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.