Indonesia’s Special Economic Zones: A Game-Changer for Foreign Investors

Indonesia is expanding its SEZs into integrated, export-focused industrial hubs to enhance competitiveness, attract foreign investment, and shift towards higher value-added manufacturing, logistics, and technology sectors.

Indonesia’s Shift in SEZ Strategy

Indonesia is advancing the development of its Special Economic Zones (SEZs) as part of a broader overhaul of its industrial policy. Instead of viewing SEZs as isolated, tax-driven enclaves, the country is repositioning them as integrated, export-focused platforms that support manufacturing, logistics, and technology industries. This strategic shift aims to foster higher value-added activities within domestic supply chains, making the zones more competitive for long-term foreign investment.

Regional Competition and Industrial Positioning

Across ASEAN, economies are intensifying efforts to attract manufacturing and industrial investments. Indonesia’s SEZ strategy is designed to keep the country competitive by aligning industrial development with enhanced logistics, trade connectivity, and investment facilitation. By positioning SEZs as sustainable industrial platforms, Indonesia aims to secure its place as a key player in regional manufacturing markets.

Incentives and Investment Support

Indonesia’s SEZs are backed by a structured incentive framework intended to reduce fiscal barriers and ensure smooth investment execution. Incentives depend on investment scale, sector classification, and regulatory approval but generally include benefits like tax reductions. These measures are intended to attract and retain investments, particularly as companies transition from tax holidays to the standard corporate income tax rate of 22%, with considerations for global tax obligations.