House discussing Batam FTZ status<\/p>\n
Adianto P. Simamora and Fadli, The Jakarta Post, Jakarta\/Batam<\/p>\n
The House of Representatives is currently drafting a law that
\nwould provide a long-awaited legal basis for Batam Island to
\nobtain free trade zone (FTZ) status and put an end to the
\nconfusion faced by investors doing business on the industrial
\nisland.<\/p>\n
Under the proposed draft, Batam will be granted FTZ status or
\ndesignation as a tax and duty-free industrial zone for 70 years.<\/p>\n
The daily management of the island will also be taken over by
\na new agency called the Batam Authority Body, which holds the
\npower to issue business licenses.<\/p>\n
\"We hope the bill (on the Batam status) can be passed into law
\nin March, next year,\" said legislator Irmadi Lubis of the House
\nof Representatives Commission V overseeing industry and trade,
\nwhich is in charge of drafting the law.<\/p>\n
The House is using its \"initiative rights\" to draft the law,
\nafter the government failed last year to complete drafting the
\nlaw on the status of Batam.<\/p>\n
\"The law is crucial to reviving investor confidence on the
\nisland,\" Irmadi said last week.<\/p>\n
An FTZ status would enable companies on Batam, located some 20
\nkilometers from Singapore and is home to hundreds of Singaporean
\nmanufacturers and other foreign firms, to import goods without
\npaying customs duties and taxes, pending their eventual
\nprocessing, transshipment or reexportation.<\/p>\n
Batam was initially declared an industrial bonded zone in 1978
\nin order to attract foreign investment and bolster export
\ncompetitiveness. The status was later given to the nearby
\nislands of Rempang and Galang, becoming a total bonded area of
\n715 square kilometers.<\/p>\n
However, the islands for many years have technically acted as
\nan FTZ, and tax incentives originally intended for export-
\noriented industries have also been enjoyed by all residents of
\nBatam and Indonesian companies there providing products and
\nservices not destined for export.<\/p>\n
This prompted the government in 1998 to reimpose the value
\nadded tax (VAT) on Batam. The cash-strapped government also
\nwanted to raise revenue from the tax. But after strong protest
\nfrom foreign investors, the VAT policy was postponed. The
\nconfusion, nevertheless, had scared many foreign investors away.<\/p>\n
The new regional autonomy policy launched in 1999, which gives
\ngreater administrative power to local governments, had also
\ncreated confusion among foreign investors. The newly-empowered
\nlocal government, for instance, had required foreign companies
\noperating on Batam to also obtain permits from the administration
\nin addition to the license already obtained from the Batam
\nIndustrial Development Body (BIDA).<\/p>\n
But this kind of confusion will end if the new bill on the
\nBatam FTZ status is passed into law.<\/p>\n
According to the draft law, a special board to be led by the
\nCoordinating Minister for Economic Affairs, Dr. Dorodjatun
\nKuntjoro-Jakti, will be in charge of designing policies for
\nBatam. The board will consist of several ministers, officials of
\nthe Batam administration and the Riau province.<\/p>\n
Meanwhile, in order to oversee the daily management and
\nmonitoring of the development on Batam, the board will designate
\nan interim Batam Authority Body. This new commission will take
\nover the responsibilities of BIDA and have the authority to issue
\nbusiness permits on the island.<\/p>\n
This clarification on who is in charge of the controlling
\nauthority on the island should give a peace of mind to investors.<\/p>\n
\"We had received many complaints from existing investors in
\nBatam about the overlapping role of BIDA and the local government
\nbecause of the unclear status of the island,\" Irmadi said.<\/p>\n
Although Irmadi was optimistic that the problem concerning the
\nBatam status would be resolved next year, many doubts remained
\ndue to strong opposition from the local administration. The
\ncentral government, which would lose tax revenue by applying the
\nFTZ status on Batam, may also be reluctant to hastily give
\napproval to the new law.<\/p>\n
\"I prefer Batam remain as a bonded zone rather than FTZ
\nbecause it (FTZ) will void the authority of the local
\ngovernment,\" Nyat Kadir, Batam's mayor told The Post.<\/p>\n
Nyat said that the FTZ status was against the law on regional
\nautonomy.<\/p>\n
Key points of the proposed Batam FTZ status<\/p>\n
1. FTZ status will be valid for 70 years.<\/p>\n
2. The government will set up Batam Authority Commission to
\noversee daily management of Batam Island.<\/p>\n
3. Batam Authority Commission will also have the authority to
\nissue business permits and other licenses needed by investors.<\/p>\n
4. All licenses previously issued by Batam Industrial Authority
\n(BIDA) will remain valid.<\/p>\n
5. All properties currently owned by BIDA will be transferred to
\nBatam Authority Commission.<\/p>",
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