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The Special Economic Zone (SEZ) of Batam is the first one opened in Indonesia and includes not only the island of Batam, but also Galang Baru, Rempang Galang, Nipah, Tonton and Setokok islands, all positioned in one of the most active shipping routes, between Singapore and Sumatra.
Batam SEZ has been established in 2007 and the Investment Law (art. 31/1) makes it a Special Economic Zone for 70 years. Article 2/1 prioritizes the following economic fields: trade, maritime, industry, transportation, banking and tourism.
It is easy to understand why Batam can be a perfect area to establish a business for foreigners and not only for locals. But we are going to take a deeper view of the advantages of establishing a business in Batam, advantages that are not limited to customs and tax exemptions.
Batam has better physical infrastructures than the rest of Indonesia
According to a study from Political and Economic Risk Consultancy, the reasons why Batam infrastructure is better are mainly the following:
• Foreign supplies are easier to move through Batam port and airport compared to Jakarta and to the rest of Indonesia.
• Exporting finished products from Batam port and airport is easier compared to the rest of Indonesia (including Jakarta).
• The main infrastructure, as for example water supply and energy supply, are at the same level as the ones in Jakarta, considerably higher than in other parts of Indonesia. In other parts, in fact, investors/business owners have to build such infrastructure themselves.
• Being so close to Singapore. If any facility is missing in Batam, it can be found in Singapore (for example world-class hospitals).
Fast lane for foreign investments
In less than 20 working days, foreign investment applications are processed. All the licenses and permits are processed by one single entity, BIDA (Batam Industrial Development Authority), making everything easier.
It is close to Singapore
Batam is one ferry ride away from Singapore (around 13 miles – 20 km). Singaporean manufacturing firms are already taking advantage of the local taxation and the cheaper labor costs.
Batam exports 50% of local production to Singapore, and over 70% of the investments are coming from Singapore.
Wages in Batam continue being lower than the ones in nearby Singapore and Malaysia. Data from 2013 show about 210USD per month.
Labor is widely available, new workers are coming to Batam from other parts of Indonesia.
Batam is a free port and a free trade zone, which offers interesting incentives to companies producing in Batam for export.
VAT & LST – Value Added Tax and Local Service Tax
In accordance with local rules, the great majority of transactions to enter services or goods in Batam are VAT and LST exempted (always remember to verify if your products are part of this of this majority!).
When goods are imported into Batam or exchanged among companies within the free trade zone, no import duty is applied. But if those same good enter other parts of Indonesia, then all the import duties and taxes are applied.
These are the main reasons why Batam can be the perfect spot for foreign companies to start doing business with SE Asia. Singaporean companies are currently the ones taking more advantage of these unique features of Batam, but there are opportunities for companies from all over the world.
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This is true for the UK leaving the EU, for the EU companies, but also for all the businesses that are providing something unique to their customers.
“Food and drink manufacturers have been urged to protect their intellectual property (IP) rights before exporting overseas, as risks will grow once the UK leaves the EU.
Marks & Clerk trade mark attorney Aidan Clarke warned producers that entering new markets without the right protection could find their products copied or face the risk of an injunction by domestic manufacturers.
He said: “As exports reach record levels there is another threat to businesses that is much less talked-about, affecting worldwide trade, and it centres around IP rights.
“When you move into new markets without adequate protection you could be in serious trouble. Others could use your brand name, potentially stopping you from operating in those markets – or worse, you could face an injunction.”
Moved into new territories unprepared
The most vulnerable were companies that had recently seen rapid export success, according to Marks & Clerk. Firms at risk also had limited legal knowledge or resources and had moved into new territories unprepared.
A key part of any export plans should be seeking legal protection for brands before targeting overseas markets.”
Here is where Nakita Alliance and its great legal services can make a difference. Our notary (notary in Indonesia means notary + attorney) Miss Yulianti can guide your choices to reach the best solutions for your business!
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Have you ever heard about business opportunities in Batam?
