Indonesia Considers Special Economic Zone Development to Boost Economic Prosperity

Sep 2023

International trade and investment are essential to Indonesia’s economy. It has been recently reported that the government has prioritized the establishment of special economic zones (SEZ), intending to attract more than USD 50 billion in foreign investment over the next decade.

As the Indonesian economy continues to expand, the government is betting on investments to accelerate economic growth by increasing exports, reducing imports through industrialization, and enhancing employment creation.

SEZs promote industrial operations, exports, and other activities with high economic value. As of June 2023, realized investments in the country’s SEZs totaled IDR 128.5 trillion (USD 8.5 billion) through 291 firms, creating 71,349 new employment opportunities. To support the long-term viability of SEZs, the government offers fiscal and nonfiscal incentives, such as tax holidays, tax allowances, simplified customs procedures and access to land and property.

The government is also incentivizing economic development outside the island of Java under its new strategy, designating certain SEZs as targets of investments across several industries. Palm oil processing investments, for example, will be directed to the Sei Mangkei SEZ in North Sumatra, bauxite processing investments to the Galang Batang SEZ in the Riau Islands, and creative and digital industries investments to the Nongsa Digital Park in the Nongsa SEZ, also in the Riau Islands.

Efforts are being made for attracting investment in the downstream and the processing industries in selected SEZs. The Gresik SEZ in East Java is one of the SEZs expanding its downstream sector, with a projected investment of IDR 45 trillion (USD 2.9 billion) in collaboration with PT Freeport Indonesia Smelter.

(Source: The Jakarta Post)

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