Keywords

Special economic zone; Economic growth; Competitiveness.

Introduction

Based on Law No. 39 of 2009 on Special Economic Zones, then called by KEK (Kawasan Ekonomi Khusus) in Indonesian), is about an area with the certain limit within the jurisdiction of the Republic of Indonesia which is determined to conduct the economic functions and obtain the certain facilities. According to Law 39/2009, article 3, zoning aspects in Special Economic Zone can be classified into 7 (seven) zones, they are: (a) Export Processing; (b). Logistic; (c). Industry; (d). Technology development; (e). Tourism; (f). Energy, (g). Another economy. Special Economic Zones are areas where companies operate in a clear geographic area. Then, the certain economic activities are promoted by policy that are generally not applicable across the countries (Zia, 2007). Overall, SEZ is about the logical consequences in the era in the special economic zones which have privileges established by the state to attract foreign entrepreneurs to invest in the country (Pakdeenurit, 2014). That privilege may include policy, rules, or special investment regulations and also special support in infrastructure, such as tax breaks, financial support, or issuance of work permits for foreign workers. The term “Special Economic Zone” becomes more encompass than the “Free Zone”, which no longer represent the various kinds of new zones, especially the zone which oriented to certain technology and the new service (for instance are about health, tourism, security) and also the sustainable development (Bost, 2019). International Growth Centre (2019) found that most countries have not had many successful SEZ, except for China. Placing in a group can benefit the company, but this benefit depends on the flexibility of the company, while, the government should do better at stimulating the clusters that have developed organically. The effects of KEK make employment mixed, while wages in SEZ are lower and increase over time. China and India showed that the SEZ had helped increase trade flows, but the evidence continues the attractiveness of FDI is inconclusive but emphasizes the importance of improving the business. Lastly, SEZ established in non-urban areas often lead to rapid urbanization, while existing cities have an ambiguous effect.

Maulana and Nurhadi (2016) stated that Kulon Progo Regency is one of the areas that need to be developed in order to increase the regional competitiveness. In developing the area, Kulon Progo Regency has 12 sub-districts, where each district has different potential. If the sub-districts are well developed, it will increase the competitiveness of the district, province, national, even in international levels. Locally, Kulon Progo Regency has an advantageous position. It is located on the South Java transportation route which is connected to cities in Java by land transportation networks. The southern route of Java has a good prospect for development. These prospects are also supported by the wealth of regional resources in agriculture, livestock, fisheries, maritime affairs, tourism and mining in each district. The northern and western parts of Kulon Progo Regency are the hilly areas with beautiful views, also has a wealth in agriculture, plantation and tourism (RPJPD Kulon Progo Regency 2005-2025, 2005). In addition, there are plans to build mega projects in Kulon Progo Regency such as Iron Sand Mining, Steel Industrial Estate in Galur District, Panjatan and Lendah, the International Airport in the District of Temon and Sentolo Industrial Area. These kinds of wealth will mutually support the competitiveness of Kulon Progo Regency (Pemkab Kulon Progo, 2011). Kulon Progo Regency has a varied topography, with an altitude between 0-1000 meters above sea level, then divides into three regions: a. North. The northern part is about plateau/hill with an altitude between 500-1000 meters above sea level. These areas include Girimulyo, Kokap, Kalibawang, Nanggulan and Samigaluh Districts. B. Middle part. The middle part is about the hilly area with an altitude between 100–500 meters above sea level. These areas include Sentolo, Pengasih, dan Kokap Districts. C. The southern part is a lowland with an altitude of 0-100 meters above sea level, covering the Districts of Temon, Wates, Panjatan, Galur, and Lendah (BPS, 2020).

From the observations results, the following problems were found:1) the infrastructure related to business in the logistics sector has not been organized by investors; 2) uneven tourist visits in the Kulon Progo area; 3) Micro, Small and Medium Business (MSMEs) are still focused on micro businesses because they are capital; 4) technology development is still focused on the Geographic Information System (GIS); 5) Kulon Progo has mineral resources that have the potential to support Regional Original Income (PAD) and even the State Budget (APBN); and 6) Kulon Progo industry still having trouble in marketing its products.

