Batam bills leave govt, House split
Zakki P. Hakim and Rendi A. Witular, Jakarta
The deliberation of bills on Batam by the House of Representatives and the government is likely to be protracted, with a possibility of not being completed during the current session, given their different stances over fundamental issues such as the exclusive status of the island and taxation.
Meanwhile, a further delay in defining Batam's status is feared to harm the investment climate on the island -- one of the most modern investment destinations in the Asia Pacific.
The House and the government have each proposed separate bills, the first time that such an instance has occurred. A bill is usually proposed by either the government or the House.
The House, which is empowered under the Constitution to draw up a bill, completed its draft several years ago. However, the government refused to deliberate it and instead drafted its own version, which was completed several months ago.
On the issue of Batam's status, the government proposes the free trade zone (FTZ) status be accorded only to certain industrial areas on the island as "enclave FTZs", while the House recommends Batam Island be granted full FTZ status.
"There are several differences between the government and the legislators in their perspective on the FTZ status for Batam, but they are not that significant," Director General of Law and Regulation Abdul Gani at the justice ministry told The Jakarta Post on Friday.
Abdul said during the deliberation, which will start next week, the government and the House would push for their own bills and try to seek a compromise on every article.
"I can assure you that, despite the differences, we can speed up the deliberation to just 12 working days, (and enact the bill) before the tenure of the current administration ends on Oct. 20," he said.
The government and the House are also split on tax and duty exemption facilities for the island. The government's draft proposes that the facilities should be enjoyed only by those select parties that conduct business activities on the island.
The House draft, on the other hand, offers broader tax and duty exemption facilities, including consumer goods for residents.
The two institutions agreed on Thursday to start deliberations with each side referring to their own bill. The government has appointed officials from the justice, finance, trade and home ministries as its representatives.
A FTZ status will enable companies on the island to import goods without paying customs duties or taxes, depending on their eventual distribution, transshipment or reexportation.
Batam, located only 20 kilometers from Singapore, was declared a bonded zone in 1978. After decades of operation, however, the island runs more like an FTZ, as local authorities provide greater tax incentives to investors in a bid to boost investment.
With the new bills up for deliberation, existing investors are worried that the government might change the FTZ benefits they enjoy.
In order to revive the flagging investment sector, the government has been under pressure to grant Batam an FTZ status, but has not succeeded in drafting the law due to points of disagreement between ministries.
The two Batam bills
Government bill:
-- Dissolve current Batam Industrial Development Agency and replace with Batam Developer Agency
-- Designate Batam, Rempang and Galang islands as FTZ areas
-- Designate Batu Ampar, Batam Center, Kabil, Muka Kuning, Sagulung, Tanjung Uncang and Sekupang as FTZ industrial zones
-- Batam Developer Agency authorized to issue regulations for island
-- Batam Developer Agency authorized to regulate rates for seaport/airport services and facilities, infrastructure and export/import services
-- Financial reports from Batam Developer Agency is subject to annual audits
-- Tax and duties exemption facilities to be granted for select business activities
House bill:
-- Maintain current Batam Industrial Development Agency
-- FTZ areas: Batam, Rempang, Galang and Belakang Padang islands
-- FTZ industrial zones to be designated later by government regulation
-- Batam Industrial Development Authority is sole institution with regulatory powers
-- Tax and duty exemption facilities to be granted for certain business activities and residents