Thursday, 13 March 2014


The picture of an Exclusive Economic Zone [KEK] is a region packed with massive economic investment and dynamic activities. For that matter the Government had proposed development of three new KEK zones and have their development accelerated for equal distribution of growth nationwide. The proposal was rated by economists as the right step.

The Coordinating Minister of Economy Hatta Rajasa stated that three new regions being proposed were: Tanjung Api Api [South Sumatra], Morotai [Maluku] and Mandalika [East Nusa Tenggara]. The recommendation was submitted to President Susilo Bambang Yudhoyono. Once approved, the KEK projects would begin to realize even distribution of development in the regions.

According to Minister Hatta, the advantage of being KEK had to be equipped with various infra structure facilities whereby to daw investors. KEK regions had strong magnetic appeal to investors of the industrial sector.

It was noteworthy that the three new KEK were located outside Java, considering that Java was already overcrowded so it was hardly possible to serve as KEK base. Politically KEK outside Java was strategic because it was safer since it had support of spacious land and abundant water supply, but Java could still be industrial center.

However, in the future there must be equal distribution of industry in all of Indonesia so as not to be centered in Java. For example, production of motor vehicles this year which numbered 1 million units was still exercised. However, assuming that by 2020 production of automotives would come to 3 million units, it would be hard for the industry to find space in Jakarta and surrounding area.

With KEK, the Government was encouraging the industry to expand and spread out to the far regions. In developing the industry, the Government extended support in the form of facilities, material and immaterial alike such as tax exemptions and other conveniences. It was right for the Government to build KEK outside Java; in Java there was only one KEK, i.e. in Tanjung Lesung KEK in Banten which was a tourist development center.

The Mandalika KEK was one Tourism KEK. For a start, 1,200 hectare of land had been prepared for hotel and resort building, it was reported that some investors had applied to participate like PT Gobel, Mandiri Maju Hotel, and PT MNC Land.

The Tanjung Api Api KEK, was the most ready zone. Tanjung Api Api was proposed to be KEK based on agro business such as palm and rubber which would undergo downstreaming process and where coalmining industry would also be developed.

The total area of land at Tanjung Api Api proposed KEK was 2,030 hectare with initial investment plan of Rp 12,302 trillion. As with Tanjung Api as KEK, the Oceanic harbor in that location was having sea-bottom shallowing problem and must be restored soonest. Many investors were interested in investing, among them was PT Pupuk Sriwijaya [PUSRI] who planned to use 700 hectares of land with investment amounting to Rp2.7 trillion.

Furthermore KEK development in Morotai was divided into some like industry, tourism and resort. The land prepared for initial stage was 1,500 hectares, the land would be divided into zones, i.e. resort, tourism, business, logistics and fishery industry. The total proposed area was 15,000 hectares with total investment of Rp 6.8 trillion.

Mandalika would be developed into tourist resort KEK considering many investors were planning to build resort, hotel and residential area. The total are of Mandalika proposed as KEK was 1,250 hectares with total investment of Rp2.2 trillion.

In short, the areas developed as KEK were areas economically potential for development. This was because the stipulation for KEK had passed several screening and review process before final approval. There were 14 requirements to be met, among others: no land clearing or land dispute problem existing, readiness for supporting infra structure, space planning permit etc.

In that case KEK must be prepared with maximum effort. No compromise to hindrances and obstacles and no procrastination tolerated. There were lessons to learn from previous KEK’s which did not run well due to some technical, social and legal obstacles, cases which emerged only the moment KEK was about to begin. The obstacles were among others Space Planning [RTRW], certainty of land ownership, status of land, and synchronization of provincial law and central Government’s law.

An example was the Semangke Industrial Estate which was designated as KEK and was scheduled for premiere export in September 2014. Semangke in North Sumatra was this year designated as KEK. Semangke would be one of Indonesia’s biggest harbor with PT Pelindo acting as operator.

KEK Semangke had been designated for long but the maximized outcome was only visible lately. The first investor that entered was PT Unilever Oleochemical Indonesia [UOI] and was followed by other investors who developed industry in Semangke.

The Government planned to collaborate with PT Pelindo to build the Kuala Tanjung Oceanic harbor, the biggest harbor in Semangke in 2014. In line with the MP3EI Masterplan, Kuala Tanjung would be the biggest oceanic harbor in that region to anticipate future development. With Unilever participating, and biggest harbor being build, Semangke could quickly grow into an exclusive zone, which would attract more investors to come to Semangke.

Development of KEK was rated as right because it enhanced the process of growth widespreading in line with BO’s plan in many regions to initiate cluster development in the regions. This cluster approach was supported by institutional strengthening, upgrading of farmers’ competence and financing by banks.

Cluster development was focused on food commodities production which contributed to price formation and inflation in the regions and also on commodities which increased people’s income. A strategy as such could up economic growth in the regions.

Cluster distribution was exercised in many provinces with diversified priority of development according to the nature of each province. As with clusters development in Indonesia, clusters in North Sumatra would be focused on intensification of rice production by SRI method in Serang Bedagai; while in Kalimantan cluster development would be based on Pasa Housing joint marketing.

In Central Java province clusters development would be focused on rattan clusters, in the province of West Java clusters would be for development of poultry business. In the province of Bali and West Nusa Tenggara the focus would be on livestock rearing and fish cultivation. In the provinces of Sulawesi, Maluku and Papua the focus would be on seaweed, chilli, Dongga batik and Bandeng fish. The cluster development were sample projects for developing potential industries in the respective regions.

Development of KEK project by the Government and cluster development project by BI would synergize to speed up economic development distribution and to strengthen the Unified Republic Indonesia [NKRI] for narrowing inter-regional, inter provincial and inter-insular gap. Investors might choose the province they felt as right for their projects. (SS)

Business News - February 28, 2014

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