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Buoyed by the success of its free trade zones, Indonesia’s government made the development of special economic zones (SEZ) a priority policy in 2014. As of 2022, there are 19 SEZs, of which 12 are in operation and the remaining in the construction phase. Through the SEZs, Indonesia aims to attract over US$50 billion in foreign investment in the next decade.

The SEZs are designed in this way to maximize the ready availability of local resources and serve as specialized primary industries. Further, through these SEZs, the government hopes to drive economic growth away from the island of Java, which currently contributes to 60 percent of Indonesia’s GDP and 60 percent of the total population.

For foreign investors, entering Indonesia’s special economic zones and taking full advantage of what they offer requires a long-term outlook. Having this long-term outlook will allow the foreign entity to benefit from Indonesia’s unique advantages – competitive labor costs, huge domestic market, and continuing expansion of SEZ land – a constraint many businesses are experiencing in other ASEAN markets.

In this issue of the ASEAN Briefing magazine, we provide an overview of Indonesia’s special economic zones and explore the tax incentives available. Finally, we discuss choosing the ideal location in Indonesia’s SEZs by highlighting select zones.