Govt announces July Package for Batam's 'Bonded Zone Plus'

Zakki P. Hakim and Fadli The Jakarta Post/Batam

The status of the Batam Industrial Bonded zone, Bintan Industrial Estate and Karimun Industrial Cooperation zone have been upgraded to "Bonded Zone Plus" to give investors more legal certainty, top officials say.

Minister of Finance Jusuf Anwar and Minister of Trade Mari E. Pangestu introduced the governmental regulation and three ministerial decrees through the July Package of deregulation measures here on Friday. The regulations would serve as legal basis for the status upgrade, they said.

The package is expected to address four main legal and investment issues -- the status of assets in the zones, the status of land and spatial plans, the workings of the Batam Industrial Development Agency (BIDA) and the Batam municipality administration, Mari said.

"The package is based on input from various stakeholders. It is expected to provide incentives for investors, including facilitating an easier and faster flow of goods," she said.

Under the package, the government now allows manufacturers in the three areas to import used capital goods for industrial purposes without official permits and surveyor inspections, as long as they were an inseparable part of relocating businesses to the zones.

Several permits and taxes in the zones have also been scrapped under the package.

The policy is also expected to improve export-oriented business performance and sustainability; reduce costs, simplify procedures and maintain consistent policies; give clear distinctions and regulate industrial and residential zones; ensure fair taxation; and maintain an easy and fast flow of goods in the industrial zones.

It would also enable the government to simplify customs procedures by delegating the authorities of the finance ministry or its Directorate General of Customs to the heads of local Customs Service Office (KPBC).

Mari acknowledged that the package might not solve all the problems in zones, "but, at least it could address many problems that have been neglected for years."

The private sector, however, cautiously welcomed the package.

Head of the Indonesian Employers Association Riau Island chapter, Abidin, said although the policies were business- friendly, they were weaker than laws, which would give businesses more confidence.

"We greatly appreciate the July Package, but we still expect that Batam's status be strengthened in a law," he said.

Batamindo Industrial Zone general manager John Sulistiawan said that the package seemed to have returned Batam's status to Free Trade Zone; which was an extremely positive move.

"(However) we still have to see the implementation; will it be as good as the ministers have announced?" he said.

Batam Small and Medium Enterprises coordinator Dorlan Naibaho said the policies seemed to focus more on foreign investors than local SMEs, many of whom still depended on imported goods.

Batam is an attractive manufacturing and industrial location in Southeast Asia, hosting some 600 foreign companies and absorbing more than US$3 billion in foreign investment.