Singapore to help Jakarta build special zones to attract investors

Batam, Indonesia (Antara News) - Marked by the signing of an agreement, Indonesia invited Singapore on Sunday to help Jakarta establish special economic zones on three islands to lure foreign investors, particularly from Japan and the Middle East.

The agreement was signed by ministers of both countries following a two-hour meeting between Indonesian President Susilo Bambang Yudhoyono and Singaporean Prime Minister Lee Hsien Loong on Batam Island, near Singapore, Kyodo reported.

''I hope the investors will take advantages of the opportunities that lay
ahead, ranging from shipyards and oil-related business, manufacturing...and even live industries such as garment, tourism, agriculture, aquaculture and education,'' Yudhoyono said at a press conference with Lee after the meeting.

Lee shared the same view, saying in recent years new investors have not come into Indonesia and existing ones have left.

''It's something to do with the investment environment, the rules, the
legislation and the way they are implemented,'' Lee said.

''So, today's event and signing marked the start of the new field of our
cooperation within our two countries. The (Singapore) Economic Development
Board will be meeting the Indonesian counterpart to advise them on how they can change the rules to be more investor-friendly,'' he added.

''On investment promotion, we will be liberating our EDB network to actively promote Batam and Bintan as manufacturing destinations. We will create a win-win outcome for both sides. Singapore will benefit if Batam, Bintan and Karimun attract more investment,'' he referred to the islands concerned.


The zones are expected to lay the groundwork for the islands to become investor-friendly and cost-competitive manufacturing zones that can attract foreign direct investments.

The agreement is also aimed at revitalizing investor confidence and interest in Batam in the face of increasing competition from emerging markets such as China, India and Vietnam.

It spells out seven key areas -- investment, finance and banking, taxation, customs and excise, immigration, manpower and capability development -- where both countries will cooperate to ensure business, regulatory and labor conditions are favorable to investors.

In the zones, tax incentives will be offered such as no export-import taxes, no complicated licensing procedures, manpower and talent, and a high level of infrastructure, including factories, road, rail and airports and deep water harbors.

''The special economic zone will be established to attract investors, not only from Singapore manufacturing industries, but particularly those from Japan and the Middle East,'' Indonesian Vice President Jusuf Kalla said Friday.

Singapore was chosen to help Indonesia, Kalla said, because of its broad

experience in developing similar zones in China and Vietnam.

The special economic zones on Batam and its nearby islands of Bintan and
Karimun, all in Riau Islands Province, are expected to provide higher profit margins for investors.

Indonesia plans to put the zones into effect next year.

The three will serve as a pilot project for the creation of 11 more special economic zones in other parts of the country.

Declining and slipping

In the past few years, hundreds of investors have abandoned Indonesia's
industrial zones, including Batam, for other countries in the region that are stronger in attracting investors.

Before the Asian financial crisis in mid-1997, Indonesia was considered a
possible ''newly industrializing country.'' Now, the position is declining.

In a report last October, the World Bank said the country's position in many areas of business is slipping, while a survey by the World Economic Forum confirmed its competitiveness is falling.

On the other hand, China, Vietnam and Malaysia are pulling ahead, as things are happening in those countries with their respective governments putting enormous effort into creating business environments necessary to speed up economic development. (*)

Jun 26 10:39
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