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

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  • Adiwan F. Aritenang
  • Aryani N. Chandramidi

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.

Suggested Citation

  • Adiwan F. Aritenang & Aryani N. Chandramidi, 2020. "The Impact of Special Economic Zones and Government Intervention on Firm Productivity: The Case of Batam, Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 56(2), pages 225-249, May.
    • Handle: RePEc:taf:bindes:v:56:y:2020:i:2:p:225-249
    DOI: 10.1080/00074918.2019.1643005
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    Cited by:

    1. Zhang, Xiekui & Gong, Dayong & Huang, Yihan & Li, Yiting, 2024. "The Government's fiscal and taxation policy effect on enterprise productivity: Policy choice and optimal allocation," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 28-41.
    2. Hornok, Cecília & Raeskyesa, Dewa Gede Sidan, 2022. "Economic zones and local income inequality: Evidence from Indonesia," Kiel Working Papers 2225, Kiel Institute for the World Economy (IfW Kiel).
    3. Hongfeng Zhang & Chengyun Sun & Lu Huang & Hongyun Si, 2021. "Does Government Intervention Ensure Food Safety? Evidence from China," IJERPH, MDPI, vol. 18(7), pages 1-22, March.

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