Batam asks for free trade zone status<\/p>\n
JAKARTA (JP): The Batam Industrial Development Authority urged
\nthe government on Thursday to change the island's status from an
\nindustrial bonded zone to a free trade area to make it more
\nattractive and credible for foreign investment.<\/p>\n
The authority's chairman, Ismeth Abdullah, said at a seminar
\nhere that Batam's free trade zone status should be ratified by
\nlaw to provide a strong legal basis for investors to do business
\non the island.<\/p>\n
\"The conditions in Batam, near Singapore, actually resemble a
\nfree trade area ... Investors are happy with the current
\narrangement, but they still ask for a clear-cut legal assurance
\nfor their investment which, they believe, can be provided only by
\na law on the concept of free trade zones,\" he told a seminar on
\ninvestment opportunities in Batam.<\/p>\n
He said a free trade zone would certainly make Batam more
\nattractive for business because that status definitely exempted
\nthe island from various taxes, like value-added tax (VAT), luxury
\ntaxes and export and import taxes.<\/p>\n
Ismeth said Batam currently offered simple immigration
\nprocedures, easy export and import bureaucracy, exemptions from
\nexport and import taxes and special land lease permits for 80
\nyears to attract investors.<\/p>\n
In an attempt to attract investors to Batam, the government
\ndecided in 1978 to make the island, some 19 kilometers from
\nSingapore, an industrial bonded zone. In later years, several
\nislands near Batam, such as Karimun and Bintan, were also
\nincluded in the bonded zone.<\/p>\n
Manufacturers on Batam are exempted from import and export
\nduties and \"other government levies\" so that they can comfortably
\ndo business on the natural resource-scarce island.<\/p>\n
The government, however, was planning to collect VAT and
\nluxury tax on domestic sales in Batam in January next year, he
\nsaid.<\/p>\n
\"This inconsistency spooks investors. They, therefore, want
\nBatam's status to be legislated as a free trade zone to
\nstrengthen legal certainty for businesses operating on that
\nisland,\" he said.<\/p>\n
He said that the plan to impose VAT and luxury taxes in Batam
\nhad discouraged many would-be foreign investors, pointing out
\nthat about 60 foreign investors had canceled their investment
\nplans for the island.<\/p>\n
Ismeth insisted that better tax incentives provided through
\nthe free trade zone concept would be the most effective way of
\nattracting more investors to Batam.<\/p>\n
He predicted that the number of foreign investment ventures on
\nthe island would increase to about 700 by 2005 from about 400 at
\npresent, mostly from Singapore, if Batam was made a free trade
\narea.<\/p>\n
Ismeth added that exports from Batam totaled US$4.8 billion
\nlast year or about 10 percent of Indonesia's total exports.<\/p>\n
Minister of Industry and Trade Luhut Panjaitan, who attended
\nthe seminar, said he supported the Batam authority's call for
\ntransformation of the island's status to a free trade zone.<\/p>\n
\"Changing Batam's status to a free trade zone will most likely
\nmake the island much more attractive for investors,\" he told the
\nseminar participants.<\/p>\n
Luhut said the government was currently conducting a study to
\nevaluate the best arrangement for Batam within the country's
\ntrade regime.<\/p>\n
He added that the result of the study on Batam was expected in
\nNovember so that the government could decide on the final status
\nof the island by January.<\/p>\n
The idea of transforming Batam, as well as other Indonesian
\nislands near Singapore, such as Karimun and Bintan islands, from
\na bonded zone to free trade area was first aired last November by
\nPresident Abdurrahman Wahid.<\/p>\n
Despite mixed reactions from experts and officials, the
\ngovernment has established a team of university researchers and
\ngovernment representatives to study the feasibility of the idea.<\/p>\n
Luhut said similar studies would be made on Dumai, Bintan and
\nKarimun in the Riau archipelago, on Bitung in North Sulawesi and
\nMorotai and Biak in Irian Jaya. (cst)<\/p>",
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"sponsor": "Okusi Associates",
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