Special Economic Zones in Indonesia: Progress and Challenges during the Pandemic

As Indonesia joins other countries in charting its economic recovery beyond the pandemic, economic onlookers have been keenly watching the country’s special economic zones. The Nongsa Digital Park in Batam was recently endorsed as a Special Economic Zone (SEZ) by President Joko Widodo- This signals the central government’s support for regional and international businesses looking to invest in Indonesia- a much needed assurance during after the global economic landscape has been transformed by the pandemic. There is no doubt that the burgeoning data sector in the region stands to gain greatly from the endorsement. Singapore’s Economic Development Board has noted that there are already around 150 multinational Singapore-based companies in the Nongsa Digital Park.

What about opportunities for the non-digital sector? The ACI webinar on “Special Economic Zones in Indonesia: Progress and Challenges during the Pandemic” invited management-level representatives from four existing SEZs (Kendal, Tanjung Lesung, Sei Mangkei and Maloy Batuta Trans-Kalimantan) to understand the opportunities available for other industries, such as manufacturing, healthcare and tourism. The Assistant Deputy for the Enhancement of Regional Competitiveness, Kartika Listriana, from the Coordinating Ministry for Economic Affairs was the guest-of-honour for the event and provided insights from the central government.

Here are some key takeaways from the discussion:

  1. All the represented SEZs underscored the central government’s strong support during the pandemic-induced disruptions to the global economy.
  2. In keeping with public health safety, the main challenges faced by the SEZs were mobility-related: Prospective investors have not been as willing to sign agreements based on remote discussions; existing companies experienced a disruption in their labor and a marked increase in operational costs.
  3. Different economic sectors are recovering at different speeds as Indonesia internalizes its ‘New Normal’. On the one hand, manufacturing-based zones such as Kendal and Sei Mangkei have been able to harness the geographical shifts in global value chains and a heightened demand for health and digital products. On the other hand, Tanjung Lesung, an example of a tourist-based zone, has had to shift its focus towards domestic tourists given the ongoing travel restrictions.
  4. Despite the obstacles, all the zones are looking ahead optimistically. They are notably using the present ‘downtime’ to rethink its operations and infrastructure, with the purpose of standing each zone in good stead once travel and investments pick up once again.

By Clarice HANDOKO

View and download the presentation slides below:

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