Special Economic Zones (SEZs) have proven to be a strong driver of regional and national economic development for Indonesia, according to a statement issued by the government on June 201. In the first quarter of 2024, around 20 SEZs recorded sterling achievements, including investments of IDR15.1 trillion (US$914.63 million), employment of 9,342 workers, and the addition of 19 new corporates to invest in SEZs. Cumulatively up to the first quarter of 2024, the 20 SEZs have recorded investment realisation of IDR187.5 trillion, and created employment for 126,506 workers.
As technology is increasingly used to forward Indonesia’s Industry 4.0, SEZs will continue to be an important driver of the economy. To date, SEZ breakthroughs include the downstreaming of natural resources in several manufacturing SEZs, such as in the Gresik SEZ and Sei Mangkei SEZ; to digital downstreaming in the Nongsa SEZ; as well as other services such as Health in the Sanur SEZ, Education in the Singhasari SEZ, and MRO in the Batam Aero Technic SEZ. In addition, a tourism SEZ in Indonesia – Mandalika SEZ – has been in the global spotlight for hosting various worldclass sports tourism events.
The government has recently given the green light to proceed with three new SEZs. The upcoming SEZ in the BSD area (Tangerang Regency) is a Health, Education, and Technology SEZ; the other is a Health SEZ on Batam Island, in collaboration with Apollo Hospitals from India, while the third is a nickel development SEZ, located in Morowali Regency, shares Coordinating Minister for Economic Affairs Airlangga Hartarto, in his capacity as Chairman of the National Council for Special Economic Zones. “With the approval of the three SEZ proposals, it is hoped that it can encourage Indonesia's competitiveness, in proportion to the various facilities that have been provided. Furthermore, we hope that the three approved SEZs will also be able to support the business ecosystem around the area,” says Coordinating Minister Airlangga. To ensure the sustainability and development of SEZs, he emphasises the importance of monitoring each SEZ by both the central government and local governments.
While the SEZ development policy is largely aimed at developing value through technology and human resources, the development of SEZs in the services sector is also expected to be a buffer for foreign exchange outflows while increasing the country’s foreign exchange revenue.
Acting Secretary General of the National Council of SEZs Edwin Manansang hopes that the existence of new SEZs can increase investment in Indonesia.
What are the prospects for each of these SEZs? The SEZ in Tangerang Regency, Banten Province – a land area of 59.68 hectares – has a target investment realisation when fully operational of IDR18.8 trillion, and will absorb a workforce of 13,446 people. The SEZ in the Bumi Serpong Damai (BSD) area will focus on education and international health services, leveraging digital technology. Business activities in this SEZ will centre around education with the operation of Monash University – the 42nd best university in the world; and around the fields of research, digital economy, and technology development, with a target of 100 startups, the health sector with integrated services, and the creative industry sector.
Meanwhile, the Batam International Health Tourism SEZ has a commitment to realise investments of IDR6.91 trillion, and the absorption of 105,406 people. Apollo Hospital India, as the main investor, is committed to construction targets in the field of international standard health services and increased medical tourism, with a target completion and operational date of 2026. With the establishment of the Batam International Health Tourism SEZ, Indonesia is expected to save on a foreign exchange of IDR500 billion.
The SEZ in Morowali Regency, Central Sulawesi Province, supports nickel downstream activities and the green economy. It has an investment target of IDR135.38 trillion and will fully operate with a workforce of around 136,000 people. The SEZ is engaged in the production and processing of nickel, and is supported by green practices including the use of a steam gas power plant (PTLGU), fully enclosed submerged electric furnace technology, and recycling of tailings waste.
1 All information is courtesy of indonesia.go.id, the official site of the government of Indonesia
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