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From Straits Times http://www.straitstimes.com/

'Stepchild' missing out on the buzz

By Leslie Lopez, Senior Regional Correspondent

Island fails to live up to its potential but is still doing well

Batam lacks the boomtown feel of other large Indonesian cities. While several secluded parts boast of a busy nightlife, where loud techno music blares from speakers at discotheques and bars, most restaurants do light business for much of the week and depend largely on the weekend tourists from Singapore.
Megamall Batam Centre, located opposite the International Ferry Port, is one of the largest malls in Batam and popular with tourists. Tourism-related activities account for roughly 25 per cent of the island?s GDP.
View more photos

IT WOULD appear that Batam is making the news these days for all the wrong reasons.

Apart from notoriety for its naughty nightlife, Batam hit the headlines in late May following riots by several thousand dock workers over overdue salaries.

Because the anger was targeted at a Dubai-based dry dock company and the supervisors were from India, the violence that destroyed buildings and cars spooked foreign investors.

'The whole thing was overblown,' insists Mr Samsul Bahrum, the special officer in charge of economic affairs for Batam province.

But sitting in his dimly lit office, filled with faux animal skin rugs and a gurgling fountain, Mr Samsul concedes that the incident has made selling the province as an investment destination more difficult.

It wasn't supposed to be this way for Batam.

Twenty years ago, as Indonesia's limping economy struggled to attract foreign investment, then-President Suharto entered into an ambitious pact with neighbouring Singapore and Malaysia to create a growth triangle.

Architects of the growth triangle, dubbed Sijori, envisioned an economically vibrant region that would marry Singapore's superior infrastructure and capital with the abundant natural resources of its neighbours. Labour-intensive businesses in the island republic would relocate to Batam and all parties would benefit from the lower costs of production and the jobs created.

But Batam's development was hampered by Malaysia's lukewarm response to the growth triangle pact, the regional economic crisis that hit Indonesia particularly hard in the late 1990s, and competition from other countries such as Vietnam, India and China.

Today, it faces another challenge, this time closer to home.

The rapid growth across Indonesia, particularly in regions which benefit from a commodities and minerals boom, has diluted Jakarta's attention towards Batam.

'It's Indonesia's stepchild and it is no longer a priority. Economic growth is being generated domestically, so there isn't a need to push for foreign investment here,' says the chief executive of a Singapore-owned electronics manufacturing company who asks not to be named.

It certainly lacks the boomtown feel of other large Indonesian cities.

While several secluded parts boast of a busy nightlife, where loud techno music blares from speakers at bars and discotheques, most restaurants do light business for much of the week and depend largely on the weekend tourists from Singapore.

Although Batam may not be living up to its potential, it remains one of Indonesia's faster-growing regions, posting average growth rates of roughly 6.5 per cent each year, compared to around 5 per cent for most of Indonesia's other regions.

It has a population of just over one million people, up 51 per cent from four years ago.

There are currently 1,108 foreign incorporated companies, which are mainly out of Singapore and generate the lion's share of economic activity on the island.

The island's industrial sector makes up about 60 per cent of its gross domestic product, while tourism-related activities are the next most important economic activity, accounting for roughly 25 per cent.

Batam also boasts the second-highest number of annual tourist arrivals after Jakarta.

'For all its pitfalls, Batam is still a work in progress and remains one of the best destinations for business,' says Mr Stephen Samuel, chief executive of Epcos, a German-based electronics component manufacturer which moved its operations from Singapore to the island 20 years ago.

The island's strategic location, cheap land, abundant labour and low construction costs make it ideal for foreign investors seeking to escape the high cost of doing business in Singapore.

But Batam would be doing a lot better if it straightened out its complex investment rules.

Several businessmen blame the island's inconsistent investment environment on Indonesia's decentralisation programme - an ambitious economic experiment to give Indonesia's provinces greater autonomy over the economy.

The plan, which began in 2001, has produced mixed results and, in several extreme cases, the devolving of power away from central Jakarta has led to the rise of regional governments imposing their own form of red tape.

As a result, the central government in Jakarta has moved to put in place new laws to curb the powers of regional governments, only to confuse and frustrate local and foreign businesses.

Batam's planners acknowledge the problem and believe they can do better if Indonesia's central government grants the province greater autonomy over its affairs.

For example, the island has several free trade zones, which are supervised by the provincial authority, but taxation laws are still controlled by Jakarta.

Mr Samsul, Batam's special officer in charge of economic affairs, blames the disconnect on fears that too much power to the province could result in Batam becoming 'less Indonesian'.

