The initial concept of Economic Zones in Indonesia stems from the development of Industrial Zones of the British Industrial Revolution. The concept then penetrated into the development of industries, especially in big cities in the Java region. Spatial planning for industrial growth were directed to Industrial Zones which were very limited at that time. Industrial Parks in the 1970s were initiated by the Indonesian government through its State-Owned Enterprises in Jakarta, Surabaya, Cilacap, Medan, Cilegon, and Makassar.
The Industrial Revolution brought changes in the development of industrial parks in Indonesia, from state-owned domination to private sector, aiming acceleration of industrial growth in various regions while scheming the spatial planning to reduce environmental impact, create new economic centers to improve the socio-economic conditions in various regions and support Indonesia's economic growth.
In accordance with Government Regulation No. 14 of 2015 concerning the 2015-2035 National Industrial Development Master Plan (RIPIN 2015-2035), the Indonesian government set targets for the development of industrial regions in Indonesia for the year 2035:
Indonesia has also determined 10 types of priority industries:
In Indonesia, economic zone development is carried out based on a combination of spatial approaches and regional competencies. The concept of Economic Zone in Indonesia has actually existed since the development of the Sabang Free Port in Aceh in 1963. Over time, the economic zone has been developed in various forms, although the starting point was Industrial Parks of the state-owned domination. Indonesia launched the Free Trade Zone area in Batam in the late 1970, Bonded Zone in 1986 and Special Economic Zones in 2009.
- Facing the challenges of global competitiveness, technological advances are the main drivers in the development of the efficiency and effectiveness of the manufacturing industry. The Industrial Revolution 4.0 (4IR) is a big leap for industries where information and communication technology is fully utilized throughout the value chain, giving birth to a new business model with a digital basis to achieve high efficiency and better product quality. Use of Internet of Things (IoT), Big Data, Cloud Computing, Mixed Reality, Artificial Intelligence (AI), Human–Machine Interface, robotic technology and sensors, as well as 3D printing technology has been adopted by various sectors, including industrial parks.Industrial Parks in Indonesia are transforming from the 3IR to 4IR as the green industry demand for the industrial symbiosis is echoing globally, expecting efficiency in resource processing towards Net Zero Emission. Although Indonesia has entered the 4IR in 2011, the realization was somehow slow. The Indonesian government has been putting more efforts to improve the competence of human resources through link and match programs between education institutions and industries, carried out in synergy between the Ministry of Industry and related ministries, such as the National Development Planning Agency (Bappenas), the Ministry of SOEs, the Ministry of Manpower, and the Ministry of Education, Culture, Research, and Technology.
Industrial Revolution
Manufacturing industry and industrial parks are inseparable, particularly after the Indonesian government issued Law No. 3 of 2014 concerning Industry, mandating all manufacturing activities to be located in the industrial parks, with clear objectives to provide certainty of location according to spatial planning and land ownership, boost efficiency through integrated infrastructure and facilities, enhance the environmental sustainability, in addition to improve investment competitiveness and national economic growth. Along with its development, industrial parks are built based on different concepts, whether purely as industrial parks, or industrial cities that are integrated with commercial and residential centers, and integrated industrial parks that are connected to port or air logistics systems.Development Concept
In the 1990s, the enthusiasm of the private sector was quite high in applying for Location Permits to develop Industrial Parks in the regions. West Java, especially in the Jakarta-Cikampek Toll Road corridor (covering the Bekasi and Karawang areas), was booming at that time as many national private developers collaborated with foreign partners from Japan and South Korea to develop Industrial Parks.
