiwan Brantwood Shenniu Indonesia
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(investment ICDF-cultivation International Mining-nickel smelting

volume) agency (Rp 2 Pharmaceutical factory (±100 Million
Trillion) Factory (early USD/IDR 1 Trillion)
2.Sky River-seafood investment USD 500
processing factory Million, later-stage
(signed MOU in investment USD 2
2013) Million)
Competitive edge 1. Rich resource of 1. In the strategic 1. Located on the main

tuna position for the shipping track of
2. Famous scenic country to promote foreign trade, adjoining
spots for WWII. the economic Pantoloan port, with
development. deep water, which can
3. Leo Wattimena
2. Adjoins Bitung hold ultra-large type
Airport will be built
international hub container.
into an international
hub airport of port, the national 2. Rich natural
eastern Indonesia. logistics center. resources, such as
3. The largest export rubber, cocoa, sea
place for fish grass, nickel, gold, iron
processing products ore, lead and so on.
in Indonesia. 3. The Sulawesi
4. Enrolled into the government and Papu
economic hammer at creating a
development zone good investment
(KAPET) with the environment and set
provincial capital up one-stop service
Manado. (OS) and reduce tax.
4.2.2 Market Strategy
For the fact that the development environment in the area where Bitung industrial park is
located do not have favorable advantages and are faced with lots of competitors in the
market, so when the park is considering the objective of market development, it needs to
highlight its own advantages, plan and integrate the existing industrial base, precisely
bring its advantages into full play and positively foster competitiveness.
Meanwhile, Bitung should positively seek for the policy support of the country to strive for
the preferential policy given by the country and districts in the industrial development of
the park, to preferentially protect the industrial development of special economic zones in
the market competition, and to oppose the suppression of industrial development given by
the monopolized industry in the market.
In addition, Bitung should bring in well-known industrial brands, construct a powerful

competition base and market appeal, foster scale economy and brand effects.
Bitung should adhere to sustainable development and guide the park to bring in industries
step by step, according to the industrial development planning and industrial development
guidance catalog. It is also important to build up a system for evaluating and analyzing the
feasibility of the introduced industries and the market prospect, to take effective measures
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to avoid or reduce the waste of resources and environment pollution, and to promote
sustainable development of the economic society.
According to the analysis for industrial selection of Bitung, it could develop food
processing industries, daily-use and light industrial product manufacturing,
electromechanical hardware manufacturing, shipbuilding and home building materials
manufacturing. However, considering the current development conditions, Bitung do not
have the base and environment to develop all the industries at the beginning. According to
its advantages, considering the trend of regional development and conditions of
international industrial transfer, in the starting period of investment attraction, Bitung may
give priority to food processing industries, home building material industries and
shipbuilding industries and lay emphasis on the extension of upstream and downstream
industrial chains in the process of introducing industries to facilitate the formation of
industrial clusters and to enhance competitiveness.
4.3 Market size forecasting
4.3.1 Forecasting of total value of production for the park
4.3.1.1 Input-output method
(1) Overall park. The aggregate investment of industries selected by Bitung Industrial
Park involved in the whole Indonesia is 19.496 billion US dollars and the domestic
and foreign capital investment of North Sulawesi (the same below) accounts for
0.26% of that of the nation, which can measure the amount invested in the industries
selected by Bitung Industrial Park.
Figure 4-6 Domestic and foreign capital investment situation in Indonesia in 2014
Page 75
In consideration of Bitung as the special economic zone which will undertake the mission
of prospering East Indonesia, it can be assumed that the amount invested in the future will
not only account for more than half of the total investment of North Sulawesi but also the
state investment in the future will also be inclined to double and even redouble,
approximately accounting for 0.35% of the state total amount, according to the
development experiences of such economic zones of China from 1980 to 2000 as
Shenzhen (with the growth rate of 35.7% and the amount accounting for 1.56%
nationally), Zhuhai (with the growth rate of 29% and the amount accounting for 0.37%
nationally) and Xiamen (with the growth rate of 28% and the amount accounting for 0.56%
nationally).
On the basis of the investment growth trend of Indonesia in recent years (16.2% in 2014
and 15% of growth per year in the future assumed), it can be estimated that Bitung’s
annual investment growth rate will be slightly higher and if the park is completed in
development within 2025, the investment of the whole park can be estimated to be 32
billion US dollars.
The “input” in the “input-output ratio” used in the research means the total static
investment volume of the project; “output” means the summation of the all-year added
values within the total service life of the project. The equation is: R=K/IN=I/N. In the
equation, K is the aggregate investment; IN is the summation of all-year added values
within the service life of the project; for N=IN/K, if the value of N is bigger and the project
economics will be better. In combination with the industries planned and developed in the
park, it can be estimated that the basic input-output ratio is from 1:25 to 1:3. Therefore,
the total industrial output value produced per year will be 8-9.6 billion USD. It is about
1.6-2.0 billion USD in GDP after all industries are put into production in the future.
(2) Starting area. Based on the above-mentioned method, in combination with

investment projective of 2011-2015 Overall Planning for Accelerating and Expanding
the Economic Development of Indonesia until 2025, the total investment for food
processing, home building materials and other industries selected by Bitung for
starting area recently can reach to 142 million USD and the total industrial output
value produced per year of Bitung Industrial Park recently will be 360-430 million
USD, about 70-100 million USD in GDP.
4.3.1.2 Output per unit area method
The Gross regional production to be created by Bitung Industrial Park can be estimated
with the reference of the GDP output rate of unit area of land in other relevant regions.
The average output rate of Dongguan (Shaoguan) Industrial Transfer Park GDP of is
about 84 million USD per square kilometers. The output rate of Fenggang, Dongguan
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(Huidong) Industrial Transfer Park is 61 million US dollars per square kilometers.
The cases selected are from world factory—Dongguan, China whose development phase
and industrial characteristics has more similarities with this project’s future development
directions and reference significance. In the report, in consideration of Bitung’s
development conditions and the future industrial characteristics of the industrial park, the
GDP output rate of Bitung Industrial Park can be estimated to be the average of the cases
above, namely 70-75 million USD per square kilometers.
Bitung Industrial Park is about 20km2 totally, so it can be a preliminarily rough estimate
that the GDP output of the whole park will be 1.4-1.5 billion USD.
With the integration of the land use planning of the project, the construction sequence of
relevant industries and other factors, the recent park land area is 0.91km2 and it can be
preliminarily and roughly estimated that the production GDP of the starting area will be
64-68 million US dollars.
Table 4-4 Prediction of GDP output rate of unit area of land
GDP output rate of

Park Industry
unit area
Machinery manufacturing,
Dongguan (Shaoguan) 84 million US dollars
electronics, medicine, printing,
Industrial Transfer Park per square kilometers
toys,etc
Fenggang, Dongguan Advanced machinery and equipment,
61 million US dollars
(Huidong) Industrial electronic information, new textile
per square kilometers
Transfer Park clothing (shoes)
Food processing (agriculture, forestry
and fishery product processing),
daily-use and light industrial product
manufacturing (textile and garment,
70-75 million US
small household appliances),
This project dollars per square
electromechanical hardware
kilometers
products manufacturing, household
building materials industry,
shipbuilding and ship repairing and
port logistics
4.3.1.3 Comprehensiveness
In comprehensive consideration of the park gross regional production (GDP) estimated by

input-output method and output per unit area method, the GDP and industry output of the
whole park will be 1.5-1.75 billion US dollars and 7.5-9.0 billion US dollars. GDP and
industry output of starting area will be 67-84 million US dollars and 335-420 million US
dollars by arithmetic method.
4.3.2 Prediction of working population in the park
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The park will focus on food processing, manufacturing industries, including manufacturing
of daily-use and light industrial products, such as spinning, leather footwear, household
appliances, electromechanical hardware manufacturing and home building materials and
multi-services serving the park in the future. Based on the development experience of
China’s industrial park, the starting area and the whole park of the project will create a
working population of 60-80 thousand and 120-150 thousand respectively.
Table 4-5 Prediction of Working Population in the Starting Area
Working
Employment Employment density Scale of land use
population
type (person/hectare) (hectare)
(person)
Industrial park 90-110 70.3 6327-7733
Table 4-6 Prediction of Working Population in the Whole Park
Employment Employment density Scale of land use Working population

type (person/hectare) (hectare) (person)
Commercial
130-150 104.52 13587-15678
service
Public service
110-130 13.19 1450-1714
facility
Logistics
15-25 51.84 777-1296
storage
Municipal
8-12 237.83 1902-2853
road facilities
Industrial
90-110 1142.87 102858-125715
park
Total / 1550.26 120574-1472546
4.3.3 Terminal throughput forecasting
4.3.3.1 Terminal target and orientation
The terminal, as the supporting terminal at the forefront of the industrial park, will give
priority to meet the transportation needs for production and operation of the park to
guarantee the industrial development of the park. On that basis, it will provide
transportation service for the hinterland and the international market to make Bitung the
navigation junction of East Indonesia.
4.3.3.2 Prediction of container throughput
(1) Prediction of container throughput of the hinterland

z Prediction of the domestic trade container throughput of the hinterland
Based on the development status of Bitung Port, linear extrapolation method is adopted to
predict the domestic trade container throughput from 2020 to 2035.
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¾ Status of domestic trade container throughput of the hinterland

Container throughput of Bitung Port in 2014 is 0.2 million TEU. According to the survey,
the proportion of domestic trade container throughput of the hinterland in recent years is
about 90%, that is, the container throughput of the domestic trade of the hinterland in
2014 is about 0.18 million TEU.
Container throughput of Bitung Port (TEU)
Figure 8-1 Growth of Container Throughput of Bitung Port from 2008 to 2014
¾ Prediction of domestic trade container throughput of the hinterland
In recent years, the container throughput of Bitung Port shows a stable growth trend. It
increases to 0.2 million TEU in 2014 from 0.13 million TEU in 2008, at an average growth
rate of 6.6% and a stable growth speed. Considering that the container throughput of
Bitung Port is from domestic trade mainly, combining with the growth speed of the
container throughput of Bitung Port, as well as the economic development in eastern
Indonesia will drive the growth of domestic trade container throughput of the hinterland. It
is estimated that the domestic trade container throughput of the hinterland in 2020 and in
2035 will be respectively 13% and 9%, namely that the domestic trade container
throughput of the hinterland in 2020 and in 2035 is respectively 0.38 million TEU and 1.1
million TEU.
Table 4-7 Prediction of domestic trade container throughput of the hinterland
2014 2020 2035

Item Unit
(Status) (Prediction) (Prediction)
Domestic trade container throughput
104TEU 18 -- --
of the hinterland
　 Average growth rate per year of
domestic trade container throughput of % 13 9
the hinterland
　 Domestic trade container 104TEU 38 110
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throughput of the hinterland
z Prediction of foreign trade container throughput of the hinterland

Indonesia’s container throughput of this part will be predicted by the method of the
dynamic generation coefficient of the container and on this basis, the foreign trade
container throughput of this project can be determined in combination with the proportion
of the foreign trade of East Indonesia to that of the nation and the proportion of that of the
hinterland to that of East Indonesia. It can be seen from the container generation
mechanism that the total value of imports and exports of hinterland and the dynamic
generation coefficient of foreign trade container are the main influence factors of the
foreign trade container throughput and with the major connection with the containerization
level, they can finally determine the production scale based on the weight of the container
cargo.
¾ Total foreign trade value

Indonesia’s foreign trade generally increased fast and had a status of favorable balance of
trade overall in recent ten years. Indonesia had a total value of imports and exports of
354.5 billion US dollars in 2014. Indonesia has remained the annual average growth rate
of 11% of import and export from 2005 to 2014, developing faster. In the future, with the
further development of export industry and of import and export growth rate and the
growth of trade base, the growth rate for import and export will reduce slowly, as details
shown in the following table.
It can be estimated from the growth rate for import and export in various periods that the
total value of imports and exports in 2020 and 2035 will be 778 billion US dollars and
1784.5 billion US dollars respectively.
Table 4-8 Indonesia’s Total Value of Imports and Exports from 2021 to 2035, Unit:
100 million US dollars
2014 2020 2035

Item
(Actual) (Predicted) (Predicted)
Average annual growth rate of
-- 14% 8%
total value of import and export
Total value of import and export 3545 7780 17845
¾ Generation coefficient of foreign trade container

