February 5, 2009
Officals in Indonesia and Singapore say they have agreed on a new maritime borderline between Indonesia's Pulau Nipah and Singapore's Sultan Shoal.
Presenter: Christine Webster
Speaker: Indonesian political and economic expert, Professor Arif Budiman from Melbourne University
Listen: http://www.abc.net.au/ra/connectasia/stories/m1700620.asx
BUDIMAN: It is more the concern of Singapore rather than Indonesia, because Indonesia is a poor country and mostly if people cross the border they want to find work there, and Singapore cannot afford it. So it's basically the concern of Singapore to stop Indonesian cheap labour coming to Singapore. For Indonesia Singapore is only a kind of shopping place for the rich people, they go to Singapore and buy things. So this is the thing that Singapore wants but not the border, especially the ocean where it is difficult to control because there are many ships crossing the border and go to Singapore illegally.
WEBSTER: It also though from what the President of Indonesia has been saying, he says that now that this agreement has been reached Indonesia can now further explore economic development in territories, including the Batam(?), Bintan(?) and Kariman(?) islands. What sort of potential is there?
BUDIMAN: It's basically the investment, Singapore has a lot of money there and they want to invest in a productive place. They have to find a place in Indonesia, and Indonesia is more democratic now and rule of law is getting stronger, so for Singapore it is getting better Indonesia. So now they are looking, before under Suharto it's very unpredictable, so no investment going to Indonesia. This is more under Suharto. But now it is more stable, rule of law is reigning in Indonesia.
WEBSTER: And what areas could Singapore be looking for?
BUDIMAN: Maybe some way they can setup kind of small industry like in Batam(?) where there are some markets for that, some small industries, and also I think they want to go into mining to at least talking together with Indonesian mining capital.
WEBSTER: You say that there could be some small industries that Singapore would be interested in, what type of industries?
BUDIMAN: Mostly industries that produce things that are being used in daily life. As far as in the big industries like car industries, Indonesia has potential market for cars because of the booming economy, the population is so large. So there is a kind of future market for cars and luxury goods also. So Singapore is looking basically everywhere and at the moment I think mostly they are interested in the more safer industries like the luxury goods industry.
WEBSTER: Also I believe that they're looking at placing, creating a military post on Palau Nipur(?) as well. What would be the benefits of that?
BUDIMAN: Basically to stop migration from Indonesia because they cannot rely on Indonesian police or soldiers because they are still more corrupt than Singaporean police. So sometimes illegal migration comes because they bribe the Indonesian part. So by working together with the Indonesian government so the joint operation will be much more reliable than if only they relied on Indonesia. So they want to have a kind of cooperation so it will not offend Indonesia if they arrest somebody from Indonesia, because the government is involved also.
WEBSTER: What has taken Indonesia and Singapore so long to reach an agreement over this area?
BUDIMAN: I think there is a kind of distrust between Indonesia and Singapore, especially because Singapore is considered as Chinese and Indonesia has some special relationship with Chinese people, even in Indonesia they don't trust the Chinese. I think that psychologically it makes it difficult.
Full Version: Indonesia and Singapore agree on western part of border
That's good news! I think there is so much market in Indonesia that Singapore can help develop and expand ... i think that SG is going to reopen their old industries like manufacturing in order to help its working classes stay employed in this financial crisis. We can export manufacturing bases to this buffer zone between Indonesia and Singapore, for the larger Indonesian markets and surrounding Asia. I notice this is already happening in the food industry, we have Singapore value added food stuff exported all the way to Africa!
This can only be a good thing for ASEAN 
Less competition, more co-operation.
Less competition, more co-operation.QUOTE(malaccan @ Feb 5 2009, 05:17 PM) [snapback]4117071[/snapback]
This can only be a good thing for ASEAN Less competition, more co-operation.
Less competition, more co-operation.I think now that potential border problem has been successfully with satisfactory result for both sides, Indonesia and Singapore can work better to maximize our potential and gain better opportunity.
This is the semina from CSIS about Free Trade Zone in Batam, Bintan and Karimun area
QUOTE
Batam free trade zone: A blueprint for national economic recovery
In the face of Indonesian economic slump, Batam has consistently exhibited outstanding economic performance. Great expectations have been bestowed upon Batam, yet local mechanisms are not without flaws. Unresolved legal status, power struggle between Batam Industrial Development Authority (BIDA) and local government, smugglings and relations with neighbouring region are amongst the prevailing nuisances. Unless the government promptly settle those problems, Batam’s performance will dwindle, if not plunge into something as hapless as the national economy.
