Bintan Island Investors

Mar 2nd, 2007, in Business & Economy, by

Two investors desert Bintan island.

In the wake of five Singaporean firms' intentions to leave nearby Batam island, now another two foreign investors, PT Pacific Garment from Singapore and Nordec of Italy, an electrical lighting manufacturer, have left the Inti Industrial Estate in the Lobam area, Bintan Regency, Riau.

Riau
Bintan, Riau.

Inti Industrial Bintan Zone Manager, Jamin Hidayat, says the companies cited the high operational costs on the island, as well as the lack of "integration" in the regulations. 500 workers have lost their jobs as a result of the closures.

Hidayat said that additionally three other companies in the Zone have stated that they intend to cease operations, although negotiations are ongoing. These three companies appear to be concerned over legal certainty issues connected with the area's special economic zone status. tempo

Meanwhile the Jakarta Post reports Hidayat as saying that of the 30 foreign investors registered as tenants in the Lobam Industrial Area, which spans 325 hectares and has investments totaling $1 billion, at least six were set to end operations there this year.


9 Comments on “Bintan Island Investors”

  1. avatar Ali says:

    Tell me something new… šŸ˜€

  2. avatar Sputjam says:

    The Indonesian authorities should find the courage to connect the island of bintan and batam to the sumatra mainland and by road all the way to jakarta (with a bridge between sumatra and java).
    It may cost billions, but the economic advantage will spill over and open up a great swathe of the country to economic development. A major shipping hub could be built if the road networks are completed for shipment into/out of Indonesia.

    Presently, Bintan and batam are dependent on Singapore for exports. Only advantage of setting up factory on the island is due to low wage. But transport cost of trans-shipment more than offset the advantage.

    To finance such a project, approach china. let them build with a barter trade for gas or palm oil. Toll charges initially wil be dismall. But over time, It will be a success and can transform batam and bintan as industrial/business hub for Indonesia.

    There was a proposal from china to build a bridge between Sumatra and java during the presidency of Sukarnoputri. Just take the offer and the rest will be history.

    Or even better still, build the infrastructure using Indonesia’s own expertise and labour.

  3. avatar Dimp says:

    Problem for the government is that if China or other non-Indonesian country is responsible in building the infrastructure then there is limited chances for corruption amongst the government officials. It may also take longer than 5 years, so there are possibilities of them getting caught before the project is finished.

  4. avatar Dragonwall says:

    Have any thought of any reason why the pull out.

    I suppose it is because of the intense pushing of the implementation of Sharia Law that will turn the country in turmoil. Security is of utmost importance for any investors. Given whatever incentives the Indonesian government or the regency can provide will not compliment their presence.

    You should see more and more people pulling out in the near future. Investors based their security report from their own government and the foresight to make assessments and future predictions. Their loss may be momentarily and though it may hurt them, it will still be worth their while to pull out.

    Just look for yourself. Like I said in another blog. If the Indonesian is offering an interest rate of 7% and the inflation rated was reported to be @ 7% will this interest investors?

    The inflation rate already exceed double digit and BI still cut their rate! And for this they were trying to tell people the economy is stable! And attempting to lure investors back? My goodness what kind of economic mind are these kamput thinking.

    I have seen slowly the mass exodus had started and now you see a slow exodus in the process in term of economy and later on a capital flights. Ever think of investors coming to Indonesia for Investment? Promoting 2008 Indonesia Tourist. With the kind of security Malaysia had, they can’t even attract enough people to come to Malaysia as tourist. Those that came were actually those passing through from Singapore. How does Indonesia intend to bring those tourist in?

    The present government were afraid of people power like that crap Amin Rais who once threatened to lead a million people march to the Istana. The lawmakers and those security commanders are not capable of taking initiative to ensure the safety of her people let alone the tourist.

    There will never be another Seoharto.

    Unlike China. When Li Peng step down. The Chinese Central government already had someone better in mind. Zhu Rongji, Hu Jin Tao (Most dreaded person by the Mongolian) because he was the one that subdue the Monglian during the uprising.

    Indonesia does not have that talent. SBY was thought to be the one but just too bad. His capabilities were largely circumvented.

