government's support on bbk ftz (final)

INDONESIAN GOVERNMENT’S SUPPORT

ON RIAU ISLANDS PROVINCE AND

BATAM, BINTAN, KARIMUN (BBK)

FREE TRADE ZONE

INDONESIAN MINISTRY OF

FINANCE

REGIONAL TREASURY OFFICE FOR RIAU

ISLANDS PROVINCE

BATAM, BINTAN, KARIMUN (BBK) FREE TRADE ZONE OUTLOOK


FINANCE


ISLANDS PROVINCE

BBK is a main part of Riau Islands Province which situated in proximity to Singapore and Malaysia (Home to the world’s busiest and 6th busiest transshipment port respectively)

Part of the Sijori (Singapore-Johor-Riau) Growth Triangle, undertaken since 1989 and to which Singapore’s growing limitation of land and affordable labours will be poured as investments to it’s vicinity.

9.48

6.055.69

5.29

3.73 3.552.85 2.59

0

1

2

3

4

5

6

7

8

9

10

Singapore Malaysia Batam Thailand Phillipines Vietnam India Indonesia

Best

Source: Processed Data from Political and Economic Risk Consultancy Report

Physical Infrastructures

The development of industry-sustaining infrastructures is highly supported by the government as depicted above where the score of Batam’s Physical Infrastructure is well above the average of Indonesia

A range of tax and custom incentives is increasingly lucrative for investors after the legislation of BBK as Free Trade Zones in 2009

CENTRAL GOVERNMENT BUDGET ALLOCATIONS ON RIAU ISLANDS PROVINCE


FINANCE


ISLANDS PROVINCE

Source: processed data from DG of Treasury*Conversion at spot market rate as of 11 November 2015 (1 USD equals to 13,607 IDR)

No Sector

ALLOCATIONS

20142015

Increase/(Decrease)Initial Amendment

1 Public Service 1.3 trillion IDR / 95 million USD 1 trillion IDR / 73.1 million USD 1.1 trillion IDR / 81.1 million USD (190 billion IDR) / (14 million USD)

2 Defense 248 billion IDR / 18 million USD 336.4 billion IDR / 24.7 million USD 336.4 billion IDR / 24.7 million USD 88.3 billion IDR / 6.5 million USD

3 Public Order and Security

290 billion IDR / 21.3 million USD 409.7 billion IDR / 30.1 million USD 417.4 billion IDR / 30.7 million USD 127.6 billion IDR / 9.4 million USD

4 Economics 2.06 trillion IDR / 151 million USD 2.47 trillion IDR / 181.3 million USD 2.7 trillion IDR / 198.7 million USD 647.1 billion IDR / 47.5 million USD

5 Environment 87 billion IDR / 6.4 million USD 96 billion IDR / 7 million USD 82.65 billion IDR / 6 million USD (4.2 billion IDR) / (311 thousand USD)

6 Housing and Public Facilities

167 billion IDR / 12.2 million USD 159 billion IDR / 11.7 million USD 159 billion IDR / 11.7 million USD (8 billion IDR) / (588 thousand USD)

7 Health 114.3 billion IDR / 8.4 million USD 101.2 billion IDR / 7.4 million USD 109 billion IDR / 8 million USD (4.4 billion IDR) / (323 thousand USD)

8 Tourism and Culture

500 million IDR / 37 thousand USD 4 billion IDR / 300 thousand USD 4 billion IDR / 300 thousand USD 3.6 billion IDR / 263 thousand USD

9 Religion 31 billion IDR / 2.3 million USD 40 billion IDR / 2.937 million USD 52.59 billion IDR / 3.8 million USD 21.7 billion IDR / 1.6 million USD

10 Education 354 billion IDR / 26 million USD 377 billion IDR / 27.7 million USD 377.6 billion IDR / 27.8 million USD 23.6 billion IDR / 1.7 million USD

11 Social Security 12 billion IDr / 881 thousand USD 13 billion IDR / 958 thousand USD 12.7 billion IDR / 935 thousand USD 734 million IDR / 54 thousand USD

T O T A L 4.65 trillion IDR / 342 million USD 5 trillion IDR / 367.4 million USD 5.4 trillion IDR / 395.6 million USD 729 billion IDR / 53.6 million USD

