The adoption of a free trade zone (FTZ) on Batam has not made doing business on the island any easier or simpler, but has instead led to more bureaucracy and some confusion for local businesses.
Forwarding service firm PT Esqarada president director Daniel Burhanuddin said Wednesday that the business community is now considering asking the government to revoke the FTZ status and return the island's status to a bonded zone.
Daniel pointed out as an example of unclear FTZ implementation at the confusion generated by the Excise and Customs Office which now imposes levies on goods entering and leaving the Batam port under the new status, while previously charges were only imposed on goods leaving the port.
"Ideally, matters with the Excise and Customs Office and other *government bodies* should have been easier and simpler under the FTZ status, not the other way around," Daniel, who has been doing business in Batam for 20 years, told The Jakarta Post.
He alleged the (Customs) office was reluctant to let go of its supervisory role, and therefore had impeded the implementation of the FTZ.
Cahya, president director of PT Asrikon, which is building the resort site at Coastarina, pointed at another anomaly after the change in status from bonded zone to FTZ.
Prices of goods have also almost "doubled" since the FTZ was adopted in February, when goods should have been freed from a 10 percent value added tax and luxury tax.
"This is strange because value added tax is no longer imposed but the price of affected items has in fact increased. What is going on?" he asked.
Cahya's and Daniel's sentiments were shared by Johannes Kennedy Aritonang, head of the Indonesian Chamber of Commerce and Industry's (Kadin) Riau Islands chapter.
"In general, Batam's current status as an FTZ has yet to attract investment here as bureaucracy has in fact become more complicated than previously," he said.
For example, he said, businesses might spend more money if their goods exceeded quotas stipulated in a "master-list" issued by the Excise and Customs Office in line with the implementation of the FTZ.
This provision appears to be new.
In response, the Batam Port Office and the Batam free trade zone management body (BPK-FTZ Batam) said that the above complaints had a lot to do with the not-yet-smooth coordination among institutions as everybody was still adjusting to new regulations under the FTZ.
Dwi Djoko Wiwoho, BPK-FTZ Batam's spokesman, also mentioned one of the sources of confusion was the fact that the implementation of the FTZ on Batam - in addition to Bintan and Karimun - started in February, while value added tax- and luxury tax-free policies came into effect on April 1.
"Moreover, the implementation of the FTZ is subject to a six-month evaluation. The government will listen to their complaints."
Bonded zones are defined as areas within Free Trade Zones consisting of bonded warehousing and logistics services, which enjoys exemptions on payments of duties or taxes.
Batam was initially declared an industrial bonded zone in 1978 in order to attract foreign investment and bolster export competitiveness.
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