Sun, 11 Aug 2002

Offer promising investment opportunities

Batam is strategically located within an international shipping route between the Indian Ocean and the Pacific Ocean. It lies only 20 kilometers southeast of Singapore which has one of the busiest seaports in the world. A ferry ride to Singapore takes only 40 minutes.

The area of Batam Island is 415 sq kms. However, due to rapid development and the demand for space, the Batam Industrial area was extended in 1992 to include two other islands, Rempang and Galang and the smaller surrounding islands. Hence, the area was named: Batam-Rempang-Galang or Barelang. The total area thus became 715 sq kms. All the main islands are linked by the Trans- Barelang road, which includes six beautiful bridges.

Although it is considered an industrial area, Batam has been developed to serve four main functions, namely: industry, trade, tourism, and as a transshipment area. The whole area of Batam, Rempang and Galang has been designated a bonded area. All imported goods for production purposes, such as capital goods and raw materials, are exempt from import tax.

Batam is built to be an export oriented industrial area, so as not to compete with other industrial areas in Indonesia that market their products within the country.

Proximity to Singapore is an advantage as investors do not feel isolated in Batam. Batam has been developed to benefit from the progress that has been achieved by its neighbor.

With a shortage of available land and high labor costs, Singapore takes advantage of land availability and investment cost competitiveness in Batam. A close relationship between the two governments has encouraged good cooperation between private sectors on both sides.

Why invest in Batam?

As of December 2001, Batam had accumulated approximately US$8.8 billion in investment comprising $2.1 billion (24 percent) in government investment and $6.7 billion (76 percent) in private investment.

Government investment is in terms of infrastructure development. Private investment comprises 49 percent or $3.3 billion domestic investment and 51 percent or $3.4 billion foreign investment. More than 531 foreign companies are operating in Batam while the number of local companies is nearly 9,700. In the first semester this year, Batam gained investment from 47 additional foreign companies worth over $1 billion.

Industrial facilities are abundant. Investors can choose whether to plug into a commercial ready-to-use factory building with complete facilities or to acquire a lot to custom-build its factory. Erecting a 1,000 sq meter factory building on a 2,000 sq meter lot would cost only around $200,000, including the cost of acquiring the land.

There are 14 industrial estates offering facilities ranging from ready-to-build lot parcels to buildings with complete facilities. Some industrial estates also offer a complete package, which includes the processing of permits and licenses from related authorities and the recruitment of workers. Housing for workers in dormitories is also provided within the industrial estate.

There are approximately 520,000 people living in Batam, coming from all over the Indonesian archipelago with 165,000 people employed in the formal sector, and 70,000 more in the informal sector.

This labor force is becoming increasingly better skilled as they have years of training and experience. This skilled labor force can be sourced directly in Batam, without the need to recruit workers from other regions, such as Java and Sumatra. Half of the population in Batam are factory workers, making it a very healthy dependency ratio.

An application for foreign investment is processed with a one- stop policy in Batam and takes no more than 20 days to get approval.

All permits and licenses required to start development are also processed under one roof by the Batam Industrial Development Authority with streamlined procedures. Companies are allowed to have 100 percent foreign ownership. The temporary resident visa for foreigners working in Batam is easy to obtain from the local immigration office. Foreign visitors to Batam will be given a visa on arrival for most nationalities. Foreign nationals are allowed to buy and own houses, including shop houses, whether or not they work in Batam. So, Batam could become a second home for foreigners.

All of these things reflect the commitment of the Indonesian government to fully support the development of Batam. Private sector involvement with strong support from the government are among the ingredients for successful development.

Well-developed infrastructure

Besides its strategic location, space availability, labor supply, and government support, Batam has the advantage of having well-developed, modern infrastructure.

More than 1000 kms of paved roads and highways link all centers of activity. These roads are continuously being improved and widened to anticipate the rapid growth in traffic. Traffic jams are nowhere to be seen even during peak periods. There are seaports to serve cargo vessels and six passenger ferry terminals around the island to minimize travel time to destinations with more than 100 trips daily serving Singapore and Malaysia. The biggest seaport in Kabil has a berthing capacity of 35,000 Dead Weight Ton (DWT) and is being improved to accommodate ships up to 150,000 DWT. In its ultimate phase, it will have a total wharf length of 5.5 km with an 18-meter draft.

The Hang Nadim International Airport has a 4,000-meter runway, the longest in Indonesia, to serve wide body passenger and cargo aircraft with eight flights daily to Jakarta, and 50 flights weekly to other major cities in Indonesia. The terminal building has a total floor area of 31,500 sq meters and will gradually be expanded to 88,000 sq meters.

Telecommunication facilities are also of the highest standard with state-of-the-art technology, of which only 75 percent of the available capacity has been used. One does not feel isolated in Batam since communication to all parts of the world is only a button away. Electricity is supplied by PLN, the state-owned electricity company, and additional power is also supplied by private power plants.

Fresh water is abundant from six reservoirs built around the island with the total capacity of 3,850 liters per second. The supply of clean water is sufficient to support a population of 800,000 people and industry and conforms to the standards of the World Health Organization. It currently runs at a capacity of 1,710 liters of clean water per second.