Land Tenure and Agrarian Justice in Indonesian Special Economic Zones: A Juridical-Empirical Study Using Regulatory Impact Assessment Approach

Community respondents

A survey has been conducted on communities that are considered directly affected by the existence of SEZs to gather information for problem analysis. The study’s 50 respondents were from 3 SEZ locations. Understanding the characteristics of the respondents is important to ensure that the data collected is reliable and representative of the target population. Table 1 provides the respondents’ details.

This table presents the demographic profile of 50 respondents affected by SEZs in three locations (Lido, Tanjung Lesung, and Mandalika SEZ). The presence of male respondents (82%) compared to female respondents (18%) indicates a potential bias in representation, which may reflect men’s active participation in SEZ-related work or decision-making, but also indicates the need for greater attention to women’s perspectives and involvement in impact analysis and subsequent policymaking.

Respondents were grouped based on their domicile. This grouping is divided into three regions according to the location of the SEZ study: Bogor-West Java Regency (Lido SEZ), Pandeglang Regency, Banten (Tanjung Lesung SEZ), and Central Lombok Regency, West Nusa Tenggara (Mandalika SEZ). The following table presents respondent characteristics based on their domicile. Table 2 displays the respondents’ domicile.

Table 2 provides a crucial geographic overview, showing the distribution of respondents across the three study SEZs: Lido (Bogor, 66% of respondents), Tanjung Lesung (Pandeglang, 20% of respondents), and Mandalika (Central Lombok, 14% of respondents). This underscores the research’s deeper focus on the Lido SEZ and allows for comparisons of impacts that vary across locations. The concentration of respondents in specific villages (e.g., Wates Jaya in Lido) indicates that SEZ impacts are local and geographically bound and highlights potential differences in development scale and community accessibility that need to be considered in comparative analyses of SEZ impacts across regions.

Key findings from community survey

Regarding the substance of the research, respondents were asked several questions to gather information to identify problems and alternative policies regarding the existence of SEZs. The research found the following facts and data from the survey results.

SEZ Policy based on law number 39 of 2009 concerning special economic zones

Increasing investment by preparing areas with geoeconomic and geostrategic advantages is essential to national economic development. The SEZ is designed to maximize industrial activities, exports, imports, and other high-value economic activities. The goal of developing SEZs is to accelerate regional growth and serve as a breakthrough model for regional development, promoting economic growth through industry, tourism, and trade to create jobs.

SEZ is an area with specific boundaries within the jurisdiction of the Unitary State of the Republic of Indonesia, designated to perform economic functions and access certain facilities. The purpose of the SEZ is to facilitate and develop businesses in sectors such as trade, services, industry, mining and energy, transportation, maritime and fisheries, postal and telecommunications, tourism, and other fields. Accordingly, SEZ may consist of one or multiple zones, including export processing, logistics, industry, technology development, tourism, and energy zones, whose activities can target both exports and domestic markets. The criteria for designating an area as a SEZ include alignment with the Regional Spatial Plan, not posing a threat to protected areas, receiving support from the provincial, regency, or city government for SEZ management, being located strategically or possessing significant resources in marine and fisheries, plantations, mining, and tourism, and having clearly defined natural or artificial boundaries. Institutions such as the National Council at the central level and the Regional Council at the provincial level are established to manage SEZs. The Regional Council appoints a SEZ Administrator for each zone to provide services, supervise, and oversee SEZ operations. Business Entities and Business Actors conduct business activities within SEZs. Facilities in SEZs aim to boost competitiveness and attract investors. These facilities include fiscal incentives, such as taxes, customs, excise, regional taxes, and levies, as well as non-fiscal support like land, licensing, immigration, investment, and employment services. Additional facilities and incentives may be provided within the SEZ, as regulated by authorized agencies according to law.

SEZs are developed by preparing areas with geoeconomic and geostrategic advantages. They are designed to host industrial, export, import, and other economic activities with high economic value and international competitiveness. SEZs consist of one or more zones: 1) Export processing; 2) Logistics; 3) Industry; 4) Technology development; 5) Tourism; 6) Energy; and/or 7) Other economic sectors.

