Jakarta. Senior minister Airlangga Hartarto said Wednesday that Singapore and Malaysia were trying to replicate Indonesia’s idea of establishing special economic zones (SEZs) to bring in investments.

Malaysia and the land-scarce Singapore are currently trying to establish a joint SEZ. The proposed SEZ, which will include the resource-rich Malaysian state of Johor, aims to become an attractive investment destination. Malaysian Prime Minister Anwar Ibrahim and his former Singaporean counterpart Lee Hsien Loong witnessed the signing of a memorandum of understanding (MoU) on this SEZ in January. The two countries will likely ink a full-fledged pact later this year.

Indonesia has been forming SEZs across the archipelago for years as a means to bring in investments. North Sumatra’s Sei Mangkei SEZ was among the first ones to gain such status in 2012 before it launched full-scale operations in 2015. As the close neighbors proceed with their grand plan, Indonesia finds itself some new competition in SEZ development.

“Our SEZs have successfully attracted investments. Our neighbors are now eyeing to copy Mr. President [Joko ‘Jokowi’ Widodo’s SEZ] policy. Prime ministers Lee Hsien Loong … and Anwar Ibrahim have signed [the SEZ MoU] just to compete with us,” Airlangga said at the launch ceremony of an anode plant in Kendal SEZ.

Indonesia is home to 22 SEZs across the archipelago, a dozen of which are industry-related. Airlangga claimed that these SEZs had amassed Rp 205.2 trillion (almost $12.8 billion) in investments as of the first half of 2024. The SEZs have also created job opportunities for 132,227 people. The government is planning to grant the SEZ status to the Batang industrial estate.

Indonesia cannot simply rely on incentives to woo investors to beat its neighbors amidst this SEZ competition, according to Chief Investment Minister Luhut Binsar Pandjaitan.  

“Credibility and trust are key factors that we must maintain. We will have competitors in SEZ development from Johor and Singapore. … Johor will provide the land and competitive energy resources, while Singapore will support the project with high-quality human capital [in this SEZ corridor]. ... We are not afraid to compete with them,” Luhut said.

Indonesian SEZs offer their investors tax incentives and tax allowances, among others.

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