THE long awaited framework agreement between Singapore and Indonesia to help set up Special Economic Zones (SEZs) for the islands of Bintan and Batam is to be signed on Sunday.

This is part of a joint move to enhance the business environment of the two Indonesian islands by rekindling investor interest.

Prime Minister Lee Hsien Loong, who will be going to Batam on Sunday to meet with Indonesian President Susilo Bambang Yudhoyono, told Singapore media in Auckland: 'If you can sort out the SEZs and sort out these areas and bring investments in, then you set the model and you will be able to develop the same in the rest of Indonesia.'

PM Lee, who was in the final stages of an official visit to New Zealand, pointed out that Bintan and Batam had been successful in attracting investments in the past, but in recent years had seen a lot of them moving away.

'At the same time, new investments are reluctant to move in and a lot of that has to do with the investment environment, the rules, the legislation, the laws, the way they are implemented, the administration,' he said.

That is why under the proposed agreement, Singapore and Indonesia will work together to tackle problem areas such as investment, taxation and immigration, said Thong Pao-Yi, director of the International Policies Division of the Singapore Economic Development Board (EDB).

Other key areas of collaboration include customs and excise, manpower, capability development, and finance and banking.

To help manage the zones, there will be a joint steering committee of economic and foreign ministers from Singapore and Indonesia.

The ministers meet every six months during the initial period to review and resolve problems the zones might face.

There will be a joint working group to assist the ministerial committee, co-chaired by the chairman of the EDB and the chairman of the Indonesia Investment Coordinating Board.

The ministers and their advisers are expected to have quite a few difficulties in their path. Previous attempts like the Indonesian Government's Bonded Zone Plus initiative to ease customs clearance at Batam and Bintan have failed to boost investors' interest in the islands, giving rise to doubts about the zones' potential.

However, the parties involved and representatives from the Batamindo Business Council and Bintan Industrial Estate Investors Association on these islands remain 'cautiously optimistic'.

Minister of Trade and Industry Lim Hng Kiang, who was with PM Lee in Auckland, said: 'Our value-add is that we are close to the investors, we have experience in attracting investors to Singapore. We know what investors want and we can communicate the requirements to (Indonesia) and also advise our Indonesian counterparts how they can change their rules to be more investor-friendly.'

Ms Thong added: 'The timing is opportune for this framework agreement signing because we have a strong Indonesian team complemented by eager assistance from the Singapore side.

'Our experience and inputs from the past will also guide us along, as the two governments work together to enhance and foster cooperation on the islands to make them internationally competitive.'

The proposed agreement follows the visit to Indonesia earlier this year by Minister Mentor Lee Kuan Yew when he talked with political leaders about improving the country's investment climate.