The Indonesian Special Economic Zone (KEKI), also known as Special Economic Zone (SEZ) or Free Trade Zone (FTZ), is a prototype of the special economic zone designed to become a business and industrial center for domestic and multinational companies.
The zone offers various administrative facilities, such as licensing, taxation and complete infrastructure to support the businesses and industries.
However, the economic concept is still new in Indonesia and the government and private sector still questioned its effectiveness.
Despite that, the government has appointed Batam, Bintan and Karimun (BBK) islands in Riau Islands province as SEZs and to serve a pilot project for the implementation of FTZs in Indonesia.
Achieving the FTZ status is no easy task because the central government remains unwilling to fully relinquish its authority, espacially in tax collection in a particular province.
Riau Islands Governor Ismeth Abdullah has continuously played a pivotal role in implementing the concept for the past 11 years, during his term as chairman of the Batam Industrial Development Authority (BIDA).
After becoming Riau Islands' governor since 2005, Ismeth has not only focused on developing Batam as an FTZ, but also convincing the government to grant a similar status to Bintan and Karimun regencies.
The government has appointed the Batam, Bintan and Karimun (BBK) SEZ as special economic zones in Indonesia.
"We have Singapore and Malaysia on the other side.
However, the areas here could not compete them in attracting foreign investors, so implementing the SEZ concept in a number of areas is necessary because we are competing with other countries which are also doing the same thing," Ismeth recently told The Jakarta Post.
He began the fight for FTZ status when he was appointed by former president Habibie in 1998 as chairman of BIDA.
BIDA is an institution formed by former president Soeharto in 1971, which is accountable to the President, to develop Batam Island as the first international scale industrial zone in Indonesia to compete with similar zones in the Asia Pacific region.
"I have fought from the beginning to realize Batam as an FTZ so it could compete with similar zones in the Asia Pacific region.
An FTZ is a form of legal certainty awaited by investors thus far, which I believe is worthy of fighting for," Ismeth said.
For Batam, implementing the FTZ concept is no easy matter due to the difference of perspectives between the House of Representatives (DPR) and the government, especially when the DPR approved the Batam Trade Zone and Free Port Law on Sept. 14, 2004.
However, the law was impotent in its implementation because the government was unwilling to implement it.
Former president Megawati Soekarnoputra was also reluctant to accept the law.
"We in the province were quite disappointed by the government's stance but we started from scratch to convince the government that the FTZ concept in border areas is important, so the province could compete," Ismeth said.
In June 2006, President Yudhoyono announced in Nongsa, Batam, before Singapore Prime Minister Lee Hsien Loong that the SEZ in Indonesia comprised of Batam, Bintan and Karimun and later on Jan. 19 this year inaugurated the three areas as the first SEZs in Indonesia.
"The areas border with countries that have far better economic concepts, but we could become better than the other countries if our concept is interesting.
Batam, Bintan and Karimun must grow and develop with their own strength. We must work together with other countries, such as Singapore, but should not solely rely on it," Ismeth said.
