Fri, 21 May 2010

The Indonesian and Singaporean governments have agreed to jointly promote the Batam, Bintan and Karimun (BBK) free trade zone, in Riau Islands province in a bid to lure more international investors.

Trade Minister Mari Elka Pangestu said in Jakarta on Thursday that the partnership in the promotion of the BBK free trade zone was part of the economic cooperation agreement signed during President Susilo Bambang Yudhoyono's brief visit to Singapore on Monday.

Mari said that in addition to the joint promotion efforts with Singapore, the Indonesian government would also improve the legal system to make the BBK area a better place to do business.

She said the BBK free trade zone, which was formally opened in April last year still received a lukewarm response from international investors due to the lack of promotion.

Apart from the lack of publicity and the global economic slowdown, the weak legal system is also blamed for the lack of foreign investors' interest in setting up factories in the area.

Mari said the Indonesian and Singaporean governments also agreed to explore the possibility of cooperating in the establishment of a new free zone in the Lingga Singkep area in the Riau Islands province.

The government initially expected that the establishment of the free trade zone would result in an increase in exports from Batam, Bintan and Karimun islands to US$10 billion, compared to $6 billion in 2005.

"We also targeted $1 billion in new investment and the creation of 130,000 jobs. Unfortunately, we failed," Mari said, adding that the failure should serve as a good lesson for the development of other free trade zones in other Indonesian provinces.

Apart from the joint promotion program, she said, Indonesia and Singapore also agreed to cooperate in the development of the tourism industry in the Riau Islands province.

"We will cooperate to create a joint destination program called *cruise tourism' to attract more tourists from Singapore to visit Riau Islands," she said.

Mari said Singapore had established port facilities that could be used to support cruise tourism.

Also as part of the cooperation, the Singaporean government has promised to buy more agricultural products from Riau Islands such as vegetables, fruit and fish.

Singapore, which is a 30-minute ride by ferry from Batam, the main town in Riau Islands, is a large market for vegetables and fruit. But Indonesia, and especially Riau Islands, remains unable to fully tap into the market potential.

Mari said Indonesia's share in Singapore's vegetable and fruit market remained low at about 10 percent.

"With the new deal, we expect our market share to increase to 30 percent by the end of 2014," she added. (ebf)