Insights into Investment Opportunity in Batam

Insights into Investment Opportunity in Batam’s Dynamic Economy

  • InCorp Editorial Team
  • 19 June 2024
  • 5 minute reading time

Amidst the vibrant economic landscape, investment opportunity in Batam lies as a strategic economic hub poised for significant growth. 

With streamlined regulations, a skilled workforce, and unparalleled connectivity to Southeast Asia, Batam offers a compelling proposition for investors seeking diverse and lucrative opportunities.

Why Should You Invest in Batam?

Insights into Investment Opportunity in Batam

The Mayor of Batam, Muhammad Rudi, is optimistic about the city’s economic growth reaching 7% by 2023. This is because Batam has experienced increased investments, with investment realization reaching IDR 12.63 trillion in 2022. 

The realization is mostly dominated by Foreign Direct Investment (FDI), which accounted for 82% of the total amount, equivalent to IDR 11.11 trillion. This was spread across 1,738 projects. Domestic Direct Investment (DDI) reached IDR 2.52 trillion with 2,153 projects.

As of the first quarter of 2023, Batam City is leading investment realization in the Riau Archipelago Province (Kepri). It has contributed 82.9% to the total investment, reaching IDR 3.9 trillion for Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI). 

The tourism sector also plays a significant role in Batam’s economy. In March 2023, foreign tourist visits increased by 32.45% compared to February 2023. Most visitors came from Singapore, accounting for 61.29% of the total 98,268 visitors in March 2023. 

Rudi also highlighted that Batam’s current development is focused on infrastructure, specifically the acceleration of road development and city access until 2024. There are plans for 22 road infrastructure projects to be completed by 2024.

Benefits of Doing Business in Batam

Batam offers many advantages for foreign investors, making it an ideal destination for business growth and expansion.

CategoryKey Points
Strategic Location1. Adjacent to key international sea routes: Malacca and Singapore Strait.
2. Proximity to ASEAN countries, totaling 640 million people.
3. Only 20 km from Singapore, reachable in 45 minutes by ferry.
Attractive Incentives1. Duty exemption on imported machinery/equipment, raw materials, and spare parts for export-oriented production.
2. VAT and Luxury Goods VAT exemption on machinery/equipment, raw materials, and spare parts.
3. Income Tax exemption (Article 22) on imported machinery/equipment, raw materials, and spare parts for production.
4. Generalized System Preferences (GSP) facilities provide import duty deductions on exported products.
5. Agreements with 56 countries to prevent double taxation.
Modern Infrastructure1. International Airport with Indonesia’s longest runway (4,025 km).
2. Five international passenger ports and four cargo ports.
3. Six connecting bridges for Batam, Rempang, and Galang.
4. Availability of 7 reservoirs meeting industrial and consumer demands (3,535 L/second capacity).
5. Wastewater Treatment Plant (WWTP) separating biological and chemical waste (230 liters/second capacity).
6. Installed electricity capacity of 538.95 MW.
7. 1,670 km of built roads.
8. 111,700 line units for phone communication and a fiber optic internet backbone up to 1Gbps.
9. BP Batam IT service center has disaster recovery center advantages.
Competitive Investment CostParticularly advantageous for export-oriented industries.
Clean and Healthy EnvironmentBalanced division between green areas (environment) and industrial zones.
Safety and ComfortBatam is Indonesia’s melting pot, ensuring a secure and comfortable environment.

Batam FTZ & SEZ

Batam’s Free Trade Zone (FTZ) and Special Economic Zone (SEZ) offer a range of benefits for investors, such as relaxed regulations, tax exemptions, streamlined procedures, and strategic location in Southeast Asia.

1. Free Trade Zone

The Batam FTZ is strategically positioned for investors. Batam’s maritime trade routes are crucial in supporting global trade traffic.

2. Special Economic Zones (SEZ)

Batam Aero Technic Special Economic Zone (SEZ BAT)

  • Focuses on Maintenance, Repair, and Overhaul (MRO) activities.
  • Indonesia’s first MRO-focused SEZ.
  • It aims to employ 9,976 workers by 2025.

Nongsa Digital Park Special Economic Zone (SEZ NDP)

  • Largest data center hub in Indonesia.
  • Recognized as a digital bridge and a National Strategic Project.
  • Projected to employ up to 16,500 individuals.
  • Currently, it has 1,395 workers already absorbed.

International Healthy Zone Special Economic Zone (SEZ IHZ)

  • Proposed by Batam Indonesia Free Zone Authority (BP Batam).
  • Located in Sekupang.
  • Envisioned to create a medical ecosystem, including the pharmaceutical industry, healthcare equipment, and accommodation services.
READ MORE:

Top Sectors to Invest in Batam

Some business opportunities can be the best options for your investment in Batam, such as:

1. Batam Marine and Shipyard Industries

Situated strategically southeast of the Malacca Strait, the world’s busiest shipping lane, Batam plays a pivotal role in marine and shipyard industries. 

Recognizing the industry’s immense value, Batam has fostered significant growth in shipyard activities, contributing substantially to the city’s industrial development over the past two decades.

2. Batam Electronic Manufacturing Industries

To support the Making Indonesia 4.0 initiative, the Ministry of Industry encourages Batam to evolve into a hub for high-value-added electronic manufacturing industry clusters. 

The first semester of 2023 saw dominance in machinery, electronics, medical instruments, electrical equipment, precision, optics, and clocks, with 246 projects and an investment value of USD 157.5 million.

3. Batam Tourism Industry

Geographically positioned near neighboring countries, Batam, in the Riau Islands province, serves as a business and service center in the Asia Pacific region, attracting foreign tourists. 

Renowned for its industrial and tourism sectors, Batam’s strategic location bordering Singapore and Malaysia makes it a preferred destination. 

With numerous tourism opportunities and facilities, including Free Trade and Free Port Zone status, Batam caters to diverse visitor needs for leisure or business purposes.

Investment Facilities for Foreign Investors in Batam

The government has set favorable circumstances for Batam investment through these incentives:

  • No charges for export-import activities
  • No imposition of Value Added Tax (VAT)
  • Exemption from luxury goods sales tax
  • Generalized System of Preferences (GSP) Facility
  • Tax allowances
  • Tax holidays
  • Agreements to prevent double taxation with 57 countries
  • Competitive investment environment with streamlined operational costs
  • Super deductible tax

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Start Investing in Batam with InCorp Indonesia

Batam, a dynamic island paradise in Indonesia, beckons investors with its strategic location, flourishing economy, and investor-friendly policies. However, navigating the intricacies of business setup can be daunting. 

InCorp Indonesia is your trusted partner, providing expert guidance and efficient solutions. Our experts will handle the legalities, ensuring your business setup is smooth and compliant.

From securing your investor KITAS to registering your company, we’ll guide you every step of the way. Schedule a free consultation today by filling out the form below.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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Frequent Asked Questions

As an investor, you are required to have a minimum investment of IDR 1 billion in invested shares to be eligible for an investor KITAS.

An Index 313 Investor KITAS will allow its holder to stay in Indonesia for a year, while an Index 314 Investor KITAS allows for a 2 year stay.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.