House urged to finalize FTZ law on Batam
The Jakarta Post, Jakarta
Batam Industrial Development Authority (BIDA) chairman Ismeth Abdullah urged lawmakers to quickly complete the deliberation of the bill providing Free Trade Zone (FTZ) status for Batam as any further delay would slow down the flow of new investment into the island.
Speaking during a press conference, Ismeth said on Tuesday that the long-awaited law was crucial to providing legal certainty for investors.
"If the deliberation of the law by the House can't be completed soon, the flow of foreign investors will decline," he said.
He hoped that the law would have entered into effect by next year.
After years of delay, the government passed on the Batam FTZ bill to the House of Representatives for deliberation a few months ago. But there are signs that the deliberation process might be slower than expected as lawmakers will have other priorities in the run-up to the 2004 general election.
FTZ status would enable companies on Batam to import goods without paying customs duties and taxes, pending their eventual processing, transshipment or reexportation.
Batam, located some 20 kilometers from Singapore, is one of the most modern industrial bonded zones in Asia Pacific.
There are some 650 foreign companies operating on the island with a combined investment of about US$3.7 billion. Their existence has provided jobs for 173,000 workers, with a further 70,000 jobs in the informal sector.
The industrial island of Batam was declared a bonded zone in the 1970s. But after decades of operation, Batam is now more like an FTZ as the government gives greater tax incentives to investors in a bid to boost investment. But existing investors are still worried that the government might suddenly change the current FTZ benefits particularly considering the fact that the existing government regulation on fiscal policy for Batam will expire at the end of this year.
Ismeth said that BIDA had been lobbying the central government to extend the regulation on fiscal incentives. But to date, the government has yet to respond to the request.
Some experts have said that turning Batam into a permanent FTZ would boost its attractiveness in the eyes of investors particularly as the island is also competing for investment with Malaysia's Johor, Vietnam's Ho Chi Minh City and China.
They argued that if Batam could attract a large number of foreign investors, the island could become an engine of growth for the country's economy as a whole.