Batam vows to further boost investment climate

Batam vows to further boost investment climate

Sari P. Setiogi, The Jakarta Post, Jakarta

The Batam administration vowed to further improve the
investment climate on the industrial island in a bid to attract
more investment.

Batam on Tuesday was named as one of the most attractive
investment destinations in the country by Regional Autonomy Watch
(KPPOD), an organization set up by the business community to
promote a better investment climate in this country.

Last year, Batam was ranked fifth in the KPPOD survey.

Batam Mayor Nyat Kadir said that the authorities in Batam had
formulated a medium-term plan on how to make Batam, which is
located only some 20 kilometers away from Singapore, a more
attractive place for investment and doing business.

"We have already drafting a city plan for the next 10 years,
and are in the process of designing a 10-year maritime plan,"
Kadir said.

His administration had also launched an e-government system to
help provide faster and better government services.

"In 2003, we approved over 13,000 commercial licenses for
projects worth about US$2 billion," said Kadir.

He added that the Batam authority also allocated a hefty Rp
2.5 billion (US$299,000) annually to support law enforcement and
ensure security.

The local administration was also working hard to control the
island's population, with Kadir saying that population growth had
dropped to 2.5 percent from 13 percent a few years ago.

"Without any controls, overpopulation will result which in the
end may increase the crime rate. This must be avoided," he said.

The government was also working on a housing project to
accommodate over 25,000 workers in Batam. So far, 24 twin blocks
out of a planned 102 twin blocks had been constructed.

However, Kadir acknowledged that despite all the local
government's efforts, the future of Batam would also depend on
the immediate approval by the House of Representatives of a bill
converting Batam into a free trade zone (FTZ).

The bill on the Batam FTZ is currently in the hands of
lawmakers. Although some expect the law to be finally passed
this year (after years of delay), analysts said that there could
be further delays as legislators were very busy preparing for the
upcoming elections.

The Batam authorities have said that any further delay would
create legal uncertainty and cause a slowdown in the flow of new
investment into the island.

Conferring FTZ status on Batam would enable companies on Batam
to import goods without paying customs duties and taxes pending
their eventual processing, transshipment or reexportation.

Batam is one of the most modern industrial bonded zones in
Asia Pacific. There are some 650 foreign companies operating on
the island with a combined investment worth about US$3.7 billion.

The industrial island of Batam was declared a bonded zone in
the 1970s. But after being in existence for decades, Batam is now
more like an FTZ as the government gives greater tax incentives
to investors in a bid to boost investment. But existing investors
are still worried that the government might unilaterally abrogate
the current FTZ benefits if FTZ status is not supported by a
special law.

Some experts have said that turning Batam permanently into an
FTZ would boost its attractiveness in the eyes of investors,
particularly as the island is also competing for investment with
Malaysia's Johor state, Vietnam's Ho Chi Minh City and China.