Wed, 13 Aug 2003

Govt criticized for slow progress in drafting Batam FTZ law

The Jakarta Post, Jakarta

The government is being criticized for the slow progress in drafting a law on Free Trade Zone (FTZ) status for Batam.

Sofyan Wanandi, chairman of the National Economic Recovery Committee (KPEN), said that the much-anticipated law was very important to strengthen legal certainty for investors interested in Batam.

"If this issue is not settled immediately, how can we lure investors to Batam?," Sofyan asked on Tuesday during a seminar with the Batam Industrial Development Authority (BIDA), investors, and government officials. The event was held at the headquarters of the Centre for Strategic International Studies (CSIS), a respected private think-tank.

The industrial island of Batam was declared a bonded zone area in 1978. But after decades of operation, Batam is now more like an FTZ as local authorities give greater tax incentives to investors in a bid to boost investment activities. But existing investors are still worried that the government might suddenly change the current FTZ benefits. In a bid to attract more investment, the government has been under pressure to draft a law which would make the FTZ status legal and permanent.

But for years the government has failed to complete the drafting of the law.

An FTZ status would enable companies on Batam, located some 20 kilometers from Singapore to import goods without paying customs duties and taxes, pending their eventual processing, transshipment or reexportation.

The island is home to hundreds of Singaporean manufacturers and other foreign firms.

Sofyan asserted that the government would have to make the issue a top priority so that investors feel secure, thereby making Batam a prime mover for the country's economy.

Benny Pasaribu, a legislator from the Indonesian Democratic Party of Struggle (PDI Perjuangan) said the House of Representatives would prioritize the deliberation of the draft law on Batam FTZ during the next House session.

"The House fully supports an FTZ in Batam and it will be high on our agenda in the next session," he said.

Jinny Charles Katuuk, deputy director of Fiscal and Economic Decentralization and Infrastructure Development at the Office of the Coordinating Ministry for Economic Affairs said that the slow progress in drafting the law was because the government was still trying to get more input.

"The government wants to make sure that it has all the opinions from all parties concerned ... so nothing will be left out during the deliberation process with the House," Jinny said.

The Coordinating Ministry of Economic Affairs is in charge of designing policy for the island.

According to Jinny, the draft is now at the Ministry of Law and Human Rights pending deliberation at the House.

"We're ready whenever the House summons us to discuss the draft," Jinny said.