Indonesian President Joko Widodo launched three special economic zones (SEZs) on 1 April 2019 across 2,200 hectares of land at the eastern part of the archipelago in a fresh bid to attract investment and stimulate economic growth in less developed areas.
The government aims to attract 110 trillion rupiah (US$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 co-ordinating ministry for economic affairs.
Widodo stated that he hopes the existence of SEZs will help grow manufacturing and other industries. These businesses would help Indonesia produce more value-added products for export rather than just exporting raw materials.
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.
Gunar Myrdal, an economist at PT Bank Maybank Indonesia in Jakarta, welcomed the move. He states that Indonesia’s underdeveloped areas require a boost in the form of stronger manufacturing activities.
Some have speculated that this move is Widodo’s attempt to appeal to voters for the upcoming election. However, economist Andry Asmoro, from PT Bank Mandiri, dismissed the rumours, saying that the sole aim of those zones is to bolster economic growth in the region.
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 per cent.
Annual growth has remained around 5 per cent in recent years, while foreign investment last year was weak despite the president’s efforts to improve investment climate.
The government statement on 1 April 2019 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.