In the SEZ, facilities and housing for workers can be developed, and each SEZ area provides locations for micro, small, and medium enterprises (MSMEs), as well as cooperatives, both as business actors and supporters of company activities within the SEZ. According to Article 4 of Law Number 39 of 2009, locations proposed to become SEZs must meet the following criteria.

According to Article 5 paragraph (2) of Law Number 39 of 2009, the implementation or management of business activities in SEZs is carried out by Business Entities designated as SEZ managers, where Business Entities can be in the form of:

Regulations or provisions related to import and export bans or restrictions that are governed by laws and regulations apply within SEZs. Goods subject to import and export restrictions may be granted exemptions or conveniences for the movement of goods entering or leaving the SEZ. Additionally, quarantine procedures for humans, animals, fish, and plants must comply with relevant laws and regulations.

Every manager or business entity operating in SEZs is provided with facilities by the government. Each taxpayer conducting business in SEZs receives Income Tax (PPh) facilities. Besides income tax incentives, additional tax benefits can be offered based on the characteristics of the zone. Facilities are granted in accordance with applicable laws and regulations, as well as governed by government regulations. Tax incentives may also be available for a specific period for investors, such as reductions in Land and Building Tax. According to Article 32 of Law Number 39 of 2009, regarding the import of goods into SEZs, the available facilities include:

Taxable goods delivered from other locations within the customs area to the SEZ can be exempt from VAT and PPnBM, and goods delivered from the SEZ to other locations within the customs area are also exempt, provided they are not addressed to the party receiving VAT facilities. These transactions are subject to VAT or VAT and PPnBM in accordance with applicable laws and regulations. Goods of import origin that are issued from the SEZ for the purpose of being imported for use, provided that the expenditure is not intended for the party that receives exemption or suspension facilities for import duties, excise, or taxes in the context of importation.

Beyond fiscal incentives related to VAT and PPnBM, regarding regional taxes and levies, every taxpayer operating in SEZs receives incentives such as exemptions or relief from these taxes and levies. In addition to regional tax incentives and levies, local governments may also provide other facilities.

Furthermore, in addressing crucial aspects of business operations, regarding land, licensing, immigration, and investment in SEZs, obtaining land rights is facilitated according to laws and regulations. As per Government Regulations, business entities that acquire land in designated SEZ locations are granted land rights. Within SEZs, facilities and waivers are provided for business licensing, business activities, industry, trade, ports, and immigration for foreign entrepreneurs. Security facilities are also available. However, SEZs do not have provisions regulating open business sectors with investment requirements, except those reserved for MSMEs and cooperatives.

Finally, concerning the human capital aspect, in the employment sector, labor use in the SEZ prioritizes Indonesian citizens. If foreign workers are employed, the permit for employing foreign workers (TKA) is granted once and remains valid for long.

Development of SEZs in Indonesia

Like other developing countries, Indonesia uses SEZs to attract domestic and foreign direct investment (Law Number 39 of 2009 concerning Special Economic Zones). The introduction of the Job Creation Law (UUCK) has established SEZs as a type of economic zone designed to encourage investment by offering many facilities. However, the law’s goal of creating jobs through increased investment by regulating SEZs with these facilities results in adverse effects instead of economic benefits for the regions and communities where SEZs are located and the national economy. In several ways, SEZs are considered vulnerable to practices like state capture and the distribution of concessions that mainly benefit business actors, leading to rent-seeking behaviors. There are also allegations of human rights abuses in SEZ development, such as in the Mandalika SEZ in Lombok, where coercion and intimidation have been reported during land acquisition. Despite providing numerous facilities, SEZs act as large-scale land tenure instruments. In this context, SEZs have become tools for capitalists to persuade the state to use non-market means for land acquisition and capital accumulation. This large-scale land tenure practice by SEZs, often called land grabbing, has persisted in Indonesia from the New Order regime through the current reform era, resulting in extensive land ownership claims,^17,40,41 even in Indonesia, this kind of land-grabbing practice has continued since the New Order regime until the current reform era, with various forms of large-scale land ownership.⁴²

