T

he controversial idea to turn West Java robust industrial areas in Karawang, Bekasi and Purwakarta into a special economic zone (SEZ) may not materialize any time soon as the government has signaled that such a scheme is unlikely.

The request was previously lodged by powerful business lobby group the Indonesian Chamber of Commerce and Industry (Kadin), as it stated the three regencies combined made up almost half of the industrial area in the archipelagic country. Kadin has discussed the proposal with President Joko “Jokowi” Widodo.

Coordinating Maritime Affairs Minister Luhut Pandjaitan said it was “impossible” to turn the West Java area into an SEZ.

“The criteria for establishing a special economic zone do not fit with the area, but we are still looking into it,” he said on Friday.

Based on government data, a location proposed to be an SEZ must fulfill certain criteria, including alignment with provincial spatial planning, securing support from the regional government, being located near a trade area and international shipping infrastructure, as well as having a clear border.

Luhut did not specify which criteria the West Java regencies did not meet, but he said the government would still seek a scheme that could boost business efficiency in the three regencies.

The comment, however, echoes a previous assessment by National Development Planning Agency (Bappenas) Minister Bambang S. Brodjonegoro, who stated the area did not meet three requirements for SEZs, which were intended for underprivileged regions with potential but lacking the necessary infrastructure, regulatory support and incentives.

The three regions are seen to be already at a developed stage and will not need special treatment.

Bappenas and the Coordinating Maritime Affairs Ministry were previously tasked by the President with conducting the study as a follow-up to Kadin’s proposal at a meeting on Nov. 2.

The meeting was also attended by Industry Minister Airlangga Hartarto, Transportation Minister Budi Karya, Deputy Finance Minister Mardiasmo, Lippo Group CEO James Riady and Kadin chairman Rosan P. Roeslani.

The establishment of SEZs is regulated under the government’s sixth economic policy package, issued two years ago.

If the industrial areas were turned into an SEZ, new businesses operating there would enjoy hefty incentives, such as tax holidays for between five and 25 years for investment of at least Rp 500 billion (US$36.9 million), and exemptions from import duties, value-added tax and luxury tax.

Companies would not need to go through the bureaucratic hassle of obtaining their licenses, such as for land, immigration and labor, as they would be handled by the SEZ administrator. Foreign nationals and entities could also own homes and apartments located in the SEZ with permanent resident permits.

The establishment of an SEZ can be proposed by a business entity, regional administration or a ministry. Approval from a city, regency or provincial administration is also needed, with the final decision in the hands of the president.

However, the SEZ concept for manufacturing is supposedly intended for areas outside Java, as the Jokowi administration aims to promote equal economic development and reduce economic reliance on Java as the center of the country’s economic activity.

The government has given SEZ status to 12 regions, consisting of eight focussing on manufacturing and four on tourism.

Kadin chairman Rosan was not immediately available for comment.

However, Kadin advisory board member Chris Kanter said that generally, an SEZ was made to develop new areas into an industrial center.

“Karawang and Bekasi have always been industrial centers. [...] I see that the [government] focus should turn toward developing remote areas, especially so eastern Indonesia has industrial centers as well,” he said.