    Remember Singapore was almost the first country to see a forthcoming riot and they were the first few to send in people for the evacuation job. the first riot seen unforeseen losses unprecedented. Not they anticipate and minimize their loss. Nothing will stop them from doing so.

  5. avatar Desmond says:

    I would like to comment on Dragonwallā€™s 7th paragraph on ā€œthe present government were afraid of people power..ā€ Not only the present government is, all governments after Pak Harto were.

    The exodus of investors is caused by a few factors, the people power and the fear of it by the government is clearly seen by the labor law.

    Potential investors shy away because of the labor law that leans towards the labor ā€œworkersā€, many investors, including both foreign and domestic are complaining that these laws are too pro-labor, many cases, investors are not protected by the law when they face with problems of theft, cheat, rob, extortion, blackmailingā€¦ etc carried out by present and past workers. Investors have to pay these workers off even they are caught as the culpritsā€¦

    Insane?

    I think a fairer labor law will see more investors coming inā€¦

  6. avatar dragonwall says:

    The exodus of investors is caused by a few factors, the people power and the fear of it by the government is clearly seen by the labor law.

    Right and this is one factor that is causing the President to be in a dilemna and due to the vast majority of the workers are pribumi, so there is always a second thought for any action to be taken.

    P

    Potential investors shy away because of the labor law that leans towards the labor ā€œworkersā€, many investors, including both foreign and domestic are complaining that these laws are too pro-labor,

    This is another problem owing to the unprofessional handling of human resources and absolute law to oversee the situation as a whole. My factory used to have a lot of workers but I don’t have that problem because most of them will have to sign an affidavit of self admission as well as the willingness to be prosecuted under the law for such violations. The rest is left to the legal and HR department o enforce them.

    many cases, investors are not protected by the law when they face with problems of theft, cheat, rob, extortion, blackmailingā€¦ etc carried out by present and past workers.

    My factory deal in high value items and there were cases where people resort in stealing that comes in many form. I won’t go into details of how they do it but we caught them because our factory is fitted with a high tech screening device that will deliver any metal detection up to 0.05.

    Investors have to pay these workers off even they are caught as the culpritsā€¦

    Uer such circumstance it is easy to handle. Just bring in the cops and let him be brought to the police station and he will sign a confession. Then if he returns again we will shoot him. Our factory employs armed guards of course with the blessing of the Indonesian government. We will not do the shooting but those officers will and it is legal.

    Insane?

    It is design but mad people so I guess so.

    I think a fairer labor law will see more investors coming inā€¦

    Perhaps you might be unaware, but even with fairer labor law nothing will help Indonesia because of many other factors. Not just these. Security if one, the othr is currency and thirdly political and religious factors which plays a big part of that.

    Coupled with the legal system that had not favored government project where investors were being brough to court for being in violations of government approved investment. Tell me who will invest in Indonesia let alone Bintan.

    I suppose it is because of the sand and water deal but correct me if I am wrong.

  7. avatar Desmond says:

    Hi Dragonwall

    Are you writting from Singapore? I think you are a superb guy that I woiuld like to meet to seek opinions. We are potential investor into Batam or Bintan (don’t know which one to choose yet)

    Regards
    Des

  8. avatar dragonwall says:

    At this point of view I would definitely suggest you stay away from Indonesia in term of investment.

    Until such time when the exchange stabilize or a new government, hopedfully it is the same President SBY.

    If not if you wish to speculate then wait till it reaches anything above 12,750 per USD. Currently it had weakened from 11500 to about 12250 or 12400. If it breaks the 12750 then likely it will breach the 13500 barrier for the few reasons.

    1. Unstable economy.
    2. Economic slowdown.
    3. Security unstable.
    4. Lack of investors.
    5. Lack of international trust.

    There are also many sectors to look into especially when dealing with government officials. Any investments should inform the Singapore Government before the final go. These officials do not exactly knows what they are talking except when you give them something for nothing they are all too happy to have them.
    I a writing from the United States.

  9. avatar Rukimaru says:

    Hi Dragonwall,

    Very informative. Our company has recently purchased a large block of land in the Riau province, do you still think it is a bad investment even in the current economic conditions?

    The Bintan Is. development is looking very lucrative right now, considering at there are a number of big companies already investing there (resort types like Clubmed etc.).

    As well as its status as a FTZ – one would think that it is a prime real estate for developing?

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