In its effort to boost economic growth and achieve the “2045 Golden Indonesia Vision,” the Indonesian government plans to establish four new Special Economic Zones (SEZs). These new zones will be located in Batam in the Riau Islands, South Tangerang in Banten, and Morowali in Central Sulawesi. Each SEZ will focus on different sectors, including logistics, energy development, health tourism, the digital economy, education, and creative industries.
The development plan for these four SEZs has passed the evaluation stage and is awaiting Presidential approval before being included in the government’s list of special areas to be developed. In addition to these four SEZs, there are seven other proposals under consideration, located across Java, Sulawesi, and East Kalimantan. One of the proposals is the Nusantara SEZ in the new capital city, which is expected to be a hub for energy supply and mining activities.
On July 26, 2024, President Joko Widodo inaugurated the Batang Integrated Industrial Estate in Central Java. The industrial area, which began construction in 2020, is projected to create up to 250,000 jobs, with the first phase already attracting investments worth IDR 14 trillion and employing around 19,000 workers. This area is part of the government’s broader strategy to strengthen economic infrastructure through SEZs.
Since the enactment of the SEZ Law in 2009, Indonesia has continuously promoted SEZ development to achieve balanced economic growth across regions. The first SEZ in Indonesia was Tanjung Lesung in Banten, which opened in 2012. To date, there are 20 SEZs focusing on industrial, tourism, and digital sectors.
To attract investors, the Indonesian government offers various incentives, both fiscal and non-fiscal. For instance, investments of at least IDR 1 trillion are eligible for a 20-year corporate income tax exemption, while smaller investments still qualify for tax exemptions for a certain period. Additionally, non-fiscal incentives include extended land use rights for up to 80 years and relaxed foreign ownership rules, allowing up to 100% ownership in certain sectors.
Another initiative taken by the government to accelerate SEZ development is the optimization of the “One Map” policy. In February 2023, the Geospatial Information Agency (BIG) began opening access to geospatial data to the public, which was previously restricted. This policy is expected to expedite the development of SEZs and other national strategic projects.
Given the positive progress of most existing SEZs, the government is optimistic that these zones will significantly contribute to regional economic improvement, reduce regional disparities, and boost exports and imports of high-value goods and services. By mid-2024, total investment in SEZs had reached IDR 205.2 trillion, with over 130,000 workers employed.
With the various policies and incentives in place, the Indonesian government hopes that SEZs will continue to grow and play a key role in promoting inclusive and globally competitive economic growth.
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Author:
Dewi Susanti