Riau Islands Expects $5b Investment Over 5 Years

Riau Islands hopes to attract up to $5 billion in new foreign investment over the next five years after parliament passed a bill turning the area into a free trade zone, its governor said Wednesday (17/10/07).

The free trade bill offers investors benefits that include exemption from import duties, value-added tax and sales tax on luxury goods in the provinceís main industrial islands of Batam, Bintan and Karimun.

"Parliament's approval is a positive sign for foreign investors from all over the world. We have 26 signed agreements worth $1.7 billion spread over Batam, Bintan, and Karimun waiting for the law," Ismeth Abdullah told Reuters in an interview.

"Among the big players seriously interested in investing are an oil company from the US and an Italian shipyard firm. The two of them combined will contribute around $600 million."

Abdullah said major companies from Singapore, Japan, Taiwan, Europe and the Middle East are also interested in investing in the islands, which could create about 900,000 jobs over the next five years.

"We will control all the investment activities at an integrated office, to avoid bureaucratic hurdles in FTZ. We will make those three islands as a zero obstacle zone for investment," he said.

The new bill, which still has to be approved by the president to become law, only applies to the three islands, but Abdullah said he expects the benefits to trickle down to the entire province.

Fresh investment will almost double the share of exports from the islands to 25% of Indonesia's total exports over the next five years, from 14% currently. Exports reached $100.69 billion last year, and were up 14.3% in the first half of the year to $53.62 billion, the governor said.

Meanwhile German-based electronics component manufacturer Electronics Parts and Components (Epcos) has invested $10 million in the Panbil industrial zone in Batam, Riau Islands due to the islandís competitive edge, Epcos supervisory board chairman Klaus Ziegler said Monday.

Epcos Indonesia CEO Stephen Samuel said Batam is more competitive than Malaysia's Iskandar industrial area and other industrial zones in Southeast Asia.

The company will begin producing car heating and cooling systems in June 2008, Ziegler was quoted as saying by Antara.
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