RI urged to decide on Batam status

Zakki P. Hakim, The Jakarta Post, Singapore

The incoming government should quickly decide on the free trade zone (FTZ) status of the industrial island of Batam, otherwise existing and potential investors would turn away to competing investment areas in China and Vietnam, Singapore foreign minister George Yeo has warned.

Yeo was quoted by the visiting chairman of the Indonesian Chamber of Commerce and Industry (Kadin), MS Hidayat, as saying that Batam had the potential to become a leading industrial center like China's Shenzhen within 10 years as long as the lingering legal uncertainty was quickly resolved.

Hidayat said that whether to turn the whole of Batam into a FTZ area (as suggested by the House of Representatives), or to adopt the enclave FTZ approach where only certain industrial zones on the island would enjoy FTZ status (as demanded by the current government), was not an issue for investors as what was most important was that the status of Batam be clearly defined.

A delegation of Kadin officials held a meeting with Yeo on Monday during a visit to Singapore to attend the five-day Global Entrepolis @ Singapore (GES) 2004 investment and trade forum.

Singapore companies are among of the top investors in Batam, located some 30 kilometers southeast of the city state.

Yeo's statement came after the House and the outgoing administration failed to reach an agreement on the status of Batam as a FTZ. Last month, the House endorsed its own version of a bill that granted FTZ status to the whole of Batam Island. This was opposed by the government.

Without the government's approval, the law cannot take effect, creating further uncertainty for investors on the island, which since 1978 has been promoted by the government as an industrial bonded zone to attract foreign investors. It is now one of the most attractive manufacturing and industrial locations in the Southeast Asia region, playing host to some 600 foreign companies and absorbing over US$3 billion in foreign investment.

The government has argued that extending full FTZ status to the whole Batam would cause envy in other regions not privileged with FTZ status.

"The Kadin local representative (in Batam) told me that there are about 250 investors that have expressed interest in investing in Batam, but postponed their decisions until there is a clear decision on Batam's future," Hidayat told reporters on the sidelines of the GES annual forum.

He added that Kadin had invited the investors, who are mostly participants in the GES forum, for a two-day visit to Batam.

This year, the GES is expected to attract more than 3,000 leading executives, entrepreneurs and venture capitalists from Asia and the world, with more contingents from India and China as well as from the U.S., Japan, Russia and Korea, and regional groups from ASEAN, the Middle East and European Union.

In total, some 10,000 visitors from around the world are expected to attend the event, in which cosmetics producer PT Martina Berto and apparel maker PT Great River Garments represent the Indonesian side.