A diverse group of experts and authorities gathered in a seminar hosted by CSIS to discuss ‘Batam: A Formula for Growth’ on August 12, 2003. The speakers in the first session, titled ‘Developments and Opportunities in Batam’, are: Mr Ismeth Abdullah (Chairman — BIDA), Mr Jimmy Kartuk (Representative from the Minister of Economic Affairs), Dr Arifin M. Siregar (Former Minister of Trade), Mr James W. Castle (Chairman — Castle Asia), Mr Sofjan Wanandi (Chairman — Committee for National Economic Recovery).
Presenting on the second session, titled ‘Role of FTZ and Batam in Indonesia’s Development’ are: Dr Benny Pasaribu (Member of Parliament), Dr Bambang Brodjonegoro (Faculty of Economics — University of Indonesia), Dr Umar Juoro (The Habibie Center) and Dr Prabowo (United Nations Support Facility for Indonesian Recovery, Jakarta). Dr Hadi Soesastro, Executive Director of CSIS was the moderator of the discussion. The wide-ranging participants in the discussion include representatives from BIDA, the Parliament, relevant ministries, business community from goods and service sectors, NGOs, academics and others.
An Effective Development Strategy for Batam: Equality or Fairness?
Ismeth Abdullah highlighted current conditions of Batam. It is clear that Batam is doing quite well and already in the process of paying back all the investment put by the government in developing Batam. What Batam needs is formalisation of its legal status as FTZ and consistent public policies from central government that will enable Batam to meet and expand its potentials. BIDA faces serious challenges without them and fears how it would actually hamper Batam’s development.
From the government's part, Jimmy Kartuk, representing Prof. Dr Dorodjatun Kuntjoro-Jakti, the Coordinating Minister of Economic Affairs, stressed that the government has been rigorously scrutinizing available alternatives in order to come up with the best strategy for Batam. The government intends to be ready for challenges and consequences of those alternatives, both on the conceptual front as much as on the practical front.
According to him, progress in the conceptualising stage is evident. At least, there have been some common platforms established. Relevant parties of interest have concurred that there are urgent needs for:
(1) Clean and effective BIDA;
(2) Proper spatial planning for housing area, water and green area, service/commercial area and industrial area;
(3) The principle of keadilan under the consideration of the welfare of the other provinces and related actors;
(4) Clear legal standing and framework;
(5) Consistent public policies;
(6) Realistic attitude towards the social and political ramifications of the development of Batam.
Other issues are:
(1) Port/Harbour Planning for national and international purposes;
(2) Combining spatial planning with specific type of industries to enable an effective service support system;
(3) Development of service sector for trade, finance and tourism; and
(4) Population planning in accordance to the available or potential resources in Batam.
Between Free Trade Zone and Enclave Concept
Arifin Siregar asserted that despite Indonesia’s unpopularity in the eyes of investors, a report from Political and Economical Risk Consultancy (PERC) shows how Batam seems immune by ranking third on the list of world most popular investment destination. He re-emphasized the need for clear legal status for Batam to enhance investments and careful considerations over the alternative policies, in this case the enclave concept.
Free Trade Zone is the best alternative available for Batam. The enclave concept leads to negative ramifications, such as: bureaucratic inefficiency, the risk of greater KKN (corruption, collusion and nepotism), and inability to compete with other trade zones in the Asian region (China, Singapore, etc). This opinion was supported fully by other speakers and participants.
Government Lack of Capacity in Dealing with Current Challenges
Strong criticisms arise during the discussion, mainly surrounding the government’s slow response to the unclear situation and the rhetorical principle of keadilan. Resolution for Batam has been delayed for far too long and this creates confusion within for the business community and investors. Sofyan Wanandi criticised the government’s slow response as indicative that the government is unable to determine their priorities.
Keadilanas a concept must be clearly defined whether it is to be as fairness or simply equality. Some participants representing of various groups pointed the use of such rhetoric as ironic and vague in reality. If it is a matter of the well being of the neighbouring regions, the government should be able to accommodate requests from regions for FTZ status, as long as they are capable of fulfilling certain criteria.
It is the responsibility of the government to come up with those criteria and other legal necessities. On the legal front, the presence of Law no. 36 and 37 are considered not enough foundation to make Batam an FTZ. With clear set of criteria and consistent policies/regulations, FTZ in other areas with unique varieties might be desirable, thus not only would it spread welfare to other regions, but also consolidate national economy.
Benny Pasaribu identified some of the main obstacles for the implementation of FTZ: (1) The ineffective policy planning and policy making mechanism within the government; (2) Inadequate institutional capacity; and (3) Lack of trust amongst countries. The Parliament acknowledges that Batam FTZ is one important strategy to sustain Indonesia in global competition. The political consensus had been established within the Parliament that the government together with the Parliament should immediately start the discussion and enforcement of the Bill for Batam FTZ. At the mean time, business community and BIDA have to prepare themselves as well.
FTZ in Indonesia and the Significance of Batam
The objective of FTZ, according to Bambang Brodjonegoro, should be the creation of job opportunities and income, increase of country reserve, growth of FDI and technology transfer. Conditions in Indonesia show that there has not been any other area with potentials as solid as Batam in becoming an FTZ. Indonesia has many Bonded Zone, which development is relatively modest. Indonesia also has Quasi-FTZ, something like the unsuccessful carpet industry. The only FTZ around is Sabang and it is not very successful as well.
Unlike Sabang, Batam has possessed several beneficial characteristics:
(1) Steady job and income creation;
(2) Foreign exchange earnings;
(3) Good credibility in the investors’ eyes; and
(4) Batam has already become a growth centre for its surrounding areas. Other regions, which request FTZ status, lack such capacity.
Challenges in the Future
Bambang pointed out some potential problems that must be addressed properly, such as:
(1) Bad location selection;
(2) Lack of cash flow and excessive infrastructure cost;
(3) Operational failure, involving bureaucratic red-tapes, corruption and bad coordination;
(4) Unskilled labour and low productivity;
(5) Operational inefficiency;
(6) Smuggling;
(7) Government budget by having less tax and import duty revenue; and
(8) The emergence of Free Trade Area, such as US-Singapore FTA.
Problems of tax, legal framework and security in Indonesia in general were highlighted by Umar Juoro. The national strategy during this unfavourable climate is not adequate to boost investment. He proposed to adopt China’s one country, two systems approach to make FTZ desirable and doable. Whatever legal frameworks or policies or strategies that the government proposes, it would bring nothing unless it can be practised consistently. Indonesia produces many laws, but very few are actually useful.
As mentioned by James Castle, the world investment climate is slacking. It is important to establish Batam in order to attract whatever opportunities the investors provide. Prabowo underlined the need to gain momentum in the region. Currently, the 2 potential centres of growth are Thailand-China-Mekong and Singapore-Batam. Unless Batam is made well prepared, Indonesia will lose the momentum and will find it more difficult to recover from the current crisis.
Conclusion
Batam should be the leading spearhead of Indonesia’s investment strategy. The People’s Consultative Assembly’s Resolution No. 5/MPR/2003 suggests that the President and the House of People’s Representatives should legally resolve Batam as a Free Trade Zone. Such law is imperative since Batam needs a firm legal status to ensure investors.
The dialogue session for the proposed Government Regulation that exempt value added tax (PPn) and value added tax for luxury goods (PPnBM) has been postponed five times. The proposed bill for Batam as FTZ prepared by the Parliament generally legalises all the activities occurring in Batam. It will also speed up Batam’s transformation into a competitive economy. The economic development in Batam will eventually prop economic activities in the other regions of Indonesia. The delay undermines the urgent need for the government and the Parliament to formulate a law on Batam as FTZ.
Developing physical infrastructures, institutional capacity and security measures against smugglings are vital prerequisites to protect Batam as FTZ from potential negative impacts. Another important precondition is clear and complementary authorisation between local government and BIDA. There must be a formal government regulation to secure the implementation of Law No. 53/2000, especially article 21.
The enclave concept is not the answer for Batam. Creating enclaves within Batam will bring about social and political instability. Such approach will also hamper counter smuggling measures. In conclusion, Batam FTZ must cover the overall area, not partial.
In the face of Indonesian economic slump, Batam has consistently exhibited outstanding economic performance. Great expectations have been bestowed upon Batam, yet local mechanisms are not without flaws. Unresolved legal status, power struggle between Batam Industrial Development Authority (BIDA) and local government, smugglings and relations with neighbouring region are amongst the prevailing nuisances. Unless the government promptly settle those problems, Batam’s performance will dwindle, if not plunge into something as hapless as the national economy.
