CORE values industrial SEZ expansion as supporting downstreaming policy

The Executive Director of the Center of Reform on Economics (CORE) Indonesia, Mohammad Faisal, has assessed that the expansion of industrial-based Special Economic Zones (SEZs) supports the government’s downstreaming policy. This follows three industrial SEZs—KEK Gresik, KEK Kendal, and KEK Galang Batang—submitting applications for land expansion and area development, averaging twice their existing size, to accommodate new investment demand. “I think the expansion of these three SEZs is very good, indeed, if it is to accommodate the surge in investment,” Faisal said when contacted in Jakarta on Saturday. “Because looking at the three SEZs, these are SEZs that contain industries or manufacturing plants related to the government’s downstreaming policy, mineral processing, and high-tech industries such as electronics, petrochemicals, and EVs,” he added. Faisal cited KEK Gresik as being closely linked to the metal/smelter, electronics, chemical, and energy industries. Meanwhile, KEK Galang Batang focuses on the mineral processing industry (bauxite) and its derivative products. Similarly, KEK Kendal is known as a centre for developing export-based and technology industries, including electric vehicles (EVs). “So, if there is a need for land expansion due to increased investment in these industrial estates, it is certainly very good for driving our industrialisation,” Faisal said. He added that the characteristics of manufacturing investment itself require quite extensive land. Therefore, he continued, the SEZ expansion is expected to help with expansion and to attract larger investments, including the facilities within them. “Such as ease of export-import facilitation, which then means encouraging industries that are not only oriented towards the domestic market but also the export market,” Faisal stated. However, he cautioned that the government needs to pay attention to the correlation between additional investment and the creation of quality jobs domestically. Faisal believes there needs to be an indicator as a benchmark to control the quality of investment, including an indicator of the number of domestic workers absorbed. “So, if so far only the investment value has been the indicator, here the quality of incoming investment should also be considered, including how many jobs are created for the domestic community and technology transfer,” Faisal said. “As well as the involvement of local economic actors or businesses in what is integrated with the manufacturing industry from this new investment,” he added.