Batam signs promotion pact with Japanese businesses

Adianto P. Simamora, The Jakarta Post, Osaka, Japan

The Batam Industrial Development Authority (BIDA) and four leading business associations in Japan's industrial town of Osaka signed on Monday memoranda of understanding (MoU) to promote Batam island as an investment destination for Japanese investors.

The four associations were the Kansai Economic Federation (Kankeiren), Japan Indonesia Business Association of Kansai (Jibak), Association for Medium and Small Enterprises of Fukui Prefecture and the Osaka Business Partner City Council.

Under the MoUs, each association will organize trade and investment missions from Osaka to Batam.

As an immediate follow-up on the agreements, a 50-strong business delegation from the town will visit Batam in December this year to seek investment opportunities and deepen their understanding of development in Batam.

BIDA chairman Ismeth Abdullah said that the signing was aimed at helping boost Japanese investors' interest in making investments on Batam island.

"From the meeting with the Japanese investors, we know that not all of them want to focus their investments on China. They are now seeking places for expansion in the ASEAN countries so this is a good opportunity for us to attract them to Batam," Ismeth told The Jakarta Post and RCTI television after meeting with some 86 Osaka businesspeople.

The BIDA has also gained support from the Japan External Trade Organization (JETRO) to promote Batam to Japanese investors by providing a free space for BIDA at its representative office in Osaka.

"Many people are now obsessed with China, but China could have some problems in the future such as labor, financial and management problems, so they (investors) should seek out good investment places such as in Batam, and Sri Langka," Nobumasa Take, director general of Jetro Osaka said.

He added, however, that many of the small and medium scale enterprises in Japan did not know about Batam island.

"Indonesia must actively promote Batam to Japanese investors and give accurate information, including the incentives and other facilities that are on offer to investors," he said.

Japan has long been the largest investor in Indonesia.

Ismeth admitted that Indonesia had been lagging behind in promoting investment within its territory compared to other countries such as China, Vietnam and Thailand.

Today, there are investors from 34 countries doing business on Batam island.

Japanese investors, one of the earliest investors in Batam, have contributed some US$421.7 million of investment through 12 wholly-owned companies and 39 joint ventures.

Ismeth added that the BIDA had also allocated 50 hectares of industrial land for Japanese investors.

"In a bid to attract more Japanese investors, the BIDA has allocated some 50 hectares near the port to meet their demands," Ismeth said.

He expressed optimism that many investors from Japan would enter Batam in the near future despite the current economic slowdown in Japan.

"We can offer investors many facilities that enable them to reduce their operating costs so that they can resell their products more cheaply on the Japanese market," he said.

Ismeth went on to say that Batam offered attractive tax incentives, such as exemptions from import/export taxes, value- added tax and sales tax on luxury goods. Beside, investors had the option of obtaining 100 percent ownership.

The island also offered a one-stop service for the processing of all investment applications and speedy customs clearance for imports and exports at sea ports and airports.

Batam, the country's largest industrial hub, accounted for 14 percent of the country's non-oil and gas export revenue last year, with total exports reaching $5.7 billion.

The government plans to grant the island the long anticipated Free Trade Zone (FTZ) status next year to boost its attractiveness as an investment destination. Located in the Riau archipelago, some 20 kilometers south of Singapore, Batam was named an industrial bonded zone in 1978.

Ismeth added that in the first six months of this year, Batam had attracted some 47 new foreign projects, with a total investment of US$100 million.

"I am confident this year's new investment will reach some 80 companies, higher than our previous target of 70 companies," he said.

The BIDA predicted that some 90 new foreign investments would be set up in Batam in 2003.