Indonesia’s Batang Zone Aims to Attract Major Investments with New SEZ Status

Indonesia's Batang Integrated Industrial Zone (KITB) has been designated a special economic zone (SEZ), promising significant incentives to attract global investors. According to Coordinating Minister Luhut Pandjaitan, the SEZ aims to create 250,000 jobs and attract trillions in investments.

Batang Industrial Zone Gains SEZ Status, Aims to Attract Trillions in Investments and 250,000 Jobs

According to Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan, the government has elected to designate the Batang Integrated Industrial Zone (KITB) as a special economic zone (SEZ).

As a result of this status, the KITB is eligible to receive specific incentives designated for SEZs. "Consequently, we will offer the same incentives, tax holidays, and other benefits as those provided to other SEZs," he stated at the inauguration ceremony for the new industrial area on July 26 as reported by Kumparan.

The industrial zone in Central Java is anticipated to generate a minimum of 250,000 employment opportunities and entice investment in trillions of rupiah.

The opening event was headlined by President Joko "Jokowi" Widodo, who lauded the KITB as a chance to attract overseas investors to construct factories in Indonesia. He also noted that the country's ranking in a global competitiveness index had improved to 27th.

According to Asia News Network, Indonesia was ranked 27th out of 67 nations assessed in the 2024 World Competitiveness Ranking (WCR) published by the Institute for Management Development (IMD). This represents an improvement from the archipelago's 34th position in 2023. In Southeast Asia, Indonesia was outranked by only Singapore and Thailand.

According to the President, several factors, such as the country's economic and political stability and relatively low level of inflation, contributed to the enhanced ranking.

“This is our strength, and I’m pleased that, with my decision to have an industrial zone located in Batang with an area of 400 hectares, which is fully occupied, we have now opened another 400 ha on the northern side of the toll road. The total planned area is 4,300 ha, which will eventually accommodate [more] industries,” Jokowi said.

Nevertheless, the President warned that the country would only benefit from the region if the opportunities were seized with prudence.

“I see that there is a lot of interest for industries to relocate their factories to countries that have stable economic growth, low inflation and a [high degree of] political stability, and that’s how a lot of investors view Indonesia. However, if we fail to make the right decisions, those opportunities will surely disappear,” the President warned.

Investment Minister Bahlil Lahadalia, who also attended the opening ceremony, observed that the industrial zone had already attracted the investment of numerous companies. In total, 18 businesses had invested over Rp 14 trillion, creating approximately 19,000 jobs.

Batang SEZ to Focus on High-Tech, Labor-Intensive Industries with New LG EV Battery Plant

According to the minister, the Batang industrial area was planned to cater to high-technology and labor-intensive industries, with a particular emphasis on small and medium-sized enterprises.

According to the Jakarta Post, in December last year, the government reportedly negotiated a contract with South Korea's LG Energy Solution (LGES) to construct an electric vehicle (EV) battery cathode plant in Batang. The agreement is estimated to be between US$600 million and $800 million.

Bahlil observed that the scheme was on the brink of being realized. "The investment minister stated at the same opening event, which was live-streamed on YouTube, that LG Group will commence the construction of cathodes as part of the vehicle battery ecosystem in September, following the completion of a feasibility assessment in August. The cathodes will be developed in Batang."

“So, for LG battery cells, the precursor smelter is located in North Maluku, the cathodes in Batang and the battery [production] in Karawang. That way, it is not all concentrated in Maluku, resulting in more balanced development,” he added.