The Impact of Special Economic Zones and Government Intervention on Firm Productivity: The Case of Batam, Indonesia

A.F. Aritenang*, A.N. Chandramidi

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

7 Citations (Scopus)

Abstract

Various studies have explored the effects of industrial agglomeration and special economic zones (SEZs) in Asia, but there has been a lack of data-driven analysis of SEZ performance. This paper provides a case study on Batam, which has been developed as an SEZ through government-to-government (G2G) cooperation, offering lessons for other developing countries. The study examines the effects of industrial zones, foreign investment and government intervention on firm productivity, using an ex-post evaluation method and econometric models. The paper does not find conclusive evidence that Batam’s status as an SEZ affects firm productivity and growth. Although firm agglomeration proves beneficial for firm productivity, it is not clear that SEZ policy has driven this productivity. The paper argues that government policies should stimulate innovation and inter-firm cooperation to increase knowledge spillovers and technology transfer instead of focusing on attracting investment.
Original languageEnglish
Pages (from-to)225-249
JournalBulletin of Indonesian Economic Studies
Volume56
Issue number2
DOIs
Publication statusPublished - 2020
Externally publishedYes

Keywords

  • special economic zone
  • SEZ
  • agglomeration economies
  • firm productivity
  • ex-post evaluation
  • econometric analysis

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