Moving towards the Free Trade Zone era in Batam:

Moving towards the Free Trade Zone era in Batam: Preparing an intelligent and reliable island

Based on surveys conducted by the Central Statistics Bureau (BPS), the application of a free trade and free port zone, or generally referred to as Free Trade Zone (FTZ), in Batam will increase the island's annual gross domestic product by Rp 1.6 trillion and its manpower by 35,600 people.

While the relevant law is currently under discussion at the House of Representatives, the results of the survey have strengthened the determination of the Batam Authority (OB) and the city administration to intensify preparations of supporting infrastructure for the FTZ implementation.

New roads are being constructed. The airport is being enhanced. Increase of electric power, as well as reserves of clean water, installment of modern telecommunications and expansion of the seaport are all under way.

All these vital infrastructure are being prepared to meet the growing demands of residents as well the needs of heightened industrial activities. Currently, there are 531 foreign companies spread in 14 industrial estates on the island: Walakaka Industrial Park, Kara Industrial Park, Cammo Industrial Park, Tunas Industrial Park, Kabil Industrial Park, Taiwan International Industrial Estate, Citra Buana Centre Industrial Park I & II, Batamindo Industrial Estate, Panbil Industrial Estate, Malindo Cipta Perkasa Industrial Park, Bintang Industrial Park I & II, Indah Industrial Park and Latrade Industrial Park.

The island, with a population of about 523,000, presently faces an urgent problem, the availability of clean water, as the content of bauxite in its soil causes the volume of water to be low.

The water installation and its management -- previously under the Batam Authority -- has been transferred to PT Adhya Tirta Batam (ATB), which was established in 1995 and is affiliated to a British company.

ATB has been awarded a 25-year concession to take care of the island's water requirement based on the Build Operate Transfer (BOT) agreement, which will be evaluated at the end of the 25- year period. Six reservoirs along with installations all over Batam have been made ready by the Batam Authority.

The six reservoirs are as follows: Baloi with a 270,000 cubic meter (m3) capacity and available processing capacity of 30 liters per second (lt/second); Sei Harapan with a 3,600,000 m3 capacity and 210 lt/second processing capacity; Nongsa with a 720,000 m3 capacity and 60 lt/second processing capacity; Sei Ladi with a 9,490,000 m3 capacity and 240 lt/second processing capacity; Muka Kuning with a 12,720,000 m3 capacity and 310 lt/second processing capacity; and the largest reservoir, Duriangkang, with a 78,180,000 m3 capacity and available processing capacity of 3,000 lt/second, of which only 750 lt/second is currently used, while its balance processing capacity is still 2,250 lt/second.

Head of the Office of Water Supply and Waste Management, Fredy Tanoto, said that in anticipation of future demand, the Batam Authority is preparing 10 more reservoirs which are to be spread out as far as Galang island.

"Should Batam overflow with investors in the future, Galang Island is planned to become an extension of Batam," added Fredy.

Apart from increasing the quantity, the Batam Authority also insists that ATB should improve the quality of the water supply, so that it can be consumed as potable water.

The Batam State-owned Electric Company (Batam PLN), with autonomy from its parent company, PLN, has created major breakthroughs on the island, which probably have not been made in other parts of the country.

With the new law on electricity in effect since September, 2002, Batam PLN is no longer a branch, but an affiliated company. This status has made Batam PLN more flexible in cooperating with other related companies.

Its distribution and services division manager, Ida Bagus G. Mardawa Padangratha, said that the company currently operates 26 diesel generators in four locations: nine units in Sekupang, four in Batu Ampar, four in Baloi, seven in Tanjung Sengkuang. Two other generators with huge capacities are to be ready within the next two years in anticipation of any future demand.

Today, electric consumption is still dominated by business and trade circles at 46.5 percent, while household usage is 30.8 percent, manufacturing plants are taking up 13.8 percent and about 8.5 percent for other uses.

According to Ida Bagus, Batamindo Industrial Cakrawala has the largest power plant among the existing industrial estates at 70 megawatts, while Panbil Industrial Estate has a two-megawatt electric power generator. The capacity of PT PLN Batam, meanwhile, is 175.4 megawatts with a supplying capacity of 147.9 megawatts.

"To fulfill future demand, we are shifting the electric generators from diesel to gas- and steam-based generators. By 2005, we expect to be ready with the new operation system," Ida Bagus added.

PT PLN Batam has opted for these power bases due to the lack of water-based electric power on the island.

In the area of telecommunications, the island is also enjoying various advancements made possible by high-tech services provided by PT Telkom and PT Indosat, which further accords Batam Authority the capacity and capabilities to develop the island as one of the most sophisticated industrial zones in Asia.

This is proven by the existence of a program called Batam Intelligent Island (BII), which is aimed at integrating every element operating on the island, be it government, private companies or other parties, on an online system through an integrated website.

Head of Data and Information System Center, Robert Purba Sianipar, said that BII was inaugurated by then State Minister of Research and Technology, A.S. Hikam, on May 18, 2001. BII is set as a model project for the nation in the future networking of every element, though presently it only comprises those in Batam.

"This is to meet our investors' demands as almost all of them need fast access to the international world," added Purba.

One of the first steps is taking the available websites for all government offices and private companies and integrating them into a single domain: www.ibatam.com.

The integration is also made possible due to the advanced telecommunications equipment and system provided both by PT Telkom and PT Indosat, as well as the various cellular operators, such as Telkomsel, Satelindo, Excelcom and IM3.

The BII project also receives support from the Japan External Trade Organization (JETRO) in the area of training, communications and equipment.

"One of the instant benefits today, is that applications and permit processing are done online, which is much faster than the conventional method. This computerized system also reduces corruption and collusion," Purba said.

Optic fibers with 12 cores, or a 180-gigabyte capacity -- one of the vital hardware in the BII project -- has been installed underground and covers almost 30 percent of the island's area. It will also be used to connect multimedia with all private companies, government offices and other public institutions to provide better services for the entire community.

The estimated budget for the BII project, to be completed by the end of 2005, is US$ 54 million. The Batam Authority Board and Telkom, as the engines of the project, are currently conducting the necessary communications and public relations work, as well as preparing the required equipment.

Arief Musta'in, the general manager of PT Telkom for Riau Islands Area, said that Telkom has provided major support for the BII project, among other things, by preparing High Performance Back Bond Transmissions, a high-capacity underground optic fiber to anticipate increased demand in the future.

Musta'in added that today, both fixed telephone and cellular operators are treating Batam as a competition arena. Indosat, for instance, made the island its pilot project for the company's new cellular card, IM3. Likewise, all the hardware and software, plus services, of PT Telkom on this island can only be rivaled by those available in Jakarta.