Overview
There are 7 new areas currently under review to become Special Economic Zones (SEZ). Some are located in Java, Sulawesi and also near the new capital city Nusantara. Secretary General of the National Council for SEZ, Rizal Edwin Manansang only mentioned that the new SEZs would be designated for natural resource processing such as nickel and bauxite to coal, without providing further details.
Besides the 7 newly proposed SEZ, the government of Indonesia targets to award 4 new SEZs before the end of President Jokowi’s term in October, namely Nipa Island SEZ in Batam focusing in logistics industry; International Edutek Medika SEZ in Tangerang, West Java focusing in educational research and creative industry; International Health Tourism SEZ in Batam; and Bungku Green Industry SEZ in Morowali, Central Sulawesi for energy distribution. More SEZs are developed in response to the concentrated development in Java and Sumatra as it is deemed helpful in maximizing the industries, exports, and imports.
The government of Indonesia is contented with the SEZ program given the cumulative investment achievement of IDR 205.2 Trillion (around USD 15.4 billion) from 2012 until June 2024, and average employment creation of 57,005 per year, with the most contribution made by private sectors. Some government officials are of the opinion that SEZ is too easily awarded to projects without clear business plans. The SEZ Council pays more attention at land related matters, requiring land acquisition progress of minimum 50% from the proposed area, certainty in spatial planning with clear boundaries, also ensuring that the proposed area is not located in a protected zones / forests. To date, there are 22 SEZs across Indonesian archipelago. Some have been revoked due to lack of capital and development progress.
Latest Update
- Vinfast Builds its Factory in Subang Area
- PT VinFast Automobile Indonesia conducted groundbreaking for an electric car assembly facility in Subang, West Java, on July 15, 2024. No published information about the certain location / industrial park.
- The initial investment for the assembly facility is worth US$200 million, targeting production capacity of 50,000 units of electric cars per year.
- The assembly facility also includes several main production areas such as Body Shop, General Assembly Shop, Paint Shop and testing area, among The facilities will be built on a 170 Ha of land.
- This assembly facility is expected to start operating in the fourth quarter of 2025 by producing 4 models of VF 3, VF 5, VF 6, and VF 7 for the Indonesian market.
- VinFast is also interested in investing in the charging stations in Indonesia to build the EV ecosystem.
- Super Electric Mobility Hub in KITB
- On Friday, July 19, 2024, KITB signed a cooperation agreement with Utomo Charge+ an electric vehicle charging system solution provider, to utilize commercial land in KITB to develop what is called Super Electric Mobility Hub, consisting of 60 ultra-fast charging stations.
- Utomo+ becomes the first commercial cluster partner of KITB, as part of KITB’s green and sustainable initiatives, by providing reliable charging infrastructure, aiming for the largest and first EV charging centre in The government of Indonesia targets 32,000 public charging stations to be built by 2030.
- Construction of the Super Electric Mobility Hub is scheduled to begin in the 4th quarter of 2024 and is expected to be completed in the 2nd quarter of 2025. The charging stations will be capable of serving various types of EVs, ranging from personal electric vehicles to commercial electric buses and trucks.
- Expansion of Batam SEZ
- Nongsa Digital Park SEZ in Batam signaled area expansion responding to the growing demand of data center in the area.
- To date, there are 10 data center companies in the Digital Park, with 6 others in the waiting list. Data centre operates on a massive electricity and water supply, making the current Nongsa Digital Park capable of only supporting 10 data centre in the area, besides the land constraint. One data centre requires an average of 5 Ha of land.
- The development of Nongsa Digital Park, which is a base for creative industry players in the digital sector was also supported by the Singapore Government.
- §United States Support for Semiconductor Industry in Indonesia
- US has identified Indonesia as one of seven countries to receive support in becoming a semiconductor hub as stated by Secretary of State for Economic Growth, Energy, and the Environment, Jose W. Fernandez.
- Indonesia has potentials to become part of the 21st-century semiconductor industry, supported by the US under the Creating Helpful Incentives to Produce Semiconductors and Science Act or known as the CHIPS Act, a regulation to help strengthened semiconductor industry in the US, by providing incentives, investments, etc.
- This collaboration aims to help Indonesia advancing in the semiconductor industry, that will be supported by US semiconductor companies, in addition to educational and exchange programs.
- The Organization for Economic Cooperation and Development (OECD) visited Indonesia early July at the request of the US Government to assess the country’s semiconductor ecosystem.
- Hyundai Investment of IDR 500 Billion in Balikpapan
- The increasing economic growth of East Kalimantan stimulates Hyundai Construction, a South Korean engineering and construction contracting company, to build Hyundai Facility in Balikpapan.
- Hyundai Facility is an integrated facility that integrates workshops, showrooms, spare-part distribution, new product installation, and training center for The groundbreaking was inaugurated by East Kalimantan Acting Governor Akmal Malik. Hyundai Construction Equipment Heavy Industries CEO, Choi Cheol, attended the ceremony.
