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Criticism mounts over plan for more industrial zones across Java
The government’s plan to develop new special economic zones on Java has run up against opposition, with critics saying it would not only hamper the goal of creating equal economic development across the country but also put an additional burden on the densely populated island
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T
he government’s plan to develop new special economic zones on Java has run up against opposition, with critics saying it would not only hamper the goal of creating equal economic development across the country but also put an additional burden on the densely populated island.
The idea comes from Coordinating Economic Minister Darmin Nasution, who recently said the government would allow the development of industrial special economic zones (SEZ) in Java as long as they were export-oriented, facilitated import substitution or were hi-tech industries.
Separately, Industry Minister Airlangga Hartarto said the industrial zones would be located in Central Java and East Java. The one in Central Java would focus on automotive, textile and electrical components, while the one in East Java would become a “digital cluster” similar to the Nongsa Digital Park in Batam, Riau Islands.
The idea has raised questions over the government’s commitment to equalize development across Indonesia, with the bulk of economic activity still concentrated on Java.
The move was also seen as a step back from the government’s previous stance of directing the development of industrial SEZs to regions outside of Java, while SEZs in Java would focus on tourism, such as in Tanjung Lesung, Banten.
At present, 10 SEZs are in operation across Indonesia. Bitung, North Sulawesi; Morotai, North Maluku and Maloy Batuta Trans Kalimantan (MBTK) in East Kalimantan were the latest SEZs to be inaugurated by President Joko “Jokowi” Widodo in April.
Samuel Sekuritas economist Lana Soelistianingsih expressed regret over the plan, saying the government seemed to be sacrificing the long-term goal of providing more equitable economic development across the country for a short-term goal of attracting investment, which was set to be a key focus during President Jokowi’s second term.
“It would be regretful if the long-term goals were sacrificed for short-term interests,” said Lana, adding that such a move could accelerate land-use change on Java, which is one of Indonesia’s agricultural centers, and threaten Indonesia’s food security.
Meanwhile, Center of Reform on Economics (CORE) Indonesia executive director Mohammad Faisal suggested that only hi-tech industries be allowed to operate in the industrial SEZs on Java.
“[The industrial] SEZs in Java should be [directed toward attracting] hi-tech industries, as this fits the profile of human resources in Java,” said Faisal, adding that other industries should be directed to areas outside of Java in order to spread out manufacturing across the country.
While welcoming the government’s plan, Indonesian Employers Association (Apindo) chairman Hariyadi Sukamdani said the government should spread out the development of manufacturing industries beyond Java in the long-run to reduce the burden on the island.
“[The industrial sectors] should be spread to outside Java to reduce its burden,” said Hariyadi, suggesting the government encourage the development of upstream manufacturing industries outside Java as a way to attract more downstream industries.
Java has long been Indonesia’s economic hub, and despite the government’s recent attempt to decentralize development in the country, the economy still revolves around the island, which contributed 59 percent to GDP in the first quarter of this year, according to Statistics Indonesia (BPS).
Faisal urged the government to assess connectivity to the existing SEZs, particularly those outside of Java, in order to raise their attractiveness in the eyes of investors.
The CORE executive director said there were many complaints that SEZs outside Java lacked basic supporting infrastructure despite already having the SEZ status, while he said there was also room for improvement of public services provided by the government inside the SEZs.
