Does a special economic zone impact the surrounding economy? The case study of Kendal, Indonesia

Irwanda Wardhana, Indri Riesfandiari, Erizal Jamal (), Vyta W. Hanifah (), Pihri Pihri, Felix Wisnu Handoyo, Nugroho Purwono, Rizky Prayogo Ramadhan, Budhi Setyawan, Michal Placek, Bakri Prakarso A. W, Natasha Dini Chrysanti, Reza Mahdi Daniswara, Bambang Wijanarko and Elen Setiadi
Additional contact information
Indri Riesfandiari: Polytechnic of State Finance STAN
Erizal Jamal: National Research and Innovation Agency
Vyta W. Hanifah: National Research and Innovation Agency
Pihri Pihri: National Research and Innovation Agency
Felix Wisnu Handoyo: National Research and Innovation Agency
Nugroho Purwono: National Research and Innovation Agency
Rizky Prayogo Ramadhan: National Research and Innovation Agency
Budhi Setyawan: Polytechnic of State Finance STAN
Michal Placek: Ambis Vysoka Skola, A. S.
Bakri Prakarso A. W: National Council for Special Economic Zone
Natasha Dini Chrysanti: National Council for Special Economic Zone
Reza Mahdi Daniswara: National Council for Special Economic Zone
Bambang Wijanarko: National Council for Special Economic Zone
Elen Setiadi: Coordinating Ministry for Economic Affairs

Palgrave Communications, 2025, vol. 12, issue 1, 1-17

Abstract: Abstract Special Economic Zones (SEZs) have become pivotal instruments for fostering regional development and industrial growth worldwide, yet comprehensive socioeconomic and spatial impacts remain crucial for understanding their true potential. This study aimed to evaluate the impact and identify the challenges of the SEZ in Indonesia, namely Kendal SEZ, by employing a mixed-methods approach to better capture the nuances of the SEZ’s impacts on the surrounding economy. A qualitative analysis was conducted as an exploratory phase involving SEZ management, enterprises, and government representatives. The quantitative analysis used Propensity Score Matching-Difference in Difference (PSM-DiD) and Geospatial Methods. Findings reveal a positive impact on increasing total household expenditures, reflecting enhanced community well-being. This SEZ strengthened the manufacturing sector, as evidenced by the increased location quotient. Spatial analysis reveals heightened economic activity via Night-Time Light emissions. The Kendal SEZ emerged as a driver of local economic growth and advanced industrial development among Indonesia’s SEZ models despite challenges like infrastructure and technical limitations. Our study contributes robust empirical evidence of the direct and indirect impacts of SEZs on regional economic development. We suggest that future policy considerations should address infrastructure and workforce challenges to sustain and enhance the benefits of SEZ.

Date: 2025
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DOI: 10.1057/s41599-025-04448-0

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