Batam aims to be manufacturing rival in Singapore's backyard

Jakarta

INDONESIA wants to reposition its Batam island as an alternative shipping and manufacturing hub to Singapore with a potential to draw US$60 billion in new investments.

Batam and nearby islands - located less than 30km south of Singapore - have attracted about US$20 billion of investments since the government began promoting them as industrial areas in the 1970s.

The region, declared a free-trade zone in 2007, is home to thousands of local and foreign firms producing goods from computers to oil rigs.

Now, authorities want 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," Edy Putra Irawady, the acting head of Batam Indonesia Free Trade Zone Authority, said in an interview.

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

The Batam free-trade zone consists of eight islands measuring 71,500 hectares. It has grown in importance as an investment destination for foreign companies, especially Singaporean firms, given its location in one of the busiest shipping channels, cheap labour and tax breaks.

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

Indonesian President Joko Widodo's administration 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. The islands suit companies looking to relocate their factories as the US-China trade war disrupts global supply chains, according to Industry Minister Airlangga Hartarto.

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, according to the ministry.

Other companies are also keen to invest in tourism, electronic goods and shipyard industries, Mr Irawady said. BLOOMBERG