Rendi Akhmad Witular, The Jakarta Post, Batam
Singapore is negotiating with Indonesia to seek concessions to partly manage Bintan Island in Riau Islands province by turning it into free trade zone (FTZ), which could accommodate more foreign manufacturing companies.
The first round of negotiation, which looks likely to trigger controversy among local politicians, began on Batam island Saturday, with Vice President Jusuf Kalla and Singapore's Foreign Affair Minister George Yong-Boon Yeo at the forefront of the talks.
""Singapore has laid out a proposal to manage Bintan Island as an FTZ. The country promises to pour in massive investment for business infrastructure on the island,"" a senior government official, who asked not to be identified, said.
The official said that Singapore was interested in Bintan because the island, located just around 20 minutes by ferry from Singapore, was part of the seven new FTZs planned by the government.
The meeting was also attended by Coordinating Minister for the Economy Boediono, Finance Minister Sri Mulyani, Trade Minister Mari Elka Pangestu, Industry Minister Fahmi Idris and Transportation Minister Hatta Radjasa.
Bintan's attractiveness lies in its business infrastructure, abundant water and labor, as well as easier customs management and supervision than other areas in Indonesia.
Due to a limitation of land capacity, Singapore is now trying to expand its manufacturing activities in neighboring countries. Bintan and Batam are likely to be its main priorities.
Chairman of the National Economic Recovery Committee (KPEN) Sofjan Wanandi -- a confidante of Kalla -- said that there was indeed a request from Singapore during the meeting to manage one of the planned seven new FTZs.
""Singapore is interested in investing in one of the seven FTZs by providing business infrastructure and a promotion network. However, the country has not yet named any areas. There will be another round of negotiations for this,"" he said.
Aside from a plan to manage Bintan, the meeting also resulted in a decision by Singapore to help promote Batam, Bintan and Karimun islands in order to lure more foreign investors.
Ministers from the two countries will regularly meet to discuss investment problems on the islands, with Vice President Kalla to leading the meetings.
Another agreement with Singapore also includes immediate efforts from Indonesia to decide the status of Batam; whether as a free bonded zone area or a full FTZ.
Before the meeting with Yeo, Kalla visited Bintan Industrial Estate, which is run by Singapore-based property giant Sembcorp Parks Management, to get firsthand information about problems encountered by the foreign business community there.
Sembcorp executive chairman Low Sin Leng said that Indonesia should immediately ease concern of businesspeople over unfavorable labor laws, uncertainty in the implementation of laws and regulations, and the complicated tax and customs procedures.
Since 1992, Sembcorp has invested around US$127 million to develop part of Bintan as a business area. Around 63 percent of the companies operating at the estate are from Singapore, 19 percent from Japan, 12 percent from Europe and the remaining 6 percent from the United States.
Sembcorp is planning to expand by another 4,000 hectares of the estate from the current 110 hectares in the near future.
According to the Investment Coordinating Board, Singapore was the largest investor here last year, with investments amounting to S$6.3 billion (US$3.69 billion) -- about one-third of total foreign direct investment inflows in 2005.
