SINGAPORE and Indonesia are launching what is being called the "last chance" to forge a powerful alliance to promote international investment on the islands of Batam, Bintan and Karimun.

Earlier efforts to give extra impetus to economic growth on the Indonesian islands at Singapore's doorstep largely failed.

On Sunday, the two countries will sign the Framework Agreement on Economic Cooperation on the islands to set up new Special Economic Zones (SEZs).

Singapore and Indonesia will set up two committees - the Joint Steering Committee and the Joint Working Group - to collaborate in key areas such as taxation and immigration.

Mr James Kong, president of the Batamindo Business Council representing a major Batam industrial park, said this attempt to help the islands regain their competitiveness will be different from previous failed attempts as "the two countries have shown their deep interest with ministerial visits to Batam and Bintan".

The Singapore delegation at Sunday's signing on Batam will be led by Prime Minister Lee Hsien Loong, while the Indonesian team will be led by President Susilo Bambang Yudhoyono.

"In the past, political instability hindered revival. But Indonesia has now sort of reached the end of economic and social problems, so the timing is right," Mr Kong said. "Failure is not an option as it will drag the islands down further. This is the last chance to do something."

Batam and Bintan's woes started after the 1997 Asian financial crisis, which saw "Indonesia dropping off the radar screens of investors", said the executive chairman of SembCorp Park Holdings, Ms Low Sin Leng.

"Indonesia used to be a favourite of Japan for risk diversification, but investment has flowed to other places like Vietnam and India. There is very strong regional competition for foreign direct investment."

In 2004, foreign investment in Batam was US$3.81 billion (S$6.1 billion). This framework agreement will also try to meet the expectations of investors for a "more predictable and stable environment", said the president of the Investors Association at Bintan Industrial Estate, Mr Paul Brandeis.

His hopes for the SEZs include a "one-stop agency to get business licence registration without having to travel to Jakarta".