Indonesia is trying to reposition its Batam island in its place shipping and manufacturing hub to Singapore, with the potential to draw US$60 billion (A$81 billion) in recent investment.
Batam and nearby islands – positioned lower than 30 km south of Singapore – have attracted around $20 billion in investment for the reason that government began promoting it as an industrial area within the Nineteen Seventies. The region, declared a free trade zone in 2007, is home to 1000’s of local and foreign corporations producing goods from computers to drilling platforms.
Now authorities wish to extend advantages to businesses by recovering some 8,000 hectares of abandoned or confiscated land to supply to exporters or producers of imported substitutes.
“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, because of its location in considered one of the busiest shipping channels, low-cost labor and tax advantages. Companies operating within the free trade zone are exempt from value added tax and luxury goods tax, in addition to from import duties.
President Joko Widodo’s administration is searching for to spice up exports to assist narrow a widening current account deficit, which poses a significant risk to the economy and is one reason investors sold the currency amid a sell-off in emerging markets last 12 months.
Indonesian Industry Minister Airlangga Hartarto said the islands are a very good fit for corporations trying to relocate factories because the U.S.-China trade war disrupts global supply chains. Taiwanese firm Pegatron Corp has already announced an investment partnership with a neighborhood electronics manufacturer PT Sat NusapersadaAccording to the ministry, Apple plans to open a brand new developer academy in Batam.
ASEAN Agreement
Companies are also keen to speculate in tourism, electronic goods and shipbuilding, Mr Irrawady said. Under special economic clusters, corporations will profit from tax incentives and advantages provided under Association of Southeast Asian Nations, or ASEAN, free trade agreements, he said.
Extending free trade advantages inside ASEAN could encourage corporations in Batam to provide goods on to other regions in Indonesia slightly than route them through Singapore, Irrawady said.
Authorities also plan to expand Batam International Airport, which, along with the favored tourist resort of Nongsa, will probably be transformed into the island’s first special economic zone for tourism purposes over the following two years, Mr Irawady said.
Batam Island’s strategic location on the Strait of Malacca, which connects international shipping lanes between the Indian Ocean and the Pacific Ocean, is a key advantage that authorities wish to further promote, Mr. Irrawady said.
“Singapore is already too crowded. Talking about crude oil transshipment services, for example, some ships have sailed from Singapore to Batam,” he said. “Carriers from regions such as Jakarta and Semarang also rely on Singapore’s direct link services to deliver their goods overseas. We want to move them all to Batam later.”
Source: BLOOMBERG
