Evaluation of Special Economic Zone (SEZ) Impact on Economic Growth: Evidence of Simalungun Regency, North Sumatera, Indonesia

Abstract

This study examines the causal effect of the Sei Mangkei Special Economic Zone (SEZ) on the economic growth of Simalungun Regency, North Sumatera using the Synthetic Control Method (SCM). This study uses macro data at the district/city level in Indonesia. The counterfactual in this study was built using a synthetic control unit derived from data from 290 regencies/cities in Indonesia from 2006 to 2020. The results of the analysis conclude that the existence of the Sei Mangkei SEZ has not yet had an economic impact on the economic growth of Simalungun Regency. This finding contrasts with most previous studies which have found that SEZs positively impact the economic growth of the host region. The Sei Mangkei SEZ has not yet had an impact because currently, the utilisation of land and the search for new business actors who are expected to invest in the Sei Mangkei SEZ are still below the target.