GOVERNMENT’S COMMITMENT ON INFRASTRUCTURE DEVELOPMENT IN RIAU ISLANDS


FINANCEREGIONAL TREASURY OFFICE FOR RIAU

ISLANDS PROVINCE

YearCentral Government Spending Allocation on Infrastructures

Public ServiceBuildings

Roads and Bridges Airports Ports Utilities Total

2010108.6 billion IDR /

8 million USD102 billion IDR / 7.5 million USD

16.9 billion IDR / 1.2 million USD

94.7 billion IDR / 7 million USD



201175 billion IDR / 5.5 million USD



82 billion IDR / 6 million USD



2012150 billion IDR /


82.6 billion IDR / 6 million USD




2013123 billion IDR /

9 million USD367.4 billion IDR /


3.8 million USD239 billion IDR / 17.6 million USD

285 billion IDR / 21 million USD

1.1 trillion IDR / 78.3 million USD


16.5 million USD385.7 billion IDR /

28.3 million USD127 billion IDR / 9.3 million USD



1.3 trillion IDR / 94.8 million USD


23.2 million USD489 billion IDR /



40.2 million USD449 billion IDR /

33 million USD2.1 trillion IDR /

155.3 million USD

Average Annual Growth

34.79% 39.58% 113.57% 49.21% 42.59% 40.86%

Central Government spending allocation on infrastructures development in BBK and it’s surrounding areas has been growing remarkably since 2010 especially on 2015 as a result of Government’s commitment on reallocating unproductive spending into infrastructures


GOVERNMENT’S COMMITMENT ON INFRASTRUCTURE DEVELOPMENT IN RIAU ISLANDS


FINANCE


ISLANDS PROVINCE

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015

In b

illio

ns

IDR

Source: processed data from DG of Treasury

Government Spending Allocation on Infrastructures

PSB

Roads

Airports

Ports

Utilities

34,79%39,58%

113,57%

49,21%

42,59% 40,86%

0%

20%

40%

60%

80%

100%

120%

PSB Roads Airports Ports Utilities Overall


Average Annual Growth of Government Spending Allocations

PUBLIC SERVICE BUILDINGS DEVELOPMENT


FINANCE


ISLANDS PROVINCE

108,675

150123

224,5

315,5

0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015

In b

illio

n ID

R


CG Budget Allocations

Indonesian Central Government has been committed to fulfill theneeds of public service, public safety and public order in BBK andit’s surrounding areas, hence maintaining the business-friendlyenvironment at place. Investment by Central Government on PublicService Buildings has been growing at an annual rate of 34.79% onaverage since 2010.

ROADS AND BRIDGES DEVELOPMENT


FINANCE


ISLANDS PROVINCE

102

196264

367.4 385.7

489

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015

In b

illio

n ID

R



Indonesian Central Government has been committed to keep improvinginterconnection between Industrial, Residential, Commercial andExport/Import shipment areas around BBK to minimize logistical costs andpromote trades. Investment by Central Government on roads and bridgeshas been growing at an annual rate of 39.58% on average since 2010.

PROJECTION OF ROADS DEVELOPMENTS


FINANCE


ISLANDS PROVINCE

2009 2015 (Projected)

Anambas 0 72,714

Lingga 0 65,26

Natuna 118,709 159,026

Karimun 26,641 96,381

Bintan 10,712 134,812

Tanjungpinang 29,724 42,671

Batam 148,209 169,322

0

100

200

300

400

500

600

700

800

Sou

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: P

roce

sse

d d

ata

fro

m t

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istr

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In K

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CG’s Road Lengths

The roads developed by the central government on Riau IslandsProvince (The province on which BBK Free Trade Zone is located) isabout 334km in the year 2009 (excluding Anambas and LinggaRegencies which data is unavailabe). Based on the currentdevelopment, the road lengths is projected to grow into 740km on theend of year 2015, approximately 121% increase on a 7 years period.

333,995

740,186

300

400

500

600

700

800

2009 2015 (Projected)

In K

ilom

eter

s

CG’s Road Lengths

CURRENT STATE OF ROADS IN RIAU ISLANDS PROVINCE


FINANCE


ISLANDS PROVINCE

The road density indicator which is a ratio of road lengths to the land areas of the respective province shows that Riau Islands is among thebest compared to other provinces and high above the national ratio. Meanwhile, the road length per 1,000 population indicator shows thatRiau Islands is lagging behind several other provinces but still above the national ratio. Overall, the two indicators shows that Riau Islandsland transportation infrastructure is much better than than the country as a whole, Central Government’s recent spike of budget allocationson Riau Islands will boost both indicators further.