According to data from the National Council of SEZs, Indonesia had 22 designated SEZs and four in the proposal stage as of 2024. Table 3 provides a breakdown of SEZs in Indonesia. Table 3 presents a list of SEZs in Indonesia, grouping them by primary development themes such as Manufacturing, Tourism, Digital, and Other Services. Furthermore, the table lists the Government Regulations that serve as the legal basis for establishing each SEZ, along with its status (established or still under proposal). This data demonstrates the diverse focus of SEZ development in Indonesia, with an emphasis on the manufacturing and tourism sectors, and provides an overview of the regulatory framework underlying each zone, including any plans for new SEZ development.

Large-scale land acquisition by SEZs

SEZs are part of Indonesia’s large-scale land tenure practices. Suppose control and utilization of land are not aligned to grant SEZ status. In that case, the land tenure by the SEZ can be considered land grabbing based on criteria such as land size, the people or entities holding land rights, land control, the legality of that control, and land use or utilization. Of the 22 SEZs that have been officially established and are operating, the total land area controlled is 20,805.10 hectares. This figure does not include the SEZs currently being proposed. Details for each SEZ are shown in Table 4.

Table 4 presents development data for the 22 officially operating SEZs in Indonesia, including information on the SEZ name, its specific geographic location (district/city and province), and the land area controlled by each SEZ in hectares (ha). The total land area controlled by these 22 SEZs reaches 20,805.10 hectares, excluding areas still in the proposal stage. This data underscores the large scale of SEZ land ownership practices in Indonesia, which have the potential to raise issues related to land tenure and its impact on local communities.

Juridical-Empirical interaction of SEZ land tenure with Agrarian justice principles: A stark contrast

The enactment of the Job Creation Law in Indonesia has established SEZs as designated economic zones, encouraging investment by offering various facilities. However, the law’s goal of creating jobs through increased investment by regulating SEZs with all their facilities leads to adverse effects instead of economic benefits for the regions and communities where the SEZs are located and the national economy overall. SEZs are also considered prone to state capture, and allocating concessions, which primarily benefits business actors, often becomes a form of rent-seeking. There are even claims of human rights violations related to SEZ development, such as the case of the Mandalika SEZ in Lombok, where coercion and intimidation were reported during land acquisition. Despite the extensive facilities provided to SEZs, they have become instruments of large-scale land control. In this context, SEZs serve as a means for capitalists to use non-market strategies to obtain land for capital accumulation.¹⁶ This large-scale land acquisition practice associated with SEZs is often called land grabbing.^40,41 In Indonesia, this land-grabbing phenomenon has persisted from the New Order era into the current reform period, involving various forms of large-scale land ownership.¹⁹

The phenomenon of land grabbing, particularly concerning SEZs in Indonesia, is not an isolated occurrence but part of a broader global trend. The term gained prominence after the food crisis around 2007-2008,⁴³ although historical precedents of land acquisition for exclusive use can be traced back centuries.⁴⁴ This global surge, often termed the “global land rush,” is fueled by increasing investment activities worldwide, impacting Asia, Africa, the Americas, and Europe.⁴⁵ Factors such as rising global food demand, dietary shifts, and increased oil prices,⁴⁶ and policies promoting bioethanol production,⁴⁷ have intensified the need for land. Consequently, numerous countries are engaged in acquiring farmland globally. Cases of land grabbing have been extensively documented, with countries like Ghana,⁴⁸ Ethiopia,⁴⁹ Cambodia,⁵⁰ Indonesia,⁵¹ and Mozambique frequently appears in studies.⁵²

To thoroughly analyze the phenomenon of land grabbing, several key criteria are essential for identification. These criteria help delineate actions that constitute land grabbing and will serve as a basis for examining SEZ practices. First, size: the extent of land control is crucial, with “extensive” control generally viewed negatively, though the threshold varies by local regulations. Second, actor: any entity, from individuals to corporations, public or private, domestic or foreign, can be a land grabber. Third, control: the goal is total control, achieved through various means such as long-term leases (concessions), cultivation, outright purchase, or supply agreements that dictate land use. Fourth, legality: while often perceived as illegal, most land grabbing occurs legally, with national and local laws sometimes tolerating or implicitly encouraging it, thus making it “legal” but unjust. Fifth, use: land is often used for exclusive purposes, frequently involving destructive methods like monoculture, land-use changes from agriculture to other sectors, land speculation, resource control, and extraction, all of which threaten food sovereignty, land management, and human rights.¹⁶

Data on the scale of land tenure by SEZs in Indonesia directly illustrates the potential for land grabbing and the imbalance between investment interests and local community welfare. Of the 22 operational SEZs, the total land-controlled spans 20,805.10 hectares, excluding proposed zones. This large-scale land tenure creates significant disparity, even if legally sanctioned. For instance, SEZs like Tanjung Lesung, controlling 1,500 hectares, acquire vast tracts of land without adequately considering the social and economic impacts on residents. Observations reveal that local communities generally lose access to their land due to SEZ acquisition, potentially exacerbating inequality. While SEZs benefit from special land management facilities, including long-term rights of use and building (up to 80 years), a lack of oversight can lead to significant areas becoming unproductive, contradicting the principle of productive land management mandated by the Basic Agrarian Law (Law No. 5 of 1960).

The consequences of this large-scale land acquisition by SEZs are starkly evident in the imbalance between investment interests and the welfare of local communities. This study highlights how SEZs acquire vast amounts of land without fully considering the social and economic impact on residents. Observations confirm that local communities generally lose access to land due to SEZ acquisition, potentially exacerbating inequality. Although SEZs are provided with special facilities in land management, including granting the Right to Use and the Right to Build for up to 80 years, the lack of supervision can lead to large areas of land becoming unproductive. This fundamentally contradicts the principle of productive land management mandated by the Basic Agrarian Law.

Crucially, the expectations of local communities regarding land use, accessibility, and the protection of important sites, such as ancestral tombs (as seen in the Lido and Mandalika SEZ cases), are frequently unmet. This underscores the urgent need for policies that balance investment incentives with protecting local land rights. Our survey data reveal that while most respondents (86%) are aware of SEZs, their perceptions are mixed, with a significant majority (64%) feeling no significant changes. The land acquisition process in several SEZs, including Mandalika, is suspected of human rights violations,⁵³ with local communities experiencing inadequate access to land and a severe lack of participation in decision-making processes related to land procurement and utilization.

Cases such as the Mandalika SEZ, which has faced allegations of human rights violations and attracted attention from international bodies like the OHCHR, exemplify the severity of these issues. The development has been criticized for not being based on human rights principles, particularly the UN Guiding Principles on Business and Human Rights. The developer, ITDC Co. Ltd., has been observed prioritizing security and criminal law approaches by involving authorities in evictions rather than resolving land disputes through human rights-based principles. Similar intimidation practices and the deployment of officers to secure land have also occurred in the Lido SEZ. These cases highlight the urgent need for fair and human-rights-respecting approaches to SEZ land acquisition to prevent conflict and ensure sustainable development.

The current legal and empirical landscape of Special Economic Zones (SEZs) in Indonesia reveals a profound dichotomy between their stated economic development objectives and the lived realities of local communities, particularly concerning land tenure. While the Job Creation Law and associated regulations aim to attract investment and create jobs through SEZs, the empirical findings from Lido, Tanjung Lesung, and Mandalika SEZs demonstrate a persistent pattern of land grabbing and profound agrarian injustice. This is not merely a theoretical concern but a tangible outcome of how SEZ policies, despite their legal veneer, facilitate large-scale land acquisition that often disregards fundamental human rights and local customs.

The core of this discrepancy lies in the stark contrast between the legal framework’s emphasis on investment incentives and the empirical reality of land acquisition practices. Legally, SEZs are endowed with special land management facilities, including long-term rights of use and building (up to 80 years), designed to attract investors. However, the empirical data highlights that this legal enablement has, in practice, become an instrument for capital accumulation through non-market strategies, leading to extensive land control by SEZ developers. This starkly contrasts with the limited economic benefits trickling down to local communities, evidenced by low labor participation and a perception of minimal progress. For instance, while Tanjung Lesung SEZ controls a substantial 1,500 hectares, the community survey indicates that a majority (58%) perceive little to no benefit, and 34% report no progress. This directly contradicts the intended multiplier effect of SEZs on local economies.

Furthermore, the contrast between the legal aspiration of fair development and the empirical reality of human rights violations is particularly alarming. Allegations of coercion and intimidation during land acquisition, as reported in the Mandalika SEZ and observed in Lido SEZ, stand in direct opposition to the UN Guiding Principles on Business and Human Rights, which are purportedly meant to guide SEZ development. Developers’ prioritization of security and criminal law approaches in resolving land disputes, as seen with ITDC Co. Ltd. in Mandalika, starkly contrasts with human rights-based conflict resolution principles and agrarian justice. This highlights a critical juridical-empirical gap: the legal framework provides tools that, when applied in practice, can be detrimental to human rights, rather than protective.

Applying the lens of agrarian justice provides a crucial framework for understanding this disparity. Agrarian justice, rooted in equitable access to resources, recognition of land rights, and meaningful community participation, directly opposes the observed outcomes in the studied SEZs. The lack of transparency and accountability in land acquisition processes, coupled with insufficient community participation, as reported in Mandalika, Tanjung Lesung, and Lido, directly violates the core tenets of agrarian justice. This is a profound contrast between the normative ideal of justice and the de facto implementation of SEZ policies. The study reveals that local communities frequently lack access to accurate information, receive inadequate compensation, and are pressured into unfair terms, all apparent breaches of agrarian justice. This prioritization of investor interests over community rights is a fundamental injustice undermining the foundation of fair resource management.

The findings underscore a stark contrast between SEZs’ intended national strategic objectives and their localized impact on community livelihoods and cultural integrity. While SEZs are designated national strategic projects, their implementation often leads to the loss of traditional livelihoods for farmers and fishermen, as agricultural land and natural resources are acquired. The subsequent difficulty in finding alternative employment due to skill mismatches further exacerbates this issue. This directly contrasts with the goal of job creation and economic growth that SEZs are supposed to foster. The study’s data clearly show that while respondents express hopes for economic growth and improved living standards, the reality is that labor absorption by SEZs remains limited due to low skill levels and mismatches with SEZ needs. This disconnect between expectation and reality is a recurring theme, demonstrating a failure to translate national policy into tangible local benefits.

Strategic actions are crucial to achieving agrarian justice and maximizing SEZ benefits. Agrarian justice is an ethical framework that fundamentally emphasizes equal access to resources like land, water, and forests. It is grounded in essential principles, including recognizing land rights for communities, actively involving local populations in decisions about those resources, and safeguarding the rights of indigenous, regional, and traditional communities. In the context of SEZs, these principles of agrarian justice serve as a tool to assess whether SEZ development policies and practices align with the values of agrarian justice.

The agrarian justice framework is essential when analyzing land-grabbing cases in SEZ development. Agrarian justice serves as a tool to assess whether the land tenure process respects the rights of local communities, how meaningfully these communities participate in decision-making, and whether the benefits of SEZ development are shared equitably. If SEZ policies and practices contradict the principles of agrarian justice, it signifies a violation of land rights. Examples from Mandalika, Tanjung Lesung, and Lido SEZs reveal issues like lack of transparency, accountability in land acquisition, and minimal community participation, indicating breaches of agrarian justice principles. This illustrates the tension between SEZ development goals and the principles of land justice, which should guide responsible resource management. Using the agrarian justice framework allows for evaluating SEZ policies from a human rights and social justice perspective, considering their impacts on local communities and the environment. This approach helps identify potential injustices and promotes more inclusive and sustainable development.