The dynamic generation coefficients of foreign trade container of Indonesia in 2009 and
2010 were 2,200 TEU/100 million US dollars and 1,900 TEU/100 million US dollars
respectively. With the adjustment of Indonesia’s economic structure, industrial structure
and product structure in the future, the proportion of the products with small volume but
high value to containerized cargo of the whole port will increase consistently, with the
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downtrend of the volume and weight of future foreign trade products of unit amount and
the gradual decline of the foreign trade container generation coefficient, and it can be
estimated that the foreign trade container generation coefficients of 2020 and 2035 will be
1,700 TEU/100 million US dollars and 1,400 TEU/100 million US dollars respectively.
Table 4-9 Generation Coefficients of Indonesia’s Foreign Trade Container
2020 2035
Item 2009 2010
(Predicted) (Predicted)
Dynamic generation
coefficient of foreign trade
0.22 0.19 0.17 0.14
container (10 thousand
TEU/100 million US dollars)
¾ Proportion of the foreign trade container throughput of East Indonesia to that of the nation
In view of the close relationship between foreign trade container throughput and value of
import and export, the report will predict the proportion of the future foreign trade container
of East Indonesia to that of the nation based on the value of import and export of East
Indonesia. The proportions of import and export trade of the provinces in East Indonesia
to that of the nation from 2010 to 2014 have stable changes, about 2%~2.5%. It can be
estimated that the proportion of the foreign container throughput of East Indonesia to that
of the nation will be 4.5% and 6% respectively in 2020 and 2035.
Table 4-10 Proportion of Value of Import and Export of the Provinces in East
Indonesia to that of the Nation, Unit: 100 million US dollars
2010 2011 2012 2013 2014

Sulawesi Barat 0.24 0.03 -- -- 1.57
Sulawesi Selatan 33.06 33.03 28.62 29.37 25.84
Sulawesi Tengah 4.47 3.93 3.55 4.80 4.02
Sulawesi Tenggara 5.43 13.00 13.79 14.14 9.05
Sulawesi Utara 4.47 8.94 10.80 8.50 11.26
Maluku 5.02 5.48 6.65 5.70 5.65
Maluku Utara 3.11 6.54 5.61 7.35 0.41
Papua Barat 13.26 24.22 22.77 22.66 11.81
Total 69.07 95.17 91.79 92.53 69.62
Indonesia 2934.42 3809.32 3817.10 3691.81 3544.71
Proportion 2.4% 2.5% 2.4% 2.5% 2.0%
Note: The provinces in East Indonesia include Celebes, Kepulauan Maluku and New
Guinea.
¾ Foreign trade container throughput of East Indonesia
The foreign trade container throughput in Indonesia can be estimated based on the
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above-mentioned calculation coefficients and formula and it can be estimated that

Indonesia’s foreign trade container throughput in 2020 and 2035 will be 13.2 million TEU
and 25 million TEU respectively, in which East Indonesia will have 0.6 million TEU and 1.5
million TEU respectively.
¾ Foreign trade container throughput of the hinterland

Considering that Bitung Port will be developed into a regional shipping hub with functions
including collection, distribution, transportation and transshipment, etc. and an
international shipping hub in a long term. It is estimated that the foreign trade container
throughout of the hinterland in 2020 and 2035 will account for 75% and 80% of the foreign
trade container throughout of East Indonesia, that is, the foreign trade container
throughout of 2020 and 2035 is respectively 0.45 million TEU and 1.2 million TEU. See
details in the following table.
Table 4-11 Prediction of Foreign Trade Container Throughput of the hinterland
2009 2010 2020 2035

Item Unit
(Actual) (Actual) (Predicted) (Predicted)
100
Total foreign trade value of million
2135 2935 7780 17845
Indonesia US
dollars
10
thousand
Dynamic production
TEU/100
coefficient of foreign 0.22 0.19 0.17 0.14
million
container
US
dollars
10
Foreign trade container
thousand 480 550 1320 2500
generation of Indonesia
TEU
Proportion of foreign trade
container throughput of
% -- -- 4.5 6%
East Indonesia to that of
the nation
Foreign trade container 10 -- --
production of East thousand 60 150
Indonesia TEU
Proportion of foreign trade
container throughput of the
% 75 80
hinterland to that of East
Indonesia
10
Foreign trade container
thousand -- -- 45 120
throughput of this project
TEU
z Prediction of container throughput of the hinterland
Page 82
In combination with the prediction of the domestic and foreign trade container throughput
of the hinterland, the container throughput of the hinterland in 2020 is 0.83 million TEU
and in 2035 is 2.3 million TEU.
According to the survey, the design annual throughput of Bitung Port at present is 0.5
million TEU, that is, there will have a throughput gap of 0.33 million TEU in 2020 and 1.8
million TEU in 2035, and the project will bear 0.33 million TEU and 0.8 million TEU in 2020
and 2035 respectively.
Table 4-12 Prediction of Container throughput of the project
2020 2035
Item Unit
Domestic trade container throughput in

10 thousand TEU 38 110
hinterland
Foreign trade container throughput in

hinterland
Container throughput in hinterland 10 thousand TEU 83 230
Designed annual throughput capacity of

existing container terminal of Bitung 10 thousand TEU 50 50
Port
Container throughput capability gap in

hinterland
Container throughput in hinterland

attracted by this project
(2) Container throughput of the industrial park
In view of the close relations between the container production in this part and the
production value and density of freight generation (namely the cargo tonnage generated
by unit GDP) in the park, this report will forecast the container production of the industrial
park based on the forecasting of the future total output value and with the reference of the
density of freight generation of relevant regions.
¾ Forecasting of total output value of special economic zone
The special economic zone is about 20 km2 totally with the GDP of about 1.5-1.75 billion
US dollars, namely industry output of 7.5-9.0 billion US dollars. In comprehensive
consideration of such factors as the land use planning of the project and construction
Page 83
sequence of relevant industries, it can be estimated that the developed area of the park in
2020 and 2035 will be 1km2 and 15km2 respectively and it can be a preliminarily rough
estimate that industry output of the park in 2020 and 2035 will be 0.4 and 6 billion US
dollars respectively.
¾ Forecasting of container production
The density of freight generation has a close relation with regional economic overall level
and industrial structure. The density of freight generation may generally show a downward
trend with the increase of the economic level; on the other hand, the density of freight
generation is closely related with the industrial structure, so the density of freight
generation is high in the heavy industry areas and low in the areas with light industrial
structure and developed high-and-new technology.
The project will primarily develop food processing and manufacturing industries, including
manufacturing of daily-use and light industrial products, such as spinning, leather
footwear, household appliances, electromechanical hardware manufacturing and home
building materials, with light manufacturing as the principal. It can be estimated that the
overall level of its density of freight generation will be about 10t/ten thousand US dollars;
with further abundance and aggregation of the park industries in the future, its density of
freight generation will show an uptrend gradually and can estimated to be 12t/ten
thousand US dollars in 2035.
Based on the correlation between economic growth and volume of transport and in
consideration of the influence of industrial structure on transportation intensity, it can be
estimated that the volume of freight of the park in 2020 and 2035 will be 0.4 million tons
and 7.2 million tons respectively. With the container cargo as 30% of the volume of freight
as per the transport form of industrial raw materials and products of the industries possibly
entered in the park, that in 2020 and 2035 will be 0.12 million tons and 2.1 million tons and
with the calculation of the average container weight of 10t/TEU and in combination with
the empty container proportion and container transportation demand of the hinterland, the
container production of the park will be 21,800 TEU and 0.3 million TEU.
The raw material of the park is introduced mainly by water transportation. The products
are most for domestic and foreign markets of Indonesia which is an island country, so
water transportation is the primary mode of transportation. It can be estimated that the
container water transportation demand for the park will account for 85% of the production,
respectively 20,000 TEU in 2020 and 0.25 million TEU in 2035.
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Table 4-13 Prediction of Container Water Transportation Demand for Special

Economic Zones
2020 2035
Year
Total developed area (km2) 1 15
Industry output (100 million US dollars) 4 62
Volume of freight (10 thousand tons) 40 720
Container transportation volume (10
12 210
thousand tons)
Container production (10 thousand TEU) 2.18 30
Container water transportation demand for
2 25
FTA (Free Trade Area) (10 thousand TEU)
(3) Throughput of international water-water transferred container
With the business development of the port and the economic development of the
hinterland in the long term, the port will provide the comprehensive transportation service
for hinterland market at the same time when it will serve the industrial park and the
international transit transportation service will be developed based on the navigation
position advantage. The container production of international water-water transfer can be
estimated to be 0.15 million TEU in 2035.
(4) Prediction of container throughput of this project
In conclusion, it can be estimated that the throughput of this project in 2020 and 2035 will
be 0.25 million TEU and 1.0 million TEU respectively, details shown as below:
Table 4-14 Prediction of Container throughput of the Port for this Project in 2020
and 2035, Unit: Ten Thousand TEU
Type 2020 2035

Container throughput of the
23 60
hinterland
Container throughput of the industrial
2 25
park
International water-water transferred
0 15
container throughput
Total 25 100
4.3.3.2 Prediction of general cargo throughput
The main general cargoes in this project are building materials. The recent general cargo
throughput is the need for the transportation produced in the construction of the Park and
the outward transport of household building materials in the Park; the long-term general
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cargo throughput is the need for outward transport of household building materials in the
Park and the transportation of household and productive building materials in the
hinterland market.
(1) Current situation of the general cargo throughput of Bitung Port
By overall analysis of the growth of general cargo throughput of Bitung Port from 2011 to
2014, the overall growth was presented in relatively fast growth state. In 2014, the general
cargo throughput of Bitung Port is 0.773 million tons, accounting for about 43.1% of cargo
throughput. From 2011 to 2014, the average annual growth rate was kept at 24.5%, which
was relatively fast.
Figure 8-2 Growth of general cargo throughput of Bitung Port from 2011 to 2014
(2) Prediction of recent throughput
The gross construction area of the Park is 388.7 hectares. The construction of warehouse,
workshop, office building and apartment will need a certain amount of building materials,
which will be transferred by water transportation to meet the market demand. In addition,
there are household building materials in the Park whose products include new building
materials, and part of the products will be outward transported by water transportation.
The predicted throughput of the recent general cargo is 0.35 million tons per year.
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Table 4-15 Construction planning of the Park
Starting
Unit Whole park Remark
area
Total m2 42,000 3,845,000 Floorage
Including: warehouse m2 0 30,000 Plot ratio of warehouse is 0.6
Commerce and trade Plot ratio of commercial and

m2 0 710,000
hall trade subzone is 1.5
Plot ration of standard

Standard workshop m2 42,000 700,000
workshop is 0.6
Plot ratio of administration

Administration building m2 0 60,000
building is 1.2
Commercial office Plot ratio of commercial office

m2 0 200,000
building building is 3.5
Plot ratio of commercial

Commercial building m2 0 745,000
building is 1.5
Plot ratio of residence

Residence apartment m2 0 960,000
apartment is 1.5
Dormitory m2 0 440,000 Plot ratio of dormitory is 1.8
(3) Prediction of long-term throughput
Indonesia is dedicated to develop the infrastructure construction. The preparation plan for
new infrastructure construction proposed by Indonesia in 2013 will cost over $ 33 billion
and will increase the demand of building material market of Indonesia. On the other hand,
Indonesia is going through the acceleration of urbanization with the short-term
urbanization rate of 44%, which will enlarge the market demand for building materials.
With the development of the infrastructure construction and urbanization in the hinterland
market in the long term, a certain amount of building materials will be needed.
On the basis of meeting the demand of the outward transport of household building
materials in the Park, the wharf of the Project will undertake a part of the building material
transportation in the hinterland market. The predicted throughput of the long-term general
cargo is 0.45 million tons per year.
4.3.3.3 Prediction of bulk cargo throughput
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The recent bulk cargo of wharf is the coal for the operation of park power plant, while
long-term bulk cargos include the coal for the park power plant and paper plant.
(1) Prediction of recent throughput
According to the planning of the park, the coal power plants will be built to provide power
for the park. Among them, the coal demand of the recently constructed 2x80MW coal-fired
units is 0.35 million tons per year. All coals required by the power plant will be handled in
the wharf of this project, so the bulk cargo throughput of the wharf will be 0.35 million tons
per year at that time.
(2) Prediction of long-term throughput
According to the planning of the park, two 2x80MW coal-fired units will be constructed in
long-term coal power plants with the coal demand of 1.4 million tons per year. All coals
required by the power plant will be handled in the wharf of this project
According to investigation and survey, some papermaking enterprises plan to invest in

factories in the Park. The raw material of coal is needed by the production and operation
of the paper plant, so demand for transferring coal will be generated with the demand of
0.25 million tons per year.
The predicted production of bulk cargo of long-term wharf i will be 2 million tons per year.
4.3.3.4 Prediction result of wharf throughput
Based on the analysis above, the prediction result of wharf throughput in the Project is as
follows:
Table 4-16 Prediction Result of Port Throughput
Short-term (2020) Long-term (2035)

General
0.35 million tons per year 0.45 million tons per year
cargo
4.3.4 Prediction result of market size
Based on the above analysis, the prediction result of market size in the Project is as
follows:
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Table 4-17 Prediction Result of Market Size of the Park
Phase 1 Whole park

