South-east Asia is ‘top of the map’ for economic opportunities: Indonesian minister

[SINGAPORE] Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto thinks that South-east Asia’s goal to become a US$2 trillion economy by 2030 is achievable, on the back of emerging sectors such as the digital economy, data centres and green energy. 

He said this in a keynote speech on Tuesday (Nov 18) at the second edition of the “Islands of Growth” business forum in Singapore, which focuses on opportunities in Batam, Bintan and Karimun (BBK), part of Indonesia’s Riau province.

“Indonesia and Singapore, as well as Asean, are top of the map – foremost (in) robust economic growth in the last decade,” he added.

“The growth of Europe is less than 3 per cent. North America, also less than 3 per cent. Only Asean growth is more than 4 per cent.”

The minister’s comments followed a pitch for investments into BBK, where he highlighted the Indonesian islands’ various capabilities for sectors including electronics manufacturing, the digital economy and shipbuilding. 

Jointly organised by Singapore’s Economic Development Board (EDB), Indonesia’s Coordinating Ministry for Economic Affairs (CMEA), and the Indonesian embassy in Singapore, the forum gathered global companies and government officials with the aim to expand economic cooperation between Singapore and BBK.

What is BBK?

Since 2007, the BBK islands have been designated as a free-trade zone. The region also has a history of economic cooperation with Singapore through a working group co-chaired by EDB and CMEA.

This group is tasked with strengthening business linkages, improving the investment and regulatory environment in BBK, and positioning the region as a key investment destination for global companies. 

Singapore and BBK’s collaboration is part of a larger, decades-old vision known as the Sijori Growth Triangle, comprising the two territories and the Malaysian state of Johor. 

SEE ALSO

South-east Asia evolving into multi-hub industrial network: Roland Berger

‘Definitely an opportunity’ for Asia-Pacific economies as the world becomes more complex: Egon Zehnder CEO

What the US-China detente means for Asean businesses

Like Johor, BBK offers Singapore-based manufacturing companies an economic and strategic hinterland, granting them access to larger land and manpower resources that are close to their regional headquarters. 

In early July, Singapore’s Deputy Prime Minister Gan Kim Yong revealed that Singapore, Malaysia and Indonesia had held discussions to advance trilateral cooperation.

They also floated plans to expand the Johor-Singapore Special Economic Zone to include the Riau islands.

Investments and operations in BBK

Singapore companies and global firms alike have been investing in BBK for decades. 

The city-state, in particular, is one of Riau’s largest foreign investors and has consistently been Batam’s top foreign investor since the 1990s. In the first half of this year, Singapore accounted for 7.9 trillion rupiah (S$632 million) or 69 per cent of Batam’s total foreign direct investment. 

Among global players, French energy equipment company Schneider Electric has long had manufacturing capacity in Batam while maintaining a regional headquarters in Singapore. 

“We play with the strengths of these two locations, which are very complementary to each other,” Pradeep Singh, vice-president of planning and logistics for East Asia at Schneider Electric, told The Business Times. 

The company leverages Singapore’s connectivity and uses the city-state as a logistics hub to distribute its products that are manufactured in Batam, he added.

He also noted that Batam’s proximity to Singapore, lower-cost trained labour force, as well as government incentives made it an attractive location for manufacturing.

Since its designation as a free-trade zone, BBK has provided incentives to investors such as import and export duties exemptions and 100 per cent foreign ownership for certain businesses without local partnership requirements. 

The regional government has also invested in infrastructure over the years, and Batam now boasts several industrial parks, including the Nongsa Digital Park that opened in 2018.

The park is intended to be a digital bridge between Singapore and Indonesia, and gives Singapore-based companies an option to leverage lower-cost tech talent and additional data centre capacity.