When Regional Policies Fail: Evaluation of Indonesia’s Integrated Economic Development Zones

This report examines the impact of Indonesia’s KAPET programme which provided incentives to firms to locate in specific districts

Abstract

The authors study the impact of Indonesia’s Integrated Economic Development Zone (Kawasan Pengembangan Ekonomui Terpadu, or KAPET) programme. It provides incentives to firms to locate in specific districts. The authors find that the programme reduced the tax burdens faced by firms, but these tax reductions did not increase the entry of large, productive firms or generate substantial increases in productivity or value added. Consequently, the authors do not see sustained increased migration rates or population growth in response to the programme, and overall, KAPET districts did not grow faster after its introduction.

This research was funded under the Private Enterprise Developmdent in Low-Income Countries (PEDL) Programme, 4p

Citation

Bazzi, S., Chari, A., Nataraj, S. and Rothenberg, A. (2017), “When Regional Policies Fail: An Evaluation of Indonesia’s Integrated Economic Development Zones”, PEDL.

When Regional Policies Fail: An Evaluation of Indonesia’s Integrated Economic Development Zones

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