Industry output in the Park $ 335-420 million $ 7.5–9 billion
GDP of the Park $ 67-84 million $ 1.5-1.75 billion
Working population in the
6-8 thousand 120-150 thousand
Park
Table 4-18 Prediction Result of the Port Throughput
Short-term (as of 2020) Long-term (as of 2035)

General
0.35 million tons per year 0.45 million tons per year
cargo
Page 89
Chapter V Engineering and Technology Programme
This chapter only extracts main conclusions. See the appendix II for the technical scheme
on engineering.
5.1 Construction scale
According to the conclusion of market analysis, the construction scale of the project is as
follows:
(1) Port area: three 50,000DWT container terminals and one 50,000DWT multi-purpose
wharf. The total length of quay line is 1,328 meters and the port area is 73.4
hectares. There are one 50,000DWT container terminal and one 50,000DWT
multi-purpose wharf in the initial project. The total length of the quay line is 680
meters and the port area is 37.5 hectares. There will be two additional 50,000DWT
container terminals in the Phase-IV of the Project.
(2) Logistics warehousing area: land area covers 45 hectares, belongs to the Phase-II
construction.
(3) Foods processing area: land area covers 131 hectares, in which 91 hectares is the
starting construction area and 40 hectares is the Phase-II construction.
(4) Daily-use and light industrial products manufacturing area: land area covers
679 hectares, belongs to the Phase-II and III construction.
(5) Electromechanical hardware manufacturing area: land area covers 319 hectares,
belongs to the Phase-IV construction.
(6) Home building materials markets: land area covers 326 hectares, belongs to the
Phase-II construction.
(7) Commerce and trade logistics area: land area covers 134 hectares, belongs to the
Phase-III construction.
(8) Comprehensive service area: land area covers 225 hectares, belongs to the third
and Phase-IV construction.
(9) Ship building and repairing area: land area covers 10.8 hectares, belongs to the
Phase- III construction.
5.2 Overall layout
Bitung and northern Minahasa special economic zone locates in the southwest of Bitung
and southeast of northern Minahasa, about 9km eastward away from Bitung port and
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about 30 km westward away from its provincial capital Manado, which faces the sea in the
front with mountains behind. Its land sources are sufficient and the total land area is
approximately 2000 hectares.
5.2.1 Function structure
“One Center; One Axis; Three Corridors and Multi-Groups” planning structure of
the special economic zone project in Bitung and Northern Minahasa
z One center: the service center is located in the central region of the special
economic zone, with functions including commerce and trade logistics, business
office, residential supporting and living supporting, etc.
z One axis: along with the east-west main road of the central region in the SEZ, it
forms an east-west ecological landscape axis with intergrate the water system and
park greenbelts.
z Three corridors: three ecological corridors connect with the region’s northern
mountains and the region’s southern sea areas, which have the landscapes and
rainwater storage functions. It will be developed into ecological waterfront center with
combining the functions of business, entertainment and residential etc., in the
regional central corridor.
z Multi-Groups: the multi-purpose groups includes port area, ship building and
repairing area, commercial business logistics area, foods processing area, daily-use
and light industrial products manufacturing area, electromechanical hardware
manufacturing area, home building materials area, comprehensive service area, etc.
and it shall be provided multiple supporting neighborhood centers according to a
certain service radius.
(1) Port area: the new port is located in the south-east of the economic zone, with a land
area of 73 hectares. Two 50,000 DWT berths shall be constructed in the phase 1;
another two 50,000 DWT container berths shall be expanded in the future phase.
(2) Ship building and repairing area: it shall be planned adjoining port’s northeast
area, with a land area of 10.8 hectares.
(3) Logistics warehouse area: it is located in the southeast of the special economic
zone adjoining port, covers 45 hectares.
(4) Food processing area: it is located in the east of economic zone, closing to the port
and modern urban function area, it shall be the major development industry area in
phase 1, with a land area of 131 hectares.
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(5) Daily-use and light industrial products manufacturing area: both daily–use and
light industrial products manufacturing areas are located in the west and southeast of
the SEZ. It will be the key development industry of the SEZ.
(6) Electromechanical hardware manufacturing area: it is located in the southwest

of the SEZ, with a land area of 319 hectares.
(7) Home building materials area: it is located in the east of the economic zone, with a
land area of 326 hectares.
(8) Commerce and trade logistics area: it is located in the west of the SEZ,, layout
shall be combining with the exit the west-side of Manado-Bitung highway in the
economic zone, developing appropriate residential and supporting functions that
service to the current villages, with a land area of 134 hectares.
(9) Comprehensive service area: it is located in the central region of the SEZ.,It will be
the core services district in the whole SEZ with functions including commerce and
trade logistics, business office, residential supporting, living supporting, etc. The
land area is 225 hectares.
5.2.2 Construction of the starting areas in the near future (2016~2018)
Starting area belongs to the first-stage project, that the port and food manufacturing area
is the main focus on constructions functions including harbor handling (construct 2
container berths in the recent phase), fish processing, agricultural and sideline production,
municipal facilities (fire station), etc. the total land area in the first stage covers 128.61
hectares (industrial area and port area), of which port is 37.4 hectares, industrial area is
69.7 hectares, roads is 12.1 hectares and other construction land is 9.41 hectares. And
the length of the main road is 2,417m, and the length of the secondary main road is
2,879m.
Table 5-1 Table of the Stage-I Planning Land Index

Land-use planning summary sheet
Area Percentage
No. Land code Land name
(ha) (%)
M Industrial land 70.30
1 Industrial land of the first 77.1
Among M1 70.30
category
Roads and transportation
S 12.10
2 facilities land 13.3
Among S1 Urban roads land 12.10
G Greenbelt and square land 5.45
3 6.0
G2 Green buffer 5.45
E Non-construction land 3.37
4 3.7
Among E1 Waters 3.37
Total land of the planning area 91.21
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Figure 5-1 Phase-I Development and Construction Planning Map

5.2.3 Phase-II project (2019~2025)
The major constructions in the Phase-II project are daily-use and light industrial products
manufacturing industries which mainly give priority to small household appliances, paper
products and textile, and furniture making and new building materials, as well as
warehouse logistics areas construction and relevant public service, municipal facilities.
Construction land area in the Phase-II covers 658.55 hectares, including the industrial
land of 399.9 hectares, warehouse land of 38.73 hectares, commercial land of 6.17
hectares, residential land of 18.56 hectares, and public services land of 16.48 hectares
and other construction land of 178.71 hectares.
5.2.4 Phase-III project (2026~2030)
It shall continue to develop manufacturing industry of daily-use and light industrial

products, and expand port area construction, with an emphasis on developing commerce
and trade logistics, and ship building and repairing function. At the same time, it shall
develop northern area of the central service region. Construction land area in the
Phase-III covers 844.19 hectares, including the industrial land of 425.63 hectares,
warehouse land of 13.11 hectares, port area land of 35.7 hectares, commercial business
land of 74.97 hectares, residential land of 78.37 hectares, public management and public
services land of 4.86 hectares, and other construction land of 211.55 hectares.
5.2.5 Phase-IV project (2031~2035)
The Phase-IV project shall focus on the development of electromechanical hardware
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manufacturing industry such as small mechanical and electrical devices, hardware spare
parts, and light-duty transportation equipment, and shall improve the construction of
central service area in the special economic zone. The newly increased land area in the
Phase-IV covers 59.15 hectares, including the industrial land of 263.31 hectares,
commercial land of 22.48 hectares, residential land of 34.18 hectares, public management
and public services land of 8.32 hectares and other construction land of 180.86 hectares.
5.3 Technical scheme on engineering
5.3.1 Construction conditions
Wind regime: During the rainy season from October to the April of the next year, the wind
in Bitung is mainly westerly and northwesterly, and during the summer from June to
September, the wind here is mainly easterly.
Wave: According to the projections of wind speed, the height of the 50-year return period
wave in the Project area is 3.0 meters.
Tidal current: The current velocity designed in Project area is about 0.5m/s, with its current
direction parallel to the coast.
Outsourcing condition: The project is adjacent to the main passageway of Bitung in its
north, with some residential districts in its west where is about 5km away from its
downtown.
The natural condition of the Project area is superior, with light wind, wavelet and neap tidal
current, preferable water depth condition and geological condition as well as such good
supporting conditions as road, water and electricity.
5.3.2 Construction Necessity
5.3.3General layout of the Port area
There are three 50,000DWT container terminals and one 50,000DWT multi-purpose
terminal at the new port, where the total length of the quayline is 1328m and the land area
is about 73.4ha. Among which, the initial project includes one 50,000DWT container berth
and one 50,000DWT multi-purpose berth. The total length of the quayline is 680m and the
land area is about 37.5ha. Marine structure is designed according to 100,000DWT.
(1) Wharf layout
The wharf apron of this port is located in -5~-7m depth contour, paralleled with the natural
coastline. The azaimuth of wharf apron is approximate 18°~198°.
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(2) Water layout
The water area contains berthing area and turning basin area. Berthing area is located in
front of the wharf, arranged as trapezoid, the width of berthing is 65m. After fully
considering the cost of engineering and development in the future, the bottom elevation is
taken as-14.5m CD at present and -15.7m CD is taken as the reserved depth for future
development and marine structure.
Turning basin is located in front of no.2 berth, and the diameter is 586m. The harbor basin
width in front of no.1 berth is 0.8 times of ship length. The turning basin and approach
channel are connected by interconnecting water area. The bottom level of turning basin is
taken as same -14.5m same with the channel.
(3) Land area layout
The total area of land area is 73.4 hectares, and the total length of berths is 1328m. 903m
of revetment will be built at east and west of the land area in the port.
1# multi-purpose berth will handle container, bulk cargo and general cargo in the near
future, and 2#-4# berths will be professional container terminals. The width of apron
working area of the berths is unified set as 70m. Behind the berth, 122,180m2 loaded
container yard, 5,471m2 reefer container yard, 33.029 m2 empty container yard will be
arranged and 14,325 m2 cargo yard will locate in the northwest of the yard area. In the
rear of the yard, life and production auxiliary area will be set up to meet the requirments of
the port operation, which contains administration building and dinning hall, rest and locker
house, parking area, basketball field and so on for life, and custom inspection area,
workshop and material storage, maintainence, pump station, domestic sewage and oil
water treatment station, substation and so on for production. Office area and auxiliary
building area will be managed independently.
Two gate complexes are set in the port, coming in the north and going out in the south.
Two gates which are used for manage office area, auxiliary building area and area out of
the port will be built in the office area.
5.3.4 Handling process
The handling process plan for containers is set as: the quayside container gantry crane
and the multi-purpose crane shall be used for ship loading and unloading operation of
containers. The container tractor with semi-trailer shall be used in horizontal
transportation. RTGs is taken for handling operations in loaded container yards and
reefer container yards. Containers can be stacked with 5 layers in loaded container yards,
and containers can be stacked with 4 layers in reefer container yards. In empty container
yards, the empty container handler shall be used for handling operations, and containers
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can be stacked with 7 layers.
Fork Lift shall be used for the handling operation in CFS.
The handling process plan for general cargos is set as: the multi-purpose crane shall be
used for ship loading and unloading operation of general cargos. Trailer with flat car shall
be used for horizontal transportation. In the general cargo stackyard, rubber-tired cranes
and fork lift trucks shall be used for handling operations.
The handling function for bulk cargos will be added in the master plan. The handling
process plan for bulk cargos is set as: the multi-purpose crane (with grab)and the portal
crane (with grab) shall be used for ship loading and unloading operation of bulk cargos.
The dump truck shall be used for horizontal transportation. In the stackyard, mobile
conveyors and front loaders shall be used for handling operations.
5.3.5 Marine structure
(1) Structure scheme of the Port
The pile platform is about 38m wide. Steel tubular piles of Φ1000 mm are provided as pile
foundation, the pile space along the apron is 8m. Each row includes nine steel tubular
piles. The precasted simply supported slab is adopted to connect the quay platform and
rear land reclamation area.
The 1500kN bollards and SUC1450 rubber Fender (two drum) are assembled on quay
wall. Two rubber ladders would be assembled along the cope line.
(2)The revetment behind quay platform
Behind the quay platform, rock slope protection of rubble-mound structure was adopted.
The soft soil layer would be dredged and replaced by 10-100Kg rock. The slope of
Chinesepode on rock core is 1:1.5, under the rock armour is 100~200 kg rock layer, The
Chinesepode weight is 1.5t. under -6.6m CD, rock armour is adopted. The slope of rock
armour on rock core is 1:2. The rock armour weight is 200~300kg. The armour rock and
rock layer are also adopted to protect basin bottom from scouring. Between backfill and
rock core there are rubble stone layer, inverted filter. The retaining wall is adopted on the
top of rock core for soil retaining.
(3) Revetment
The typical section of revetment is slope structure constructed to protect the land
reclamation. 200~300kg armour rock is proposed with thickness of 0.9m and the slope of
the revetment is 1:2.5. The underlayer rock is rubble stone layer together with inverted
filter. The retaining wall is adopted on the top for soil retaining.
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5.3.6 Municipal road
The trunk roads are divided into arterial roads and secondary trunk road. The arterial
roads are the road network backbone which connecting the districts of the development
zone with traffic function for two-way six-lane, planning red line width of 32m and 27m.
The secondary trunk roads, consisting of the main road network with arterial roads of the
region, playing the role of distributing traffic, both services, are road width for two-way
two-lane, planning red line width of 22m.
The branch roads are connecting lines to serve the trunk road, the secondary trunk roads
to the internal roads for the logistics and warehousing zone. And they are two-way
two-lane roads with the red line width of 12m to solve local area traffic with
services-based, contacting out around the block, and having certain parking.
The Park is divided into starting area and developing area, and the road components are
shown as follows:
Table 5-2 List of Road Components
Road type Design speed Road width (m) Overall length (m)
(km/h)
Starting Area Developing Area
Trunk Road 60 32 2,417 33,736
60 27 12,157
Minor Road 40 22 2,881 36,610
Road
30 12 16,055
Bypass
5.3.7 Ground treatment
(1) Port area
Since the layer of loose sand, the main method of ground treatment can be dynamic
compaction and deep vibro-compaction (or vibro-compozer with sand pile).
By contrast : The vibro-compozer with sand pile will cost highly , not economic;
The dynamic compaction will make a large impact load, which will influent the slope
stability and hydraulic structure , and the depth that need treated for this project is
generally larger than 15m, the dynamic compaction will be not suitable for this condition;
The Vibroflotation method is reinforcing effect on deep sand, and less influence on slope
stability and hydraulic structure.
To sum up, the vibroflotation method is recommended for the foundation treatment.
(2) Special economic zone
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The special economic zone with thin soil layer, roller compaction directly to the design
elevation.
(3)The Vibroflotation Method
After backfilling the site to design elevation, 75 kw vibratory probe can be selected which
can be adjusted during in-situ trial construction. The grid of vibration points shall be
equilateral triangle and the spacing shall be determined by in-situ trial test. The
recommended trial spaces are 2.5m to 3.0m.
After vibroflotation compaction the surface of the sand is still relatively loose, Using the
Vibratory roller with the exciting force not less than 400 kN rolling 6 ~ 8 times,then and
leveling to the design elevation.
Before vibroflotation treatment with large area, a pilot test area of about 50 m x 50 m is
needed to decorate in the typical area in order to determine the construction parameters.
5.3.8 Road and yard pavement
(1) Road
The roadway mainly consists of access road, common road and RTG turning lane. Access
road is 28m wide, common road width is 24m, the RTG turning lane is set considering the
empty load RTGC will operate on those roads, the width of turning lane is 24m. All the
roads set two-way drainage slope and the cross slope will be 0.5%~1%. Comprehensive
considering the load and foundation condition, cast-in-situ concrete pavement is adopted
in this area.
(2) Container yards
1) Loaded Container Yard, Reefer Container Yard
Considering the 5-high stacking laden container load and RTG will work in this area, The
Interlock block pavement is adopted in stacking area. And the container trailer lane will
apply the Cast-in-situ concrete pavement.
2) Bulk yard
The general cargo yard distributed load is 60 KN/m2, operation with 50t tire crane; The
distributed load of bulk cargo yard is taken as 100 KN/m2; Both the general cargo yard
and bulk yard will be used as heavy container yard in the forward, therefore the same
interlock block pavement structure is adopted as the loaded container yard.
3) Empty Container Yard
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Considering 7-high stacking empty container load, operation with, Interlocking concrete
blocks pavement is adopted.
4) Custom Inspection Facility
According to the handling process designs, reach stacker will be used for handling of the
custom inspection areas. Similar to the pavements for laden container yards, it is
proposed to adopt interlocking concrete blocks pavements.
5) Quay Apron Area
According to the handling process designs, reach stacker will be used for handling of the
quay apron areas. It is proposed to adopt interlocking concrete blocks pavements.
(3)RTG runways
Considering operation requirement of RTG on the stability and flatness, reinforced

