Trump's Trade War Turns Batam into an Investment Magnet

For decades, Batam was an Indonesian island that global investors barely noticed. Now, Batam is beginning to attract attention as a new manufacturing hub, thanks to United States President Donald Trump.

Bloomberg reported on Thursday (6/8) that the escalating US-China trade war during Trump’s second term is pushing more companies to move production to Batam.

Among these companies is Chinese toy maker Dongguan Welson Plastic Hardware Products Co, a supplier to Walt Disney Co and Crayola LLC. They are drawn by the young workforce, tax incentives, and Batam’s proximity to Singapore as a logistics and shipping hub.

In July, Welson’s Indonesian subsidiary, PT Welson Group Indonesia, opened its first factory outside China. The plant will produce more than 30 types of souvenirs for Disney theme park shops, including popcorn containers shaped like Cinderella’s pumpkin carriage and figures of Olaf the snowman and Sulley from the Pixar film Monsters, Inc.

“We had no choice but to diversify,” said Welson General Manager Andy Yao during a recent visit to Batam to inspect the factory’s final specifications. “If we stayed in China, we risked losing orders,” he added, as quoted by Bloomberg.

The “Liberation Day” tariffs announced by Trump in April last year prompted Welson to seek a new location after its customers asked the company to diversify its supply chain. Production costs in China were also becoming increasingly expensive, Yao said.

But Batam was not Welson’s first choice. Yao had not even known the island existed. He first reviewed Malaysia, Thailand, Cambodia, and Vietnam before a colleague suggested Batam. Three months after his first visit in July last year, Welson signed a lease contract.

The island met many criteria. Batam is only about 40 minutes by ferry from Singapore, making it easy to ship products and for customers to visit for audits. Moreover, more than half of Batam’s population is under 30 years old, providing an abundant workforce amid labour shortages in many Southeast Asian countries, Yao said.

Welson will employ 300 workers initially and plans to increase that to 600 by the end of next year.

Batam’s status as a Free Trade Zone (FTZ) is also a major draw. Companies can import raw materials and machinery without paying taxes, and are not subject to export duties on finished goods. Since Trump first took office in 2017, Batam’s exports have more than doubled to around USD19.6 billion in 2025.

Beyond benefiting from supply chain diversification that is driving manufacturing expansion from China to Southeast Asia, Batam’s rise is also a bright spot for Indonesia. The country is facing fiscal pressures, a weakening currency, and corruption problems in President Prabowo Subianto’s flagship free meal programme, among other challenges.

Although Batam is only about four times the size of Manhattan with a population of just over 1.2 million, its economic growth since the pandemic has outpaced the national average, supported by exports, manufacturing, and investment.

In 2025, Batam’s gross domestic product (GDP) growth reached 6.8%, higher than the national growth of 5.1%. In the first quarter, Batam’s economy grew 5.8%, slightly better than the national growth of 5.6%.

An often-overlooked advantage of Batam is its energy sector. More than 80% of Batam’s electricity comes from natural gas, far cleaner than the coal-based power supply that dominates Java and most other parts of Indonesia, said Mardika Parama, Director of Energy, Climate, and Resources at BowerGroupAsia Indonesia.

The island is also relatively free from natural disasters because it is not on the Pacific Ring of Fire like many other parts of Indonesia. These factors, plus the presence of several special economic zones, have helped Batam remain resilient amid turmoil elsewhere.

Over the past 12 months, Apple Inc. has built an AirTag factory in Batam that now produces about 70% of the world’s AirTag supply. Oracle Corp. and Hong Kong’s Gaw Capital Advisors Ltd. have also invested in cloud computing and data centre facilities.

Most recently, Firmus Technologies Pty announced the construction of a 360-megawatt data centre project in Batam as part of a partnership with US chip giant Nvidia Corp.

Seeing the growing potential, Indonesia’s Ministry of Investment opened a permanent office in Batam in June last year to streamline the investment process and serve companies’ needs.

Last month, President Prabowo discussed accelerating Batam’s transformation with regional leaders. One of his directives was to accelerate the development of Batam’s international port to reduce logistics costs and improve export competitiveness, according to local officials.

