Indonesia, Singapore to meet again on economic zone

Urip Hudiono, The Jakarta Post, Jakarta

The government looks set to develop Special Economic Zones (SEZs) in the Batam, Bintan and Karimun islands with Singapore, after issuing regulations relating to implementation of the SEZs earlier this week.

Coordinating Minister for the Economy, Boediono, said officials from the two countries will meet in Bali on Aug. 29 to discuss progress of the SEZs and other pending issues.

"We will discuss training programs and joint investment promotion as agreed previously," Boediono told reporters Wednesday after a meeting.

Indonesia and Singapore agreed June last year to develop SEZs in three regions of the Riau Islands province, which is a strategic location in the vicinity of Singapore; the region's trade hub.

Many industrial zones already exist in Batam, most of them investments from Singapore.

In the latest follow-up, the government on Aug. 20 issued regulations for each SEZ, which will consist of free-trade zones (FTZs) and ports.

Government regulations stipulate that the SEZ for Batam will cover Batam island, as well as the nearby smaller islands of Tonton, Setokok, Nipah, Rempang, Galang and Galang Baru.

The SEZ for Bintan will cover the Galang Batang, Maritim, Senggarang and Dompak Darat industrial zones, as well as Lobam Island. The SEZ for Karimun will affect most parts of Karimun Island and Karimun Anak Island.

The SEZs will be effective for 70 years, with their respective management agencies to be set up by next year at the latest.

The development of the SEZs has been pending, with the government issuing a regulation-in-lieu-of-law (Perpu) on SEZs in June 2007.

The ad-hoc law, which still requires approval from the House of Representatives, stipulates that SEZs can be established and implemented through government regulations.

The government sees the Batam SEZs a pilot project for a dozen others being considered in other regions around the country. It has, however, asserted the decision to implement a full FTZ for the Batam SEZs will be a special case.

The government had considered implementing an "enclave of FTZs" -- limited to industrial zones which actually require import duty exemptions and tax breaks -- to prevent the risk of smuggling throughout the islands.

Investment Coordinating Board (BKPM) chief M. Lutfi said foreign direct investment commitments to Batam had until July reached US$9 billion, compared to $426 million in the same period last year.

This is the result of efforts to improve the region's investment climate, he said.

Manpower and Transmigration Minister Erman Suparno, meanwhile, expects investment growth in the SEZs ahead to create some 30,000 jobs.

Boediono, however, said income tax breaks for industries in the SEZs would be considered different to import duty exemptions, as they are in FTZs.

The business community in both Indonesia and Singapore are still complaining about existing problems with Batam's "one-stop investment service".
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