Expansion of Three SEZs Could Absorb 500,000 Workers and Attract IDR 894.8 Trillion in Investment
A fresh breeze is blowing from Indonesia’s Special Economic Zones (SEZs). At least three SEZs — Kendal, Gresik, and Galang Batang — have proposed land expansions due to substantial new investment commitments amid increasingly limited land availability within these areas.
Data from the Coordinating Ministry for Economic Affairs reveals that the Kendal SEZ in Central Java has applied for an additional 1,000 hectares. Based on Government Regulation No. 85/2019, the current area of the Kendal SEZ is 1,000 hectares, bringing the total to 2,000 hectares once approved. Meanwhile, the Gresik SEZ in East Java has proposed an expansion of 1,260 hectares. Under Government Regulation 71/2021, the current area is 2,167 hectares, which would increase the total to over 3,400 hectares. The Galang Batang SEZ in the Riau Islands has applied for an expansion of 2,736.9 hectares. Its current area is 2,333.6 hectares, meaning the total would become 5,002 hectares.
Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono Moegiarso, explained that the expansion proposals for the three zones are still under discussion and evaluation in accordance with applicable regulations. Although final government approval has not yet been granted, Susiwijono affirmed that the government fully supports the expansion in principle to accelerate national investment realisation. He noted that the need for land expansion reflects investor confidence in the country’s SEZs.
“Amidst various questions regarding the national investment climate, Indonesia’s main industrial estates are actually experiencing high land utilisation rates, thus requiring new space to accommodate the continuous influx of investment,” Susiwijono told Bisnis.
Based on calculations by the Coordinating Ministry for Economic Affairs, the expansion of these three SEZs has the potential to add IDR 894.83 trillion in investment and absorb more than 500,000 new workers. For comparison, investment realisation across all SEZs reached IDR 335 trillion from 2012 to 2025, with employment absorption of 248,459 people. This means that if the projections are realised, the investment and employment in these three SEZs alone could surpass the total achieved by all SEZs between 2012 and 2025.
The breakdown is as follows: the Gresik SEZ expansion is projected to attract IDR 410.78 trillion in investment and 160,111 workers; the Kendal SEZ is projected to attract IDR 370 trillion and 250,000 workers; and the Galang Batang SEZ is projected to attract IDR 114 trillion and 99,534 workers.
Furthermore, Susiwijono revealed that each SEZ will host different industries. In the Gresik SEZ, the new space will be focused on building a semiconductor ecosystem, digital research, and providing renewable energy through floating solar power plants. The Kendal SEZ is projected to become a new epicentre for artificial intelligence and semiconductor industries. Meanwhile, the Galang Batang SEZ is being prepared as a centre for refinery and metallurgy.
Regarding the budget burden of this expansion, the Coordinating Ministry for Economic Affairs stated that the state budget posture remains secure because all funding is confirmed to be the responsibility of the Development and Management Business Entities (BUPP) together with investors. “The development of SEZs fundamentally prioritises financing independence driven by the private sector. From the acquisition of thousands of additional hectares of land, to the construction of basic infrastructure, to the provision of supporting facilities, everything is funded independently,” he said.
Susiwijono added that the land expansion and development of the SEZs require amendments to the respective government regulations for each zone. According to him, the BUPPs of the three SEZs are currently completing the administrative requirements. The Coordinating Ministry for Economic Affairs will coordinate with relevant ministries and agencies to support the acceleration of the expansion of the Kendal, Gresik, and Galang Batang SEZs.
Despite the welcome news, a number of economists stress that the success of SEZs should not be judged solely by land expansion or success in attracting investment. Equitable distribution and evaluation of fiscal incentives must also be a focus. Professor Syafruddin Karimi from the Faculty of Economics and Business at Andalas University, for instance, explained that expanding SEZ land does not automatically increase national production capacity. The expansion of these three SEZs could potentially only concentrate investment in areas that already have ready infrastructure, connectivity, licensing, and logistical support. “If this pattern occurs, Indonesia is merely enlarging already strong industrial pockets, not expanding the production base nationally,” Syafruddin explained.
According to him, new investment in the Kendal, Gresik, and Galang Batang SEZs can only have a significant impact on the regional economy if the government and zone managers bind investors with local linkage obligations. He cited examples such as requiring SEZs to absorb local labour, improve worker skills, and use services and raw materials from regional suppliers, including MSMEs, thereby deepening the supply chain, broadening community income, and strengthening the local tax base. Syafruddin also urged the government to implement supplier development programmes, tiered contracts for local MSMEs, industry certification, and mandatory workforce training in each SEZ.
Similarly, Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, underlined that a high investment value in a zone does not automatically translate into widespread economic benefits for the local community. Yusuf argued that focusing expansion on already established SEZs actually obscures the original purpose of their formation, which is as an instrument for equitable national economic distribution. He noted that many SEZs outside Java are still not optimally developed.