Batam bills leave govt, House split

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