'Politically, Batam is a part of Indonesia. But economically we have to accept the fact that we are more a part of Singapore and Malaysia,' he says.

ljlopez@sph.com.sg
From Straits Times <a href="http://www.straitstimes.com/" rel="nofollow" target="_blank">http://www.straitstimes.com/</a><br /> <br /> <span style="font-size: 14pt"><span style="font-weight: bold">'Stepchild' missing out on the buzz</span></span><br /> <br /> By Leslie Lopez, Senior Regional Correspondent<br /> <br /> Island fails to live up to its potential but is still doing well<br /> <br /> Batam lacks the boomtown feel of other large Indonesian cities. While several secluded parts boast of a busy nightlife, where loud techno music blares from speakers at discotheques and bars, most restaurants do light business for much of the week and depend largely on the weekend tourists from Singapore.<br /> Megamall Batam Centre, located opposite the International Ferry Port, is one of the largest malls in Batam and popular with tourists. Tourism-related activities account for roughly 25 per cent of the island?s GDP.<br /> View more photos<br /> <br /> IT WOULD appear that Batam is making the news these days for all the wrong reasons.<br /> <br /> Apart from notoriety for its naughty nightlife, Batam hit the headlines in late May following riots by several thousand dock workers over overdue salaries.<br /> <br /> Because the anger was targeted at a Dubai-based dry dock company and the supervisors were from India, the violence that destroyed buildings and cars spooked foreign investors.<br /> <br /> 'The whole thing was overblown,' insists Mr Samsul Bahrum, the special officer in charge of economic affairs for Batam province.<br /> <br /> But sitting in his dimly lit office, filled with faux animal skin rugs and a gurgling fountain, Mr Samsul concedes that the incident has made selling the province as an investment destination more difficult.<br /> <br /> It wasn't supposed to be this way for Batam.<br /> <br /> Twenty years ago, as Indonesia's limping economy struggled to attract foreign investment, then-President Suharto entered into an ambitious pact with neighbouring Singapore and Malaysia to create a growth triangle.<br /> <br /> Architects of the growth triangle, dubbed Sijori, envisioned an economically vibrant region that would marry Singapore's superior infrastructure and capital with the abundant natural resources of its neighbours. Labour-intensive businesses in the island republic would relocate to Batam and all parties would benefit from the lower costs of production and the jobs created.<br /> <br /> But Batam's development was hampered by Malaysia's lukewarm response to the growth triangle pact, the regional economic crisis that hit Indonesia particularly hard in the late 1990s, and competition from other countries such as Vietnam, India and China.<br /> <br /> Today, it faces another challenge, this time closer to home.<br /> <br /> The rapid growth across Indonesia, particularly in regions which benefit from a commodities and minerals boom, has diluted Jakarta's attention towards Batam.<br /> <br /> 'It's Indonesia's stepchild and it is no longer a priority. Economic growth is being generated domestically, so there isn't a need to push for foreign investment here,' says the chief executive of a Singapore-owned electronics manufacturing company who asks not to be named.<br /> <br /> It certainly lacks the boomtown feel of other large Indonesian cities.<br /> <br /> While several secluded parts boast of a busy nightlife, where loud techno music blares from speakers at bars and discotheques, most restaurants do light business for much of the week and depend largely on the weekend tourists from Singapore.<br /> <br /> Although Batam may not be living up to its potential, it remains one of Indonesia's faster-growing regions, posting average growth rates of roughly 6.5 per cent each year, compared to around 5 per cent for most of Indonesia's other regions.<br /> <br /> It has a population of just over one million people, up 51 per cent from four years ago.<br /> <br /> There are currently 1,108 foreign incorporated companies, which are mainly out of Singapore and generate the lion's share of economic activity on the island.<br /> <br /> The island's industrial sector makes up about 60 per cent of its gross domestic product, while tourism-related activities are the next most important economic activity, accounting for roughly 25 per cent.<br /> <br /> Batam also boasts the second-highest number of annual tourist arrivals after Jakarta.<br /> <br /> 'For all its pitfalls, Batam is still a work in progress and remains one of the best destinations for business,' says Mr Stephen Samuel, chief executive of Epcos, a German-based electronics component manufacturer which moved its operations from Singapore to the island 20 years ago.<br /> <br /> The island's strategic location, cheap land, abundant labour and low construction costs make it ideal for foreign investors seeking to escape the high cost of doing business in Singapore.<br /> <br /> But Batam would be doing a lot better if it straightened out its complex investment rules.<br /> <br /> Several businessmen blame the island's inconsistent investment environment on Indonesia's decentralisation programme - an ambitious economic experiment to give Indonesia's provinces greater autonomy over the economy.<br /> <br /> The plan, which began in 2001, has produced mixed results and, in several extreme cases, the devolving of power away from central Jakarta has led to the rise of regional governments imposing their own form of red tape.<br /> <br /> As a result, the central government in Jakarta has moved to put in place new laws to curb the powers of regional governments, only to confuse and frustrate local and foreign businesses.<br /> <br /> Batam's planners acknowledge the problem and believe they can do better if Indonesia's central government grants the province greater autonomy over its affairs.<br /> <br /> For example, the island has several free trade zones, which are supervised by the provincial authority, but taxation laws are still controlled by Jakarta.<br /> <br /> Mr Samsul, Batam's special officer in charge of economic affairs, blames the disconnect on fears that too much power to the province could result in Batam becoming 'less Indonesian'.<br /> <br /> 'Politically, Batam is a part of Indonesia. But economically we have to accept the fact that we are more a part of Singapore and Malaysia,' he says.<br /> <br /> ljlopez@sph.com.sg
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