concrete runway beam is recommended with its strong anti-pressure ability. Full-loaded
container trailers and full-loaded container reach stacker are mainly considered.
Cast-in-situ reinforced concrete beams are adopted for the RTGC runways.
(4)Other areas
1) RTG Maintenance Area
The RTG maintenance areas is used for normal maintenance and service of the RTG.
There will be pollutants such as oil and waste water generated. In the design of the
pavement in these areas, cast-in-situ concrete pavement is adopted from a point of easy
cleaning and waste water collection and discharging.
2) Area between RTG Runway Beams:
Applying Cast-in-situ concrete pavement.
The project also include other design contents such as port buildings, power supply,
communication, navigation, water supply and drainage, fire fighting and fuel gas. More
detailed information is in the attachment Technical Scheme on Engineering.
5.4 Environmental protection measures
5.4.1 Planning environmental impact analysis
According to requirements of planning environmental impact assessment, objectively

recognizing and screening environment problems in different construction phases is a
basis of completing environmental impact assessment and provides important scientific
basis for environment pollution prevention and ecological environmental protection after
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the plan implemented in the planning area, combining recycling economy development
ideas.
Main environmental factors in the assessed region include those resulted from newly
implemented development activities and in a word, they are typical environment problems
resulted from urbanization and industrialization processes.
5.4.2 Environment impact analysis in development process
(1) Water and soil erosion
Original vegetation within construction range needs to be cleared and topographical

reform and excavation and filling of earthwork needs to be conducted in development
process after the plan implemented in the planning area. Destroying the original
vegetation will inevitably lead to water and soil erosion and then influence surroundings.
(2) Water pollution source
After the plan implemented, waste water is from constructors’ sanitary sewage in
development process and industrial wastewater in work progress, which includes running,
emitting, dropping and leaking of sump oil of construction machinery, waste water
generated when outdoor machinery is washed by rainwater, pollutants generated when
building materials and garbage in air storage are washed or eluviated by rainwater and
polluted surface runoff formed when rainwater washes the ground. The waster will have a
negative effect on water environment around if mishandled.
(3) Solid waste pollution
Solid waste in development process mainly includes spoil generated by excavation,

construction waste and constructors’ domestic waste. The solid waste will not only pollute
environment but also disfigure the landscape if not disposed in time.
(4) Atmospheric environmental impact
Factors that cause atmospheric pollution in development process mainly are raise dust of
construction, tail gas from transport vehicles and construction machinery and exhaust gas
from shelters. Dusts of construction operations and tail gas from vehicles have a certain
effect on air quality of environment around construction sites, and especially in
construction peak, dusts and floating dust are hard to diffuse in a short time so part of
atmosphere can be polluted. The influence scope is small and the influence time is short
and the influence disappears automatically when construction finished. But construction
spoils need to be disposed in time and construction sites needs to be cleared in order not
to cause long-term impact.
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(5) Sound environmental impact
Effects development process has on sound environment are mainly from traffic noise
generated by transport vehicles and construction noise generated by construction
machinery, which have a certain effect on housing estates around construction region.
Therefore, in development process, construction time and procedures need to be
arranged reasonably and low noise equipment needs to be applied in order to reduce
effects of construction noise.
(6) Ecological impact
In development process, ability of greenbelt regulating and controlling environment quality

varies from quantity of greenbelt and space distribution in regional environment, and
engineering construction changes production capacity of ground. Original rugged
landform and growing vegetation become artificial hard bottom landform and artificial
afforested vegetation after being molded.
(7) Landscape impact
The current landscape in the planning area is mainly ecological one such as developed
urban built-up area and other water area and plowland. After the planning area is built up,
partial region will turn into industrial estate. The big change takes place in ecological
landscape.
5.4.3 Environmental impact analysis in the operational period
(1) Analysis on water environmental impact
After the completion of the construction of the planning area, the water environmental
impact in the operational period consists of two aspects: one is the impact on water
environment from the industrial waste water discharge in the planning area while the other
is the possible impact on water environment from domestic waste water discharge caused
by the increase in population.
(2) Analysis on atmospheric environmental impact factors
After the completion of the construction of the planning area, atmospheric environmental
impact factors in the operational period mainly consist of industrial waste gas, waste gas
from coal-fired heat-supply boiler (SO2, NO2 and smoke, etc.), automobile exhaust (NOX,
CO, PM 10, etc.) and domestic gas exhaust and so on.
(3) Factors of sound environmental impact
① Noise from machinery and equipment of industrial enterprises
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② Noise from vehicles
(4) Solid waste impact
After the completion of the construction of the planning area, the solid waste includes
industrial solid waste and domestic waste, most of which will be utilized comprehensively
in circulation. Solid waste needs to be disposed in time to prevent pollution of environment
or destruction of landscape. There may be some hazardous solid waste among the
industrial solid waste.
(5) Factors of ecological impact
① Massive energy flows and material flows formed in the planning area
② Changes in landscapes; micro-climate change caused by the underlying surface

resulted from impervious levels turned from a large number of water levels; heat and
pollution island effects;
③ Changes in conditions of runoff and concentration; and changes in surface flow

coefficient and in pollution;
④ Changes from natural ecological environment to artificial ecological environment

caused by vegetation changes;.
⑤ Changes in land utilization ratio;
⑥ Changes in species and populations of creatures and the structure of natural

landscapes caused by ecological environment change;
⑦ The habitats of aquatic creatures in local waters affected by industrial waste water.
(6) Factors of social and economic impact
① After the completion of the construction of the planning area, it will increase
employment and promote industrialization and urbanization.
② The level of the social and economic development and the overall strength in the
planning area will be improved
The level of property and of sustainable development in the planning area will be raised.
5.4.4 Mitigation measures to environmental impact
(1) Atmospheric environmental protection measures
1) Establish reasonable energy policy
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Energy consumption is the main factor that leads to atmospheric pollution. Energy
utilization pattern has a direct impact on the air pollutant discharge and then on
atmospheric environmental quality. In the perspective to improve atmospheric
environmental quality, to promote and develop clean industrial energy and to develop on
the basis of electrification, aerification and fuelization are important measures to been
taken to control atmospheric pollution and protect environment.
In order to protect the atmospheric environment in the industrial park, it is suggest that
clean oil or other cleaner energy should be introduced as the auxiliary energy in the
planning area as much as possible and that the use of severe pollutive fuels such as coal
should be restrictively limited so as to reduce atmospheric pollution.
2) Take effective control measures
Among the air pollution suspends a large amount of particulate matter, which will reduce
atmospheric environmental quality. Therefore, much importance should be attached on
reduction of particulate matter discharge. Many technologies and methods can be applied
to control particulate matter discharge. At present, the commonly used equipment
includes gravity settling device, washery dust remover, filtration dust remover, cyclone
dust collector, electrostatic dust remover and sound wave dust remover. If economic
capability allowed, multistage combination may be formed by introducing different dust
removers in order to reach optimum dust-removal efficiency. Gaseous pollutant may be
controlled by introducing methods such as combustion, assimilation, absorption and
reclamation. The concrete measures to introduce should be confirmed in accordance with
nature of contaminant and economic capability.
3) Plant purification
The green plant, in addition to beautifying the environment, adjusting air temperature,
humidity and urban micro-climate, is the factory to absorb CO2 and produce O2, and has
multiple functions to absorb harmful gas, dust, to sterilize, to reduce noise and to monitor
atmospheric pollution.
4) Cleaner production
Environmental pollution, including atmospheric environmental pollution, is essentially

caused by irrational use or waste of resources. The irrational manufacturing technique is
the main factor of environmental pollution, therefore, the basic measures to reduce
environmental pollution include to reform technology, to research and develop and to
introduce non-pollution or less-pollution techniques of cleaner production. Cleaner
production audit on the enterprises that are about to enter the park should be reinforced
for the purpose that these enterprises can meet the cleaner production requirements of
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the industry.
5) To implement the control of total amount of pollutant
In order to control the total amount of primary pollution source, measures as following
should be taken:
① to reasonably distribute reduction targets, to verify the total discharge amount of

main contaminant of major pollution source and to implement a pollutant discharge
permit system;
② to control the concentration and rate of pollutant discharge in chimney and to take
reasonably advantage of atmospheric environmental capacity.
6) Other mitigation measures
Mainly include control measures of construction dust emission, other dust emission
control, control measures of lampblack, control of automotive exhaust and control
measures of stench of sewage disposal plant.
(2) Water environmental protection measures
The water environment in the industrial park is an important part of ecological landscape.
All industrial waste water and domestic waste water should be treated with COD to reach
the emission standard of surface water. Water environmental protection measures
include:
1) To save water and reduce consumption and to reduce discharge capacity
The enterprises that are about to enter the park should attach importance on development
of non-water or less-water industry and technology, and of recycle-used water technology,
multiple-used water technology and reclaimed water technology. The consumption of
fresh water of each enterprise should reach the advanced level among domestic industry.
Water-saving measures as following should be taken:
① To introduce water-saving valves or devices. To select appropriate targets of pump