Literature Review

Special Economic Zone

The main policy taken by the government is to issue the Law Number 39 of 2009, contain about the Special Economic Zone (KEK in Indonesian) Law Number 39/2009. The appearance of Law no. 39/2009 is based on the need to speed up the development area and maintain a balance of progress in a region (as a national economic unit). The SEZ Terminology: “an area with the certain limit within the jurisdiction of the Republic of Indonesia which is determined to conduct the economic functions and obtain the certain facilities”. Walsh (2013) stated that Specific Economic Zone (Kawasan Ekonomi Khusus in Indonesian) is a limited geographic area which is regulated by specific rules and laws. A similar opinion is also stated by Shah (2009) that SEZ is a geographical area whose economic law is more liberal than the existing economic law in that country. Nazia and Varshney (2012) also defined that SEZ as a geographical area where the economic law is different from the economic law. It applied in that country with the main objective being to attract Foreign Direct Investment (FDI). Special Economic Zones (SEZ) or industrial areas are very prolific around the world. Zones can be an effective instrument to encourage industrialization if implemented in the right context (Zhihua Zeng, 2019). Special economic zone (SEZ) is legal, logistical and tax arrangements, which is intended to assist developing countries in attracting export-oriented manufacturing investment (especially foreign) in order not to occur (Warr & Menon, 2016). To build a SEZ, it must meet these following four criteria (Law 39/2009: Article 4): It is in accordance with the Regional Spatial Plan and does not have the potential to disturb the protected areas. b. The local government concerned the SEZ. C. close to international trade routes or international shipping lanes or located in areas that have excellent resource potential. d. Have clear boundaries. While, the requirements that must be fulfilled by SEZ are (Law 39/2009: Article 6): a. a. Map of development locations and the proposed area are two separate things from human settlements. B. The proposed SEZ spatial plan is complemented by zoning regulations.

Meanwhile, the requirements that must be met by a SEZ are (Law 39/2009: Article 6): a. Map of the development location as well as the proposed area separate from residential areas. b. The proposed SEZ spatial plan is complemented by zoning regulations. c. Plans and sources of financing. d. Analysis of environmental impacts in accordance with the provisions of laws and regulations. e. Results of economic and financial feasibility studies. f. The duration of an SEZ and a strategic plan.

Development Factors of Special Economic Zones (SEZs)

In China, the development of SEZs played an important role when the government opened the economy in 1980. Shenzen has succeeded in developing the SEZs that have significantly transformed rural areas into industrial centers (Guo & Feng, 2007). Tatsuyuki (2003) identified some factors that make Shenzen has a successful SEZs. First, the central government is committed in providing the policies related to SEZ development that will help create a pleasant environment to improve the industrial competitiveness. Second, building a good infrastructure is one of the factors; Shenzen has ranked the 4th world class business port and the 3rd rank famous airport in China. The supply and quality of roads, services, and telecommunications are also better within the zone. Third, Shenzen is a coastal city which adjacent to Hong Kong. It is the centerpiece of international finance, information, and services. The last important factor for success is the efficiency and continuity of policy changes to increase the government administrative capacity. The government has implemented One Stop Service for the large companies. To strengthen the government accountability, administrative transparency was established. Alkadri (2011) who did the research in KEK Banten, stated that the key factors to get the success of SEZ development are by developing: industry, infrastructure, institutions, human resources, promotion strategies, and socialization. The social systems and economic systems depend on infrastructure, so that the existence of infrastructure has a role to support sustainable development (Rahayu, Bambang, & Hardiman, 2013). A case study conducted by Lingga and Pratomo (2013) in the SEZ Sei Mangkei area, found that the development of SEZ must be with the development of social life and improvement of the economy of the surrounding community.

A policy strategy that can be done is to allocate a budget to carry out environmental development, for each business entity. This policy perspective must always be reflected on the long-term needs of the state.

Material and Methods

The object of this research is focused on the Kulon Progo Special Economic Zone (SEZ), with the research subject on: mapping logistics, tourists, MSMES, mineral resources, technology development, and exports. The data used are primary data and secondary data. The research method in this case used a survey method with non-probability sampling, the technique sampling used quota sampling. Quota sampling depends on the quota that has been previously determined. The researchers only need to determine the sample which is representative. In addition, the proportion of certain types of data needs to be considered. The analysis tool used descriptive parametric statistics.

