Measuring The Impact of Special Economic Zone (SEZ) Arun Lhokseumawe on the Sustainability of its Peripheral Area

Abstract

The impact of special economic zones (SEZ) on the sustainability of their peripheral areas is rarely measured and discussed. This research was conducted to determine the sustainability level of the Arun Lhokseumawe SEZ generated to its surrounding area before and after the exhaustion of its natural gas resources. The statistical matching method and the Moran index used for the analysis involved 14 sustainability variables representing social, economic, and environmental dimensions. The method used includes building the sustainability index using village level data, statistical matching to find evidence of impact, and determination of the Moran index to describe its spatial patterns. Additionally, the index was used to describe the policy implication based on the current SEZ sustainability level. The results show that there is no upward trend in the sustainability index after three years of operation, except for an increase in the SEZ (inside) in 2018 which then declines again in 2021. This figure is lower than before natural gas depletion. It was found that, in 2008, the spatial pattern of the high sustainability index mainly spread to areas outside the Arun Lhokseumawe industrial area. Meanwhile, in 2021, the spatial pattern of a high sustainability index clustered near the Arun Lhokseumawe special economic zone.