model, pump head and pressure when it runs, and to select those valves and
devices within an arrange of quota as much as possible, and to introduce frequency
control devices as much as possible in order to reach optimum water-saving
efficiency.
② To reinforce water-supplying management and to avoid “water waste”. In addition, to

reinforce management on water supply network and avoid water from running,
emitting, dripping and leaking, and to avoid water waste caused by human factors.
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③ To use reclaimed water as water for afforestation and introduce uniformly-sprayed

and water-saving sprayer.
2) To introduce appropriate projects into the park and to promote leaner production
technology.
Considering the state of pollution discharge, industrial pollution is the uppermost pollutant
resource. The foothold of industrial pollution prevention and treatment should be
transferred from end treatment which focuses on purification to head control which
focuses on prevention. To introduce appropriate projects in accordance with state
industrial policies. To positively develop high-tech industry which is of little harm to water
environment and low water consumption. To rely on technological support, improve
production technology, and fulfill water-saving and pollution-reduction.
3) To implement control of total pollution
In order to control the total discharge amount of main pollutant, measures as following
should be taken:
① To reasonably distribute reduction targets, to verify the total discharge amount of

main pollutant of major pollution source and to implement emission permits system;
② In the annual plan of environmental protection, the target to the decline rate of
discharge capacity per 10,000 RMB industrial output should be issued to major
pollution source in order to reinforce them to take prevention measures and to
reduce the discharge amount of main pollutant.
4) Other mitigation measures
Mainly include to refuse to introduce those enterprises that would produce the first
category of contaminant, to strengthen water pollution control; to standardize the
management on effluent segregation system and sewage discharge system; to control the
overland runoff in the developing area; to strictly implement “three - simultaneity” and
install on-line supervision system; to centrally treat waste water; to avoid as possible
accidental waste water discharge, and so on.
(3) Environmental protection measures for solid waste
As for all the solid waste in the planning area, on the premise of cyclic utilization, the
unavailable waste should be treated at 100%.
The treatment project: three solid waste disposal systems including waste collection
system, waste transport system and waste disposal system should be implemented and
gradually improved in the planning area. The whole process of solid waste from
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production to harmless treatment in the planning area should be controlled for the purpose
that no environmental pollution is to be produced in the process and that the planning
target of solid waste disposal is to be implemented.
1) Solid waste collection system
The waste should be collected at gathered places and centrally harmlessly treated
① Domestic waste collection
All waste in the planning area should be bagged by classification, and each enterprise
should arrange specific domestic waste site and implement regular sterilization and
disinfection. The management and service center shall arrange appropriate amount of
dustbin in densely inhabited areas as needed and arrange some waste collecting centers
to centrally collect commercial waste and domestic waste.
② General industrial waste collection
General industrial solid waste should be separately collected by enterprises according to

the classification and be recycled as possible. The enterprises producing general
industrial solid waste must keep solid waste in storage, construct the disposal site and
manage operation in accordance with local regulations.
③ Hazardous waste collection
It is strictly forbidden to pile up and diffuse hazardous waste. And the volume of
hazardous solid waste should be reduced as much as possible. The enterprises
producing hazardous waste should take measures to prevent expansion, run-off and
leakage in the temporary disposal site. The specialized persons are needed to separately
collect and store the waste.
2) Solid waste transport system
Domestic, industrial and hazardous waste should be transported by specialized solid

waste transport center. Diminutive waste transfer station should be arranged in the
planning area. And waste should be transported by the transport center to the waste
disposal site.
3) Treatment project
① Domestic waste treatment
Waste should be treated at waste sanitary landfill site.
② General industrial solid waste treatment
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General industrial solid waste should be treated at waste sanitary landfill site after weight
reduction treatment, remnant treatment and harmless treatment.
Measures such as weight reduction treatment, remnant treatment and harmless treatment
should be taken.
③ Hazardous waste treatment
Poisonous and harmful solid waste, with great hazard and difficulty in recycling, should be
treated as the key point of solid waste control. Management on poisonous and harmful
solid waste should be strengthened. The systems of poisonous and harmful solid waste
discharge declaration and of pollution charges should be thoroughly implemented.
Traceable accounts and formalities should be produced in processes of waste generation,
use, collection, transportation, storage and disposal and should be supervised and
managed by environmental protection administration. Hazardous waste should be stored
in accordance with relevant regulations. Specific storage site should be arranged.
Measures for to prevention of expansion, run-off and leakage should be taken. It is strictly
forbidden to pile up hazardous waste with non-harmful solid waste.
Hazardous waste, after being pre-treated by enterprises in the planning area, should be
collected by qualified institutions with License for Hazardous Waste and be transported to
poisonous and harmful solid waste disposal center by specific transport tools and be
treated by secure landfill or incineration disposal. Medical waste, as one of hazardous
wastes, should be centrally collected and treated at poisonous and harmful solid waste
disposal center.
(4) Sound environment protection measures
1) Construction noise control measures
① Construction unit shall make an “environmental protection plan during construction

period” including noise control measures, and shall be filed to local competent
administrative department of environmental protection.
② Put up an “Advance Notice” in the residential area near the construction site to
explain reasons and make an apology for understanding.
③ Adopt the construction machinery equipment of low noise as possible.
④ Diesel generating set is prohibited to be used when mains electricity is supplied.
⑤ For fixed equipment with higher noise value, sound insulation or barrier shall be
constructed.
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⑥ Construction equipment with strong noise are prohibited to be used before 6 a.m.,
during 12 to 14 at noon, and after 10 p.m.
2) Industrial noise control measures
It is recommended for industrial enterprises in planning area to actively take noise control
measures form the aspects of sound absorption, sound insulation, sound elimination and
vibration reduction.
① Equipment selection
Select good-quality and low-noise production equipment to reduce noise source intensity.
② Sound absorption
Porous sound absorbing materials (or structures) of absorption decoration are lined or
hung in the plant. When sound wave sends to the surface of sound absorbing materials, it
will enter into the hole smoothly to generate vibration of the air and material fine fiber in
the hole. The sound energy will be converted to heat energy by friction and viscosity
resistance and be consumed. In this way the noise of the plant will be reduced. The
common sound absorbing materials are organic cotton, mineral cotton, cotton wool, cane
fiber board, foamed plastic, micro-pore acoustic tile, etc. The noise reduction of sound
absorption measure normally is 4 ~ 10dB.
③ Sound insulation
Sound insulation means cutting off the noise transmission path by using sound insulation
materials or components to prevent it from entering into noise-receiving area, which
reduces the noise in noise-receiving area. Sound insulation is one of the important
measures of noise control. The common sound insulation forms are acoustic room,
acoustic enclosure, acoustic shielding, etc.
④ Sound elimination
Sound elimination is a common measure of pneumatic noise control by installing muffler in

the pipeline or at inlet or outlet. The form of mufflers is various. The more common forms
are dissipative muffler, reactive muffler, impedance composite muffler, etc.
⑤ Vibration reduction
After the vibration generated by the equipment operation is transmitted to the base, it will
be spread all around along the building structure from the equipment base and generates
noise.
The basic approach for vibration reduction is avoiding rigid connection. For example, the
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noise generated by the equipment vibration can be reduced by installing spring or rubber
shock absorber between equipment and base for eliminating the rigid connection between
them. Eliminate the rigid connection among pipelines can reduce the noise transmission
along the pipeline. For examples, the canvas joint connection between inlet/outlet of
draught fan and air ducts and the flexible synthetic rubber joint connection between
inlet/outlet of water pump and pipeline can reduce the noise transmission along the
pipeline. Moreover, take corresponding measures at the elevator and through-wall points
of pipelines such as air ducts and water pipes to prevent the vibration transmission along
the pipeline.
3) Traffic noise control measures
Driving motor vehicles shall be equipped with eligible horns. The noise of whole vehicle
shall not over the vehicle noise emission standards. Strictly control tractor’s transportation
operation in the park. The installation and usage of alarm sirens of special vehicles such
as fire engines and engineering rescue vehicles shall comply with the regulations of public
security bureau. When performing any urgent task or in the sections where prohibit using
alarm sirens, the vehicles shall not use alarm sirens. The vehicles shall control the volume
when use loudspeaker at transport hub such as station to reduce the noise influence on
surroundings. Do road greening to reduce traffic noise by the scattering and absorption
function of greenbelt and to reach the purpose of blocking out and reducing noise.
4) Community noise control
High power loudspeakers are prohibited in public area. The volume of required sound
system shall be controlled to reduce or eliminate its effect on environment, to avoid the
situation of noise interfering with normal work environment and to reduce its influence
degree on surrounding acoustic environment sensitive spots.
5.5 Investment estimation
Investment estimation is divided into two parts: Port and Special Economic Zone. Both
have two Phased construction planning（initial and long-term ）.
Cost estimates for port contains: Dredging, Land Reclamation, Ground Treatment, Marine
Structure, Handling Process, Road & Yard, Civil Works, Water supply & Firefighting
System, Drainage & Environmental Protection, Power Supply & Lighting System,
Communication System, Controlling System, Greening project, Navigation System,
Temporary Works, Mobilisation & Demobilisation and Other related fees.
Cost estimates for Special economic zone contains: Dredging, Land Reclamation, Ground
Treatment, Municipal road, Civil Works（include indoor supporting engineering）,Water
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Supply & Drainage, Firefighting System, Environmental Protection, Power Supply &
Lighting System, Gas engineering, Communication System, Greening project, Temporary
Works, Mobilisation & Demobilisation and Other related fees.
Table 5-3 Total Investment Summary Sheet
Summary of total Cost
Item Unit Qty Total (US$)
New port Phase 1 length of berth/number 680/2 500,000,000
Long-term length of berth/number 648/2 600,000,000
Special Phase 1 ha 91.20 200,000,000

economic
zone Long-term ha 1908.80 2,200,000,000
Power Phase 1 Item 1 350,000,000

plant
Long-term - - 250,000,000
Total 4,100,000,000
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Chapter VI Business Model
6.1 Cooperation contents
The project will be developed by CCCC together with North Sulawesi government. The
specific contents of the cooperation include 2 parts: Industrial Park and Port. Industrial
Park part includes first-level, partial second-level land development, and later operation
service. Port part includes the construction and operation.
Table 6-1 Cooperation Contents
Cooperation contents Remark

Land leveling, infrastructure construction,
First-level land development
etc.
Industrial
Park Second-level land development Partial industrial building construction
Park operation
3 container terminals of 50,000DWT and 1
Port construction
Port multi-purpose terminal of 50,000DWT
Port operation
6.2 Development and operation models
6.2.1 Industrial Park
Adopting concession model.
North Sulawesi government shall provide the land usage right and CCCC shall be
responsible for the land development, public infrastructure construction in the park.
CCCC shall be liable for investment, financing and construction; North Sulawesi
government shall be liable for land acquisition and demolition and policy support.
CCCC shall hold all stock rights of company in Industrial park. North Sulawesi government
provides land free of charge.
The park shall be developed and operated by CCCC itself or together with specialized
park operator consistent with the special economic zone planning selected by CCCC.
6.2.2 Port
Port part shall be invested and developed by CCCC together with North Sulawesi
government by adopting “SOT model”, namely “Supply the equipment, Operate and
Transfer”. North Sulawesi government shall be liable for financing of the main civil work of
the new port . CCCC shall be liable for port handling equipment. CCCC shall acquire
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port concession by paying concession fee to North Sulawesi government and obtain the
corresponding business income of the port; on the expiry of the project concession, CCCC
shall transfer the ownership of the port to North Sulawesi government for free or renew the
contract. North Sulawesi government shall take back the principal investment and gain
part profit of port by collecting concession fee from CCCC annually.
6.2.3 Construction model
CCCC shall be liable for the constructions of the SEZ with EPC model.
6.3 Profit model
The project profit sources include 2 parts: Industrial park and port.
The Industrial park part includes sale/rent income of land, sale/rent income of standard
factory buildings, and operation management income, etc. Most of industrial parks in
China are governmental actions. Its economic and social benefit returns mainly reflect on
revenue and increase of employment. However, based on recent feedback of
investigation and survey, most of specialized parks in China are required other
commercial project binding or direct subsidy, together with flexible policies to maintain
survive and obtain return.
The port part includes port handling income, port charge, terminal charge, storage charge,
etc. On the premise of the port reaches the predicted throughput, the port can realize
self-survival and bring economic benefits.
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Chapter VII Investment Benefit Analysis
7.1 Evaluation basic
For CCCC, the investment includes two parts: the handling equipment in port and the
industrial park. The phased implementation shall be divided into the 4 stages. The SEZ
will be constructed following phased plan. The total area of phase I is 128.61 hectares,
including two 50,000DWT berths. The total area of phase II is 658.55 hectares. The total
area of phase III is 658.55 hectares. The total area of phase IV is 509.15 hectares,
including two 50,000DWT berths. For North Sulawesi government, the investment is the
main civil works of the new port.
7.2 Basic assumption
(1) All the Benefit Analysis shall be based on the business model shown in chapter VI.
(2)The throughput of port reaches the predicted value.
(3) The calculation period of the project is 35 years.
(4) The enterprise income tax rate is 10%, the land &building tax rate is 0.1%.
(5) For CCCC,70% of the construction investment applies for loan of China commercial
bank (loan interest is 5.65%), the rest 30% and the circulating funds are inputted in capital
fund .For North Sulawesi government,95% of the construction investment applies for loan
of China government(loan interest is 2%).
(6)The charging standard of port is based on the current charging standard of BITUNG,
and assuming the price will increases 10% every five years.
(7)The revenue of industrial park, referencing the sale price of land and buildings in
Jakarta and Java island in 2013. Assuming the price will increase every five years.
(8) The proportion of the sale and rent is 20%: 80%, the starting area completed the sale
and rent by 8 years, the second phase completed by 6 years, the third phase completed
by 4 years, the fourth phase completed by 3 years.
(9) Due to lack of the price of living land and commercial land, assuming the price of living
land is 2 times of industrial land, commercial land is 3 times of industrial land.
(10)The cost mainly includes wages & benefits, electricity, fuel and water expense, repair
& maintenance cost, management fee, financial expense, and other cost.
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(11) Because of the longer incubation period, initially three years of operation period is
inability to pay the concession fee for port.
(12)The investment of port in phase I is $500million, in long-term project is $600 million.

