New KEKs to distribute growth

March 02, 2015, 02.10 PM | Source: The Jakarta Post
New KEKs to distribute growth

ILUSTRASI. Pembeli melihat atribut kampanye salah satu pasangan calon presiden di pusat perbelanjaan Pasar Senen, Jakarta, Kamis (14/3/2019). TRIBUNNEWS/IRWAN RISMAWAN


JAKARTA. The government plans to build seven new special economic zones (KEKs) by 2019 to develop centers of economic growth outside densely populated Java.

Investment Coordinating Board (BKPM) deputy director for investment planning Tamba Hutapea said the investment board had identified 10 locations for the new economic zones and some of them had been promoted to potential investors.

“The zones can be built either by the government as in Bitung [North Sulawesi] or by private investors as in Tanjung Lesung [Banten],” Tamba said recently.

A number of investors had already conveyed their interest in taking part in the development of the KEKs, he added, but he declined to mention their names.

Since 2009, Indonesia has developed a number of KEKs, which are designed to attract more investment and boost trade. KEKs offer preferential tax and excise arrangements like growth centers in other countries such as China and India.

The zones are similar to other economic center concepts, such as free trade zones (FTZ) and bounded warehouses, industrial estates and integrated economic development zones (Kapet), which critics often say are still ineffective in spurring growth.

Up to present, eight zones are under development. The palm oil industry based Sei Mangkei KEK in North Sumatra and the tourism-based Tanjung Lesung KEK in Banten have been launched.

The new sites for KEK development in the future will include Merauke in Papua: Sorong, Teluk Bintuni and Raja Ampat in West Papua; Garombing-Baru and Taka Bonerate in South Sulawesi; Tarakan in North Kalimantan; BatuLicin in South Kalimantan; Padang Pariaman in West Sumatra; and Lhokseumawe in Aceh.

Industry Ministry director general for the development of industrial regions Imam Haryono said his office was still preparing two manufacturing industry related special zones — Teluk Bintuni KEK and Batulicin KEK — to serve as bases for petrochemical and iron and steel production, respectively.

“With a focus on certain industry, we will try to create an integrated chain of industrial activities from upstream to downstream in the zones,” he said, citing that supporting facilities in the zones would include research institutions, community academies, polytechnics, laboratories and innovation centers.

Imam added that industrial clusters to drive the KEKs would be oriented toward independent cities and would generate multiplier effects on the total investment spend, particularly through secondary activities outside production, such as distribution and the warehouse business.

In addition to KEKs, the ministry is also encouraging the development of 14 industrial centers to be situated outside Java, which at present are still considered less attractive by investors due to inadequate infrastructure and a shortage of skilled human resources.

Around 56.9 percent of the total realized investment of Rp 463.1 trillion (US$35.81 billion) last year went to Java.

Indonesian Institute of Sciences (LIPI) economist Latif Adam advised that the government must provide much-needed tax incentives to strongly lure investment to the KEKs, which could be progressive according to the degree of added-value the incentives could give to production.

“If this can be done, the government then needs to encourage firms operating in the KEKs to export the biggest portion of their manufacturing output,” he said, adding that through this, the zones could serve as a real basis for international trade.

Existing KEKs (under development)

Sei Mangke KEK, North Sumatra
Tanjung Lesung KEK, Banten
Tanjung Api-api KEK, South Sumatra
Morotai KEK, North Maluku
Mandalika KEK, West Nusa Tenggara
Palu KEK, Central Sulawesi
Bitung KEK, North Sulawesi
Maloy Batuta Trans Kalimantan,
East Kalimantan

Potential locations for new KEKs

Merauke, Papua
Sorong, Teluk Bintuni and Raja Ampat,
West Papua
Garombing-Baru and Takabonerate,
South Sulawesi
Tarakan, North Kalimantan
Batu Licin, South Kalimantan
Padang Pariaman, West Sumatra
Lhokseumawe, Aceh

Source: Investment Coordinating Board (BKPM)

(Linda Yulisman)

Editor: Edy Can

Latest News