Role Of Government Of Indonesia: Transforming Special Economic Zones (SEZs) Into Being More Eco Friendly – OpEd

For starters, developing countries can support Special Economic Zones (SEZs), which are geographically designated areas within the territory of the host country that operate under a special liberated regime in terms of administration, fiscal, and regulation that the rest of the regions. These are areas which the government purposely uses to stimulate economic growth, attract FDI and work on the trades. SEZs are especially necessary for balanced regional development as it makes an equal contribution toward Gross Domestic Product (GDP) and dependence on particular economic centers (Woolfrey, 2013).

SEZs were initially conceived as tools for promoting industrialization, but frequently sacrifice environmental considerations in favor of economic growth. The traditional SEZs model, as useful for stimulating economic activity as it can be, also tends to bring about massive environmental devantion. As climate change and environment protection have become more pressing, a solution is needed. 

Switching to greener SEZs is not only an environmental necessity as well as a financial necessity. Eco-friendly practices entices worldwide financiers who give top precedence to zones that safeguard the surroundings. The government should streamline the administrative framework to help the achievement of green drive. A large amount of public private capital must  be mobilized to fill the financing gap, and detailed preparation of programs must be advanced to specialized experience. 

The stakes have never been higher and the action must be taken since failure to adapt will now hamper not only the economic growth but also will expedite environmental degradation, undermining future prosperity. Green SEZs are therefore critical today to ensure development is sustainable and equitable. 

The Evolution of Special Economic Zones (SEZs)

The concept of Special Economic Zones (SEZs) began in the late 1950s with the Shannon Zone in Ireland, a notable example of the SEZ 1.0 model. These early zones, often called Export Processing Zones (EPZs), aimed to attract foreign investment, boost exports, and generate foreign exchange profits. Despite their economic success, SEZ 1.0 led to significant environmental neglect, prompting a shift towards more sustainable models in the 1970s (The Economist, 2015).

Transition from SEZs 1 to further versions testifies to a significant change of the economic policy to focus on the principles of sustainable development and equity. SEZs 2, exemplified by China, grew to encompass whole cities and regions with market-oriented policies promoting fast socio-economic development. SEZs 3 adopted Eco-Industrial Parks (EIPs) in line with the Sustainable development Goals (SDGs) focusing on sustainable industrialization for human endeavor and social inclusion. With the advancement of the Fourth Industrial Revolution, SEZs 4 which are based on value added services involving finance and commerce surfaced. China’s Free Trade Zones are illustrated by the Shanghai Pilot FTZ established in 2013, which together with alternative FTZs represents an evolution of new trade policies under the flexibly regulated FTZs framework (Hutauruk et al. , 2023).

Moving towards the Green SEZs is not just a tendency but a necessity. The problems that happen with the environment on a global level have required that economic development should be resolved alongside sustainability. Thus, governments as well as international policymakers should consider the development of green SEZs in the long run to regulate the economy and environment in the long run. If more is not done in this regard, sustainable growth will be affected while the future generations will also be denied an adequate quality of life. Therefore, there is a paramount need to transition from traditional SEZs to more sustainable ones to balance development and ensure that no area or group acts to the disadvantage of another. This is not a change that can or should be avoided – this is change that is required in the future.

The Concept of Special Economic Zones (SEZs) in Indonesia’s 

SEZs offer an opportunity for Indonesia to economically decentralize development and enhance prosperity in less developed regions. At the same time, it is also true that the conventional SEZs model is pretty narrow in the scope of industrial development and proves not enough to stem the tide of arrested environmental crises. The government of Indonesia should express a firm and proactive commitment towards green SEZs. Simplify the regulatory framework so that green projects could be developed; hence, massive public-private investment are needed to reduce the financial gap and full fledged training would be required to enhance technical expertise.  

Without the much-needed intervention of the Government of Indonesia (GOI), the concept of green SEZs idea shall stagnate at the paper level. Based on regulation No. 40 of 2021, which state that all businesses shall operate under environmental regulations, including acquiring environmental permits and regulations Environmental Impact Assessments (AMDAL) are one of popular laws that show that the Government of Indonesia is pretty active as far as sustainability is concerned. Article 17 of Government Regulation No. 40 of 2021 is purpose to build SEZs shall be included with environmental approval document environmentally friendly technology and infrastructure to support sustainable development. 

The transition to green SEZs is not an environmental necessity but economic imperative-sustainable practices result in attracting an increasing number of international investors prioritizing the greener businesses. Transition to green SEZs shall be prioritized by the governments by overcoming any regulatory, financial, and technical barriers to make a sustainable and equitable economic future for all. 

