Indonesia’s Special Economic Zones (SEZs): A Complete Guide

A Special Economic Zone (SEZ) is a designated area that offers additional incentives and benefits for investors. SEZs focus on specific industries and offer streamlined processes, tax incentives, and excellent infrastructure. Indonesia, a Southeast Asian archipelago known for its rich culture and stunning landscapes, also has its own share of SEZs.

In this article, we delve into Indonesia’s Special Economic Zones, uncovering the opportunities and challenges they present for businesses.

Also read: Investing in Indonesia: Great Opportunity for Global Investors

Introduction to Indonesia’s SEZ

Special Economic Zones (SEZs) in Indonesia are designated areas aimed at enhancing economic activities through various incentives and streamlined regulations. These zones are strategically located to leverage geoeconomic and geostrategic advantages, serving as hubs for industrial operations, exports, imports, and other economically valuable activities with a strong focus on international competitiveness.

Airlangga Hartarto, Coordinating Minister for Economic Affairs and Chairman of the National SEZ Council, announced in the “2023 SEZ Development Report” that 20 SEZs in Indonesia attracted IDR 66 trillion in investments and created 57,005 jobs in 2023.

Also read: 7 Reasons and Advantages for Starting a Business in Indonesia

Objectives of SEZs in Indonesia

The primary goal of SEZs is to create a favorable environment for investment, export, and trade activities. This, in turn, acts as a catalyst for economic growth and reform. SEZs offer numerous benefits to investors, both fiscal and non-fiscal, making them attractive destinations for business operations.

Also read: 10 Essential Things About Business Culture in Indonesia

Benefits of Investing in SEZs

Fiscal Advantages

1. Tax Holidays: Investors in SEZs can enjoy tax holidays ranging from 10 to 20 years, depending on the main activities conducted within the zone.
2. VAT and Luxury Goods Tax Exemptions: Deliveries of taxable goods and services within SEZs are exempt from VAT and luxury goods tax.
3. Customs and Excises: Exemptions and suspensions on import duties for capital and consumption goods are provided.
4. Local Tax Incentives: Local taxes and retributions can be reduced by 50%-100%.
5. Additional Tourism SEZ Benefits: VAT refunds and exemptions from luxury goods tax for residential purchases.

Also read: Indonesia Free Trade Zone and Free Port (FTZFP)

Non-Fiscal Advantages

1. Simplified Bureaucracy: SEZs offer a one-stop service for business licensing and other regulatory requirements.
2. Building Permits: Developers can handle building permits, reducing the burden on tenants.
3. Land Procurement and Titling: Rights to use land and building rights can extend up to 80 years.
4. Immigration Incentives: Special immigration facilities include extended visas on arrival and limited stay permits.
5. No Negative List: Importation within SEZs is not subject to the usual restrictions.
6. Environmental Licensing: Developers are authorized to manage environmental licenses.
7. Property Ownership for Foreigners: Foreigners can own property within Tourism SEZs.

Also read: 10 Reasons Why You Should Invest in Indonesia

Indonesia’s Special Economic Zones Area and Distribution

Indonesia hosts 20 SEZs categorized into manufacturing, digital, tourism, and other services, each with specific focus areas and regulatory frameworks. These include several of the best cities for businesses in Indonesia:

Manufacturing SEZs

1. Gresik (East Java): Metal, electronics, chemical, energy industries, and logistics.
2. Kendal (Central Java): Textiles, furniture, food & beverage, automotive, electronics, and logistics.
3. Galang Batang (Riau Islands): Bauxite processing and logistics.
4. Sei Mangkei (North Sumatra): Palm oil processing, rubber processing, tourism, and logistics.
5. Arun Lhokseumawe (Aceh): Petrochemical and other chemical industries, and logistics.
6. Bitung (North Sulawesi): Coconut and fish processing, and logistics.
7. Palu (Central Sulawesi): Basic metal industry and logistics.
8. Maloy Batuta Trans Kalimantan (East Kalimantan): Palm oil processing, energy, wood processing, and logistics.
9. Morotai (North Maluku): Fish processing, tourism, and logistics.
10. Sorong (West Papua): Nickel processing, palm oil processing, sago processing, and logistics.

Also read: Complete List of Industrial Estates in Indonesia

Digital SEZs

1. Nongsa (Batam, Riau Islands): Digital economy, technology development, tourism, education, and creative industries.
2. Singhasari (Malang, East Java): Tourism and technology development.

Tourism SEZs

1. Mandalika (Central Lombok, NTB): Tourism.
2. Lido (Bogor, West Java): Tourism and creative industries.
3. Tanjung Lesung (Pandeglang, Banten): Tourism.
4. Tanjung Kelayang (Belitung, Babel): Tourism.
5. Likupang (North Minahasa, North Sulawesi): Tourism.
6. Kura Kura Bali (Denpasar, Bali): Tourism and creative industries.

Other Services SEZs

1. Sanur (Denpasar, Bali): Health and tourism.
2. Batam Aero Technic (Batam, Riau Islands): Aircraft maintenance, repair, and overhaul (MRO).

Also read: Where to Invest in Indonesia: 7 Best Cities and Locations

Can Foreigners Start a Business and Invest in Indonesia’s SEZs?

Yes, foreigners can start a business and invest in Special Economic Zones (SEZs) in Indonesia. The Indonesian government has made it easier for foreigners to invest in the country, and SEZs offer a number of incentives that can make it even more attractive for foreign investors.

Steps to Invest in SEZs

1. Preparation: Secure a land agreement with the developer and establish a company in accordance with Indonesian regulations.
2. Registration: Register through the Online Single Submission (OSS) or SINSW.
3. Construction and Operation: Begin construction and operational activities once approvals are obtained.

Also read: Can a Foreigner Own 100% of a Business in Indonesia?

The specific requirements may vary depending on the Indonesia’s Special Economic Zones and the type of investment. To simplify the process and ensure compliance, you can rely to InvestInAsia’s services for Indonesia PMA / Foreign company registration and Business Licenses Registration in Indonesia.

InvestinAsia is one of a company that can help you with Indonesia company registration. We have a team of experienced professionals who can help you through the process of Indonesia representative office registration, virtual office setup in Indonesia, and obtaining the necessary business registration number in Indonesia.

If you are interested in starting a business in Indonesia, you can start by contacting us to get special offer.

In conclusion, Special Economic Zones in Indonesia are a viable option for investors looking to establish or expand their businesses. With an array of incentives and strategic locations, they offer a compelling proposition. However, it’s crucial for investors to assess both the benefits and challenges carefully before making a decision.

If you have any further questions, don’t hesitate to chat with us!

source:

Secretariat General of the National Council for Special Economic Zones