The government will have set up the management agencies for the special economic zones (SEZs) in the Batam, Bintan and Karimun islands by September, as required by recently issued government regulations.
Coordinating Minister for the Economy Boediono said Friday that the government was now awaiting the details of the agencies from the Riau Islands provincial administration for approval.
"The local administration will propose the makeup of the management agencies directly to the President," he told reporters.
Boediono said that the existing Batam Authority would be one of the management agencies, with a higher body -- an "SEZ council"-- to be set up for the three islands. The council would determine and supervise the implementing policies for the SEZs.
Riau Islands governor Ismeth Abdullah has said that his office would soon submit proposals on the management agencies and the SEZ council, and expressed the hope that they would be up and running by next month.
"There will be separate management agencies for Batam, Bintan and Karimun, and the SEZ council," he said.
"The SEZ council will comprise representatives of the local administration, the customs service, the immigration service, the investment board, and the provincial council, so that all the policies can be properly coordinated so as not to hamper business and investment again."
The government issued three new regulations earlier this week -- one each for Batam, Bintan and Karimun -- stipulating that the management agencies must be set up within not later than one year.
The SEZs, which cover most of the three islands, involve the establishment of free ports, a one-stop investment office and easier immigration procedures for businesspeople and investors. Indonesia is working together with Singapore on the Riau Islands SEZ project.
Meanwhile, speaking on the investment potential of the SEZs, Ismeth said he expected them to attract up to US$15 billion in investment over the next five years.
The Investment Coordinating Board (BKPM) had reported investment commitments for Batam amounting to $9 billion up until the end of July -- an increase from $426 million as of July last year.
"We recently signed up 22 projects worth $2 billion for Batam, all to be realized soon," Ismeth said.
He expressed the hope that the SEZ in Batam would focus primarily on the electronics and manufacturing industries, Bintan on the tourist industry, and Karimun on shipbuilding and petrochemical projects.
Through the SEZs, the government hopes to spur more economic growth in the region, which will in turn generate more income tax to compensate for the potential losses from the lifting of import duties in the FTZs, Boediono said.
"Import duties from Batam are already not so significant, anyway," he said.
Boediono has asserted that the government's income tax breaks for investments in designated industries and regions will not automatically apply to projects in the SEZs if they do not meet the required conditions, although such projects would be exempt from import duties due to their being located in an SEZ.
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