North Kalimantan, the newest province in Indonesia, is situated next to the smaller but richer and more developed Malaysian state of Sabah. The province is one of the economically most successful provinces in Indonesia in terms of growth per capita.

The abundance of natural resources explains much of the economic success, and combined with the revenues from extensive cross-border trading, much of it deemed illegal by Jakarta but tacitly or directly supported by local politicians and business elites, much wealth is being accumulated. To increase and sustain this wealth, the administration of North Kalimantan have been working towards the creation of a Special Economic Zone (SEZ), in the city of Tarakan. Modelled on similar zones in China, the SEZs with their preferential tax arrangements for businesses are expected to attract foreign capital to the area, and boost exports.

How will the SEZ transform the patronage based economy of Tarakan? What kinds of power configurations and capital flows are mobilized in the creation of such a zone? These are the kind of questions that this subproject will attempt to answer, questions also applicable for the formation of SEZs in much of Southeast Asia, inspired by the economic success of especially China.