Madura island has established a soda ash industry – which is mostly used for the extraction and smelting of various metals, especially alumina products – since 2021. The industry has an investment of IDR 3.08 trillion. It is part of the Investment Coordinating Board (BKPM),’s 47 projects in Indonesia.
Madura is an island across East Java’s capital of Surabaya and only separated by Madura strait. The island has an area of 4,441.95 square kilometers (sqkm). In total, Madura has 127 islands with two major islands of Madurakera and Kangean. The island’s total population was 4,004,564 inhabitants in 2020.
Meanwhile, East Java is a province in Indonesia with an area of 46,428 sqkm, according to BKPM. The province offers 28 opportunities, 11 industrial centers, 6 airports, 32 ports, 248 educational facilities, 473 hotels and 344 hospitals.
The BKPM is the government institution that deals with investment coordination and implementation of policies. It coordinates projects all around Indonesia. The institution was established in 1973. Investment Minister Bahlil Lahadalia has chaired the board since 2021.
Potential and lucrative investment
The soda ash project is located in Madura’s Sumenep regency. The BKPM project has an interest rate of return (IRR) of 11.7%, a net present value (NPV) of IDR 605.01 billion and a payback period of 7.17 years.
The project resides on a land owned by the Kalianget salt processing plant. State-owned company PT Garam owns the 4.75 hectare land. The land is in a strategic location as it is only 2 kilometers away from the Sumenep salt processing location, 6.7kms away from city center and 3.7kms away from Kalianget port. It makes the project have a high potential value.
The construction of a soda ash factory is a development of the salt industry to add more added value to the potential salt potential in the region. With a high salt concentration in the region, it is highly potential and lucrative.
The development of the project is in joint cooperation with PT Garam, which owns salt ponds, to create salt as the main material for soda ash. Soda ash is a material that could be used as a raw material for glass, ceramic, pulp and paper and other industries.
The government will provide incentives in the form of import facilities and a tax holiday. Import facilities are import duty exemption facilities for business actors conducting business activities in the industrial sector that produce goods and/or services based on Minister of Finance Regulation (Permenkeu) No. 176/PMK.011/2009 in lieu of Permenkeu No. 188/PMK.010/2015. Meanwhile, tax holidays are reduced to income tax exemption (PPh).
Natural disaster challenges
However, Madura island is vulnerable to earthquakes, according to the Meteorology Climatology and Geophysics Agency (BMKG). The island was prone to earthquakes due to its location in the RMKS (Rembang, Madura, Kangean and Sakala) Fault zone. The fault zone trends west–east, forming a deformed zone of 15 to 40 km wide and 675 km long from Rembang area in the west through Madura island and Kangean islands to Sakala offshore area in the east.
BMKG Head of Earthquake Information and Tsunami Early Warning Division, Daryono, said on June 14, 2018, that historically the region and its fault zone were living proof of the vulnerability of Madura that resulted in earthquakes with significant devastating effects.
The seismic activities in Madura have clusters of high activity on the sea bed. Daryono added that it was a proof of how active the region could be.