Results and Discussion

Geographically, Kulon Progo Regency has the following boundaries: North Magelang Regency, Central Java Province; South Indian Ocean; West Purworejo Regency, Central Java Province; East of Sleman Regency and Bantul, D.I Yogyakarta. 3. Kulon Progo Regency with Wates as the capital city has an area of 58.627,512 ha (586.28 km²) consists of 12 Districts, 87 village, 1 Sub-district, and 918 hamlet (BPS, 2020). The research found that:

Kulon Progo is set to become the center of the steel and metal industry. This requires infrastructure investment of IDR 11.58 trillion. Yogyakarta is included in the top 15 in air cargo, especially for domestic activities. There was an increase of 12% referring to the domestic growth of freight transport by air in 2015 to 2016. Silaban and Pribadi (2019) stated that the operation of Yogyakarta International Airport or YIA in Kulon Progo is estimated become the trigger in developing the logistics services sector apart from tourism and manufacturing. The logistic service sector is expected to compete in line with the opening of access to air transport traffic which will also be followed by the opening of land access with plans to build a toll road lead to Yogyakarta.

There are 12 tourist sites that can be visited by domestic and foreign tourists in Kulon Progo. The number of Kulon Progo tourists based on total visits can be explained as follows: a) Glagah is about 58%, Glagah Beach has special characteristics that are rarely found on other beaches of the Kulon Progo area. Some of the attractions of Glagah Beach below are able to attract tourists to visit, this beach is known for having lagoons and concrete tetrapod that can break the waves. The waves that hit the tetrapod will produce waves on the beach; b) Trisik is about 4%, Trisik Beach is located in the southeast of Kulon Progo, precisely in Banaran, Galur. Trisik Beach is a sloping beach, black sand; c) Sermo Reservoir is about 12%, Sermo Reservoir is a reservoir located in Kulonprogo Regency, Yogyakarta Special Region, Indonesia. This reservoir was built in 1994 and inaugurated by Soeharto as the President at November, 20^th, 1996; d) Congot is about 7%, Congot beach, a beach that is rarely seen in public because it is rarely covered. This beach is one of the most popular fishing spot beaches. This beach becomes the Bogowonto’s Estuary, and there is a new tourist attraction on the west coast namely Mendit Sand mangrove forest which is very happening; e) Kiskendo is about 1%, is a cave that has reliefs carved on the rock cliffs around the cave entrance. The large relief size and preserved makes it even more real. Each sculpted fragment threw me at the Ramayana, the world's most legendary epic, the story of Dewi Shinta between Rama and Rahwana; f) Suroloyo is about 2%, Suroloyo Peak is one of the highest peaks in Menoreh Hills, Yogyakarta. The hills which have an altitude around 1,019 meters above sea level stretch along Yogyakarta and Central Java; g) Nglinggo is abuot 6%, Nglinggo Tourism Village is a hamlet in the Village of Pagerhajo Menoreh. This hamlet has natural mountain attractions, trekking tours, Watu Jonggol waterfall, countryside, a tea and coffee developments; h) Tritis for about 2%, Tritis tea garden is located in Ngargosari Village, Samigaluh District, Kulon Progo Regency, to explore the tea garden, you can use the footpath. The tea plant looks beautiful. When you reach the top of the tea garden, you will spoiled with views of the Menoreh hills which look beautiful from a distance; and i) Kalibiru for about 5%, Kalibiru tourism is located at an altitude of 450 meters above sea level, which has now become a lush tourist forest. With various trees, such as cypress, teak, and eucalyptus. This tourist spot is located in the countryside, hence many houses with old Javanese designs.

Micro, Small and Medium Enterprises (MSMEs (MSMES in Indonesian)) MSMES should be revitalized. MSMEs must be revived so that they have a stronger competitiveness. MSMEs Kulon Progo also has a fundamental problem related to capital problems. So far, capital has come from their family (independent capital). From that statement, it can be inferred that MSMES in Kulon Progo needs a place like cooperative shop or institution so that the MSMES still on the track/sustainability.

