Indonesia wants to re-position Batam Island, just 30 kilometers south of Singapore, as an alternative manufacturing and shipping hub that would compete with the city-state, and would potentially draw in $60 billion USD in new investments,
Batam and nearby islands have already attracted $20 billion USD in investments after they were declared a free-trade zone in 2007. They are home to thousands of local and foreign firms producing a variety of goods. Now, Batam authorities want to expand their businesses by reclaiming 8,000 hectares of confiscated and idle land to offer to exporters or producers of import substitutes.
Edy Putra Irawady, the acting head of Batam Indonesia Free Trade Zone Authority, said, “We aim to develop enclaves of special economic zones in Batam with dedicated clusters for tourism and logistics, among others. Based on a rough calculation, the potential investments including those in the pipeline are worth around $60 billion USD.”
The Batam free-trade zone consists of eight islands measuring 71,500 hectares. The trade zone has grown in importance as an investment destination for foreign companies, especially Singaporean firms, given its location in one of the busiest shipping channels, along with cheap labor, generous tax benefits and a variety of recreational options. Companies operating in the free-trade area are exempt from value-added and luxury taxes, as well as import duties.
Indonesian President Joko Widodo’s administration is seeking to boost the country’s exports and the expanded Batam Island free trade zone would suit companies looking to relocate their factories as the US-China trade war disrupts global supply chains.
Taiwan’s Pegatron Corp. has already announced an investment partnership with local electronics manufacturer PT Sat Nusapersada, while Apple Inc. plans to open a new developer academy in Batam, according to media reports.
Irawady from the FTZ said that companies are also keen to invest in tourism, electronic goods and shipyard industries and that the extension of the ASEAN free trade benefits may spur companies in Batam to directly supply goods to other regions in Indonesia rather than routing it through Singapore.