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Batam's business model overtaken by events

Indonesia's increasingly attractive domestic market has led to a change in corporate strategies and the island is ill-equipped to capitalise on this structural shift.

Despite the island's well-developed infrastructure, its connectivity with major population centres in Java and Sumatra is not good, with expensive and infrequent domestic shipments. Indeed, it's often cheaper and easier for firms in Batam to send goods first to Singapore and then on to Jakarta, than to wait for a direct shipment.

BATAM has an unbeatable business proposition. The Indonesian island is 20 kilometres from Singapore, offers much cheaper land and labour, and is connected to its rich neighbour through extensive logistics networks. Over the past decades, Indonesia's leaders have sought to leverage this. In the...