Batam officials try to lure more Japanese investors

Batam officials try to lure more Japanese investors

Hendarsyah Tarmizi, The Jakarta Post, Tokyo

Domestic and foreign companies operating in Batam will receive
a broad range of tax incentives under the proposed law now being
deliberated upon by the House of Representatives (DPR).

Speaking at a seminar entitled "Business Opportunities in
Batam" at the New Otani Hotel in Tokyo on Tuesday, the chairman
of the Batam Industrial Development Authority (BIDA), Ismeth
Abdullahl, said the new tax incentives would include a tax
holiday of between three to five years.

"Such tax incentives are quite important to enable us to
compete with other industrial bonded zones in the Asia-Pacific,"
Ismeth said.

At present, investors operating in Batam and nearby islands of
Rempang and Galang are exempted from paying import duties, value-
added tax and sales tax on luxury goods. But these tax breaks are
still technically required by some government regulations.

"These tax facilities will be stipulated in the proposed trade
zone law to give certainty to investors," Ismeth said.

Speakers at the seminar, which was organized by BIDA in
cooperation with Sumitomo Bank included Indonesian ambassador to
Japan, Abdul Irsan, the deputy chairman of the Investment
Coordinating Board (BKPM), Risaldi Kasri and the chairman of the
Japan-Indonesia Business Association of Kansai, Hajime Kinoshita.

"The geographic advantage of Batam, which is about 20
kilometers south of Singapore, is no longer enough to lure
investors," Ismeth said at the seminar, in which about 80
Japanese businesspeople attended.

"We need to not only improve the infrastructure, but also the
tax incentives so that investors' operating costs in Batam will
be lower than their rivals, for instance, in China," he added.

In addition to the improvement of the fiscal incentives, BIDA
also continues to upgrade the existing infrastructure facilities
such as roads, seaports and the airport to make the island more
attractive to investors.

Three ports with international standard facilities have been
built at Sekupang, Batu Ampar and Kabil, to support export and
import activities of the industrial and manufacturing companies
on the island.

The Batam industrial bonded zone, which has now been expanded
into Rempang and Galang islands, has an international airport to
meet the rapid increase in the flow of goods to and from the
island. Nadim International Airport, with a 4,000-meter runway,
is capable of serving jumbo jets such as the Boeing 747.

Ismeth said that the Batam authority would expand cargo
handling facilities at Batu Ampar port to meet the sharp increase
in the cargo traffic. With the expansion plan, Batu Ampar will be
able to handle one million containers, or five times more than at
present.

"The expansion is important to meet the increase in the number
of foreign companies which are expected to reach 800 by 2005," he
added.

Investment in Batam has showed a continued increase during the
past five years despite the sharp decline in direct foreign
investment in the country as a whole.

At present, there are about 650 foreign companies from 34
countries operating in Batam and the nearby islands, with total
investments of about US$3.7 billion. The number of Japanese
companies is about 50 with a combined investment of $400 million.
They are mostly engaged in electronics, oil and gas as well as
plastics.

"As of July this year, there were an additional 35 foreign
companies with an investment of about $62.2 million," Ismeth
said.

"In addition, there are also 10 existing foreign companies
which will expand their manufacturing plants this year with a
total investment commitment of about $48 million," he added.

Ismeth told the Japanese investors that starting next year, as
part of the free trade agreement between Singapore and the U.S.,
investors in Batam would receive special tax facilities when
exporting their products to the U.S.

"These incentives will affect 266 types of IT and medical
related products," he added.

Besides becoming a major investment destination in the Asia-
Pacific region, Batam has also emerged as one of the country's
most important tourist destinations. More than one million
tourists visited the island last year, making it the second most
popular area in Indonesia. Bali is still first.