Japanese investors start to return to Batam<\/p>\n
Hendarsyah Tarmizi, The Jakarta Post, Jakarta<\/p>\n
Japanese investors have started to come back to Batam and open
\nup businesses in this industrial bonded zone thanks to the
\nJapanese government's move to lessen the concentration of the
\ncountry's overseas investment in China.<\/p>\n
The chairman of the Batam Industrial Development Authority
\n(BIDA), Ismeth Abdullah, said in Tokyo last week that the
\nJapanese government's new policy of limiting the country's
\noverseas investment in China had contributed to a significant
\nincrease in new investment commitments in the island this year.<\/p>\n
\"A large part of the new investment commitments made by
\nforeign investors during the first semester of this year came
\nfrom Japan. This indicates a growing confidence on the part of
\nJapanese investors in doing business in Batam,\" Ismeth said
\nfollowing the signing of Memorandums of Understanding (MOUs)
\nbetween BIDA and five Japanese companies in Tokyo last week.<\/p>\n
In the MOUs signed at a business gathering held as part of
\nBIDA's four-day investment campaign in Japan's capital, the five
\ncompanies expressed their intention of setting up factories on
\nthe island. BIDA, for its part, agreed to provide all the
\nnecessities needed for bringing their investments to pass.<\/p>\n
Ismeth said that besides the five companies, many other
\nJapanese investors had informally expressed their interest in
\nestablishing factories on the island.<\/p>\n
However, he said that most of these companies were waiting for
\nthe implementation of the proposed law on the strengthening of
\nthe status of Batam as a free trade zone, which would, among
\nother things, provide a broader tax incentive base for new
\ninvestors.<\/p>\n
Lured by a large domestic market and attractive tax
\nincentives, most Japanese medium and large-scale companies have
\nbeing putting a larger part of their overseas investment into
\nChina over the past five years. As a consequence, the flow of
\nJapanese investment to Indonesia has almost came to a halt,
\nparticularly over the past two years.<\/p>\n
The concentration of Japanese investment in China has,
\nhowever, caused concerns for the Japanese government. Focusing
\ninvestment on one country not only entails higher risk but also
\ncould cause imbalances in economic growth in the Asian region.<\/p>\n
Executive director of the Japan External Trade Organization
\n(JETRO), Shinchi Saito, acknowledged that there had been a change
\nin the government's overseas investment strategy.<\/p>\n
\"We are now encouraging our investors not to concentrate their
\ninvestment on China. They are being asked to also invest in
\nSoutheast Asia so that every country in this region will have an
\nequal opportunity to grow,\" he said during a meeting with BIDA
\nexecutives on Wednesday.<\/p>\n
Saito, however, warned that JETRO, which is in charge of
\nmonitoring and supervising the country's outbound and inbound
\ninvestment, had no power to tell investors where they should
\ninvest their money.<\/p>\n
\"If Batam has a better business climate and more attractive
\nfiscal packages, the investors will naturally go to this
\ninvestment site,\" he said.<\/p>\n
According to Saito, Indonesia as a whole should offer fiscal
\nincentives as good as those provided by China, Malaysia and
\nVietnam if it wanted to attract foreign direct investment.<\/p>\n
\"If you want to attract foreign investors, you should offer
\nbetter incentives than the others,\" he told Indonesian
\njournalists covering the meeting.<\/p>\n
The chairman of the Kansai's Japan-Indonesia Business
\nAssociation, Hajime Kinoshita, shared Sato's view. He said that
\nthere was a growing interest among Japanese companies in setting
\nup their overseas factories in Batam but they were still waiting
\nfor an improvement in the tax incentives available before coming
\nto the island.<\/p>\n
Japanese investors generally did not have any problems about
\nthe situation Batam or the quality of its infrastructure. \"They
\nare already familiar with Batam. Its strategic location and
\nmodern infrastructure are better than other investment
\ndestinations in the region but they want much more attractive tax
\npackages, such as tax holidays, before doing business on the
\nisland,\" he said.<\/p>\n
Batam, some 20 kilometers to the south of Singapore, is one of
\nthe most modern industrial bonded zones in Asia Pacific. At
\npresent, investors doing business on the island are exempted from
\npaying import and export duties, as well as sales tax on luxury
\ngoods, and value added tax.<\/p>\n
The Ministry of Trade and Industry is proposing a law to
\nstrengthen the status of Batam and its neighboring isles of
\nRempang and Galang, as a free trade zone.<\/p>\n
With the new legislation, BIDA as the sole authority for the
\nindustrial bonded zone, will have more power not only in
\nprotecting the foreign companies' assets and operations but also
\nin improving fiscal incentives to investors.<\/p>\n
BIDA chairperson Ismeth said that the proposed law, which was
\nnow being deliberated by the House of Representatives in Jakarta,
\nwould pave the way for the introduction of the long-waited tax
\nholiday.<\/p>\n
With this new fiscal incentive, investors would not only be
\nexempted from paying import and export duties, sales tax on
\nluxury goods and value added tax, but also from corporate income
\ntax for certain periods of time.<\/p>\n
\"I hope there is no problem with the bill as most of the
\narticles in the bill are based on concepts prepared by the House
\nmembers themselves,\" he said. \"We are optimistic that the law
\nwill be passed by the end of this year and could be implemented
\nnext year,\" he added.<\/p>\n
According to Ismeth, encouraging the passage of the new
\nlegislation was one of many efforts being made by BIDA to ensure
\nthat investors' operations on the island were more competitive
\nthan those in China and in other parts of the Asian region.<\/p>\n
Batam, which was established as an industrial bonded zone in
\n1971, has become one of the largest investment destinations in
\nAsia Pacific. There are 650 foreign companies operating on the
\nisland at present with a combined investment of about US$3.7
\nbillion. Their existence has provided jobs for 173,000 workers,
\nwith a further 70,000 jobs in the informal sector. Last year,
\nthese companies paid corporate income tax of almost Rp 1
\ntrillion.<\/p>\n
There are now 50 Japanese companies operating, with their
\ntotal investment being worth about $400 million. The companies
\ninclude affiliates of Japan's business giant Sumitomo,
\nelectronics company National\/Panasonic Matsushita and Nippon
\nSteel.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/japanese-investors-start-to-return-to-batam-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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