The investment of industrial park in phase I is $200million, in long-term project is $2700
million.
7.3 Cost benefit Analysis
7.3.1 Revenue
(1) The revenue of Port
The production throughput of phase I is 350,000tons general cargoes, 250,000TEU

containers and 350,000 tons bulks. With the extension project, the production throughput
increases to 450,000tons general cargoes, 1,000,000TEU containers and 2,000,000 tons
bulks.
The starting project gets the production throughput by 6 years, the extension project gets
the production throughput by 3 years.
The operating revenues mainly comprise handling charge and other charges.
The handling charge for general cargo is 8 USD/ton, the handling charge for 20’ heavy
container is 70USD/TEU, for 40’ heavy container is 105USD/FEU, and charging 50% of
the empty containers (the proportion of 20’ and 40’ container is 85%:15%, the proportion
of laden and empty containers is 80%:20%) and for the bulk is 5 USD/ton
Other charges (include storage charge, sea pilot & harbor pilot).
Assuming the price increases 10% every five years.
(2) The revenue of industrial park
① The revenue of land and building
After first-level and partial second-level development. The land and buildings can be sold
or rented.
Table 7-1 the land and buildings can be sold or rented (Unit: m2)
Starting second phase third phase fourth phase
Land area building area Land area Land area Land area
703000 42000 5331100 6891200 3610300
Reference the sale price of land and buildings in Jakarta and Java island in 2013. The
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land and buildings sale and rent prices are as follows:
Table 7-2 the land and buildings sale and rent prices
price Sale(USD/m2) Rent(USD/m2•mouth)
Standard factory 400 40
Industrial land 60 8
Living land 120 16
Commercial land 180 24
Note: Due to lack of the price of Living land and Commercial land, assuming the price of Living
land is 2 times of industrial land, commercial land is 3 times of industrial land.
Management fee charge is 0.02-0.08 USD/m2•mouth in Indonesia existing industrial park,

the management fee in this project is 0.05 USD/ m2•mouth.
The proportion of the sale and rent is 20%: 80%, the starting area completed the sale and
rent by 8 years, the second phase completed the sale and rent by 6 years, the third phase
completed the sale and rent by 4 years, the fourth phase completed the sale and rent by 3
years.
The price increases every five years, assuming growth of the increment.
②The revenue of water works
It is estimated that the Short-term water consumption is 7430 m3/d, Long-term water
consumption is 132,500 m3 /d. The charge of small and middle industry is 1.15 USD/m3
(including sewage charges), Assuming the price will increase 10% every five years.
7.3.2 Cost
(1)Operating Cost of Port
Port operating cost mainly includes wages & benefits, electricity, fuel and water expense,
depreciation cost and equipment update, harbor dredging & maintenance cost, repair &
maintenance cost, management fee, other handling-related cost, financial expense,
concession fee.
z Wages & Benefits
Port wages & benefits are mainly for stevedores, drivers and repairmen. Under the current
price, the cost in the starting project will be $2.01 million per year, In the whole project will
be $5.52 million per year. the price increases 10% every five years.
z Electricity, Fuel and Water expense
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Under the current price, the total electricity, fuel and water expense in starting project will
be $3.32 million per year, in the whole project will be $10.25 million per year. Assuming
the price increases 10% every five years.
z Depreciation cost and Equipment Update
This cost-benefit analysis applied the method of annualized average with a residual rate of
5%, the depreciation period is 15years.
Equipment Update purchase price based on current price.
z Harbor Dredging and Maintenance cost
The total harbor dredging and maintenance cost in starting project will be $0.78 million per
year. In the whole project will be $1.56 million per year.
z Repair & Maintenance cost
Under the current price, the total repair & maintenance cost in starting project will be $1.75
million per year. in the whole project will be $4.15 million per year. Assuming the price
increases 10% every five years.
z Management fee
Under the current price, the total port management fee in starting project will be $0.90
million per year. in the whole project will be $2.49 million per year. Assuming the price
increases 10% every five years.
z Other handling-related cost
Under the current price, the total port other handling-related cost in starting project will be
$0.52 million per year.in the whole project will be $1.43 million per year. Assuming the
price increases 10% every five years.
z Financial expense
The financial expense mainly refer to the loan interest as per the actual amount.
z concession fee
Civil part of the investment provided by the government, CCCC pay concession fee.
Because of the longer incubation period, initially three years of operation period is inability
to pay the concession fee, to ensure the financial viability and profitability, and reach the
financial indicators of general international shipping investment projects, there will be an
upper limit of the concession fee.
(2)Cost of Industrial Park
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Operating cost of Industrial Park mainly includes wages & benefits, management fee,
amortization of development cost, depreciation and other cost, financial expense.
z wages & benefits, management fee
Under the current price, the wages and benefits in starting project will be $1.27million per
year, the total management fee in starting project will be $0.28 million per year. For the
whole project the total wages and benefits will be $10.46million per year, the total
management fee will be $2.37 million per year. Assuming the price increases 10% every
five years.
z Amortization of development cost
Apportioned with the progress of the land and buildings sales.
z Depreciation
The cost-benefit analysis applied the method of annualized average with a residual rate of
5%. The depreciation period is 35years.
z Other cost
Other cost includes water, electricity etc. Charging 50% of the management fee.
z The operation cost of water works
Lacking of basic data, reference the same scale water works in Bitung, the operation cost
of water supply is 0.361USD/m3, the operation cost of sewage treatment is 0.086 USD/m3.
Assuming the cost increases 10% every five years.
z Financial expense
The financial expense mainly refer to the loan interest as per the actual amount.
7.4 Profit analysis
¾ Port
（1）Analysis of profitability
To ensure the financial viability and profitability, and reach the financial indicators of
general international shipping investment projects, there will be an upper limit of the
concession fee.
The financial indicators of the profitability are shown as the follow table.
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Table 7-3 Profitability Analysis of Port for CCCC
starting &extension
SN Indicator Unit starting area
area
1 FIRR % 8.32 8.78
2 Pre-tax NPV(ic=8%) million USD 9.51 18.80
3 Payback period years 15.66 -
4 EIRR % 8.97 9.32
5 ROI % 13.27 15.05
6 ROE % 13.81 14.20
For the phase I, the FIRR (Pre-tax) is 8.32%, which is higher than 8%. The EIRR (after-tax)
is 8.97%, which is higher than 8%. The financial net present value is higher than 0.
For the total project, the FIRR (Pre-tax) is 8.78%, which is higher than 8%. The EIRR
(after-tax) is 9.32%, which is higher than 8%. The financial net present value is higher
than 0.
The profitability can reach the financial indicators of general international shipping
investment.
ROI and ROE is higher than the corresponding reference value in the industry.
Table 7-4 Profitability Analysis of Port for North Sulawesi government
SN Indicator Unit
1 FIRR % 7.11
Pre-tax
2 NPV(ic=8%) million USD -43.35
4 EIRR % 8.82
(2) Analysis of debt repayment ability
Both the starting & extension project, the loan could be paid back on schedule.
(3) Analysis of financial viability
Both the starting & extension project, the net cash flow of each year shall be positive value
during the evaluation period, and the accumulated surplus funds over the years shall all
be positive, therefore, the project will be financially viable.
¾ Industrial Park
(1)Analysis of profitability
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According to the calculation, the financial planning cash flow statement shows that the
accumulated surplus capital is negative during 4-18 years (the load payback period) the
shortage of starting project is $158.65million and of the starting & extension project is
465.10 million. In order to ensure the sustainable operation, it’s need the subsidies.
The financial indicators of the profitability are shown as the follow table.
Table 7-5 Profitability Analysis of Industrial Park
total project
SN Indicator Unit starting project
1 FIRR % 6.51 8.33
2 Pre-tax NPV(ic=8%) million USD 7.05 48.40
3 Payback period years 16.04 -
4 EIRR % 8.11 8.89
5 ROI % 6.12 7.80
6 ROE % 7.36 8.75
For the starting project, the FIRR (Pre-tax) is 6.51%, the EIRR (after-tax) is 8.11%.
For the starting and extension area, the FIRR (Pre-tax) is 8.33%, the financial net present
value is higher than 0.
ROI and ROE is lower than the corresponding reference value in the industry.
(2) Analysis of debt repayment ability
With the subsidies, both the starting area and starting & extension project, the loan could
be paid back on schedule.
(3) Analysis of financial viability
With the subsidies, both the starting area and total area, the loan could be paid back on
schedule.
The net cash flow of each year shall be positive value during the evaluation period, and
the accumulated surplus funds over the years shall all be positive, therefore, the project
will be financially viable.
7.4 Conclusions of Financial Evaluation
(1)Within the conditions above, the analysis result is that the port is feasible both in
engineering Technology and economy analysis.
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Under the SOT model, the throughput of the port reaches the predicted value.
For CCCC, the financial internal return rate could reach general international shipping
investment project baseline. For the investor of structural construction, it’s economically
viable.
(2)According to the successful experience of Chinese industrial park, the investment and
construction of SEZ shall be government-led, with a variety of preferential policies to
support and subsidies. It will promote employment and economic development.
(3)With large-scale investment and long payback period, to ensure the financial viability a
nd profitability, it need the new port completation, the land and standard workshops Sale
& Rent as the predicted schedule, the shortage of fund get subsidy.
(4)For the local residents, the SEZ will provide 120-150 thousands jobs, they will get the t
raining of labor skills and the better living standards. For the North Sulawesi government,
the SEZ will create GDP $1.6-2 billion and create tax revenue $200-400 million.
The SEZ is valuable for the develpment, CCCC will cooperate with the North Sulawesi go
vernment and impel its development together .
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Chapter VIII Policy Demand and Support Guarantee
To guarantee the viability of the industrial park, create favorable and relaxing investment
environment, increase its business and investment attraction and promote its sustainable
development, it is proposed to solicit more support from Indonesia government and North
Sulawesi government on the basis of the existing privilege policy of Indonesia. This part
will be improved and perfected according to the consultation between the two sides.
8.1 Reference experience of Shenzhen Special Economic Zone
(1) Enterprise income tax preferential treatment

1. Preferential tax rate
¾ The enterprise income taxes of production, business and other incomes of various
enterprises in Shenzhen Special Economic Zone are levied by 15% tax rate.
¾ After the expiration of tax reliefs of enterprises engaged in production operation, the
current enterprise income tax of enterprises with over 70% export products output of
the current year can be levied by 10% tax rate approved by the tax authority. The half
tax rate duration of advanced technical enterprises can be extended for another 3
years by application.
2. Reduction and exemption

