Business

Govt targeting five economic
zones until 2014

The government plans to develop at least five special economic zones (SEZs) through 2014 in a bid to boost growth in the regional economies and improve the livelihoods of the local residents.

Coordinating Economic Minister Hatta Rajasa said on Friday that the regions targeted included Mandalika in Central Lombok regency, West Nusa Tenggara, and Bitung in North Sulawesi, apart from the palm oil and chemical-based Sei Mangke economic zone in Simalungun regency, North Sumatra, and integrated tourism-based Tanjung Lesung in Pandeglang regency, Banten. The government would issue regulations to establish these regions as SEZs, he said.

“From the 65 proposed regions, we see eight regions with the potential to be developed as SEZs. In 2011, we targeted at least two regions to develop this year and five regions until 2014,” he told reporters after a meeting on SEZs at his office.

Hatta was upbeat on the regions’ potentials, citing Mandalika, which was estimated to absorb US$3 billion in investments, as an example.

“Mandalika has a lot of potential because it will already have an international airport, and investors have already expressed their intentions to invest there. It will become the main harbor in the eastern part of the country, which is integrated with an industrial estate,” he said.

President Susilo Bambang Yudhoyono witnessed on Oct. 21 the ground breaking for the Mandalika tourism center, which will also serve as a food production center to include the agriculture, husbandry and marine-based industries as well as geothermal energy. The new growth zone is forecasted to quadruple the province’s GDP by 2025.

Currently, the government is developing Sei Mangke, which is projected to cost Rp 5.7 trillion ($646.63 million), and Tanjung Lesung with an estimated investment of Rp 3.8 trillion for the initial phase.

Consumer goods giant Unilever is committed to investing in the Sei Mangke zone, while PT Banten Investment is ready to pour investment into the Tanjung Lesung zone.

Indonesian Logistics Association (ALI) chairman Zaldy Masita told The Jakarta Post on Sunday that the government had to see the progress of the current SEZs before opening other zones.

“Any location is OK, but the government should not open too many SEZs. Just start with the first two, and if the results are satisfying, launch the others,” he said.

Zaldy said the new economic zones would be well-developed as long as they were equipped with basic supporting infrastructure such as railways, seaports and multi-mode logistics centers.

“It is the government’s responsibility to provide the infrastructure, as is the case in special economic zones in other countries. If the private investors are required to build the infrastructure, the investments are too expensive and these zones will not be attractive for them to set up their businesses there,” he said.

Institute for Development of Economic and Finance (INDEF) economist Ahmad Erani Yustika shared a similar view, saying that infrastructure would be of the highest importance in developing special economic zones, as it would become a non-fiscal incentive for investors.

Indonesian Institute of Science (LIPI) economist Latif Adam said that apart from the infrastructure, the network and connectivity with surrounding areas would be also important for SEZs.

“The growth of a special economic zone depends on its focal industry, which cannot develop optimally without supporting industry. So mapping out this network will be important,” he said.

The SEZs have been included in the government’s ambitious Master Plan for the Acceleration and Expansion of Indonesian Economic Growth from 2011 to 2025 worth Rp 4,000 trillion (US$468 billion). The master plan is expected to boost Indonesia’s GDP to about $4.5 trillion by 2025, which would make the country among the world’s 10 largest economies.

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