Joko Widodo launches three new Special Economic Zones in Eastern Indonesia to spur growth

Indonesian President Joko Widodo on Monday launched three special economic zones (SEZs) across 2,200 hectares of land at the eastern part of the archipelago in a fresh bid to attract investment and spur economic growth in less developed areas.

Indonesian President Joko Widodo on Monday launched three special economic zones (SEZs) across 2,200 hectares of land at the eastern part of the archipelago in a fresh bid to attract investment and spur economic growth in less developed areas.

The government aims to attract 110 trillion rupiah ($7.73 billion) investment in the SEZs – in East Kalimantan, North Sulawesi, and North Maluku – and create 120,000 jobs by 2025, according to a statement from the coordinating ministry for economic affairs.

Investors in the SEZs get preferential treatment such as removal of import duties for manufacturing of export goods, as well as easier land and employment rules, including allowing expatriates to own properties within the zone.

“We hope that the existence of SEZs will grow manufacturing and other industries so that we will no longer export raw materials, but products with higher added value,” the statement quoted Widodo, in Manado, North Sulawesi for a launch ceremony, as saying.

Widodo has had mixed success with his reform agenda since taking office in 2014, promising to transform Southeast Asia’s largest economy by reviving manufacturing and lifting growth to 7 percent.

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Annual growth has remained around 5 percent in recent years, while foreign investment last year was weak despite the president’s efforts to improve the investment climate

Widodo is running for re-election on April 17 against former military general Prabowo Subianto, who has criticized his economic track record. In 2014, Widodo defeated Prabowo, to win a five-year term

Monday’s government statement said the three new SEZs have attracted a combined 5.24 trillion rupiah of investment commitments. These include ones from PT Jababeka Morotai, a unit of industrial estate developer PT Jababeka and Kilang Kaltim Continental, a crude oil refinery operator, subsidiary of Canadian Continental Energy Corporation.

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Over the last decade, Indonesia’s special economic zones (SEZs) and industrial estates have grown multi-fold, both in terms of number and breadth. In 2014, there were approximately 74 industrial estates with an area of 36,300 hectares in the country. By 2017, the number of industrial estates expanded to 87 with an area of 59,700 hectares. Similarly, the number of SEZs in the country has increased to 12; out of these, four are currently operational, representing economic activities across various industrial sectors.

Given Indonesia’s locational advantages– rich natural resources and a climate conducive to many forms of agriculture -, these clusters offer growing opportunities for investment in manufacturing, agriculture, marine, infrastructure, and tourism industries. Moreover, Indonesia has large forests areas, deposits of coal, tin, bauxite, copper, nickel, and other minerals. The country also boasts a significant oil and gas sector and is one of the leading suppliers of natural rubber.

To facilitate investment in these zones, the government of Indonesia has instituted a number of incentives targeting investors setting up within SEZs and industrial parks.

  • SEZ Sei Mangkei

The main industries set up in Sei Mangkei include palm oil and rubber industry. Besides, there are ancillary industries established in the region such as logistic, energy, electronics, and tourism. The main products manufactured here are fatty acid, fatty alcohol, surfactant, biodiesel, and biogas.

  • SEZ Tanjung Api-Api

The SEZ is a downstream industrial center of the resource-based sectors such as seed rubber, palm oil, and coal and has a good potential of water supply from the nearby Banyuasin and Telang River. It is strategically located near the Indonesian archipelago Lanes (ALKI 1) and the Strait of Malacca.

  • SEZ Maloy Batuta Trans Kalimantan (MBTK)

The MBTK SEZ is located in East Kutai Regency, East Kalimantan province and consists of industrial zones, logistics, and export processing. The region is rich in natural resources such as oil palm, oil, gas, minerals, and coal. The SEZ can serve as the processing centre of palm oil and its derivatives, industrial minerals, gas, coal, tourism.

  • SEZ Palu

Palu provides a strategic location for the development of natural resources- based industries. These include agriculture and plantations of rubber, cocoa, rattan, seagrass, as well as the mining of nickel, gold, iron ore, and lead.

Mandalika has the status of Special Economic Zone (SEZ) for the agricultural and ecotourism industries which was newly launched by the Indonesian government in 2014. It has benefits for investors in terms of fiscal and non-fiscal incentives. With a total area of 1250 ha, it offers natural beauty, panoramic views, and other tourist attractions.

  • SEZ Bitung

Located in Sulawesi Utara District, SEZ Bitung is built on an area of 534 Ha and is strategically located with international access to East Asia and the Pacific.  The key industries include fisheries, oil industry, and other logistical support.

  • SEZ Morotai

Morotai Island has a famous World War II airport – Leo Wattimena Airport that has a huge runway capacity. The airport has the potential to serve as supporting infrastructure in the SEZ and increase East Indonesia’s access to the international market. The island is nestled between Asia and Australia and has short flights from Singapore and Taipei.

  • SEZ Sorong

Located in Mayamuk District, KEK Sorong is built on an area of 523.7 Ha on the international trade trajectory of the Asia Pacific and Australia.

The SEZ provides several geo-economic advantages, namely potential in the fishery and marine transportation sectors. The location is also very strategic for the development of the logistics industry, agro-industry, mining, and shipyard industry.

Read more on the Indonesian SEZ areas

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