by Alexander Chipman Koty ASEAN Briefing

ndonesia is set to open two new special economic zones (SEZs) in the island city of Batam after President Joko Widodo recently approved the decision.

The new zones aim to develop a number of industries in Batam, with an emphasis on the digital economy, data centers, logistics, tourism, and aviation.

Batam has been a free trade zone since 2009, along with the neighboring Bintan and Karimun islands, and its first SEZs were set up in 2017. Together, the three islands are known as the BBK free trade zone.

In addition to the new SEZs, Batam has several other projects in the pipeline, including upgrades to the Batu Ampar Port and the development of the healthcare sector.

What are the advantages of a special economic zone in Indonesia?

SEZs in Indonesia benefit from several advantages, such as business tax and income tax cuts as well as special investment incentives. They also tend to have a higher-quality infrastructure and benefit from industry clustering. Free trade zones, in contrast, are not able to offer fiscal incentives.

Where are the new Indonesian special economic zones located?

Nongsa Digital Park currently focuses on digital technology and tourism and Batam Aero Technic specializes in the maintenance, repair, and overhaul of passenger aircraft; both will be upgraded to SEZ status.

The plans for the SEZs were submitted last year but required approval from Widodo, better known as Jokowi, before being finalized. Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, announced the new SEZs following a visit to Batam on June 12, 2021.

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