Special Economic Zone (SEZ) Development Policy Strategy in Attracting Foreign Investment
DOI:
https://doi.org/10.30659/ttcsb275Keywords:
Capital, Economy, Investment, Policy, PublicAbstract
Special Economic Zones (SEZs) are area-based policy instruments to strengthen the attractiveness of foreign investment, but the success of a region is not determined by incentives alone. This article analyzes public policy strategies in SEZ development through a literature review and normative analysis of Indonesian regulations. The discussion focuses on priority sector selection, infrastructure readiness, investment facilitation, data-driven promotion, local business linkages, and legal certainty and accountability of incentives. The study shows that investment attraction is more sustainable when fiscal facilities complement basic competitive conditions, such as connectivity, skills availability, institutional quality, licensing consistency, and market access. The main regulations analyzed include Law No. 39 of 2009 concerning SEZs, Law No. 25 of 2007 concerning Investment, Law No. 6 of 2023, Government Regulation No. 40 of 2021, Government Regulation No. 28 of 2025, and provisions on tax and customs facilities. The article recommends a sectoral roadmap, integrated services, results-based incentives, strengthening local suppliers, and a performance dashboard that distinguishes commitment from investment realization. Measurement of economic, social, fiscal, and environmental impacts needs to be implemented periodically so that SEZs do not develop as enclaves, but rather as drivers of productivity and inclusive regional development.
Downloads
References
Journals:
Afida, Chabibah Nur & Cahyo Aji Widodo. “The Location-Based Tax Incentives in Indonesia: Special Economic Zones.” Jurnal Pajak Indonesia (Indonesian Tax Review), Vol. 7, No. 2, 2023, 11–17. DOI: https://doi.org/10.31092/jpi.v7i2.2171
Aggarwal, Aradhna. “How Special are Special Economic Zones: Evidence from South Asia.” The World Economy, Vol. 46, No. 8, 2023, 2361–2382. DOI: https://doi.org/10.1111/twec.13383
Alfaro, Laura et al., “FDI and Economic Growth: The Role of Local Financial Markets.” Journal of International Economics, Vol. 64, No. 1, 2004, 89–112. DOI: https://doi.org/10.1016/S0022-1996(03)00081-3
Asiedu, Elizabeth. “On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?.” World Development, Vol. 30, No. 1, 2002, 107–119. DOI: https://doi.org/10.1016/S0305-750X(01)00100-0
Bénassy-Quéré, Agnès et al., “Institutional Determinants of Foreign Direct Investment.” The World Economy, Vol. 30, No. 5, 2007, 764–782. DOI: https://doi.org/10.1111/j.1467-9701.2007.01022.x
Borensztein, Eduardo et al., “How Does Foreign Direct Investment Affect Economic Growth?.” Journal of International Economics, Vol. 45, No. 1, 1998, 115–135. DOI: https://doi.org/10.1016/S0022-1996(97)00033-0
Brussevich, Mariya. “The Socioeconomic Impact of Special Economic Zones: Evidence from Cambodia.” The World Economy, Vol. 47, No. 1, 2024, 362–387. DOI: https://doi.org/10.1111/twec.13526
Busse, Matthias & Carsten Hefeker. “Political Risk, Institutions and Foreign Direct Investment.” European Journal of Political Economy, Vol. 23, No. 2, 2007, 397–415. DOI: https://doi.org/10.1016/j.ejpoleco.2006.02.003
Dorożyński, Tomasz et al., “Determinants of Investment Attractiveness of Polish Special Economic Zones.” Entrepreneurial Business and Economics Review, Vol. 6, No. 4, 2018, 161–180. DOI: https://doi.org/10.15678/EBER.2018.060409
Dunning, John. “The eclectic paradigm as an envelope for economic and business theories of MNE activity.” International Business Review, Vol. 9, No. 2, 2000, 163–190. DOI: https://doi.org/10.1016/S0969-5931(99)00035-9
Globerman, Steven & Daniel Shapiro. “Global Foreign Direct Investment Flows: The Role of Governance Infrastructure.” World Development, Vol. 30, No. 11, 2002, 1899–1919. DOI: https://doi.org/10.1016/S0305-750X(02)00110-9
