Batam's investors want clear policy on island's status: BIDA
Batam's investors want clear policy on island's status: BIDA
By Devi M. Asmarani
BATAM ISLAND, Riau (JP): Batam Industrial Development
Authority (BIDA) said on Friday foreign and local investors here
were concerned over the government's seemingly inconsistent
economic policy on the island.
BIDA deputy chairman for administration and planning Wendy
Aritenang said the investors questioned the government's
sincerity in accommodating their commercial needs, as its policy
on the industrial island seemed to have been wavering over the
last decade.
"A clear policy, especially on the island's status, is the
most important thing for investors, because that will determine
their estimation of cost structures for their investment here,"
he said.
Wendy was referring specifically to a 1998 government
regulation on the imposition of value-added tax (VAT) on Batam.
The 1998 regulation says export-oriented companies will be
subject to receive refunds for the VAT payment only after they
prove that they have exported their products.
Wendy said the investors saw this move as a contradiction to
the previous policy on Batam which had attracted them to invest
in this 415-square-kilometer island in the first place.
"This move will force them to redo their cost structure," he
said.
In an attempt to attract investors to the area, the government
decided in 1978 to make Batam, some 19 kilometers away from
Singapore, an industrial bonded zone. In later years, several
islands near Batam were also included in the bonded zone.
According to the 1978 regulation, manufacturers on Batam are
free from all import and export duties and "other government
levies".
Wendy said the 1998 regulation, which is due to take effect
this April, was based on the fact that despite its status as an
industrial bonded zone, Batam also has noncommercial inhabitants.
"I understand that what the government tried to achieve with
this policy was the sense that justice was being done, that Batam
would be treated fairly like other areas in Indonesia.
"But this can have a grave impact on the industry here," he
said, adding that investors saw the move as inconsistent.
He said foreign investors' on Batam were mainly concerned that
the policy would become an administrative snag for daily business
operations.
"They are not convinced that they will be able to get their
tax return on time and in the full amount, even with the
government's promises," he said.
In addition, they are also concerned that the tax imposition
will raise labor costs in the area, he said.
But the local small and medium enterprises, which make up the
existing supporting industries for Batam's main industries, will
be the most affected by the policy, he said.
He said the supporting industries, on which the tax would be
imposed, could lose businesses to their foreign counterparts as
the VAT would make them uncompetitive.
"What we will get in terms of tax income from imposing VAT on
Batam is far less than what we actually put at stake here," he
said.
Wendy said BIDA had proposed the government conduct at least a
one-year study before recommending any more new economic policies
on Batam.
"We hope to hear (the central government's response) on this
proposal pretty soon," he added.
As of November 1998, the combined investment value in Batam
amounted to US$2.27 billion, compared to about $2.24 billion in
1998. Wendy said that on Batam, there are 380 foreign investors,
mostly from Singapore, and the number is targeted to increase to
750 by 2004, reaching $5 billion in value.