Consequently, this study finds that large-scale land tenure practices at Mandalika, Tanjung Lesung, and Lido SEZs significantly harm local communities, strongly indicating agrarian injustice. This manifests as:

The juridical-empirical interaction of SEZ land tenure in Indonesia, as analyzed through the lens of agrarian justice, reveals a persistent pattern of land grabbing. While aimed at economic development, the legal frameworks and facilitative policies for SEZs have often enabled large-scale land acquisition that disregards community rights, diminishes livelihoods, and leads to significant social and economic injustices. Without a fundamental commitment to the principles of agrarian justice—equitable access to resources, meaningful community participation, and protection of local rights—SEZ development risks perpetuating inequality and undermining sustainable and inclusive growth.

Policy recommendations: Guiding the way to Agrarian justice

The findings from the juridical-empirical analysis and the RIA framework illuminate critical areas for policy intervention to mitigate land grabbing and foster agrarian justice within Indonesian SEZs. The following policy recommendations, derived directly from the study’s findings, aim to bridge the identified gaps and create a more equitable development model:

By implementing these recommendations, Indonesia can move towards a model of SEZ development that not only attracts investment but also upholds the principles of agrarian justice, ensures human rights, and fosters truly sustainable and inclusive growth for its citizens. Combining robust regulatory measures with genuine community empowerment, this integrated approach is crucial for transforming SEZs from potential sites of conflict into engines of equitable prosperity.

Novelty of research

This study adopts a comprehensive and integrated approach to understanding the complex relationship between SEZ land tenure, agrarian justice, and policy effectiveness in Indonesia. Unlike previous studies that tend to examine SEZs, land grabbing, or agrarian issues separately, this study’s originality lies in its unique combination of integrated juridical-empirical analysis linking legal implementation to its impacts on local communities, the use of agrarian justice as a central analytical framework for assessing the success and fairness of SEZ development—a perspective rarely explored before—and the application of Regulatory Impact Assessment (RIA) to generate concrete and actionable policy recommendations. By systematically applying the RIA approach, including cost-benefit analysis, this study not only identifies problems but also offers practical solutions grounded in legal and empirical evidence. This combination of approaches allows for a more in-depth and critical evaluation of SEZ policies, going beyond superficial economic benefits to assess their real impacts on social justice, human rights, and sustainable development.

Research limitation and future direction

Acknowledging the limitations of this research is crucial for a balanced understanding of its findings and for guiding future scholarly endeavors. While this study offers a comprehensive juridical-empirical analysis of SEZ land tenure and agrarian justice in Indonesia, particularly in Lido, Tanjung Lesung, and Mandalika SEZs, certain constraints should be noted. Firstly, the sample size for in-depth interviews, while providing rich qualitative data, was limited to two respondents. This small number, though purposively selected, may not fully capture the diversity of experiences within the local communities affected by SEZ development. Secondly, the focus on three specific SEZs, while allowing for in-depth case studies, may limit the generalizability of findings to all SEZs across Indonesia. Each SEZ has unique contexts, and variations in implementation, local governance, and community dynamics could influence outcomes differently. Thirdly, the research relies on available legal documents and empirical data, which, despite efforts to be thorough, might not encompass all nuances or emerging issues. The dynamic nature of SEZ development and land tenure policies means that new challenges can arise.

Building upon these limitations, future research could explore several avenues. Expanding the sample size for in-depth interviews would offer a more robust representation of community voices and experiences, capturing a wider spectrum of perceptions and impacts. A comparative study across a larger and more diverse set of SEZs in Indonesia, perhaps including those from different regions or with varied development themes, could provide broader insights into the patterns of land tenure and agrarian justice. Future studies could also delve deeper into the specific mechanisms of state capture and rent-seeking within SEZs, examining the political economy of land concessions in greater detail. Furthermore, longitudinal studies tracking the socio-economic and environmental impacts of SEZs over extended periods would be invaluable for assessing the long-term sustainability and fairness of these development models. Finally, investigating the effectiveness of current grievance redressal mechanisms and exploring innovative models for community participation and benefit-sharing could offer practical pathways towards more equitable SEZ development. Research incorporating quantitative methods alongside qualitative approaches could also provide a more holistic understanding of the socio-economic impacts.