Jakarta. Indonesia is trailing its ASEAN peers in the development of Special Economic Zones (SEZs), with Chief Economic Affairs Minister Airlangga Hartarto acknowledging that the limited size and reach of the country’s SEZs are hampering efforts to improve investment efficiency and reduce high logistics costs.

Speaking at the Investor Daily Round Table (IDRT) in Jakarta on Monday, Airlangga said Indonesia currently operates 24 SEZs covering just 21,000 hectares, far behind Vietnam’s 1.6 million hectares spread across four SEZs, Malaysia’s 2.15 million hectares in six zones, and Thailand’s 622,000 hectares in ten.

“President Prabowo Subianto himself noted that compared to Vietnam’s millions of hectares, Indonesia’s SEZ footprint remains limited,” Airlangga said.

The minister added that Indonesia's Incremental Capital Output Ratio (ICOR) --a measure of how much investment is needed to generate economic output-- remains inefficient at 6, partly due to high logistics costs and suboptimal investment planning.

Indonesia’s logistics costs currently stand at around 12 percent of GDP. The government aims to bring that figure down to 8 percent, although Airlangga said this target might not be achieved until 2035 without regulatory reforms and expanded infrastructure investment in SEZs.

“It’s taking too long to push for efficiency,” he said.

The government sees SEZs as a critical tool for improving efficiency in logistics, particularly in managing the flow of goods in and out of industrial areas. Airlangga suggested that deregulating logistics and accelerating SEZ development could help lower ICOR and make Indonesia more competitive in the region.

“We need to drive more investment into SEZ-based logistics infrastructure if we want to improve our cost structure and efficiency,” he said.

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