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he government has been urged to manage the investment climate in Batam, Riau Islands, which has created uncertainty for foreign investors following the recent official closure of Japan'€™s electronic motor company PT Nidec Seimitsu Batam'€™s (NSB) production factory.

NSB recently shut down operations in Batam in favor of relocating to Vietnam, citing lower production costs.

NSB general manager Iwan Syahferi confirmed that the relocation to Saigon High Tech Industrial Park was due to the unsustainable production costs in Batam, which included increasing wage rates.

The minimum wage for Indonesian workers currently stands at Rp 2,422,000 (US$ 207,05), which is almost 20 percent higher than 2013'€™s figure of Rp 2,040,000.

'€œI cannot explain further details about the relocation due to the multiple stakeholders involved. However, I can say that it is cheaper to do business in Vietnam than it is in Batam,'€ Iwan told The Jakarta Post on Tuesday.

The factory itself will be shut indefinitely on July 25.

According to Iwan, NSB is not the first company owned by Nidec to have been relocated to Vietnam, though it was the last operation that the company had in Batam.

'€œAs a public firm, this decision is made purely on business grounds and not on speculation,'€ he said.

He urged the Batam government to make itself aware of the situation so that it could improve the region'€™s business climate.

NSB is the first company to have laid off its workers due to rising wage rates in Batam this year. Last year, fellow Japanese electronics manufacturing company PT Sun Creation Indonesia also closed its factory in Batam in favor of Vietnam, in a process that cost 1,000 jobs.

Japan remains the sixth largest contributor of foreign investment in Batam, behind Singapore, Malaysia, Taiwan, South Korea and Australia. The country has invested up to $128,8 million and has 15 companies in the region.

Batam municipal spokesman Ardiwinata said that the regional government is dedicated to getting rid of all the problems that have been hindering foreign investors from committing to their investments
in Batam.

'€œThe mayor of Batam is still committed to the fact that Batam shall remain an investment-pulling city, no matter what it takes and what regulations need to be loosened,'€ Ardiwinata said.

'€œWe are seeing that the relocation of several factories in Batam has been caused by their internal business decisions.'€

Previously, Coordinating Economic Minister Chairul Tanjung evaluated that the investment situation in the Batam special economic zone (KEK) had been stagnant since 2009.

The development of the region has been deemed misguided due to the absence of a master plan or adequate infrastructure.

Batam has also been focused more on ship and heavy machinery industrial development than the electronics industry.

Chairul conducted field observations following reports that Batam'€™s investment climate was stagnating.

His conclusion was that the stagnation was being caused by the status that the Free Trade Zone (FTZ) has been given, which should have driven production activity, he told The Jakarta Post.

'€œThe investment climate in Batam has remained stagnant since 2009, but the consumption sector is moving at an incredible pace. I am saying this to the management body of the Batam Free Trade Zone, that Batam is not made as a consumer city but as a production hub,'€ Chairul said during his Batam visit in June. (dyl)