- To realize this 2 Ha of integrated facility in Balikpapan, Hyundai Construction Equipment allocated an investment of IDR 500 Billion (USD 30.6 mio).
- Investment on Indonesia’s First Floating LNG in West Papua
- Malaysian energy and hospitality giant Genting signed contract worth more than USD 1 Billion with Wison New Energies, a China-based provider of clean energy services, to construct a floating liquefied natural gas (FLNG) facility, which is said to be the first one in Indonesia and the ninth in the world, for a 1.2 mtpa (Million Ton per Annum) FLNG unit.
- Under the Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) Contract, Wison will construct the FLNG facility at their shipyards located in Nantong and ZhouShan in China. After passing field performance tests, the FLNG Facility will be towed to its final destination located in Bintuni Bay, West Papua, Indonesia, where final commissioning tests will be conducted.
- The project timeline is estimated at 27 months from the EPCIC contract execution, with an additional 18-month warranty period. The anticipated sail away date from ZhouShan shipyard is slated for the second quarter of 2026.
- The feed gas for the new FLNG facility is expected to be supplied from the Asap, Merah, and Kido (Indonesia’s National Strategic Project for gas) structures within the concession area of the Kasuri Block in West Papua, which is awarded to Genting Oil Kasuri (GOKPL), a 95% indirect subsidiary of the Genting in May 2008.
- Small Scale LNG in East Java
- State-controlled gas distribution company PT Perusahaan Gas Negara through its subsidiary PT PGN LNG Indonesia, is collaborating with LNG technology provider Galileo Technologies SA to develop small-scale LNG (SSLNG) facilities in East Java Province.
- Juan Fornaso, Sales VP for Europe and Asia Pacific at Galileo Technologies, highlighted the significance of the project during a recent visit to customer sites, including the location for their inaugural SSLNG plant near “This project is a game-changer to unlock domestic gas production potential,” he said without further details on the proposed project.
- New Electricity Tariff Regulation
- The Ministry of Energy and Mineral Resources has issued a new regulation in the form of Ministerial Regulation No. 7 of 2024 concerning Electricity Tariffs Provided by PT PLN, revoking previous regulation No. 28/2016, deemed no longer in line with consumer needs.
- In general, this new regulation does not change electricity tariffs or customer groups, but there are additional regulations regarding the sale of bulk electricity at Low Voltage, Medium Voltage and High Voltage to regulate electricity charging for battery- based electric motorized vehicles.
- Tariffs for industry remain at IDR 485 to IDR 1,112 per kWh for Low Voltage 450 VA up to 14 kVA; IDR 1,057 per kVArh for Low Voltage 14kVA up to 200kVA; IDR 1,114.74 per kVarh for Medium Voltage; IDR 996.74 per kVarh for High Voltage.
- Swiss’ Potential Investment in Nusantara for Electricity and Water Supply
- Swiss Ambassador for Indonesia Olivier Zehnder said the private sectors of Swiss are keen to participate in new capital city Nusantara project and are ready to come to the site to monitor the development progress.
- Swiss government is currently working with the Indonesian Planning Agency (Bappenas) to develop the 2025-2028 Swiss-Indonesia program framework.
- In 2023, Switzerland ranked 6th among all European countries FDI to Indonesia, recorded a total investment of USD 150.065 Million with 750 projects, according to BKPM data. This figure increased by 12.17% compared to 2022.
- 190 Years of Right to Cultivate in Nusantara
- President Jokowi granted longer term of period for land utilization in the new capital city Nusantara project to secure more The Right to Cultivate (HGU) is set up to 190 years, with the first tenure of up to 95 years, extendable for another 95 years, under conditions of proper utilization.
- The new policy is contained in Presidential Regulation Number 75 of 2024 concerning the Acceleration of the Development of New Capital City Nusantara.
- The decision stimulated negative response from domestic stakeholders, including the House of Respresentatives, noting “Nusantara for Sale”. Indonesian new capital city project requires huge capital injection as the state budget is used only for the development of the core government area.
- Cross-Border SEZ of Singapore and Malaysia
- Malaysia announced it is close to reaching an agreement with Singapore to develop Southeast Asia’s first cross-border SEZ, called the Johor-Singapore Special Economic Zone (JS-SEZ). Malaysian Minister of Economy Rafizi Ramli revealed that several final issues had been done in bilateral talks with The two parties should be able to sign an agreement and inaugurate the zone in September 2024.
- The SEZ will help drive sustainable growth, develop human capital, and improve infrastructure and connectivity. It will also build on Johor’s strong growth and significant investments in the region by Singapore. Johor recorded RM70.6 billion (US$15.6 billion) worth of foreign investments in 2022, across various sectors including electrical and electronics, medical equipment, food manufacturing and data centers.
- To stay attractive, Indonesia is considering to make changes on the Government Regulation 40 of 2021 regarding Special Economic Zones, adding more incentives in its SEZs, especially Batam and Bintan SEZ with proximity to JS-SEZ, to create more competitive environment.
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