Based on the Table 1, MSMES population in Kulon Progo is about 40.730 MSMES, from the population consists of 4 (four) types of business, namely large, medium, small and micro enterprises. The highest percentage of 4 (four) types of business goes to micro business, which is about 97.75% or around 39.816 of MSMES, then the second percentage goes to small business for about 1.61% or as much as 656 MSMES, for medium business is about 0.63% or as much as 257 MSMES, and the last is about the big business with 1 MSMES or as much as 0.01%.

There are three types of Micro, Small, and Medium Enterprises (MSMEs) in Kulon Progo such as trade sector, agricultural industry and non-agricultural industry. These three sectors are dominated by the non-agricultural industrial sector. From the chart above, the trade sector showed a fluctuating result, which is from 2016 to 2019. In 2016, the number of MSMEs was 11869, then increased in 2017 to 12539 and in 2018 decreased become 12152 and stagnant in 2019. The agricultural industry sector in 2016 and 2017 counted to 1912 MSMEs then decreased in 2018 to 1827 MSMEs and stagnated in 2019.

The potential mine in Kulon Progo is very great, such as: iron sand and the Progo River to the Bogowonto River, which are the deposition areas for iron sand minerals; raw material for cement, which is very much found in Banguncipto Village, Sentolo District, Wijimulyo Village, Nanggulan District and Sidorejo Village, Lendah District; c) andesite stone quarry is located in Pengos Hamlet, Gerbosari Village, Samigaluh District; d) limestone, which is one of the minerals that is widely used by the industrial, construction and agricultural sectors located in Gegunung Hamlet, Sendangsari Village, Pengasih District; e) marble rocks in the Junut Hamlet, Purwoharjo Village, Samigaluh District. Thus, it can be concluded that iron sand and the cement raw mineral are the highest potential in Kulon Progo.

The technology development of MSMEs in Kulon Progo held the technology guidance business development training handled by the Ministry of Cooperativeness and MSMEs, in order to up the MSMEs in the 4.0 industrial area. The implementation of Smart City in Kulon Progo is expected that the local products can be known in Indonesia. One of the applications used is the Geographic Information System (GIS). Able to market Kulon Progo's local products is the result of this implementation. It is useful for the economic welfare in Kulon Progo.

Based on Figure 1, there are ten (10) types of export commodity such as charcoal briquettes, tea makuto dewo, agel crafts, wood crafts, wigs, crystal sugar, coconut husks, home decor crafts, hand tractors and stagen. That graphic showed that the wig dominates in export, also has an increase from 2014 until 2017. The second high commodity is about the charcoal briquettes. It increases from 2014 until 2016. However, the charcoal briquettes have decrease in 2017. The next one is about crystal sugar which has a decrease from 2014 to 2016 and has a significant increase in 2017.

Figure 1 Export Commodity in Kulon Progo on 2014-2017

Conclusion

This research, based on the findings, concludes as follows:

1. Yogyakarta International Airport or YIA in Kulon Progo is estimated become the trigger in developing the logistics services sector apart from tourism and manufacturing.

2. Beach still become the main income from Kulon Progo.

3. Micro, Small and Medium Enterprises (SMEs) are dominated by micro businesses that are active in the non-agricultural industrial sector.

4. The potential mine in Kulon Progo is very abundant and needs to be researched. They are iron sand, raw material for cement, limestone, andesite, and marble.

5. Technology development for MSMEs in Kulon Progo based on Geographic Information System (GIS).

6. Wig is the most export commodity in Kulon Progo.

This study suggests that:

1. The researchers should focus on one area of the zone in the Specific Economic Zone (Export processing, logistics, industry, technology development, tourism, energy, and other economies).

2. The next researcher is expected to conduct a research, focusing on mapping and planning related to the special economic zones which still has a minim data.

The implementation of this study as follows:

1. Economic aspects: The results of this research are expected to be able to provide the local government in Kulon Progo regarding to the economic policies, such as taxes, levies, and local revenue.

2. Social aspects: With this research, it is hoped that the Kulon Progo Special Economic Zone will develop well, as same as the expectations of the community, so that the industrial workforce is not significantly unemployed.

3. Environmental aspects: With this research, it is hoped that the existing business environment in Kulon Progo will grow and develop with local orders and be able to build an environment focused on Green the Jewel of Java for Kulon Progo.

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