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Karawang International Industrial City
Karawang International Industrial City (KIIC) is located in Karawang Regency, West Java. In its concept, KIIC was developed as an Industrial Park only for industrial manufacturing activities with supporting facilities related to the industry (warehousing, factory and office rentals, banking facilities, serviced apartments, and limited commercial areas), and not mixed with the development of residential areas. KIIC is a joint venture between Sinarmas Land Indonesia and Itochu Corp. Japan. The industrial park is managed by PT Maligi Permata Industrial Estate with a total area of 1,500 hectares, electricity is supplied by PLN with 2 sources of 360 MVA, water treatment plant capacity of 35,000 m3/day and waste treatment of 36,000 m3/day, and underground piped natural gas supply by state-owned PGN. 75% of the industrial tenants is Japanese manufacturing companies, while 58% of the tenant mix is dominated by automotive industry with big names of Toyota, Daihatsu and Yamaha.MM2100
MM2100 Industrial Town in Cikarang is managed by PT. Megalopolis Manunggal Industrial Development. Established in 1990 by Marubeni Corporation of Japan and the Manunggal Group of Indonesia on 805 ha, the industrial city was developed in 3 phases. Electricity is supplied by Cikarang Listrindo, a private power supply company, natural gas is supplied through underground pipelines by PT PGN. The industrial park has 3 units water treatment plant with total capacity of 72,000m3/day and 2 units waste water treatment facility up to 72,000 m3/day using food chain reactor / biological process. MM2100 has a residential and commercial area of 12 hectares, Vasanta Innopark, with the concept of The First Integrated Japanese Town which offers convenience for tenants to live, work, learn and play.
Batamindo Industrial Park
Batamindo Industrial Park was conceptualized under an economic cooperation agreement between the governments of Indonesia and Singapore in 1989. Since its inception in 1990, the 320-hectare industrial park was developed as a joint venture between Indonesia's Salim Group and Singapore's Sembcorp Development Ltd, offering independent key supporting infrastructure such as 110.8 MW power generation, 4,500 m3/day water and waste treatment, telecommunications, sanitary systems, firefighting and medical facilities as well as work-life amenities.Java Integrated Industrial and Port Estate (JIIPE)
JIIPE (Java Integrated Industrial and Port Estate) is an integrated industrial park in Gresik, East Java. As a public private partnership project between Pelabuhan Indonesia (Pelindo) and AKR Corporindo on 3,000 Ha, consisting of 1,800 Ha industrial area, 400 Ha port area and 800 Ha residential and commercial area, JIIPE offers more access to reduce logistics costs. The multipurpose port with -14 LWS and total 6,200-meter berthing area is able to cater more than 50,000 DWT vessels. Hosting Freeport Indonesia, a copper smelting company, as its anchor tenant, and inviting more heavy and medium industry, JIIPE adopting industrial clustering system in its staging development to support the tenants’ productivity and reduce costs of transferring goods. Commercial since 2015, JIIPE has been awarded as one of the Special Economic Zones in Indonesia in 2021. The developer builds and operates independent utilities, including gas power plant with capacity up to 1,100 MW and water treatment plant with capacity up to 7,300m3/day.
Galang Batang Industrial Park
Galang Batang Industrial Park in Bintan, Riau Island hosts bauxite processing industry and its supply chain on 2,336 Ha. The Indonesia-China industrial park has a Special Economic Zone status, starting operation in October 2018 and is one of the role models of export oriented SEZ. Nanshan Group as its strategic partner has successfully built an aluminium refinery with 2 million ton per year capacity, supported by 6 x 25 MW coal fired power plant, 40,000m3/hour gas plant and multipurpose port of 2 x 35,000 DWT. Bauxite and aluminium downstream industry is the targeted sector. Adjacent to the Batam Free Trade Zone and the Philip Strait, the Galang Batang Industrial Park has direct access to the Malacca Strait and the South China Sea.Indonesia Morowali Industrial Park
Indonesia Morowali Industrial Park (IMIP) develops a nickel-based industrial park, hosting tenants in the nickel processing both for class 1 of the electric vehicle battery supply chain and class 2 of the stainless-steel supply chain. The project commenced after a G2G agreement between Indonesia and China in 2013. Developed by the Bintang Delapan Group of Indonesia and Tsingshan Steel Group of China, until 2021 the industrial park development has reached 3,000 hectares. Commercial areas, religious building, hotel, clinic and education center completed the integrated industrial park.The developer is expanding the industrial park to accommodate incoming demand from the nickel processing supply chain, in addition to expand its utility facilities from the current 1,960 MVA electricity and 1,200 lps water treatment plant. Located in Central Sulawesi, the development of IMIP brings multiplier effects to the regional economics.As of September 2022, there are 107 Industrial Park developers registered in the association of HKI (Himpunan Kawasan Industri), with the total area of 106,870.30 Ha. As many as 75 industrial parks are already in operation, while the remaining 32 are still under construction and planning stages.In the recent 5 years, as the downstream processing activities have been accelerated in the Eastern of Indonesia, the statistics show more balanced industrial park development between Java Island (56%) and non-Java Island (44%). Natural resource processing industry, logistics and new economic center development is rising in Sulawesi, Maluku, Kalimantan, and Sumatera. While Java is still being the center of high-tech and labor-intensive industry due to supply chain, infrastructure and human capital consideration. New demand in the data center, electric vehicle and health supply chain as well as e-commerce and logistics and natural processing in the plantation, fishery and mining sector will find its nature call to fit to the industrial park development in Indonesia.Developing a new industrial park? We will help you to accelerate the project, from planning to commercial stage, our consultants will give you guidance to shorten your learning curve and comply to the Indonesian regulations. Contact us.