¾ The local income tax of the production, business and other incomes of
foreign-invested enterprises and foreign enterprises can be exempted for 3%.
¾ For the enterprise in the special economic zone engaged in the development and
management of port and wharf with an operation period over 15 years shall be
exempted from enterprise income taxes from the 1st to the 5th year since its
profit-making year and pay half of income taxes from the 6th year to the 10th year.
¾ For the enterprises in the special economic zone with the operation period over 10
years in respect to such manufacturing industries as industry, agriculture and
communication and transportation, from the profit-making year, the corporate income
tax should be exempted in the first year and second year and paid in half from the
third year to the fifth year; and be paid in half from the third year to the eighth year for
the enterprises recognized to be the hi-tech enterprises by the municipal
government.
¾ For the enterprise in the special economic zone engaged in service industry with a
total investment over 5 million dollars or RMB 20 million and an operation period over
10 years shall be exempted from enterprise income taxes in the 1st year and pay half
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of the enterprise income taxes from the 2nd year to the 3rd year.
(2) Value-added tax and consumption tax

¾ All products exported by foreign-funded enterprises, unless otherwise specified by
state, are exempted from value-added tax and consumption tax.
¾ The products manufactured and sold in Shenzhen Special Economic Zone can be
temporarily exempted from industrial value-added tax as per the policy stipulated by
“local product-local market”, but the consumption tax should be levied for the
products with consumption tax.
¾ The production projects, with business registration after January 1, 1994, approval to
set up before December 31, 1992 and new establishment after January 1, 1994, has
the products different from the originals and tax drawback (exemption) for the
exported products manufactured by the foreign-funded enterprises with independent
management accounting.
¾ The foreign-funded enterprises approved to set up before December 31, 1993 in the
special economic zone are included in six industries, such as electricity, high
technology, commercial wholesale, spinning, dyeing and processing. Due to the
value-added tax collection and examination and approval of the tax authority, the
taxes paid additionally for the increased burden of taxation should be returned within
no more than 5 years in the approved business period.
¾ Where any increased burden of taxation occurs to the foreign-funded enterprises of

both Bao’an District and Longgang District after tax reform in accordance with the
relevant regulations of Shenzhen City, the taxes can be returned as per the
stipulated period. The taxes should be fully returned in 1994 as per the actually
increased amount of burden of taxation. Since 1995, the return rate gradually
decreased by 20% year by year.
¾ The foreign-funded enterprises import the products by a mode of trade of materials

or imported materials for processing and exempt the import-related value-added tax
and consumption tax, and after importing the processed products, exempt the
value-added tax and consumption tax paid on processing or products for processing
on consignment.
¾ When the foreign trade enterprises carry on the entrust on foreign-funded

enterprises to process after imported materials for processing or the foreign-funded
enterprises carry on the entrust on other foreign-funded enterprises or domestic
enterprises on processing after imported materials for processing, they can be
exempted from the value-added tax and consumption tax for consigned process fees
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with duty free certificate of materials for processing.
(3) Reduction and exemption of other local tax categories of special economic zone
¾ The newly built houses newly constructed or purchased by the tax unit (the houses
built with violation of laws excluded) can be exempted from building taxes for three
years from the month of completion and purchase. The building taxes should be
levied as per 70% of the original value of the house property, with the tax rate of
1.2% or as per 12% of rental income.
¾ The national unified reduction and exemption policies apply to other local taxes of
the enterprises in the special economic zones, such as business tax and vehicle and
vessel use tax.
¾ The expatriate employees should pay individual income tax as per 4-45% of excess
progressive of tax rate after the deduction of monthly income minus RMB 4,000.
(4) Land use preference

Based on the transfer of the state-owned land use right prescribed by the Agreement, the
land premium standard should be determined as per land use, land location, floor space
ratio and land-use life. For the newly commenced infrastructural project, from the effective
date of Land Use Contract to the completion date provided by the Contract, the land use
fee should be levied in half. Where the completion can’t be realized as scheduled, the
grace period can be appropriately extended no more than one year after the approval of
the competent department.
(5) Import duties

From October 1, 1997, the total level of China’s import duties has been adjusted from 23%
to 17%. The State Council decided that, from January 1, 1988, for the projects
encouraged and included in limited B-type of Catalogue for the Guidance of Industries for
Foreign Investment, their own equipment imported within the total investment, except for
the products listed on Catalogue for the Import Commodity Nonexempt for the Foreign
Investment Projects, are exempted from customs duties and import-related taxes and the
technology and parts and components and spare parts imported with equipment as per
the Contract also exempted from customs duties and import-related taxes; for domestic
investment projects only subject to Catalogue for the Industry, Product and Technology
Developed under Encourage of China, their own equipment imported within the total
investment, except for the commodities listed on Catalogue for the Import Commodity
Nonexempt for the Foreign Investment Projects, are exempted from customs duties and
import-related value-added taxes. For their own facilities imported based on the
international commercial loans and export credit project by foreign government loan and
international financial organization loan, except the commodities listed on Catalogue for
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the Import Commodity Nonexempt for the Foreign Investment Projects, are exempted
from customs duties and import-related value-added taxes.
In terms of the tax policy of imported equipment for the projects approved before
December 31, 1997, first, the State Council has decided to exempt from the import
customs duties and import-related value-added taxes for their imported equipment and
raw materials of the foreign-funded enterprises approved to establish before March 31,
1996 according to law, until the completion of import. Second, the imported equipment for
the technological transformation projects approved as per the nationally stipulated
procedures before March 31, 1996, from January 1, 1998, the import customs duties and
import-related value-added taxes are all exempted as per the originally approved
exemption range of the equipment and the tax exemption procedure should be handled by
the project unit with the original approval documents to local customs. Third, the imported
equipment of foreign-funded enterprises and domestic-invested projects approved to set
up from April 1, 1996 to December 31, 1997 and the imported equipment approved from
January 1, 1995 to December 31, 1997 based on foreign government and international
financial organization loan project, from January 1, 1998, except for the products listed on
Catalogue for the Import Commodity Nonexempt for the Foreign Investment Projects, are
exempted from customs duties and import-related taxes. The tax exemption procedures
should be handled by the project unit with the original approval documents to the local
customs.
8.2 Preferential policies in development period
(1) Purpose
To establish relevant preferential policies for investor to guarantee the sustainable

construction and operation of the SEZ.
(2) Policy contents
¾ The special economic zone shall be listed as a key economic zone by Indonesia
government, it shall take the the regency level economic management authority, and
have the right to formulate relevant preferential policies to attract foreign investment.
¾ During the repayment period, subsidize the park operation financing gap within 15
years. Annual subsidy shall be 18.78~7.67 million U.S. dollars (decrease year by
year) by means of direct financial subsidies, land compensation, etc.;
¾ No charge franchise fee for first 3 years of port operation. From the 4th year to the
20th year, the franchise fee gathered yearly should not more than 13.98 million U.S.
dollars and from the 21st year (after two berths of the expanded project are put into
use), the amount gathered should not more than 37.86 million U.S. dollars;
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¾ Give preferential tax policy for investor. During the development period of the port
(within 8 years after operation), exempt the corporate income tax and
correspondingly reduce it in accordance with the operation situation later;
¾ If the income unit prices in operation reach less than 90% of the preset values in the
financial estimates which leads to insufficient operating incoming compared with
expected one, the income discontinuity will be paid by Indonesian government;
¾ Establish the special fund for the development of the park which is passed by
congress;
¾ Allow investor use franchise as collateral for financing and Indonesia government
offer the help of guarantee, etc;
¾ At the end of the franchise, the investor still have the ownership of movable fixed
assets in the park;
¾ Before Bitung industrial park is developed to bring profits, North Sulawesi

government shall promise not to develop similar industrial park project;
¾ Permit CCCC to participate in the infrastructure engineering construction of park and

port as a contractor.
8.3 Investment attraction policy
(1) Purpose
To accelerate the transition of development period by strengthening propaganda,

increasing the influence of industrial park and expanding investment attraction channels
on government level.
(2) Policy measure contents
Conduct vigorous propaganda for the park through Chinese and Indonesia governments.
With the assistance of Indonesia governmental agencies, Chinese Embassy in Indonesia
and Chinese Ministry of Commerce, propagandize the industrial park to promote its image
and influence and expand investment attraction channels.
8.4 Labor employment policy
(1) Purpose
To create relaxing employment environment by reducing the restraint of labor

employment.
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¾ Broaden the labor autonomy right of the enterprises in the park;
¾ Simplify the procedure of hiring foreign employees by the enterprises in the park;
¾ Create steady external environment for the production and creation of the
enterprises by preventing the occurrence of strike or lockout;
¾ Decrease the restricted conditions for hiring foreign employees in the construction
period of port and park.
8.5 Tax policy
(1) Purpose
To create park environment of low tax and more privileges to increase the business and
investment attraction of the park.
¾ On the basis of the existing Indonesian law, establish tax relief policy of competitive
advantage, including business tax, corporate income tax, individual income tax,
value-added tax, luxury turnover tax, land and building taxes, departure tax, stamp
tax, entertainment tax, radio and television duties, road tax, motor vehicle tax, bicycle
tax, advertisement tax, alien tax, development tax, etc.
¾ No tax on the stock dividend received by the stock holder of foreign company;
¾ No tax on foreign income of the enterprises in the park;
¾ Foreign employees shall not pay higher income tax than local inhabitants;
¾ Enjoy the industrial encouragement policy, regional encouragement policy and

preferential policies in special economic zone accorded to Indonesian project with
the same conditions.
¾ The equipment and materials dedicated for the construction and operation of the
terminal and park, which are imported, shall be exempted from import duty.
¾ The raw materials, finished goods, consumer goods and other items related to the
investment projects of the enterprises in the park shall be exempted from import duty
and quota restrictions.
8.6 Service support
(1) Purpose
To provide support for business activities of enterprises in the park.
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¾ Execute single management model. The enterprises in the park shall only be
managed by CCCC or the joint venture set up by CCCC and North Sulawesi
government;
¾ Foreigners shall be allowed to be engaged in commercial activity;
¾ Simplify relevant approval process for enterprise registration, construction and

investment to cut down the commission;
¾ Simplify the procedure of imports and exports and re-exports. Simply all affairs
related to tariff and commercial profits.
8.6 Intellectual property protection policy
(1) Purpose
To provide proper intellectual property protection for the enterprises in the park by
standard management of intellectual property.
¾ The enterprises in the park shall be protected by the existing Indonesian relevant
intellectual property laws and regulations;
¾ The intellectual property authorized in China shall be effectively protected as well.
8.7 Foreign exchange management
Investment Company and enterprises in the park shall be exempted from the control of
“Foreign Exchange Regulation Act”.
Page 127
Chapter IX Risk Assessment
9.1 Risk analysis
9.1.1 Market risks
The most important market risk for this project is whether the market can satisfy the
investment returns. Bitung is in the economic margin of Indonesia with limited resources
and insufficient population and labors; Sulawesi’s contributions to the nation’s economy is
less than 5% with instable regional development basis, so it has no competitive advantage
in attracting external production factors and certain difficult in industry introduction. A part
of industries in the industrial park are for East Indonesia market with small market
demands. Meanwhile, Bitung’s market competitiveness is not prominent, so its market
share is hard to reach to the ideal status. Indonesia established 8 special economic zones
and 13 industrial parks. Many resources are separated invisibly during Indonesia’s rapid
development, which causes an obstacle to form joint forces to promote the development
of some special economic zone or industrial park. Special Economic Zone Morota and
Palu with relatively short distance have some similarities with Bitung in the position of
industrial development and are the direct rivals in the industrial park of this project.
9.1.2 Financial risks
9.1.2.1 Interest rate risk
Interest rate risk means the risk of possible loss due to the reduced project value or
income, directly or indirectly, caused by interest rate changes during the operation of the
project.
9.1.2.2 Exchange rate risk and exchange risk
Exchange rate risk means the risk of the loss for project benefits, directly or indirectly
caused by the exchange rate fluctuations during the operation of the project.
Exchange risk means the risk of free convertibility of the project nation currency and free
remittance of project benefits. Generally, the investors hope to remit the project benefits in
domestic currency form or hard currency form and the lending bank also want to repay the
loan by the same currency with the loan.
In recent years, the average exchange rate of IDR to USD has dropped consistently while
the exchange rate of USD to RMB has also declined continuously. Such kind of financial
environment is badly unfavorable for the overseas project invested domestically.
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Data source: the website for exchange rate statistics of the United Nations
Figure 9-1 Exchange Rate of USD to IDR from 2010 to 2015
9.1.2.3 Inflation risk
Inflation shows in the economic life of various nations and in contrast, the inflation rate is
much lower in developed countries than developing countries.
Investment has the stable price and invariable monetary value as the precondition and
foundation; however, the inflation can cause the rises in prices and then the investment
cost of the project will increase by different rates and finally the benefits will be influenced.
In accordance with the current inflation in Indonesia domestically, there will be some
certain inflation risks within the years of the construction and operation for the investment
of the project.
Data source: the World Bank statistics website
Figure 9-2 Inflation Rate of Indonesia from 2000 to 2013
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9.1.3 Political risks
Indonesia implements the multi-party system. Currently, Indonesia has numerous parties
and complex political interests. The election often ends with concession, usually jointly
holding power by multi-party. In the general election in 2014, Joko Widodo was elected
president. The Democratic Party of Struggle he represents consists of persons split off
from the original Indonesia Democratic Party and also is the representative of Indonesia’s
secular political power. The governing theories of all parties aren’t exactly in conformance,
which causes certain risks for the policy continuity and political stability.
As a result of imperfect law system of Indonesia, the political management environment is

