JAKARTA (TheInsiderStories) - The Indonesian government has decided to transform the status of Batam from Free Trade Zone into a Special Economic Zone (SEZ) in a move to accelerate the development of Batam.
Coordinating Minister for Economic Affairs Darmin Nasution said Batam has become a Free Trade Zone for long, however, its economic development has been stagnant. “The concept of Free Trade Zone is outdated,” Darmin said in Batam on Monday.
The government has issued Presidential Decree No. 8, 2016 on the National Council of Free Trade and Bonded Zone of Batam (PBPB Batam) on February 29, 2016.
In addition to losing its competitiveness, there has been dualism of authority in Batam, namely Batam Management Authority and Batam Municipality. This dualism has caused overlapping of permits and authority in the area.
The Head of National Council of PBPB Batam Darmin Nasution said a Special Economic Zone, Batam will get a lot of benefits compared to its previous status as FTZ region. These benefits include various tax discounts and incentives.
As part of the transformation, the government will replace top officials of the BP Batam with professional executives.
Darmin added in the next four months, an audit will also be carried out on Batam Management Authority (BP Batam).
From these audits, the government will map into two parts of Batam areas, which composed of industrial and residential areas.
The industrial areas, said Nasution, will be transformed into SEZ, and will be under the responsibility of the new BP Batam. Meanwhile, residential area will be managed by Mayor of Batam.
Meanwhile, Trade Minister Thomas Lembong said Indonesia should develop more SEZs in the country. He cited the Philippines has developed 300 SEZs, which have been quite successful, as reflected in an increase in the country’s exports.
Minister Thomas Lembong said among facilities and tax incentives to be given to Batam SEZ will include (1) Investments Allowance, (2). Accelerated Amortization, (3) Dividend Tax, (4) Extension Compensation Losses, (5) Tax Holiday, (6) Refund of VAT to the private holders of foreign passports, and (7) Suspension of Duty.
Batam is located within Riau Islands Provinces, which is only less than an hour away from Singapore.
Riau Islands Governor Muhammad Sani said he expects the change of status of Batam will help resolve bureaucratic problems in Batam, including the land issues.
Interior Minister Tjahjo Kumolo said the change of status of Batam and clear authorities and duties of the New BP Batam and Municipality of Batam will help improve coordination with other related government institutions, both locally and nationally.
“BP Batam and Local Government coordination will be improved,” he said.
Business players welcome the government’s decision including the local chapter of Indonesia Employers’ Association and Real Estate Indonesia, Riau Islands. They hopes that the government will improve port infrastructure of Batam.
Prior to the status of Batam is fully changed to Batam SEZ, there will be a transition period for six months. The new executives of Batam Management Authority (BP Batam) will be responsible for the transition period. The agency will be required to identify assets, type of cooperation with investors, separation of duties and responsibilities between BP Batam and Batam Municipality as well as preparing the future development of Batam. (*)