Two Free Trade Zones and KEK, Encourage Increased Investment in Batam

BATAM – The Batam region is located on international shipping routes and borders directly with Singapore and Malaysia. This makes this area potential for development from an economic perspective, in line with Batam’s vision to become a Madani World City, which is modern, competitive and attractive for investment.

Seeing these geoeconomic and geostrategic advantages, the government established two facilities areas, namely free trade area /free trade zone (FTZ) and special economic zone (SEZ). This policy is expected to be a catalyst in increasing the volume of investment in this region.

Director of Communications and Guidance for Customs Service Users, Nirwala Dwi Heryanto said, the Ministry of Finance, through Customs , also provides fiscal and procedural incentives for these two facilities. Apart from attracting investment and increasing industrial competitiveness, providing fiscal and procedural incentives is also a commitment from Customs and Excise to the implementation of the trade facilitator function and industrial assistance.

“This incentive is expected to reduce investment barriers, as well as encourage the business world, which is more broadly able to drive economic growth factors, to achieve the government’s goals of realizing national economic stability,” said Nirwala at the Batam Customs Office, Wednesday (26/ 6/2024).

According to Nirwala, the Batam free area was established in 2007 through PP No. 46/2007 concerning the Batam Free Trade Area and Free Port and began operating in January 2009. The aim of its formation is to encourage international trade traffic activities which bring in foreign exchange for the country and can provide great influence and benefits. for Indonesia, opening up the widest possible employment opportunities, and increasing tourism and investment, both foreign and domestic.

Free areas in the Batam area include Batam Island, Panggang Island, Setokok Island, Nipah Island, Rempang Island, Galang Island and Galang Baru Island. In this area, various sectors are experiencing rapid development, such as the manufacturing industry, electronics, shipbuilding, tourism and logistics.

“For free zones, we provide fiscal incentives in the form of exemption from import duties and no import tax (PDRI) on the import of goods from abroad into the free zone, and VAT is not collected on the import of goods from other domestic areas into the free zone. Meanwhile “for non-fiscal incentives in the form of ease of investment and one-stop business licensing through the Batam Business Agency (BP Batam),” he explained.

Another facility area in the Batam area, namely KEK, is an area with certain boundaries within the Indonesian legal territory which is determined to carry out economic functions and obtain certain facilities. The aim of establishing KEK is to accelerate economic development in certain strategic areas for national economic development and maintain balanced economic development in each region within the unity of the national economy.

Currently, in the Batam area there are three SEZs. First, the Batam Aero Technic KEK which was established in 2021 and is located in Nongsa District. This KEK has business activity themes including production and processing; logistics and distribution; research, digital economy and technology development; as well as other economies.

Second, the Nongsa KEK was established in 2021 and is located in the northern area of ​​Nongsa District. This KEK has the theme of research business activities, digital economy and technology development; tourist; education; creative industry; and other economies. Third, the Tanjung Sauh SEZ which will be established in 2024 and is located in the northern area of ​​Nongsa District. This KEK has the theme of production and processing business activities.