“Our goal is to develop enclaves of special economic zones in Batam” with clusters dedicated to, amongst others, tourism and logistics, Edy Putra Irawady, acting head of the Batam Free Trade Zone Authority in Indonesia, said in an interview.
“Based on rough calculations, the value of potential investments, including those in the pipeline, is approximately $60 billion.”
The Batam Free Trade Zone consists of eight islands covering an area of 71,500 hectares. It has grown in importance as an investment destination for foreign corporations, especially Singaporean ones, as a consequence of its location in one among the busiest shipping channels, low-cost labor and tax advantages.
Companies operating within the free trade zone are exempt from value added and luxury taxes and import duties.
President Joko Widodo’s administration is searching for to spice up exports to assist curb a widening current account deficit, a key risk to the economy and one among the explanations investors sold the currency amid a sell-off in emerging markets last yr.
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According to Indonesian Industry Minister Airlangga Hartarto, the islands suit corporations seeking to relocate their factories because the trade war between the United States and China disrupts global supply chains.
According to the ministry, Taiwanese company Pegatron Corp. has already announced an investment partnership with local electronics manufacturer PT Sat Nusapersada, and Apple Inc. plans to open a brand new software academy in Batam.
Irrawady said corporations are also keen to take a position in tourism, electronic goods and shipbuilding.
Under special economic clusters, corporations will have the ability to profit from tax incentives and advantages provided under Association of Southeast Asian Nations (Asean) free trade agreements, he said.
Irrawady said extending the advantages of ASEAN free trade could encourage corporations in Batam to directly supply goods to other regions in Indonesia, slightly than route them through Singapore.
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Irrawady said Batam’s strategic location – along the Strait of Malacca, which connects international shipping lanes between the Indian Ocean and the Pacific – is a key advantage that authorities wish to further promote.
“Singapore was already too crowded. For example, if we talk about crude oil transshipment services, some ships have moved from Singapore to Batam,” he said.
“Forwarders from regions such as Jakarta and Semarang also use Singapore’s point-to-point services to deliver their goods overseas. We want to transfer all of them to Batam later.”
