Deal aims to make Batam, Bintan, Karimun attractive to investors

IN WHAT has been described as the start of a 'new phase of cooperation' between Singapore and Indonesia, the two countries have signed a framework agreement for economic cooperation in special economic zones (SEZs) in the Indonesian islands of Batam, Bintan and Karimun.

The agreement outlines seven key areas Indonesia and Singapore will cooperate on - including investment, taxation, immigration and finance and banking - to ensure that business, regulatory and labour conditions in these islands are favourable to investors.

The deal was inked yesterday in Batam by Singapore Trade and Industry Minister Lim Hng Kiang and Indonesia's Coordinating Minister for the Economy Dr Boediono. The signing was witnessed by Prime Minister Lee Hsien Loong and Indonesian President Susilo Bambang Yudhoyono.

Speaking at the signing ceremony, Mr Lee said that Batam holds 'great economic significance' to both countries.

He said that the region had attracted significant investments and generated more than 200,000 jobs between 1990 and 2000, but had in recent years seen a decline in new investments.

'When President (Yudhoyono) called me in February and said he wanted to revitalise Batam and Bintan, I immediately gave him my full support,' Mr Lee said. 'This scheme also fits into Indonesia's plan to set up SEZs and to improve the investment climate all over Indonesia, starting with the SEZs, and then extending to the rest of the country.'

Calling the event an 'important milestone for bilateral relations', Mr Lee said the agreement affirms the commitment 'at the highest level' to the speedy and successful implementation of the SEZs.

'Success in the SEZs will create a win-win outcome for both sides,' Mr Lee said. 'Singapore will benefit if Batam, Bintan and Karimun attract more investments because it will help to make Singapore more competitive, compared to China, India or Vietnam.'

Mr Lee said that Singapore will have three main roles in this collaboration: advising Indonesia on the needs and wants of investors, outreach and promotion of the islands as manufacturing investment locations through the Economic Development Board's (EDB's) existing network and capability building by increasing collaborations in technical training of workers in the polytechnic and vocational levels.

He also drew a distinction between the agreement and the Suzhou project in China, saying that the latter involved building up from scratch, while Batam and Bintan already have the prerequisites for SEZs.

In his speech, Mr Yudhoyono said the agreement would help establish an 'investor-friendly' environment in the islands. 'I hope that investors will take advantage of the opportunities that lie ahead, ranging from shipyard and oil-related business, manufacturing sectors such as electronics and precision equipment, chemicals and even light industries such as garments, tourism, agriculture, aquaculture and education.'

A joint steering committee, responsible for the implementation of the agreement, is scheduled to be established and to meet within the next three months. It will be co-chaired by Mr Lim and Dr Boediono.

The committee, which will report directly to Mr Lee and Mr Yudhoyono, will supervise the action plan for the development of the SEZs and promote and adopt market-oriented proposals. A joint working group will also be established.