If you have never heard of a place called Batam, in Indonesia, then you have been missing out on the largest city in the Riau Islands, located just 20km from Singapore and 25 from Malaysia’s Johor. Batam is known for its inviting hills and amazing landscapes – which have already attracted many tourists and kept them as investors and entrepreneurs who truly dig the scene in this iconic Indonesian city.
So by now you must be asking yourself “Just what is it that makes the Batam business scene so very special?”.
Well, the truth is, for a long time Batam has been a symbol of bureaucracy and legal hurdles for many entrepreneurs. However, this is all set to change as procedures are being made much easier as thanks to the growth in tourism people have actually become much more interested in benefitting from the gross-domestic product of the country.
Business opportunities in Batam, Indonesia
The first thing that makes Batama growing business hub is its amazing location. Basically, Batam is close to one of the most progressive startup scenes in the world – Singapore, not to mention the dynamic and vibrant business environment in Malaysia.
What is more, Batam is strategically placed in the midst of some of the best economies in the world – making it a bridge to doing business with any one of them.
And let’s face it – Indonesia is also known as a country where the labor is more affordable for anyone from the Western world. That is why many investors and entrepreneurs have outsourced their businesses to this city – especially the ones that operate or offer services in Malaysia and Singapore too.
So, in a nutshell, the strategic geographic position and the perfect economic setting, accompanied by the affordable workforce and skilled professionals is what makes Batam, Indonesia one of the fastest emerging business scenes in Asia.
From real estate to IT, the Batam business opportunities are endless
Batam is currently being visited more and more by Singaporeans looking for profitable real estate to buy and then resell at a better price. The rumors are, that due to the mainstream approach that is being put into place, Batam will definitely attract the eye of many an investor seeking peace of mind in Indonesia, not to mention streamlining their business operations and maximizing their savings.
From factories to local markets, Batam is also known for its great manufacturing facilities, making shipping products to Western countries one of the most profitable businesses. Once again, investors and entrepreneurs are the most popular target group to reap the benefits and take the business scene in Batam to another level – from a growing trend to a profitable reality.
If you are thinking about creating your business or registering a company in Batam, we can help you with the whole procedure. Thanks to our partnership with a reputable notary (Miss Yulianti, who is also the Official Notary for the Indonesia Foreign Investment Board), we can arrange everything you may need, just get in touch!
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The USA is investing a lot in the future growth of economic ties with Indonesia, with emphasis on financial sector and infrastructures.
The relationship between Indonesia and the US could reach an economic value of almost US$132 billion in 2019, with a 46 percent increase from $90 billion in 2014, say the US Chamber of Commerce and American Chamber of Commerce (AmCham) Indonesia in their “US-Indonesia Investment Report 2016”.
Of course this prediction will be confirmed only if President Joko Widodo is able to achieve an economic growth of 7%, rising from 4.8% in 2015, which was one of the lowest percentages of the past 6 years, which is still remarkable when compared to the average growth, for example, of the European Union.
The US Chamber of Commerce considers this target achievable if the government is able develop new policies, including transparency and a further revision of the negative investment list (DNI), which governs the number and types of sector for foreign investment in Indonesia.
Indonesian government has already opened 35 investment sectors to foreigners since February 2016. These 35 sectors also include e-commerce, which is expected to grow exponentially in the next few years, becoming a primary target for US investors. The government has also made a huge effort to make it easier for foreigners to do business in Indonesia, by reducing the amount of bureaucracy.
Research by AmCham claims that these moves were perceived as being positive by more than 80% of US companies operating in Indonesia, which reported an improvement in the investment environment which, in turn, will lead to an increase in investments in the next five years, especially in agriculture, finance, information technology, telecommunications and consumer goods industries.
Indonesia’s ranking in the World Bank’s 2016 Ease of Doing Business report is 109 out of 189 countries, but this new and less bureaucratic approach will soon push Indonesia up in the rankings.
A further improvement of bureaucracy and possibly the abolition of the DNI could be the key in bringing Indonesia to its full potential within the next few years.
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