The government is looking to cut bureaucratic red tape for businesses investing in special economic zones (KEK), as President Joko “Jokowi” Widodo seeks to attract investments and boost economic activity in the designed industrial areas.
Investment Coordinating Board (BKPM) chairman Franky Sibarani said that business people planning to invest in KEKs would soon be able to utilize the one-stop business service, which unites all required investment permits in one body, rather than requiring applicants to deal with a host of agencies and ministries.
“The BKPM will focus on KEKs in an effort to integrate business permit-processing at the central and regional levels, as well as to attract more investment and spur economic activity,” Franky said in a statement released over the weekend. The one-stop service begun its operations in January, but at that time the facility was limited to investors processing their permits at the BKPM’s central office in Jakarta.
Since then, the investment agency has extended the new system to the regional level. As of June 1, 370 regencies and 97 cities had implemented the one-stop service, according to BKPM data.
The BKPM would extend the services to an additional 46 regencies and six KEKs, Franky said. His agency, he explained, would coordinate with the zone administrations, as well as with the respective provincial governments, to integrate the business permit application system.
Franky argued that KEKs had a strategic role as a center for economic growth and job creation at the regional level, pointing to the example of an agriculture- and ecotourism-focused KEK in Mandalika, West Nusa Tenggara, which is estimated to have generated 58,000 new jobs since its inception in 2014.
The government has developed a number of KEKs since 2009, when it first assembled businesses from a specific industry in one area, providing financial incentives in the hope that their investment could boost economic activity in the zones.
The zones are similar to other economic center concepts, such as free trade zones (FTZ) and bounded warehouses, industrial estates and Integrated Economic Development Zones (Kapet), which critics say are ineffective at spurring growth.
Eight new zones are now under development. The palm oil industry-based Sei Mangkei KEK in North Sumatra and the tourism-based Tanjung Lesung KEK in Banten were launched personally by President Jokowi this year.
The Jokowi administration has also designated new sites for KEK development, including Merauke in Papua; Sorong, Teluk Bintani and Raja Ampat in West Papua; Garombing-Baru and Taka Bonerate in South Sulawesi; Tarakan in North Kalimantan; Batulicin in South Kalimantan; Padang Pariaman in West Sumatra; and Lhokseumawe in Aceh.
“This is a positive signal that the government indeed wants to spearhead development in KEKs. Up to now, it has been left to the private sector to take the initiative in the development of emerging industrial zones,” Enny Sri Hartati, an economist with the Institute for Development of Economics and Finance (INDEF), commented on Sunday.
According to Enny, many private industries remain reluctant to invest in KEKs because companies are required to bear high costs, partly as a result of inadequate infrastructure in the zones.