Bill on Special Economic Zones

The House of Representatives (Dewan Perwakilan Rakyat / DPR) has finally passed the Bill on Special Economic Zones. It is expected that this bill will drive not only economic growth in the specific areas targeted but also across the whole Indonesian economy.

There have been some concerns that the bill has taken a long time to negotiate the DPR and finally gain passage. However, now that the bill has passed it provides the government with the impetus to develop areas into special economic zones and grant those zones the necessary facilities and incentives to be successful. Generally, it is expected that the government will focus on areas that are deemed to hold economic potential and that are also geographically strategic. These special economic zones (Kawasan Ekonomi Khusus / KEK) will focus on industries such as manufacturing exports, logistics, technology, tourism, and energy, among others. It is further expected that these zones will be competitive on an international scale.

The bill establishes a National Council and a Zone Council. The bill sets out the membership of both. The bill also sets out the duties and functions of each. For example, the National Council comprises of the Minister and the Heads of the relevant Non-Department Government Agencies. The primary function of the National Council is to compile the Master Plan for the KEK and to provide recommendations on areas that are suitable to become KEK.

The primary facilities that are to be provided relate to income tax. However, it is expected that other facilities and incentives will be offered relevant to the characteristics and features of the respective KEK.

The government has stated that it intends to finalize as much of the subsidiary legislation that is required under the bill within the next three months. It is then expected that the KEK created under the provisions of this bill will come on line within one to two years.