Industrial parks should be equipped by basic infrastructure, such as energy and electricity, water resources, waste water treatment, reliable telecommunications networks, gas supply, and the integration of logistics systems, land, sea and air, to support the manufacturing activities. Some industrial park developers build and manage independent utility infrastructures, while some opt to utilize national infrastructure, resulting to different pricing, capacity and reliability.Need more data for industrial park developers and utility rates? In opaque jurisdictions like Indonesia, there is limited data available online. Most of the time, information would have to be manually retrieved from relevant institutions. Without well-placed support, this un-digitized data will be difficult and more importantly costly to retrieve. Contact us for reliable data. - Both nature and culture are major components of Indonesian tourism. The natural heritage can boast a unique combination of a tropical climate, a vast archipelago of 17,508 islands, 6,000 of them being inhabited, the second longest shoreline in the world (54,716 km) after Canada. It is the world's largest and most populous country situated only on islands. The beaches in Bali, diving sites in Bunaken and Raja Ampat, Mount Bromo in East Java , Lake Toba and various national parks in Sumatra are just a few examples of popular scenic destinations. These natural attractions are complemented by a rich cultural heritage that reflects Indonesia's dynamic history and ethnic diversity. One fact that exemplifies this richness is that 719 living languages are used across the archipelago.The 2019 Travel and Tourism Competitiveness Report ranks Indonesia 40th out of 140 countries overall with a score of 4.3. It lists the price competitiveness of Indonesia's tourism sector the sixth out of 140 countries. The report states that Indonesia scores well on visa policy (#3) and international openness (#16), as well as on natural (#17) and cultural resources (#24). However, Indonesia has a low score in infrastructure (#98), as some aspects of tourist service infrastructure are underdeveloped. Other aspects that need to be improved include health and hygiene, environmental sustainability, and affinity for travel and tourism.
To speed up the improvements, the Indonesian government has been focusing on Tourism Parks and establishing 88 National Tourism Strategic Areas (KSPN), with first priority given to 10 regions to become the New Bali:
Of the 10 Priority Zones, the government chose 5 to be Super-Priority Zones
The tourism sector is a significant driver of Indonesia’s economic growth. The COVID-19 pandemic has brought unprecedented disruption and many vulnerable people who rely on tourism for their livelihoods are affected most by the uncertain situation caused by the pandemic. During the recovery, the Indonesian government has launched more programs to boost the tourism industry, while continuing infrastructure development in the prioritized regions. Of the 10 Priority Zones, the government chose 5 to be Super-Priority Zones.
- Science and Techno Park is expected to be managed professionally as start-up incubators. According to Presidential Decree No. 106/2017 concerning Science and Technology Areas, the Ministry of Research, Technology and Higher Education is the coordinator of the development of Science and Techno Parks in Indonesia. Article 30 of the Decree defines various incentives given by the Indonesian government to support the Science & Techno Park development, from research and development financing, initial capital, access to marketing, intellectual property facilities, incubation funds, assistance for facility and infrastructure, licensing and tax facilities.Science & Techno Parks roll on synergy among academia, business, and government to create a conducive environment for sustainable research and technology related activities, fostering technology-based start-ups as Indonesia is projected to become the largest digital economy in ASEAN with 1,000 technopreneurs, a business valuation of USD 100 billion, and an e-commerce value of USD 130 billion.
