Government to divide Batam into free trade 'enclaves'<\/p>\n
Urip Hudiono and Fadli, The Jakarta Post, Jakarta\/Batam<\/p>\n
The government has finally decided to propose free trade zone
\n(FTZ) status for Batam in certain industrial areas on the island,
\ndismissing worries the move might only discourage investors.<\/p>\n
Coordinating Ministry of Economic, Financial and Industrial
\nAffairs official Mahendra Siregar told The Jakarta Post on Friday
\nthe proposition, dubbed \"enclave FTZ\", had been affirmed in the
\ngovernment's final draft for the law on an FTZ status for Batam.<\/p>\n
\"We hope to be able to submit the draft to the House of
\nRepresentatives for deliberation soon,\" Mahendra said. \"We only
\nneed to work out several remaining details of the FTZ's
\nimplementation with customs and taxation officials.\"<\/p>\n
The government has been under pressure to grant an FTZ status
\nto all of Batam and the adjacent islands of Rempang and Galang in
\na bid to boost investment there.<\/p>\n
Batam has 14 industrial zones including Batam Center, Nagoya
\nand Muka Kuning. About 650 foreign companies are operating on the
\nisland, with a combined investment of about US$3.7 billion. They
\nprovide jobs for 173,000 workers, with a further 70,000 jobs in
\nthe informal sector.<\/p>\n
Mahendra said the enclave FTZ scheme was chosen to ensure only
\nexport-oriented industries would receive exemptions on customs
\nduties and taxes.<\/p>\n
\"Industries targeting the domestic market should be excluded
\nfrom the FTZ status, as it would not be fair for local
\ncompetitors located in other regions,\" Mahendra said.<\/p>\n
\"The enclave FTZ scheme will also prevent Batam from being
\nmisused as an entry point to flood foreign goods into the
\ndomestic market,\" he said.<\/p>\n
Mahendra denied the proposed enclave FTZ scheme was just
\nanother name for the bonded zone policy, which has been
\nimplemented in Batam since the 1970s. An FTZ, which was
\ncompletely outside the authority of customs and taxations
\noffices, would further enable companies to import goods without
\npaying customs duties and taxes, pending their eventual
\nprocessing, shipment or export, he said.<\/p>\n
Mahendra said the enclave FTZ scheme could be just as
\neffective attracting investors as a whole-island FTZ. Investors
\nwould still come to Batam because of its advantages -- a better-
\nthan-average infrastructure and a strategic location only 20
\nkilometers from Singapore.<\/p>\n
Batam Industrial Development Agency head Ismeth Abdullah, who
\nhad been aggressively campaigning for the implementation of FTZ
\nfor the whole of Batam, said he accepted the government's
\ndecision.<\/p>\n
\"Investors care more about legal certainty than whether the
\nFTZ is an enclave or covers the whole island,\" Ismeth said.<\/p>\n
However, Association of Indonesian Industrial Estates (HKI)
\nBatam chapter chairman Johannes Kennedy Aritonang said the
\nenclave FTZ scheme, along with the recently imposed domestic
\nconsumption taxes, were likely to increase the cost of labor on
\nthe island and dissuade investors.<\/p>\n
The government imposed in January new taxes on cigarettes,
\nautomotive products, liquor and automotive products, as well as
\nnew value-added tax and sales tax on luxury goods in March.<\/p>\n
Batam's local administration would start in September
\ndeliberating of a new minimum wage for the island, Johannes said.
\nAs many workers lived outside the enclave FTZ, they would be
\nsubject to the recent consumption taxes and would face higher
\nprices for essential goods, he said.<\/p>\n
\"(The administration) is likely to require companies in Batam
\nto provide a higher minimum wage,\" Johannes said. \"We can only
\nhope companies will stay and maintain their operations in Batam.\"<\/p>",
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