ADVERTORIAL - FOR MONDAY
ADVERTORIAL - FOR MONDAY
Investment Year
Batam -- The right model in attracting foreign investments
The unfavorable situation in the world's economy will undoubtedly make the task of the Batam Industrial Development Authority (BIDA) in attracting foreign investors more challenging.
The task will be even more difficult given the lack of the government's supports. The central government's policies related to investment activities on Batam and neighboring islands of Rempang and Galang have been discouraging. Foreign and local investors who played a pivotal role in the development of the islands have often been forgotten.
President Megawati Soekarnoputri declared in Feb. 27 the year 2003 as Investment Year for Indonesia amid the growing optimism on the signs of recovery in foreign inflows into the country.
With the declaration of the Investment Year, the government hopes the realization of investment approvals will improve and reach at least 30 percent.
The realization of investment plans in Batam has reached 80 percent, far than the government's target. Last year, total investments on the island and surrounding areas reached about US$9.19 billion, absorbing 161,648 workers and contributing income tax of over Rp 1.4 trillion.
However, the success of Batam in attracting both foreign and domestic investments has not received a positive support from the central government. This can be seen from the uncertainties related to the implementation of the proposed Law on Free Trade Zone that will turn Batam as one of important free trade areas in Asia and Pacific. With this status, investors can enjoy a number of fiscal breaks such as the exemption of Value Added Tax (VAT)
Batam Island has an area of about 415 sq kilometer. However due to the progress of demand of space, the Batam industrial area was expanded in 1992 with the inclusion of two other islands, Rempang and Galang. Its close proximity to Singapore is one of the advantages of the industrial bonded zone but the island need to introduce more incentives such as tax breaks to enable it to compete with other investment destinations in the region.
BIDA's Chairman, Ismeth Abdullah, said the authority would make any possible efforts to further attract foreign investors to the industrial bonded zone despite the lack of the government's supports.
A number of programs have been made to enable BIDA to promote the island more effectively such as through the sending of investment mission overseas.
"If in the past we focused only on Singapore, we are now also giving more attention to other Asian countries and Europe," Ismeth said, adding that the authority had recently sent investment missions to Japan and Germany as part of its campaigns to attract new investments from outside Singapore.
Ismeth said that the mission had produced fruitful results such as the signing of Memorandum of Understanding (MOU) accords with a number of economic organizations both in Japan and Germany.
The authority has also made significant breakthroughs in its efforts in promoting the quality of services such as by organizing regular meetings with investors as well as actively being involved in mediating disputes arising between workers and investors.
The authority also takes more persuasive approaches in settling the problems rising from the different perception of tax payments with investors. Besides simplifying the procedures imposed on investors in obtaining their investment permits, the authority also guarantees that they will be freed from illegal levies when applying for permits.
Ismeth, however, acknowledges that the improvement of services was no longer enough in attracting foreign investors to the island. "If the investors are not given attractive fiscal incentives such as the exemption Value Added Tax (VAT) and Import Taxes, they will not come and will instead invest in other countries," he said.
At present, BIDA is also working closely with the local police and security apparatus to ensure that Batam will remain a secured place for investors.
As part of the cooperation, the authority has provided a number of patrol cars and motorcycles, as well as communication equipment to about 600 police members in Batam, Rempang and Galang islands.
Besides cooperating with the police, the authority also has its own security department (Dirpam) which has so far recruited 700 personals to help the task of the police members. The assistance provided by the authority to the Police, the Army, the Navy and the Air Force in the form of equipment reaches about Rp 2 billion a year.
The assistance is given to help the police and other security apparatus maintain the law and order and to ensure that the island is a secured place for some 611 foreign investors.
The investors mostly carry out their activities in modern industrial estates on the island. There are 14 industrial estates at present, which include Walakaka Industrial Estates, Kara Industrial Park, Cammo Industrial Park, Tunas Industrial Park, Kabin Industrial Park, Taiwan International Industrial Estate, Citra Bauana Centre Indsutrial Park I and II, Batamindo Industrial Estate, Panbil Industrial Estate, Malindo Cipta Perkasa Industrial Park, Bintang Industrial Park I and II, Indah Industrial Park and Latrade Industrial Park.
About 4,000 hectares of land have so far been designated for industrial activities. The authority is currently preparing another 500 hectares for a similar purpose to anticipate the surge in new investments in the future.
BIDA is also working closely with other agencies in improving the water, electricity and telecommunication facilities.
In providing the water supply, the authority has appointed PT Adhya Tirta Batam (ATB), a local subsidiary of a British water company to manage and operate water installation facilities on the island under a 25-year Build, Operate and Transfer (BOT) contract.
ATB, which began its operation in 1995, processes and manages the distribution of water from six major dams on Batam including Baloi, Sei Harapan, Nongsa, Sei Ladi, Muka Kuning and Duriangkang dams.
The company is able to process about 30 liters per second from the water resource in Baloi dam, about 210 liters per second in Sei Harapan, 60 liters per second in Nongsa, 240 liters per second in Sei Ladi, 310 liters per second in Muka Kuning and 3,000 liters per second in Duriangkang.
The appointment of the branch of the state owned electricity company PLN in Batam as an independent company in late 2002, has been a major breakthrough in the distribution of electricity on the island. With its new status, PLN Batam has an autonomous authority not only in the distribution of the electricity supply but also in the operation of its power plants. It means that the company will have more leeway in solving the electricity problem that might arise on the island.
At present, PLN Batam operates 26 diesel power generators in Sekupang ( nine units), Batu Ampar ( four units), Baloi ( four units), Tanjung Sekuang ( seven units) . The company plans also two build two more power generators in Tanjung Sekuang within the next two years to anticipate the surge in the electricity demand. At present, the combined generating capacity of the company's power generators is 175.4 Megawatt (MW).
A number of industrial estates operate captive power plants to meet the need of electricity from investors running factories on the estates. Batamindo Industrial Estate, for an example, operates a power plant with a generating capacity of about 70 MW and Pambil Industrial Estate operates a power plant with a capacity of 2 MW.
With the use of digital technology, fixed-telephone facilities on Batam island and its surrounding areas are relatively more advanced, compared to those in other Indonesian areas, which mostly still use an analog system. Besides using digital technology, the telecommunication facilities on the island are also supported by more reliable underground cables, which have a bigger transmission capacity.
In the field of mobile phones, Batam has often been used by mobile phone operators as a pilot project for the introduction of their new services. Indosat Multi Media Mobile (IM3), for example, firstly introduced its multimedia service on the island.
"Batam has become the launching area of new telecommunication services both for mobile and fixed phone operators, " said Arief Musta'in, the general manager of Telkom for Riau islands. "For Telkom, the island is the area where the company used its latest technology," he added.
Telkom, with a capacity of providing 78,400 telephone lines, has 76,000 subscribers on Batam and surrounding areas.