Bintan a new rising star for investment

By Johannes Simbolon

JAKARTA (JP): In a relatively short time, Bintan Island in the Riau archipelago has turned itself into a burgeoning center for investment activities in Indonesia and Southeast Asia.

Since the Indonesian and Singaporean governments signed an agreement to develop the island in 1990, money has been pouring in to make it ever more beautiful, industrious and rich.

More than a dozen investors have and will continue to set up factories in the industrial park in the south of the island.

And international hotels and cottages, and golf courses have been built along the wonderful white beaches to the north.

Singapore's Prime Minister Goh Chok Tong expressed his big hopes for the island at the opening of the Bintan Beach International Resort (BBIR) in June last year: "Bintan will achieve success as the bright star among the tropical island resorts in Asia."

Minister of Industry and Trade Tunky Ariwibowo recently said that Bintan was a showcase of the successful bilateral cooperation between Indonesia and Singapore, in which both countries complemented each other in their shortcomings and plus points.

He said Singapore had a lot of capital but lacked the land, labor and natural resources needed for large businesses.

As a major air transportation hub in Asia, the country draws millions of visitors each year but has few tourist attractions to keep them there for long.

Indonesia, on the other hand, is rich in natural resources, manpower and potential tourist attractions but lacks the capital to develop them.

Bintan's proximity to Singapore should be a special attraction for investors. It has a population of 200,000 and is approximately 1,030 square kilometers in size (about one a half times the size of Singapore).

It is 50 kilometers southeast of Singapore and can be reached in one hour by ferry from Singapore and less than a half an hour by ferry from Batam Island, Indonesia's largest industrial zone.

They key mover behind investment in Bintan is the widely diversified Salim Group.

The group developed Bintan Beach International Hotel on 23,000 hectares in a consortium with Riau's provincial administration, the Indonesian navy, and a group of Singaporean investors.

The Indonesian group owns 60 percent of the project (Salim 80 percent, the Riau administration 12.5 percent and the navy 7.5 percent). The 40 percent belongs to Singapore Technologies Industrial Ltd, the Development Bank of Singapore, Overseas- Chinese Banking Corporation, Overseas Union Bank, UOL Equity Investment, Straits Steamship Ltd, Tropical Resorts and KMP Bincorp Investments.

With a total investment of S$3.5 billion, the consortium has managed to turn the swamps and jungle along the island's northern beaches into a posh tourist resort.

Hotels already operating in the resort include the Rasa Indah, Sedona Bintan Lagoon, Bintan Lagoon Beach and Resort, Club Med Bintan, Laguna Bintan, Banyan Tree Bintan, Mana Mana Beach Club, Mayang Sari Beach Resort and Nirwana Garden Resort.

The management plans to have 14 hotels with 3,500 rooms there by 2000. It wants 1.5 million tourists to visit the resort each year.

Salim together with Singapore's Technologies Industrial Corporation and JTC International is also developing Bintan Industrial Estate (BIE) on 4,000 hectares in the south.

BIE director Handoko Adiwinoto said the estate was initially designed to accommodate labor-intensive industries like clothing and furniture, to avoid competition with Batamindo Industrial Park in Batam, which was designed for electronic, high-tech investment.

Many Singaporean investors already operate in Batam, which has been developed as an investment center since the 1970s, much earlier than Bintan.

BIE has attracted ten clothing and furniture investors from Singapore since the estate construction began in 1993.

Problems developed, Handoko said, when the United States imposed the Indonesian quota, instead of the Singapore quota, on clothing produced in Bintan from July last year.

BIE's management took quick steps to reposition itself by moving to high-tech industries, like electronics.

Within a year, it had attracted eight electronics tenants from Singapore and Japan with a total investment of S$100 million.

They include semiconductor maker PT Yoshikawa Electronics Bintan, a subsidiary of Japan's Yoshikawa Group; loudspeaker manufacturer PT Foster Electric Indonesia, owned by Japan's Foster; audio component maker PT HT Bintan, a subsidiary of Singapore's Hong Guan Technologies; cash drawer assembler PT GP Technology Bintan, a subsidiary of Singapore's German Plastic Technology Pte Ltd; cleaning equipment maker PT Esco Bintan Indonesia, a subsidiary of Singapore's Esco Holding Pte Ltd; leadframe manufacturer PT Sumiko Leadframes Bintan, a subsidiary of Japan's Sumitomo Metal Mining Co. Ltd; collets maker PT Bon Mark Indonesia, owned by Japan's Bon Mark Co. Ltd; and disc drive component maker PT D'Mac Indonesia, an affiliate of Singapore's D'Mac.

Handoko said investors enjoyed a number of investment incentives including duty-free importation of raw materials and equipment, and chance to sell up to 20 percent of their products on the domestic market.

Investors are also attracted by the 80-year land lease to foreigners rule.

"BIE also provides a one-stop service for investors to process all their licenses as quickly as possible," Handoko recently said at a ceremony to inaugurate the entry of several new BIE tenants.

Sources at BIE said some of the eight electronic companies had been operating on Batam but expanded to Bintan because land leases and labor costs were cheaper.

Handoko said the Salim group was also developing a giant drinking water project on the island with a production capacity of 550 million gallons a day.

Abut 400 million gallons a day will be exported to Singapore which thus far imports drinking water from Malaysia's Johor state.

"The drinking water project is strategic because Johar has warned Singapore that it would stop unprocessed water to the country," said Handoko.

Jungle and swamps are still visible on Bintan. But, in view of the rapid development, Bintan will look very different some years from now.

"What we are doing now on the island is giving hope to the local people. A hope for a bright future," Tunky said recently.