A diverse group of experts and authorities gathered in a seminar hosted by CSIS to discuss ‘Batam: A Formula for Growth’ on August 12, 2003. The speakers in the first session, titled ‘Developments and Opportunities in Batam’, are: Mr Ismeth Abdullah (Chairman — BIDA), Mr Jimmy Kartuk (Representative from the Minister of Economic Affairs), Dr Arifin M. Siregar (Former Minister of Trade), Mr James W. Castle (Chairman — Castle Asia), Mr Sofjan Wanandi (Chairman — Committee for National Economic Recovery).
Presenting on the second session, titled ‘Role of FTZ and Batam in Indonesia’s Development’ are: Dr Benny Pasaribu (Member of Parliament), Dr Bambang Brodjonegoro (Faculty of Economics — University of Indonesia), Dr Umar Juoro (The Habibie Center) and Dr Prabowo (United Nations Support Facility for Indonesian Recovery, Jakarta). Dr Hadi Soesastro, Executive Director of CSIS was the moderator of the discussion. The wide-ranging participants in the discussion include representatives from BIDA, the Parliament, relevant ministries, business community from goods and service sectors, NGOs, academics and others.
An Effective Development Strategy for Batam: Equality or Fairness?
Ismeth Abdullah highlighted current conditions of Batam. It is clear that Batam is doing quite well and already in the process of paying back all the investment put by the government in developing Batam. What Batam needs is formalisation of its legal status as FTZ and consistent public policies from central government that will enable Batam to meet and expand its potentials. BIDA faces serious challenges without them and fears how it would actually hamper Batam’s development.
From the government's part, Jimmy Kartuk, representing Prof. Dr Dorodjatun Kuntjoro-Jakti, the Coordinating Minister of Economic Affairs, stressed that the government has been rigorously scrutinizing available alternatives in order to come up with the best strategy for Batam. The government intends to be ready for challenges and consequences of those alternatives, both on the conceptual front as much as on the practical front.
According to him, progress in the conceptualising stage is evident. At least, there have been some common platforms established. Relevant parties of interest have concurred that there are urgent needs for:
(1) Clean and effective BIDA;
(2) Proper spatial planning for housing area, water and green area, service/commercial area and industrial area;
(3) The principle of keadilan under the consideration of the welfare of the other provinces and related actors;
(4) Clear legal standing and framework;
(5) Consistent public policies;
(6) Realistic attitude towards the social and political ramifications of the development of Batam.
Other issues are:
(1) Port/Harbour Planning for national and international purposes;
(2) Combining spatial planning with specific type of industries to enable an effective service support system;
(3) Development of service sector for trade, finance and tourism; and
(4) Population planning in accordance to the available or potential resources in Batam.
Between Free Trade Zone and Enclave Concept
Arifin Siregar asserted that despite Indonesia’s unpopularity in the eyes of investors, a report from Political and Economical Risk Consultancy (PERC) shows how Batam seems immune by ranking third on the list of world most popular investment destination. He re-emphasized the need for clear legal status for Batam to enhance investments and careful considerations over the alternative policies, in this case the enclave concept.
Free Trade Zone is the best alternative available for Batam. The enclave concept leads to negative ramifications, such as: bureaucratic inefficiency, the risk of greater KKN (corruption, collusion and nepotism), and inability to compete with other trade zones in the Asian region (China, Singapore, etc). This opinion was supported fully by other speakers and participants.
Government Lack of Capacity in Dealing with Current Challenges
Strong criticisms arise during the discussion, mainly surrounding the government’s slow response to the unclear situation and the rhetorical principle of keadilan. Resolution for Batam has been delayed for far too long and this creates confusion within for the business community and investors. Sofyan Wanandi criticised the government’s slow response as indicative that the government is unable to determine their priorities.
Keadilanas a concept must be clearly defined whether it is to be as fairness or simply equality. Some participants representing of various groups pointed the use of such rhetoric as ironic and vague in reality. If it is a matter of the well being of the neighbouring regions, the government should be able to accommodate requests from regions for FTZ status, as long as they are capable of fulfilling certain criteria.
It is the responsibility of the government to come up with those criteria and other legal necessities. On the legal front, the presence of Law no. 36 and 37 are considered not enough foundation to make Batam an FTZ. With clear set of criteria and consistent policies/regulations, FTZ in other areas with unique varieties might be desirable, thus not only would it spread welfare to other regions, but also consolidate national economy.
Benny Pasaribu identified some of the main obstacles for the implementation of FTZ: (1) The ineffective policy planning and policy making mechanism within the government; (2) Inadequate institutional capacity; and (3) Lack of trust amongst countries. The Parliament acknowledges that Batam FTZ is one important strategy to sustain Indonesia in global competition. The political consensus had been established within the Parliament that the government together with the Parliament should immediately start the discussion and enforcement of the Bill for Batam FTZ. At the mean time, business community and BIDA have to prepare themselves as well.