0,36

0,270,21

0,39

0,490,55

0,25

0,00

0,10

0,20

0,30

0,40

0,50

0,60

Aceh Riau Jambi Bengkulu Lampung RiauIslands

NationalSource: processed data from BPS (2012)

Road Density by Province

0

1

2

3

4

5

Aceh Riau Jambi Bengkulu Lampung RiauIslands

National

4,634,23

3,35

4,55

2,232,69

2,01

Source: processed data from BPS (2012)

Road Lengths per 1,000 population by Province

ONGOING CG’s PROJECTS ON RIAU ISLANDS PROVINCE


FINANCE


ISLANDS PROVINCE

City/RegencyVolume (Road

&Bridge Lengths)Budget

Tanjungpinang Municipality

26.38 KM 26.1 billion IDR / 1.9 million USD

BatamMunicipality

121.2KM 237.6 billion IDR / 17.5 million USD

Bintan Regency 2.42 KM 7 billion IDR / 515 thousand USD

Karimun Regency


Natuna Regency


Lingga Regency 25.7 KM 5.5 billion IDR / 405 thousand USD

0

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40

60

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100

120

140

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Budget(IDR)

Volume(KM)


AIRPORTS DEVELOPMENT IN BBK


FINANCE


ISLANDS PROVINCE

16.9 21.3

82.651.5

127

312.2

0

100

200

300

400

2010 2011 2012 2013 2014 2015

In b

illio

n ID

R



As a province consists of 2,408 islands, Air Transportation hasbecome the best alternative for people’s transportation in termsof time. The recent and planned developments of Airports by theCentral Government will encourage travel between islands andboost trading in the province, BBK as the economic hub of theprovince will benefit the most. Investment by Central Governmenton Airports has been growing at an annual rate of 113.57% ataverage since 2010.

ONGOING AIRPORT PROJECTS


FINANCE


ISLANDS PROVINCE

Karimun airport development will improve the flow of staple foods and basic needs which the island cannot self-sustain therefore reducing livingcosts and labour costs. Meanwhile, the development of airport in Dabo Singkep will broaden the opportunity to utilize the relatively more fertileland of Dabo Singkep to support the needs of staple foods in the Riau Islands Province hence sustaining the export-oriented zone in BBK

PORTS DEVELOPMENT


FINANCE


ISLANDS PROVINCE

94.7 82138.6

239 263

547.1

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015In

bill

ion

IDR



Riau Islands Province area consists of 5% Land and 95% water. Sea Transportation has therefore become the veins of Riau Islands, without it theprovince will definitely stagnate. In order to maximize the different range of potentials that each island has and harmonize the fulfillment ofinterdependent needs of each island, Central Government has been lavishly allocating spending on port developments. By developing the seatransportation, BBK can be focused on it’s industries while other parts of the province will support the basic needs of BBK, therefore creating anever competitive export-oriented free trade zone . Investment by Central Government on ports has been growing at an annual rate of 49.21% onaverage since 2010.

ONGOING PORT DEVELOPMENT PROJECTS ON RIAU ISLANDS PROVINCE


FINANCE


ISLANDS PROVINCE

City/Regency Port Budget

Tanjungpinang Municipality Dompak 42.4 billion IDR / 3.1 million USD

Tanjungpinang Municipality Tanjung Mocoh 22.5 billion IDR / 1.6 million USD

Karimun Regency Malarko 5 billion IDR / 367 thousand USD

Anambas Islands Regency Letung 31 billion IDR / 2.3 million USD

Anambas Islands Regency Midai 23 billion IDR / 1.7 million USD

Anambas Islands Regency Pulau Laut 24 billion IDR / 1.75 million USD

Anambas Islands Regency Subi 76 billion IDR / 5.6 million USD

Anambas Islands Regency Serasan 12.6 billion IDR / 927 thousand USD

Lingga Regency Dabo Singkep 5 billion IDR / 367 thousand USD


UTILITIES DEVELOPMENT IN BBK


FINANCE


ISLANDS PROVINCE

88.5125.8

254285 290

449

050

100150200250300350400450500

2010 2011 2012 2013 2014 2015

In b

illio

n ID

R



Utilities which includes Electricity, Water and Waste Treatment is fundamental to the development of cities and industries. In an attempt tokeep up with the rapid industrial expansion in Riau Islands, Central Government has been increasing it’s Budged Allocations on utilitiesexponentially on an average annual growth of 42,59%

UTILITIES STATE ON RIAU ISLANDS PROVINCE


FINANCE


ISLANDS PROVINCE

The commitment to develop Riau Islands Province as a competitive economic hub on the border of Indonesia has successfully increase thepercentage of population having access to electricity by 24.47% in just a 2 years period, outpacing several other provinces in the region.