Global Green Growth Institute (GGGI) Indonesia Programme

Indonesia being among the founding member countries of an organization such as the Global Green Growth Institute (GGGI) has demonstrated a high interest in sustainable development. Indonesia is now at the forefront of implementing green growth since signing the Agreement on the Establishment of GGGI at the Rio+20 Conference in 2012, and ratification in 2014.

This commitment was however cemented by the signing of the Host Country Agreement (HCA) last year allowing GGGI to officially conduct its operations in the country. To illustrate their seriousness, the GoI allocated USD 5 million annually to GGGI in the five-year period following 2015, namely 2015-2018 (Global Green Growth Institute, 2022).

In 2017, GGGI and Indonesia developed the Country Planning Framework (CPF) 2016-2020 aimed at developing an inclusive green investment and enhancing institutions to support green growth. This framework was developed collaboratively with national and subnational authorities and other partners worldwide.

The GoI pursues sustainable growth under the Low Carbon Development Initiative or LCDI, integrating green growth elements in planning and policy. These are aligned with the Nationally Determined Contributions (NDCs) and Sustainable Development Goals (SDGs) that are enshrined in the National Medium-Term Development Plan (RPJMN) as envisioned in the United Nations’ Sustainable Development Goals (SDGs). Indonesia has its target to reduce GHG and cut emissions by 29% by 2030, which may rise to 41% if supported by the global community.

Pursuing from the success of the prior CPF, the 2021-2025 CPF also continues this synergy. Between 2016 to 2020, GGGI educated and supported the preparation of over 50 Indonesian policies and secured over USD 220 million in results-based payment from FCPF Carbon Fund, GCF and others. However, expenditure in climate action by the government has been USD 8. 8 billion and USD 5 We have adopted this multi-dimensional and global approach in analyzing the key performance indicators relevant to economic welfare in the BRIC countries, and the role that innovation plays in shaping their future. Several pieces of research cite online sales of $7.5 billion, $8 billion, and $8.2 billion from 2018 to 2020, respectively, with an average of $4. This is a lower amount of funding which is only 3% of the national budget and significantly insufficient for achieving the defined NDCs (Global Green Growth Institute, 2020).

Others include large scale programs, which are still ongoing; with USD 103 million REDD+ payments and another USD 110 million from the World Bank FCPF Carbon Fund. Thus, in order for Indonesia to attain its desired NDCs it will require a major ramp up in the instances of green investments. GGGI partners with similar establishments such as BPDLH, PT.SMI,Forest plantation, preservation, and processing, and in cooperation with the Ministry of Environment and Forestry (KLHK), private sectors are implementing these initiatives (Global Green Growth Institute, 2022).

The stakes are high. Continued financing and improved regulation remain elusive for Indonesia, threatening the country’s ability to meet environmental goals. This is not just an environmental issue that can be solved just by planting trees but an economic problem as well. Sustainability directly influences the growth of the economy, which in turn influences the flow of international investors who are a key to creating long-term gains. The goIe is now in a ‘decisive time’ wherein it can push for that change for a sustainable future.

• About the authors: Indra Wahyu Pratama and Clara Lucia Marghanita are Master’s students specializing in International Relations at Universitas Gajah Mada.

References

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Global Green Growth Institute. (2024, April 4). Indonesia’s Secretariat General of the National Council for Special Economic Zone and GGGI sign MoU on ‘Green Growth for Special Economic Zones’. Global Green Growth Institute (GGGI). Retrieved June 13, 2024, from Global Green Growth Institute (GGGI)

Hutauruk, R. H., Tan, D., Situmeang, A., & Deisemadi, H. (2023). Developing an Indonesian Regulatory Framework in the Face of SEZs5.0. Journal of Indonesian Legal Studies, 8(2), 453-500. http://journal.unnes.ac.id/sju/index.php/jils

Moeis, A. O., Gita, A. A., Destyanto, A. R., Rahman, I., Hidayatno, A., & Zagloel, T. Y. (2024). Policy Analysis of Coastal-Based Special Economic Zone Development Using System Dynamics. International Journal of Technology, 15(1), 195-206. https://ijtech.eng.ui.ac.id/article/view/5498

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Woolfrey, S. (2013). Special economic zones and regional integration in Africa. The Swedish EmbassyNairobihttps://www.tralac.org/files/2013/07/S13WP102013-Woolfrey-Special-economic-zones-regional-integration-in-Africa-20130710-fin.pdf