Border economic zones to boost growth and tackle poverty

Abstraksi

Border areas are often far from urban economic centers and can be flash points for conflict, holding back economic growth. Residents living at Indonesia’s border with Timor-Leste have a poverty rate twice that of Indonesia as a whole. Economic zones located at the border (or across it) however are a means of tackling poverty by attracting trade and investment into these lagging areas. Border zones differ from more common forms of economic zones as they may need a greater focus on small and medium enterprises, capacity building and the importance of an effective transport and logistics corridor is heightened to ensure the zone is linked with trade gateways and consumers. The Asian Development Bank, at the request of the Ministry of Finance, has undertaken three studies, using mixed methods, on the feasibility of economic areas at Indonesia’s borders with Timor-Leste and Malaysia. In North Kalimantan and West Kalimantan the study identifies opportunities for higher value-added trade of their rich resources (palm oil, fish, wooden furniture) with Malaysia and expansions of services such as medical tourism and higher education. In Nusa Tengarra Timur, preliminary findings recommend expansions of joint tourism itineraries with Timor-Leste and the establishment of a SPS livestock zone across the Island of Timor to help trade and cooperative production of cattle, pigs and poultry- a major source of livelihood for border residents. All studies however emphasize the importance of transport and trade facilitation as well as cross-border institutions to realize the potential gains.