Many industrial areas in Batam, Riau Islands province have been forced to discontinue promoting their sites due to a lack of interest from investors.
Secretary of the Industrial Areas Association (HKI) in Batam, Eddy Akun told The Jakarta Post that several industrial complexes have stopped promotion abroad.
The move to stop promotion, he said, was not because the city's 22 industrial complexes covering 1,500 hectares were fully booked but mainly due to low interest from foreign investors.
"My industrial complexes have stopped promotion for two years. We even closed our office in Singapore. It's wearisome when foreign investors ask about Batam's status, tax and other things," said Eddy who owns two industrial areas -- Bintang Industrial Park I and Bintang Industrial Park II -- covering 60 hectares of land in Batam.
Bintang Industrial Park I currently hosts 17 foreign companies, far lower than its full capacity of 50 companies. In Bintang II, only 15 out of 40 companies were in operation.
He blamed the unclear status of Batam as an industrial city following the issuance of Autonomy Law No. 22/1999, which caused, among other things, an overlapping in authority and conflicting procedures between the Batam city administration and the Batam Industrial Development Authority (BIDA).
Moreover, many interested investors were daunted by regulations on value-added tax and luxury goods tax, he added.
"Even Batam's reputation as one of the dirtiest cities in Indonesia has been a cause for concern, many roads are not being properly maintained. How can we promote it abroad if the situation in Batam is like this?" Eddy said.
According to chairperson of the Indonesian Chamber of Commerce and Industry in Batam, Nada Faza Soraya, in the last five years, 10 foreign companies relocated outside the island, two canceled investment plans, six postponed investment plans and eight had closed businesses.
"Slow business at industrial complexes also affected small-to medium-scale businesses, which partnered with industrial complexes, such as catering and cleaning service businesses. There has been a decline in orders," Nada said.
Low investment interest in Batam was acknowledged by BIDA, which oversees foreign investment on the island.
According to BIDA spokesman Tri Novianto, 26 foreign investors had closed business in Batam from 1991 to 2005. "A Japanese company even closed due to unclear taxation...," Tri said.
He said the situation also resulted in stiff competition to lure new investors by offering facilities like boarding houses for workers as well as power generators and water supply.
He said the authority had high hopes that Batam would still be a magnet for investment because according to the authority's data, the Investment Coordinating Board had issued 63 investment application forms last year. In Batam, BIDA recorded 813 foreign companies with an investment value of around US$3.4 billion.
"Now, we're waiting for certainty on Batam's legal status based on the law and government regulation on the working relationship between BIDA and the Batam city administration. If these things are still not clear, I don't know what will happen," Novi said.
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