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Indonesia Targets 4% ICOR Reduction Through SEZ Development

Jakarta (ANTARA) – Indonesia aims to boost its economic efficiency by targeting a 4 percent reduction in the Incremental Capital Output Ratio (ICOR) through the development of special economic zones (SEZs). Coordinating Minister for Economic Affairs, Airlangga Hartarto, highlighted the significance of prioritizing SEZ development to achieve this ambitious goal.

Importance of ICOR Reduction

During his keynote speech at the IBC Business Competitiveness Outlook 2025 in Jakarta, Hartarto emphasized the importance of improving Indonesia’s investment efficiency. The ICOR measures how efficiently a country converts capital investment into economic output, with lower values indicating better efficiency. Currently, Indonesia’s ICOR stands at around 6 percent, and the goal is to reduce it to 4 percent within the next three to four years.

Role of SEZs

Hartarto pointed out that SEZs play a crucial role in enhancing economic efficiency. He cited the example of the Galang Batang SEZ, which focuses on critical minerals and strategic manufacturing, as a model for efficient development. The minister also highlighted the success of the Weda Bay SEZ, where a significant investment yielded high export returns with an ICOR of only 2 to 3 percent, showcasing remarkable efficiency.

Impact of SEZs

Indonesia is home to several prominent SEZs, including Gresik, Kendal, and Galang Batang, operating in diverse sectors such as minerals and manufacturing. These zones collectively contribute billions in annual exports, with the potential to drive further SEZ expansion. Hartarto stressed the need for all regions to achieve similar levels of efficiency to establish Indonesia as a global benchmark for economic development.

Growth and Investment

SEZs have been instrumental in attracting investments and creating job opportunities in Indonesia. In 2024 alone, these zones attracted over US$5 billion in investments and employed nearly 43,000 workers. Since 2012, SEZs have seen cumulative investments totaling over US$16 billion and have provided livelihoods for more than 156,000 individuals, involving nearly 400 business entities.

Indonesia’s SEZs have witnessed rapid growth across various sectors, including manufacturing, digital economy, health, education, and aircraft maintenance services. The continuous development of these zones is crucial for driving economic growth and attracting further investments, contributing to the country’s overall economic prosperity.

This article showcases Indonesia’s commitment to enhancing its investment efficiency through SEZ development, with a clear focus on achieving a 4 percent ICOR reduction in the coming years. The success of SEZs in driving economic growth and creating employment opportunities underscores their pivotal role in Indonesia’s economic landscape.