BATAM FREE TRADE

ZONE
AHMADI SUBRATA
120908

Historical Development of
Batam
The development of Batam dated back to 1970s. Initially, Batam was
developed with the view to compete with Singapore. Over the years, the
Indonesian authority perceived that it will be more beneficial to leverage on
the good infrastructure and distinctive economic performance of Singapore to
develop Batam into an industrial location. The former aide to former
President Suharto and his successor, Dr Habibie has put forward his balloon
theory of development for Batam. He said that Singapore is like a balloon
filling up with air. If the air does not find a second balloon, the first balloon
will burst.
Batam of Indonesia can benefit from Singapores excessive
growth due to its proximity to Singapore and can be positioned as an
extension of Singapores production base.

Legal Platform Batam Free

Trade Zone

Strategic Location of Batam

20 km

Modern Infrastructure

Total Investment

USD 5.818 Billion

(Domestic
Investment)

USD 3.367 Billion

(Government
Investment)

Up to June 2013

USD 6.949 Billion

(Foreign Investment)

Ratio of Goverment & Private Invesment = 1:3.79

Government Investment

USD 3.367

20,87 %

Foreign Investment

USD 6.949

43,07 %

Domestic Investment

USD 5.818

36,06 %

USD 16 .135

100,00 %

Total

Population
Up to June 2013

Source: Batam Demography and Settlement Office

Work Force
Up to June 2013

Source : Batam Labour Office

Industrial Estates
Up to June 2013

22 Industrial Estates
990 Multinational
Companies

Some of Multinational
Companies Operating in
Batam

Hotels and Resorts

64 Hotels
(one to four-star
hotels)
2 Marinas

Foreign Visitors
/ Thousand people
Up to June 2013

Source : Central Bureau of Batam

Roadmap Batam Free Trade

Zone

SWOT Analysis

Conclusion
In summary, due to its history of development and proximity to Singapore, BBK
especially Batam has seen rapid development over the years, as compared to other
regions in Indonesia. Although the pace of development has slowed down for a few
years since 2000, foreign direct investment approvals and realisations have been
slowly improving for the last few years due to efforts by the Indonesian government.
However, there are issues of legal certainty, labour regulations, and infrastructure
development that BBK need to address in order to improve the investment climate
which will ultimately lead to the establishment of BBK SEZ.
In conclusion, the current policy priority in BBK should be to improve on the existing
investment climate and the business environment. Labour market conditions in BBK
such as the minimum wage, labour regulations in retrenchment, severance pay, labour
unions, infrastructure conditions such as quality of road and electricity, and
institutional conditions such as level of legal certainty should be improved to raise
investors confidence for the longer term benefits of BBK. It should also be noted that
the timing and timeliness of the implementation of improvements is of essence due to
emerging competition from Iskandar Development Region (IDR) in South Johor,
Malaysia, as well as Vietnam and China.

THANK YOU