The status of Batam, Karimun and Bintan as being among the country’s top investment destinations is under threat as inconsistent regulations are eroding its competitiveness, say businesses.
Declining competitiveness has actually been evident for several years and has not been improved by the introduction of special economic zone (SEZ) status covering the three islands, the Bintan chapter of Indonesian Employers Association (Apindo) said on Saturday.
“Nowadays, there are only 22 foreign companies left in Bintan from the 34 companies in 2000,” chairman Jamin Hidayat said. Jamin is also the liaison manager of Bintan Inti Industrial Estate.
According to Jamin, many foreign investors have quit the islands mainly because of unpredictable regional administration policies. Policies regarding customs and labor costs have been repeatedly changed since regional autonomy began in the year 2000.
Due to these changing policies, foreign investors could not easily predict and calculate their production and investment costs.
Johannes Kennedy Aritonang, president director of PT Panbil Industrial Estate which operates in Batam, has the same opinion.
Only a small number of foreign investors have made major investments on the three islands. “It is very hard these days for any industrial estate company to get an investment contract worth more than US$ 1 million,” Johannes said.
Both Jamin and Johannes said Apindo’s efforts to persuade regional administrations to adopt pro-business policies have not been sucessful in reversing these trends.
In February, Batam, Bintan and Karimun were given SEZ status. Yet, this has led to more bureaucracy and some confusion for local businesses.
According to the scheme, companies operating in Batam, Bintan, and Karimun would no longer pay value-added tax (VAT), import duties and luxury tax.
Oddly, the Customs and Excize Office now imposes levies on goods entering and leaving the Batam port under the new tax regime , while previously charges were only imposed on goods leaving the port.
Jamin said that after introduction of the new status, only two foreign investors have given new business proposals to the Bintan regency. One of them was proposed by a Si