Development of Science & Techno Park in Indonesia
BSD City Digital Hub
Developed on an area of 25 hectares in 2017 to become the future home for technology companies and start-ups in Indonesia. Currently, a number of educational institutions in the programming and coding have been operating, such as Apple Developer Academy, Binar Academy, Techpolitan, Purwadhika, Grab Innovation Lab, and Creativenest.
Nongsa Digital ParkPrepared for digital business development in Indonesia and globally, employing digital creators also provides state-of-the-art information technology facilities, including high-speed optical networks and data centers. This area is still in the brown field development stage. In the economic zone, some facilities are built. such as IT office park (digital town), Apple Academy, and animation film studio.
Looking for partnership with the Science & Techno Parks? Discuss with us,. - Logistics and distribution centers can be developed in an integrated area that regulates supply chain activities, aiming of lower logistics costs for industrial tenants. The logistics costs of a country reflect the country's level of efficiency in shipping goods from the points of origin to the points of destination. Indonesia is listed as one of the countries with quite high logistics costs compared to other ASEAN countries with a percentage of logistics costs to GDP of 26% as of February 2022.To date, the need for raw materials and capital goods as well as auxiliary materials for domestic industries is still largely imported from warehouses in neighbor countries, particularly Singapore and Malaysia, which causes inefficiencies in terms of cost and time. Various efforts have been made by the Indonesian government to reduce logistics costs, aiming to lower it to 17% in 2024 by improving the regulations, developing infrastructure and adopting the information technology systems.
Some examples of the logistics park development in Indonesia:
In 2015 the Indonesian government launched the Bonded Logistics Center concept, targeting Indonesia to become the next logistics hub in the Asia Pacific region. An extension of the function of the Bonded Storage as a distribution center for imported raw materials and the consolidation of export goods, the Indonesian-launched Bonded Logistics Center is socialized as a place for stockpiling export-import goods for industrial purposes, which allows value-added activities such as sorting, packing and labeling. In its development, the Bonded Logistics Centers were built thematically to accommodate the industrial commodities, for basic goods, finished goods, air cargo hub, e-commerce distribution center, floating storage, and Bonded Logistics Center for small medium enterprises and large industries. The concept was gradually accepted by the market, stimulating many companies moving their goods from Singapore and Malaysia to Indonesia.
- Indonesia will soon have a Health Park as a national health improvement for cancer treatment in particular, in addition to providing a better facility for middle-class Indonesian citizens who generally prefer to seek treatment abroad such as to Penang, Malaysia, and Singapore. Data shows that Indonesia still recorded a cancer death rate of 60 percent, higher than the world average, which was already below 50 percent, and more than 2 million Indonesians travelled overseas in 2019 to get health services, worth USD6 billion.The Indonesian government through the Ministry of State-Owned Enterprises assigned PT Hotel Indonesia Natour in collaboration with PT Pertamina Bina Medika – Indonesia Healthcare Corporation (IHC) to build the first Special Economic Zone (SEZ) for Health and Tourism in Indonesia, located in Sanur, Bali. As a state-owned hospital holding, IHC currently oversees 75 hospitals and 143 clinics throughout Indonesia. The groundbreaking of the Sanur SEZ was carried out by President Joko Widodo on December 27, 2021.
Sanur SEZ comes with an integrated business model, combining health facilities, hotel and MICE accommodation, ethnomedicinal botanical gardens, as well as a commercial center, on an area of 41.26 hectares owned by PT Hotel Indonesia Natour (HIN) with estimated investment value of USD664 million. Bali was chosen as the location to give patients the opportunity to get world-class health services, while traveling and enjoying the nature beauty and hospitality of Bali. There are six clusters in the Sanur SEZ that are devoted to health services. Two of them have been leased and will later be built as international-class hospitals operated by the Mayo Clinic.
Four others are open for investors in the plastic and cosmetic surgery, geriatrics, stem cell research center, as well as oriental medicine and fertility center. Indonesia has been inviting investors from developed countries, including Japan and South Korea to bring their technology and expertise to support the health park development.
The Sanur SEZ is projected to divert 4% – 8% of Indonesian citizens from seeking health treatment abroad. It is hoped that by 2030, the number of patients seeking treatment at the Sanur SEZ will reach 123,000 to 240,000 people. The Special Economic Zone status for Sanur Health Park allows clinical-trial research and allows foreign doctors to provide medical services.
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