The Jakarta Post
The provincial government of Bangka Belitung Islands off southern Sumatra is correct to propose to the interministerial National Council on Special Economic Zones (SEZ) that the coastal areas of Sungai Liat and Tanjung Gunung on Bangka Island be designated as SEZ in a bid to diversify the local economy away from an over-dependence on tin mining.
Indeed, as an industry based on nature and culture, tourism is one of the most suitable businesses for the two islands to develop because of the multiplier effect and labor-intensive nature of its operations. Travel-related businesses such as hotels, restaurants, transportation, handicrafts and cultural shows are all labor intensive, the very kind of businesses needed to absorb the huge pool of job seekers.
The central government itself has put tourism development on top of its working programs and has thus far designated several beach-fronted areas as tourism-based SEZs, including Morotai in North Maluku, Mandalika on Lombok Island, Tanjung Lesung in Banten province and Tanjung Kelayang on Belitung Island.
Based on the 2009 SEZ Law, investment projects in SEZs enjoy streamlined, one-stop procedures for business licensing and easier hiring of expatriates, flexible labor regulations, tax breaks and customs duty exemptions.
Another policy reform package launched by the central government in November 2015 further strengthened the bureaucratic administration and management within SEZs by authorizing the administrator of an SEZ to act as a one-stop licensing center with the full autonomy to ask for cooperation from all other ministries and government agencies, to recruit its own staff and set its own standards of remuneration, different from other civil servants.
However, interministerial coordination is never easy.
The SEZ National Council, which is chaired by Coordinating for Economic Minister Darmin Nasution, should therefore be more careful in assessing SEZ proposals because many provincial governments often consider SEZs simply as a means of accessing tax facilities and other special treatment without seriously assessing their real potential.
The blunt reality now is that not much progress has been made in the development of the 12 SEZs already designated by the SEZ National Council, including those in Semangke in North Sumatra, Bitung in North Sulawesi, Sorong in Papua and Poso in Central Sulawesi, largely as a result of land-acquisition problems and poor coordination in license processing.
What is most obviously missing from the SEZ development, despite all the laws and regulations, is an administrator, with overall inter-ministerial authority, in charge of coordinating the provision of all the tax incentives, facilities and the expedited licensing for investors operating in an SEZ.
The best lesson from successful SEZ development in Malaysia, China, Vietnam and India is that an SEZ should be managed by a super ministerial body directly under the President that ensures action is more important than bureaucratic rules and rigidity to make things much easier for investors.