Megawati inaugurates new industrial estates in Batam

Fadli, The Jakarta Post, Batam

President Megawati Soekarnoputri inaugurated on Wednesday six new industrial estates built at a total cost of US$210 million, and an expansion of an electronics plant worth Rp 10 billion ($1.2 million), on Batam island.

The estates -- Panbil Industrial Estate, Tunas Industrial Estate, Bintang Industrial Estate II, Citra Nusa Industrial Estate, Citra Buana Industrial Estate and Latrade -- are expected to attract more foreign investors and increase employment opportunities on the island.

Batam currently hosts 611 foreign firms from 34 countries.

In her speech, Megawati commented on the fact that Batam tended to be more of a free trade zone (FTZ) than a bonded zone, as was originally intended in 1978.

She was aware that imported luxury goods entering Batam were not subject to value added tax, and this fact indicated that the government was being "tolerant" to Batam due to its unique position as an industrial area.

"The government should provide a conducive environment for industry so that it can develop," she said.

Batam Industrial Development Authority (BIDA) chairman Ismeth Abdullah reiterated the importance of a law declaring Batam island, which is located 20 kilometers from Singapore, to be a free trade zone.

"Such a law will provide legal certainty for the investors here. In return, it will attract more investors, meaning more employment," he said.

FTZ status for Batam would mean that exporters operating on the island would be allowed to import raw materials without paying customs duties and taxes, pending their eventual processing, transshipment or reexport.

Batam was declared an industrial bonded zone in 1978 to lure investment and foster export competitiveness. Since then, the island has become the country's main industrial center, where 70 percent of economic growth is contributed by the export-oriented manufacturing sector.

The export value of the islands' output last year was over $6.5 billion, or about 14 percent of the country's total exports for that year.

According to Ismeth, some 60 percent of the 611 foreign firms operating on Batam are involved in the electronics sector. So far, the total value of foreign investment on Batam amounts to $9 billion.