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JAKARTA (TheInsiderStories)The Minister of Transportation and the Batam Indonesia Free Zone Authority (BIFZA) have resolved a conflict on port operation in Batam, putting an end to a lingering dispute between the two agencies.

Lukita Dinarsyah Tuwo, the Head of Batam Indonesia Free Zone Authority, explained that the new stipulation aims to impart certainty to investors, who happen to be industry payers on Batam.

Following the decision, BIFZA will be in charge of several authorities including those responsible for providing land, port security, guaranteeing environmental sustainability, creation of a port masterplan, as well as a working scope masterplan.

In addition, BIFZA will specify the tariffs to be set by the Minister, which covers financial issues, port service tariffs and port-related services tariffs, maintaining goods flow and conducting contractual cooperation with licensed business players.

‘We will oversee several services, including ship docking, terminals for individual interest, specific terminals from syahbandar, goods service, rent/operation cooperation for commercial use services,’ he added.

Over the next 6 months, BIFZA and Ministry of Transportation will jointly carry out the agreed transformation. The Ministry of Transportation will transform Batam Port Office into Batam Special Port Authority and Syahbandar Office. Meanwhile, BIFZA will transform Batam Seaport Office into Batam Special Port Authority, coordinating with related ministries.

Boosting Batam’s Economic Value

The government has taken several steps to increase investment in Batam, including appointing a new head, replacing entire management teams with a group of Java-based senior civil servants, as well as changing the island’s decade-old status as a ‘Free Trade Zone’ (FTZ) to that of a ‘Special Economic Zone’ (SEZ).

First established by a presidential decree in the 1970s, Batam was once at the forefront of the island’s industrialization. But over the decades, Batam’s economic activity has stalled. Over the past two years, economic growth has leveled off, registering a mere 2 per cent over the last six months. This is substantially below the national average of 5 per cent.

Foreign direct investment has plummeted to a quarter of the levels seen during the 2000s. According to Batam’s Manpower Agency, between 2015 and last year, more than 110 firms closed down their operations. This trend has continued unabated, with 53 firms closing in the first half of this year.

Batam’s total export value last year reached US$8.41 billion (S$11.4 billion). Total imports topped US$6.13 billion, with Singapore accounting for US$3.89 billion of exports and US$2.1 billion of imports.

Meanwhile the SEZ status possesses a number of positive attributes, including income tax cuts of 20 to 100 per cent for up to 25 years, exemption from value-added tax, removal from Indonesia’s negative-investment list, which denotes industries from which foreign investors are barred, and the postponement of import duty on capital goods, equipment and materials for industrial processing. The government, however, still needs to tackle other onerous issues including red tape and bureaucratic overlap, as well as wage levels issue that are crucial for manufacturing, and which are substantially higher than those in Central and East Java. (*)

Written by Yosi Winosa, email: