[030219.EN.BIZ] Indonesia Positions Batam Island Group to Rival Singapore as Shipping Hub

INDONESIAN authorities, with US$60 billion of new investment, are marketing Batam island as an alternate shipping and manufacturing hub to Singapore only 30 kilometres away.

The region, Batam and nearby islands, were declared a free-trade zone in 2007, and since then have developed a cluster of industries from computers to oil rigs, reported Bloomberg.

Companies operating in the free-trade area are exempt from value-added and luxury taxes, as well as import duties.

Now Jakarta wants to expand benefits to businesses by reclaiming about 8,000 hectares of idle or confiscated land to offer to exporters or producers of import substitutes.

"We aim to develop enclaves of special economic zones in Batam" with dedicated clusters for tourism and logistics among others, said Edy Putra Irawady, acting head of Batam Indonesia Free Trade Zone Authority.

"Based on a rough calculation, the potential investments including those in the pipeline are worth $60 billion," said Mr Irawady.

Indonesian President Joko Widodo is seeking to boost exports to help curb a widening current-account deficit, a key risk for the economy and one of the reasons why investors sold off the currency amid an emerging-market sell-off last year.

Singapore is among the top FDI providers min Indonesia. The islands, say Indonesia's Industry Minister Airlangga Hartarto, suits companies looking to relocate their factories as the US-China trade war disrupts global supply chains.

Taiwan's Pegatron Corp has already announced an investment partnership with local electronics manufacturer PT Sat Nusapersada, while Apple plans to open a new developer academy in Batam.

Companies are also keen to invest in tourism, electronic goods and shipyard industries, Irawady said. Under the special economic clusters, companies will enjoy tax incentives and benefits stipulated under free-trade agreements of the Association of Southeast Asian Nations, or Asean, he said.

The extension of the Asean free trade benefits may spur companies in Batam to directly supply goods to other regions in Indonesia rather than routing it through Singapore, Irawady said.

Source : HKSG.