Harding, Torfinn & Beata S. Javorcik. “Roll Out the Red Carpet and They Will Come: Investment Promotion and FDI Inflows.” The Economic Journal, Vol. 121, No. 557, 2011, 1445–1476. DOI: https://doi.org/10.1111/j.1468-0297.2011.02454.x
Liu, Yang & Yidan Jin. “Special Economic Zones, Export Status, and Firms’ Productivity: Theory and Evidence from China.” Review of Development Economics, Vol. 26, No. 3, 2022, 1338–1360. DOI: https://doi.org/10.1111/rode.12883
Mulyana, Septira Putri & Putri Raodah. “Analisis Yuridis Pengaturan Investasi di Kawasan Ekonomi Khusus (KEK) Mandalika Pasca UU Cipta Kerja.” Private Law, Vol. 5, No. 2, 2025, 432–441. DOI: https://doi.org/10.29303/prlw.v5i2.7197
Purwana, Aditya Subur et al., “LESSON LEARNED FASILITAS KAWASAN EKONOMI KHUSUS INDONESIA” Jurnal Perspektif Bea dan Cukai, Vol. 7, No. 2, 2023, 315–337. DOI: https://doi.org/10.31092/jpbc.v7i2.2286
Ramasamy, Bala & Matthew Yeung. “A Causality Analysis of the FDI-Wages-Productivity Nexus in China.” Journal of Chinese Economic and Foreign Trade Studies, Vol. 3, No. 1, 2010, 5–23. DOI: https://doi.org/10.1108/17544401011016654
Sihaloho, Tumpal & Naufa Muna. “Kajian Dampak Ekonomi Pembentukan Kawasan Ekonomi Khusus.” Buletin Ilmiah Litbang Perdagangan, Vol. 4, No. 1, 2010, 75–101. DOI: https://doi.org/10.30908/bilp.v4i1.150
Singhania, Monica & Akshay Gupta. “Determinants of Foreign Direct Investment in India.” Journal of International Trade Law and Policy, Vol. 10, No. 1, 2011, 64–82. DOI: https://doi.org/10.1108/14770021111116142
Snyder, Hannah. “Literature review as a research methodology: An overview and guidelines.” Journal of Business Research, Vol. 104, 2019, 333–339. DOI: https://doi.org/10.1016/j.jbusres.2019.07.039
Suryani, Nurafni Irma & Ratu Eva Febriani. “Kawasan Ekonomi Khusus Dan Pembangunan Ekonomi Regional: Sebuah Studi Literatur.” Convergence: The Journal of Economic Development, Vol. 1, No. 2, 2019, 40–54. DOI: https://doi.org/10.33369/convergence-jep.v1i2.10902
Swamy, Vighneswara & Vijayakumar Narayanamurthy. “What Drives the Capital Flows into BRICS Economies?.” The World Economy, Vol. 41, No. 2, 2018, 519–549. DOI: https://doi.org/10.1111/twec.12606
Tamno Tekam, Jacques Eric & Joseph Keneck-Massil. “Foreign Direct Investment Attractiveness in Africa: The Role of Special Economic Zones.” The World Economy, Vol. 48, No. 12, 2025, 2507–2526. DOI: https://doi.org/10.1111/twec.70011
Wang, Jin. “The Economic Impact of Special Economic Zones: Evidence from Chinese Municipalities.” Journal of Development Economics, Vol. 101, No. 1, 2013, 133–147. DOI: https://doi.org/10.1016/j.jdeveco.2012.10.009
Widyastuti, Bela Pratama et al., “Indonesia’s FDI in Development of Special Economic Zones (SEZs).” KnE Social Sciences, Vol. 9, No. 4, 2024, 743–755. DOI: https://doi.org/10.18502/kss.v9i4.15117
Zeng, Douglas Zhihua. “The Past, Present, and Future of Special Economic Zones and Their Impact.” Journal of International Economic Law, Vol. 24, No. 2, 2021, 259–275. DOI: https://doi.org/10.1093/jiel/jgab014
Regulation:
Minister of Finance Regulation Number 237/PMK.010/2020 concerning Tax, Customs, and Excise Treatment in Special Economic Zones
Regulation of the Minister of Finance Number 33/PMK.010/2021 concerning Amendments to Regulation of the Minister of Finance Number 237/PMK.010/2020
Government Regulation Number 28 of 2025 concerning the Implementation of Risk-Based Business Licensing
Government Regulation Number 40 of 2021 concerning the Implementation of Special Economic Zones
Law Number 6 of 2023 concerning the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law
Law Number 25 of 2007 concerning Investment
Law Number 32 of 2009 concerning Environmental Protection and Management
Law Number 39 of 2009 concerning Special Economic Zones