ProvinceElectrification Ratio

2009 2011 Increase

RiauIslands

52.17% 76.64% 24.47%

Riau 38.88% 54.8% 15.92%

South Sumatra

56.11% 65.18% 9.07%

Jambi 29.9% 32.74% 2.84%

Bengkulu 52.74% 64.48% 11.74%

Lampung 47.75% 61.88% 14.13%

Source: processed data from PT. PLN (2012)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

RiauIslands

Riau SouthSumatra

Jambi Bengkulu Lampung

Electrification Ratio by Province

2009

2011

Government Supports on FTZ Agency in Batam (BP BATAM)


FINANCE


ISLANDS PROVINCE

CategoryBudget Allocations

2014 2015

Operational Expenditures771.3 billion IDR /


Capital Expenditures548 billion IDR / 40.3 million USD

500 billion IDR /36.7 million USD

Total1.319 trillion IDR /

97 million USD1.247 trillion IDR / 91.6 million USD

58,46%41,54%

Budget Proportion (2014)

OperationalExpenditures

CapitalExpenditures

59,90%40,10%

Budget Proportion (2015)

OperationalExpenditures

CapitalExpenditures

As a part of it’s endeavour to attract investments and promote Riau Islands Province as abusiness-friendly zone, Central Government has been allocating significant budgets tosupport Batam Free Trade Zone Agency (BP Batam) which operation includes managingseveral strategic entities, developing prioritized areas and providing services for investorsat ease


Government Supports on Other FTZ Agencies


FINANCE


ISLANDS PROVINCE

Regional Development Council70.4 billion IDR / 5.2 million USD

Secretariat10.4 billion IDR / 764 hundred USD

Operational8.6 billion IDR / 651 hundred USD

Promotions830 million IDR / 61 hundred USD

Equipments451 million IDR / 33.1 hundred USD

Infrastructures254.5 million IDR / 18.7 hundred

USD

Bintan Development Agency25.6 billion IDR / 1.9 million USD

Operational2.3 billion IDR / 167 hundred USD

Promotions504.5 million IDR / 37 hundred USD

Infrastructures22.8 billion IDR / 1.7 million USD

Karimun Development Agency27 billion IDR / 2 million USD

Operational3.2 billion IDR / 235.2 hundred USD

Promotions1.5 billion IDR / 110.7 hundred USD

Equipments241.2 million IDR / 17.7 hundred USD

Infrastructures22.4 billion IDR / 1.6 million USD

Tanjungpinang Development Agency7.3 billion IDR / 538 hundred USD

Operational3.4 billion IDR / 235.2 hundred USD

Promotions1.2 billion IDR / 91.3 hundred USD

Equipments359 million IDR / 26.3 hundred USD

Ifnrastructures2 billion IDR / 147.6 hundred USD


Aside from the significantsupport given to BP Batam,Central Government alsodevelop several fledgingFTZ agencies which areprojected to thrive andhold strategic positions onpromoting and developingit’s respective area into acompetitive, investment-friendly zone

CONCLUSIONS


FINANCE


ISLANDS PROVINCE

The implementation of Free Trade Zone supported by broad access between industrial, commercial, residential and shipment areas,clear labour policy and investment-friendly regulations will boost economics growth and employment rate on the particular area andtrickle into it’s surrounding areas.

The Central Government of Indonesia has been committed to build Batam, Bintan, Karimun (BBK) Free Trade Zone into a competitiveinvestor-attracting region by establishing several FTZ Agencies and pouring investments into infrastructures into BBK. Thiscommitment is proved by the average annual infrastructure budget allocations growth rate of 40.86% since 2010.

In the future, the Central Government will be prioritizing even more to develop BBK as part of it’s policy to improve thecompetitiveness of the export-oriented zone. This priority is enhanced by the Central Government’s policy to focus construction onareas with high maritime potentials and border areas to which BBK qualified.


FINANCE


ISLANDS PROVINCE

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government's support on bbk ftz (final)

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