not transparent and the corruption is quite serious domestically. Currently, the traditional
family powers domestically in Indonesia control the vested interests and hinder the
improvement of political transparency. Whether the policies can be steady, whether the
Indonesia’s existing laws currently can be effectively implemented and whether there will
be corruptions during the policy implementation will be the serious problems for economic
development and foreign investment.
9.1.4 Natural environmental risks
Indonesia is in tropical zone with the climatic environment easy to show such natural
disasters as heavy rainfall and mud-rock flow under the influence of tropical anticyclone.
Serious flood is the greatest natural environmental risk for this project. Bitung’s climate
can be divided into rainy season (from October to April of next year), prevailing west wind
and northwest wind, and dry season (from May to September), prevailing east wind. The
rainfall reaches the most from January to March with the rainfall more than 2,800mm
within 26-day rainfall per month averagely, causing many floods and influencing the
production and life.
9.1.5 Social risks
There are still some social risks for the investments in Indonesia currently. On one hand,
since China and Indonesia reestablished diplomatic relations, the bilateral relation has a
generally healthy and stable development and both political mutual trusts are
strengthened consistently with reciprocal visits and contacts of both leaders, but
meanwhile, a few large-scale Chinese exclusion events, in which the latest one in 1998
caused thousands of Chinese being killed, once happened. At present, Indonesia still
insists on placing a part area in southwest of South China Sea into its “Natuna Sea”, so
the Chinese exclusion event incited by some Indonesia’s nationalism sentiments is also a
problem.
On the other hand, Indonesia, as the biggest muslim country globally, has some
Page 130
religionary extremists and terrorists which are not large in number but are strict in
organization and relatively strong in destructive power. Currently, Indonesia is the biggest
source of foreign combatants of “Nation of Islam”. Since the 21st century, Indonesia has
suffered from successive terrorist attacks. Terrorist bomb occurred in Bali in October
2002, in Marriott Hotel in Djakarta in August 2003 and at the gate of the Embassy of
Australia in Indonesia in September 2004 and the terrorist attack occurred in Djakarta in
July 2009, etc. Some countries, such as America and Australia, give a safety precaution to
their citizens going to Indonesia to remind them to enhance their vigilance in Indonesia.
9.1.6 Engineering technology risks
This project mainly involves in a new area of about 2,000ha in Special Economic Zone
Bitung and North Minahasa and newly-constructed port area. The overseas waterborne
transportation industry has flourished in recent years with rich and mature design and
construction experience but the basic facilities in this area are relatively backward, data
for natural conditions is insufficient, such base materials as terrain, geology and hydrology
in this phase are not enough and the supporting water and electricity are undefined, so
there is a certain engineering technology risk.
9.2 Risk management
Table 8-1 Risk Management Measures
Risk
Risk factor Measures
class
In terms of market risk, with the full investigation of
market demands, it is recommended to first develop
the basic industries meeting the market demands and
Market risks Greater
then to introduce the industries with more
competitiveness after the basic industries reaches a
certain scale by industry clusters.
In terms of prevention against interest rate risks, the
loan guarantee of fixed interest and multi-currency
Interest combination can be used for the settlement of project
Common
rate risks expenses or income and hedging technology, such as
cap, interest rate collar and floor, and other measures
can also be used.
Some measures can be taken for prevention against
Financial Exchange the exchange rate risks, such as the common
risks rate and currency is used for settlement of project income while
Greater
exchange the local currency is used for payment of the wages of
risks local personnel and relevant materials so as to reduce
the holdings of local currency.
Some measures can be taken for the prevention
Inflation against the inflation risks, such as the monitoring for
Common the market price fluctuations of construction materials
risks
and materials required during operation can be
strengthened and appropriate materials stock can be
Page 131
purchased and kept timely; the material purchaser

system with various channels and long-term
cooperation can be established and price voice can be
obtained.
In terms of the prevention against the political risks,
close attention should be placed on Indonesia’s
political trends and full knowledge of the governing
guidance and development planning of all parties
should be obtained to adapt to the complexity of
Political risks Common
Indonesia’s law system step by step. Keep a good
relationship with the government agencies and a
win-win cooperation to create a better external
environment for the company’s development in
Indonesia.
In order to prevent the natural risks, flood drainage
can be solved by reasonable planning, such as
artificial water body and park green space with
Natural hypertonicity, to intensify the water regulation and
Lower
environmental risks storage capacity of the park and homogenize the
surface runoff so as to reduce floods and relieving the
influence of rainfall in the rainy season on production
and life.
For the prevention against these social risks, on one
hand, the project investors should comply with the
“Going Out” policy of the Government of China to
strengthen the relationship with Chinese Embassy
and Foreign Office to get protection and support. On
Social risks Lower the other hand, they should respect the local social
customs and religious culture. China’s investors need
to perform the company’s social responsibilities and
strengthen the communications with the local people
when they launch trade and investment activities in
Indonesia.
As this project needs more data and information, such
as local hydrology, investigation, price and supporting
facilities planning, it is recommended to develop local
Engineering
Low hydrometry, investigation and measurement and other
technology risks
works, to perform relevant scientific researches and
tests and to implement multi-scheme comparison and
selection for the engineering design.
Page 132
Chapter X Conclusions and Recommendations
10.1 Conclusions
(1) The leading industry and industrial system of the SEZ are put forward by analyzing
the appropriateness of the industry in the Park and the development status and
industrial development direction of industries in Bitung city, and combining the
location feature of the Project. A comprehensive industrial system includes leading
industries, auxiliary industries and basic industries. The leading industries include
food processing industry, household light-manufacturing, furniture and building
material industry as well as port logistics industry which is the supplementation of
front port. It develops the port comprehensive service system with all features of
logistics industry chain and integrates the development of storage, packing, free
trade, processing, marketing, wholesale, exhibition, shipping exchange and
information management which involve in the function of several links. The auxiliary
industries refer to the industry supporting the development of the leading industry,
including hardware mechanical and electrical manufacturing and shipbuilding
industry. The basic industries mean the industry providing basic service for
enterprises and staff so as to maintain the operation of the Park, including providing
such basic services as park management, catering and retailing.
(2) It analyzes the main industries of the SEZ from four aspects with market potential
and development trend, target market, competition pattern and market strategy,
comprehensively analyzes the market of the Special Economic Zone and then puts
forward reasonable construction scale. The total developed area of the SEZ is about
2,000 hectares, 3 supporting terminals for the container of 50,000 DWT and 1
multi-purpose terminal for the container of 50,000 DWT. The prediction throughput of
the recent is 250,000 TEU for container , 350,000 tons for general cargo and
350,000 tons for bulk cargo per year.; in the long-term stage, the throughput will be
1,000,000 TEU for container , 450,000 tons for general cargo and 2,000,000 tons for
bulk cargo per year..
(3) It puts forward economical and reasonable technical schemes on engineering for
general layout, marine structure, process equipment, ground treatment and road
,and works out environmental protection measures for water, air, noise and solid
waste by analyzing the environmental factors at such three stages as planning,
developing and operation. The total investment cost is 4,100,000,000 dollars.
(4) The development mode of the special economic zone includes two parts including
Park and Port. The former’s land is provided by the Indonesian government for free
Page 133
and invested and built by CCCC. The latter is invested and built by CCCC and the
North Sulawesi Government. CCCC will assume the purchase cost for port
equipment and cost for port operation; and North Sulawesi government shall be liable
for financing of the main civil work of the new port.
CCCC will undertake the engineering construction of the SEZ with EPC model.
CCCC will independently develop and operate the SEZ. The “SOT” mode will apply
to the part of the Port. CCCC gets the right of management as well as corresponding
operating revenue of the Port by paying concession fee to the North Sulawesi
Government. Upon the expiration of the concession, CCCC will transfer the
ownership of the Port to the North Sulawesi Government for free or renew the
contract. However, the North Sulawesi Government will annually collect concession
fee from CCCC so as to recover capital and get part of the profits from the
investment in the Project.
(5) According to accounting calculation, under the fixed concession fee of the port, its
investment profitability can meet the reference value of the financial evaluation index
for the general overseas investment project, and have the debt paying ability and
financial viability. In the event that the investment profitability of the Park is lower
than reference value of the financial evaluation index for the overseas investment
project and lower than the industrial reference value, investment profitability and
have the debt paying ability and financial viability under the situation of making up
funding gap. It is suggested to get the support from the local government from the
following aspects so as to improve the income level of the Project:
¾ Apply for Indonesian government subsidies to make up the accumulated surplus

fund gap, such as financial subsidies and land compensation;
¾ Reduce the concession fee of the new port, to increase the fee for the Park;
¾ Strive for the preferential tax policy.
Moreover, the starting area needs a long cultivation time, so it can be built in the mode of
small-scale progressive development. Reduce the income at the initial stage to increase
the revenue of the Project and relieve stress of repayment of principle and interest.
(6) It puts forward feasible and practical countermeasures through the analysis on such
risk factors as politic, market, finance, natural and social environment and
engineering technologies.
10.2 Recommendations
(1) The feasibility study report will be improved according to the suggestion and
Page 134
comment in this meeting.
(2) Geography Survey and soil investigation shall be carried out soon for finalizing
the feasibility study report .
(3) location, feasibility study, necessary scientific research and test works for industrial
park facilities, such as power plant, water supply, new port and commercial buildings
etc., shall be implemented.
(4) It is suggested to confirm the business model of the SEZ.
(5) It is suggested to confirm the approval authority of preferential policies for

Indonesia government and local government.( What policies can be formulated in
province, Which projects require state approval).
(6) It is suggested to confirm the land acquisition .
(7) The connection road between toll road and the SEZ shall be completed by North
Sulawesi government.
(8) It’s expected that North Sulawesi government can report to Indonesia government,
and get the supports from Indonesia government . CCCC and
North Sulawesi government can cooperate on promoting the SEZ’s development.
Page 135

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Feasibility Study Report of

Special Economic Zone Bitung and North

China Communications Construction Co., Ltd.

1.1 Profile of CCCC

CCCC operates at over 120 countries covering businesses of engineering infrastructure,

Table. 1-1 Brief business description of CCCC

construction projects contracts value of about USD 15-20 billion.

¾ Comprehensive regional development and operation capability

CCCC is committed to its “Five Core Businesses” strategy (namely engineering

With extensive experience of comprehensive urban development and professional facility

¾ Strong financing capability

¾ Good external cooperation, a powerful guarantee to industry introduction and

1.2 Project background

In Jan. 2015, China Communications Construction Company Limited (hereinafter referred

1.3 Project components

Figure 1-1 Sketch Map of Land Range

1.4 Methodology of the study

1.4.1 Industrial analysis

1.4.2 Market analysis

Comprehensively analyzing the market of Bitung SEZ from supply-demand structure,

The container throughput is predicted to comprise container production of the park,

1.4.3 Technical scheme on engineering

1.4.4 Financial estimation

1.5.1 Development Orientation

(1)International shipping hub

(2)Economic growth pole of Eastern Indonesia

(3)National innovation and testing base of international opening-up cooperation

Referred to international successful SEZ management model, to improve local business

(4)Environmental friendly investment hot spot

1.5.2 Social and economic benefits

(1)Promoting balanced regional development

(2)Supplying job and improving living standard

(3)Improving labor skills

(4)Growing the tax revenue

(5)Promoting urbanization, enhancing the city image

1.5.3 The Necessity of the New Port

（2）The new port shall accelerate logistics industry's development.

1.5.4 Industrial analysis

Based on the results of industrial analysis, a complete industrial system of Bitung is

1.5.5 Market analysis

Table 1-1 Result of Market Size Prediction in the Park

Staring area Whole park

Table 1-2 Result of Port Throughput Prediction

Short-term (2020) Long-term (2030)

1.5.6 Technical scheme on engineering

(1) Construction condition

(2) Overall layout

(3) General layout of the new port

(4) Handling process

Fork Lift shall be used for the handling operation in CFS.

(5) Marine structure

(6) Ground treatment

1.5.7 Business model

The park adopts concession mode.

1.5.8 Financial estimation

(1) Investment estimation

Table 1-3 Investment Estimation Table

Summary of total Cost

Item Unit Qty Total (US$)

New port Phase 1 length of berth/number 680/2 500,000,000

Long-term length of berth/number 648/2 600,000,000

Special Phase 1 ha 91.20 200,000,000

Power Phase 1 Item 1 350,000,000