FTZ in Indonesia and the Significance of Batam
The objective of FTZ, according to Bambang Brodjonegoro, should be the creation of job opportunities and income, increase of country reserve, growth of FDI and technology transfer. Conditions in Indonesia show that there has not been any other area with potentials as solid as Batam in becoming an FTZ. Indonesia has many Bonded Zone, which development is relatively modest. Indonesia also has Quasi-FTZ, something like the unsuccessful carpet industry. The only FTZ around is Sabang and it is not very successful as well.
Unlike Sabang, Batam has possessed several beneficial characteristics:
(1) Steady job and income creation;
(2) Foreign exchange earnings;
(3) Good credibility in the investors’ eyes; and
(4) Batam has already become a growth centre for its surrounding areas. Other regions, which request FTZ status, lack such capacity.
Challenges in the Future
Bambang pointed out some potential problems that must be addressed properly, such as:
(1) Bad location selection;
(2) Lack of cash flow and excessive infrastructure cost;
(3) Operational failure, involving bureaucratic red-tapes, corruption and bad coordination;
(4) Unskilled labour and low productivity;
(5) Operational inefficiency;
(6) Smuggling;
(7) Government budget by having less tax and import duty revenue; and
(8) The emergence of Free Trade Area, such as US-Singapore FTA.
Problems of tax, legal framework and security in Indonesia in general were highlighted by Umar Juoro. The national strategy during this unfavourable climate is not adequate to boost investment. He proposed to adopt China’s one country, two systems approach to make FTZ desirable and doable. Whatever legal frameworks or policies or strategies that the government proposes, it would bring nothing unless it can be practised consistently. Indonesia produces many laws, but very few are actually useful.
As mentioned by James Castle, the world investment climate is slacking. It is important to establish Batam in order to attract whatever opportunities the investors provide. Prabowo underlined the need to gain momentum in the region. Currently, the 2 potential centres of growth are Thailand-China-Mekong and Singapore-Batam. Unless Batam is made well prepared, Indonesia will lose the momentum and will find it more difficult to recover from the current crisis.
Conclusion
Batam should be the leading spearhead of Indonesia’s investment strategy. The People’s Consultative Assembly’s Resolution No. 5/MPR/2003 suggests that the President and the House of People’s Representatives should legally resolve Batam as a Free Trade Zone. Such law is imperative since Batam needs a firm legal status to ensure investors.
The dialogue session for the proposed Government Regulation that exempt value added tax (PPn) and value added tax for luxury goods (PPnBM) has been postponed five times. The proposed bill for Batam as FTZ prepared by the Parliament generally legalises all the activities occurring in Batam. It will also speed up Batam’s transformation into a competitive economy. The economic development in Batam will eventually prop economic activities in the other regions of Indonesia. The delay undermines the urgent need for the government and the Parliament to formulate a law on Batam as FTZ.
Developing physical infrastructures, institutional capacity and security measures against smugglings are vital prerequisites to protect Batam as FTZ from potential negative impacts. Another important precondition is clear and complementary authorisation between local government and BIDA. There must be a formal government regulation to secure the implementation of Law No. 53/2000, especially article 21.
The enclave concept is not the answer for Batam. Creating enclaves within Batam will bring about social and political instability. Such approach will also hamper counter smuggling measures. In conclusion, Batam FTZ must cover the overall area, not partial.
It has been proposed to build Batam-Bintan bridge.
Batam authority is serious in preparing the infrastructure for Free Trade Zone area in Batam-Bintan-Karimun
We need more SE Asian unity, not just in economic ties.
Singapore should led the SE Asian pack in military too, combining Indonesia, Malaysia and Singapore could potentially create strong force. Singapore need Indonesia and Malaysia for our long term survival and development.
With Singaporean brains and natural resource from Indonesia and Malaysia can only be benefit all three nations.
Forget Aussies who always trying to be US sheriff in SE Asian, Singapore should be leader in SE Asia.
Singapore should led the SE Asian pack in military too, combining Indonesia, Malaysia and Singapore could potentially create strong force. Singapore need Indonesia and Malaysia for our long term survival and development.
With Singaporean brains and natural resource from Indonesia and Malaysia can only be benefit all three nations.
Forget Aussies who always trying to be US sheriff in SE Asian, Singapore should be leader in SE Asia.
Humm , I am glad Singapore and Indonesia border issue is resolved peacefully
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