Indonesia’s Batam hoping for $60 billion in investments

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Indonesia’s Batam Hoping For $60 Billion In Investment
View over Batam’s Harbour Bay with the Singapore skyline in the background © Arno Maierbrugger

Indonesia wants to re-position Batam, an island archipelago just 30 kilometers south of Singapore, as an alternative manufacturing and shipping hub that would compete with the city state, thereby potentially drawing $60 billion in new investments, Bloomberg News quoted Edy Putra Irawady, acting head of Batam Indonesia Free Trade Zone Authority, as saying.

Batam and nearby islands have already attracted about $20 billion of investment after they were declared a free-trade zone in 2007. They are home to thousands of local and foreign firms producing goods from computers to oil rigs.

Now authorities want to expand benefits to businesses by reclaiming about 8,000 hectares of idle or confiscated land to offer to exporters or producers of import substitutes.

“We aim to develop enclaves of special economic zones in Batam with dedicated clusters for tourism and logistics, among others,” Irawady said.

“Based on a rough calculation, the potential investments including those in the pipeline are worth around $60 billion,” he said.

The Batam free-trade zone consists of eight islands measuring 71,500 hectares. It has grown in importance as an investment destination for foreign companies, especially Singaporean firms, given its location in one of the busiest shipping channels, cheap labour, tax breaks and recreational options. Companies operating in the free-trade area are exempt from value-added and luxury taxes, as well as import duties.

President Joko Widodo’s administration is seeking to boost exports to help curb a widening current-account deficit, a key risk for the economy and one of the reasons why investors sold the currency amid an emerging-market sell-off last year.

The islands would suit companies looking to relocate their factories as the US-China trade war disrupts global supply chains, according to Indonesia’s industry minister Airlangga Hartarto.

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 the ministry.

Companies are also keen to invest in tourism, electronic goods and shipyard industries, Irawady said. Under the special economic clusters, companies will also enjoy tax incentives and benefits stipulated under free-trade agreements of the Association of Southeast Asian Nations (ASEAN), he said.

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, Irawady added.

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[caption id="attachment_32464" align="alignleft" width="300"] View over Batam's Harbour Bay with the Singapore skyline in the background © Arno Maierbrugger[/caption] Indonesia wants to re-position Batam, an island archipelago just 30 kilometers south of Singapore, as an alternative manufacturing and shipping hub that would compete with the city state, thereby potentially drawing $60 billion in new investments, Bloomberg News quoted Edy Putra Irawady, acting head of Batam Indonesia Free Trade Zone Authority, as saying. Batam and nearby islands have already attracted about $20 billion of investment after they were declared a free-trade zone in 2007. They are home to thousands of local...

Reading Time: 2 minutes

Indonesia’s Batam Hoping For $60 Billion In Investment
View over Batam’s Harbour Bay with the Singapore skyline in the background © Arno Maierbrugger

Indonesia wants to re-position Batam, an island archipelago just 30 kilometers south of Singapore, as an alternative manufacturing and shipping hub that would compete with the city state, thereby potentially drawing $60 billion in new investments, Bloomberg News quoted Edy Putra Irawady, acting head of Batam Indonesia Free Trade Zone Authority, as saying.

Batam and nearby islands have already attracted about $20 billion of investment after they were declared a free-trade zone in 2007. They are home to thousands of local and foreign firms producing goods from computers to oil rigs.

Now authorities want to expand benefits to businesses by reclaiming about 8,000 hectares of idle or confiscated land to offer to exporters or producers of import substitutes.

“We aim to develop enclaves of special economic zones in Batam with dedicated clusters for tourism and logistics, among others,” Irawady said.

“Based on a rough calculation, the potential investments including those in the pipeline are worth around $60 billion,” he said.

The Batam free-trade zone consists of eight islands measuring 71,500 hectares. It has grown in importance as an investment destination for foreign companies, especially Singaporean firms, given its location in one of the busiest shipping channels, cheap labour, tax breaks and recreational options. Companies operating in the free-trade area are exempt from value-added and luxury taxes, as well as import duties.

President Joko Widodo’s administration is seeking to boost exports to help curb a widening current-account deficit, a key risk for the economy and one of the reasons why investors sold the currency amid an emerging-market sell-off last year.

The islands would suit companies looking to relocate their factories as the US-China trade war disrupts global supply chains, according to Indonesia’s industry minister Airlangga Hartarto.

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 the ministry.

Companies are also keen to invest in tourism, electronic goods and shipyard industries, Irawady said. Under the special economic clusters, companies will also enjoy tax incentives and benefits stipulated under free-trade agreements of the Association of Southeast Asian Nations (ASEAN), he said.

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, Irawady added.

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