SEZs Expected to Boost Exports, Employment

Kompas/Bahana Patria Gupta

Java Integrated Industrial and Port Estate (JIIPE), Gresik, East Java, Friday (3/9/2021).

JAKARTA, KOMPAS — The government is developing a number of special economic zones (SEZ) as part of its economic development program to boost investment, industrial growth and exports. A number of incentives and facilities, including tax breaks, have also been introduced to encourage investors to open factories in these economic zones. However, a number of challenges need to be overcome in order to realize the program.

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The development of the special economic zones (SEZs) is expected to help boost investment by 6.4 percent, exports by 4.5 percent and imports by 5.9 percent to achieve this year’s economic growth target of 5 percent, in line with the 2021 Development Outlook of the National Development Planning Ministry/National Development Planning Agency (Bappenas).

Indonesia currently has 19 SEZs. Of these, 12 are in operation and the remaining seven are under construction. Among the total SEZs, 11 are for industry and the rest for tourism.

Iskandar J.K. Rares, general manager for Domestic & International Market/Marketing & Business Development at PT Berkah Kawasan Manyar Sejahtera (BKMS), said on Friday (3/9/2021) that the Java Integrated Industrial Port and Estate (JIIPE) under BKMS management already had 15 tenants, including Nippon Indosari Corpindo and PT Freeport Indonesia.

Its tenants mainly comprise nickel and steel smelters as well as electronics, petrochemical, and energy plants.

He said BKMS expected to have 100 corporate tenants that employed a total of 190,000 workers in the first five years of operation. The JIPPE special economic zone currently hosted around 1,000 workers. The SEZ occupies 3,000 hectares consisting of a 1,761 ha industrial area, a 400 ha port and 800 hectares of supporting facilities, including residential and commercial areas. The JIIPE was officially designated a special economic zone on 28 June 2021. Its tenants mainly comprise nickel and steel smelters as well as electronics, petrochemical, and energy plants.

KOMPAS/KRISTIAN OKA PRASETYADI

The Bitung Special Economic Zone in North Sulawesi is still not completely built so it is not yet operational, Sunday (5/9/2021). Although it is targeted to bring in an investment of Rp 32 trillion by 2030, the SEZ which was inaugurated by President Joko Widodo in 2019 has instead become an informal settlement.

Meanwhile, Kendal Special Economic Zone in Central Java, operated by PT Kendal Industrial Estate, is expected to employ tens of thousands of workers by the year-end. As many as 69 companies so far have built factories in the economic zone, which officially gained SEZ status in 2019. Of the total tenants, 19 are in operation and according to the 2020 SEZ Final Report, the Kendal SEZ has absorbed 8,690 workers.

"In October 2021, a garment company began periodical operations. Another textile company is also expected to start operating in 2022, also periodically. When operating at full capacity, the two companies can employ a total of 10,000 workers," Juliani Kusumaningrum, the Sales & Marketing head at PT Kendal Industrial Estate, said in Kendal on Friday.

Another SEZ has also been developed in Bitung, North Sulawesi. At least five companies, with one company already operating, have reached an initial agreement to enter the Bitung zone, which was officially designated as a SEZ in 2014. The Bitung zone is operated and managed by PT Membangun Sulut Hebat, part of the Bitung SEZ Development and Management Agency (BUPP).

KOMPAS/DWI DOANG

A resident arrives at the Covid-19 Vaccination location at the Tuwa Kawa Cafe in Mataram City, West Nusa Tenggara, Wednesday (18/8/2021).

"The North Sulawesi provincial government is pushing for progress in the Bitung SEZ," Bitung SEZ executive secretary Julis Talimbekas said in a telephone interview from Manado.

Meanwhile, the operation of the Arun SEZ, Aceh, which gained SEZ status in 2017, still remains hampered by land issues. Marzuki Daham, the director of Arun SEZ operator PT Patriot Nusantara Aceh, said there was a problem with land use permits in the economic zone, which was under the joint ownership of several business consortiums.

SEZ National Council acting secretary Elen Setiadi said that during the pandemic, the country’s manufacturing SEZs were able to continue operating, but that the tourism SEZs had difficulty operating. According to him, the SEZ National Council had mapped the problems of SEZs in each region and hoped to find solutions to the various problems.

The 2020 annual report of the SEZ National Council shows that total investment commitments in SEZs across the country had reached Rp 70.4 trillion (US$4.94 billion). Meanwhile, investment realization totaled Rp 23.1 trillion, or 32.8 percent, as of December 2020. The largest investment realization was recorded by the Galang Batang SEZ (Rp 12.8 trillion), followed by the Sei Mangkei SEZ (Rp 5.2 trillion) and the Kendal SEZ (Rp 2 trillion).

KOMPAS/ADITYA PUTRA PERDANA

The atmosphere in front of the PT Master Kidz Indonesia building, which produces children\'s toys, in the Kendal Industrial Estate with the status of a Special Economic Zone (KEK), in Kendal Regency, Central Java, Friday (3/9/2021). Kendal SEZ, with an area of 1,000 hectares, has now 69 tenants and 19 of them are already operating.

Of the 11 SEZs in operation, two SEZs have been exporting a share of their production output since 2020 to book Rp 5.26 trillion in export earnings, namely the SEI Mangkei SEZ (Rp 5.18 trillion) and the Palu SEZ (Rp 79.9 billion). The Galang Batang SEZ is expected to begin exports this year and aims to achieve an export earnings target of US$300 million. (LKT/AGE/MKN/OKA/ZAK/ WER/AIN/NDU/CIP/DIT)

(This article was translated by Hendarsyah Tarmizi)