“The most powerful marketing tool for Batam is the experience of companies already operating there,” Parama told Bloomberg. “If investors truly feel the benefits of investing or building supply chains through Batam, they will talk about it. Among global investors, such news spreads very quickly.”

Batam’s current success is the result of decades of development. Fifty years ago, Batam was a quiet island of fishing villages and mangrove forests. Its rise as an oil industry and shipyard base began in the early 1970s when PT Pertamina (Persero) made Batam a logistics hub for offshore oil and gas operations. After that, Batam gradually attracted foreign manufacturing investment in electronics and engineering products.

Batam’s development parallels the journey of Citramas Group, a Batam-based conglomerate led by Indonesian businessman Kris Taenar Wiluan. Its businesses span property to tourism, and the company is the developer of Nongsa Digital Park, one of five special economic zones in Batam.

Citramas initially provided infrastructure for the oil and gas industry in Batam before expanding into tourism in the 1980s, when Batam was seen as a cheap weekend getaway for Singaporeans and Malaysians before the era of low-cost airlines. Over time, Citramas built various resorts, including an 18-hole golf course designed by Jack Nicklaus.

However, Mike Wiluan, Kris Wiluan’s second child and eldest son, wanted to focus on developing the digital economy. The film enthusiast founded Infinite Studios, a studio complex spanning more than six hectares that was used in the television series Westworld and the film Monkey Man, the directorial debut of Hollywood actor Dev Patel. Films and animations produced by Infinite Studios have also aired on Netflix Inc., HBO, and Apple TV.

Before the Hollywood projects arrived, Wiluan — who now serves as Chief Executive of Citramas Group — admitted he struggled to convince international partners to film in Batam.

“Almost everyone just imagines what this place is like. It’s as if it only exists in their imagination until they finally come and see it for themselves,” said Wiluan, who was also one of the producers of the hit film Crazy Rich Asians.

Infinite Studios later became the precursor to the development of Nongsa Digital Park, which was launched in 2018 and projected to become an Indonesia-Singapore digital economy bridge by the leaders of both countries at the time.

The 188-hectare area also provides dedicated land for data centres, which is now fully occupied by companies such as DayOne Data Centers Singapore Pte Ltd. and BW Digital Pte Ltd. There is currently even a waiting list of companies wanting to enter, as they seek to take advantage of the 14 international submarine cable systems that pass through Batam.

Batam is certainly not without competitors. Malaysia and Thailand are also racing to become regional data centre hubs, while the Johor-Singapore Special Economic Zone launched last year is also targeting investment in the digital and manufacturing sectors.

Nevertheless, Wiluan is confident Batam can compete. In the Nongsa area, he is developing various green infrastructure and renewable energy projects, including solar power, water management, and power generation.

The people of Batam are also feeling the benefits. Apple and IBM have opened digital academies in Nongsa to train Batam residents in digital technology. Meanwhile, Infinite Studios provides free animation software training for one month. The best participants are recruited as company employees. The programme, which began in 2016, has now entered its 19th cohort.

One participant who was successfully recruited is Tommy Bagasdame, 31, who joined the animation studio eight years ago.

“Without a major creative industry hub here, local artists and technology talent would face a difficult choice: adapt to factory or administrative jobs, or leave Batam to pursue creative careers in big cities like Jakarta,” Bagasdame said.

Batam’s per capita income in 2025 has even surpassed Jakarta’s. Meanwhile, the unemployment rate fell to 7.6% last year, from 11.8% in 2020.

South of Nongsa stands the 100-hectare Tunas Prima Industrial Estate, which is the site of Apple’s AirTag factory. Luxshare Precision Industry Co. has employed at least 2,000 local workers at the facility and plans to increase that to 6,000 in the coming months, according to sources familiar with the matter. Apple and Luxshare have not responded to requests for comment.

The industrial estate developed by Tunas Group is now about 60% occupied. Besides Welson, there is an outdoor furniture factory supplying products to Walmart Inc. and Costco Wholesale Corp. Tunas Group also owns two other industrial estates that are fully occupied.

“I don’t think Trump realises that his policies may have accelerated Batam’s rise,” said Chrispin Andereas, Head of Business Development at Tunas Group. “Not just Batam, but most of Southeast Asia is also benefiting from global supply chain disruption. And this trend will continue.”