Indonesia’s Ministry of Home Affairs plans to end the dualistic administrative authority that has been the basis of the free trade zone in the Riau Archipelago. This has raised uncertainty in investment and business circles, particularly Singapore which is Batam’s main investment partner.

Fifteen years after the introduction of regional autonomy in Indonesia in 2001, the dualistic administrative authority in Batam – one for the management of free trade and the other for the administration of the province – is headed for closure. Following conflicts of interest between Batam’s Free Trade Zone Management Agency (BPK FTZ) and the Batam administration, the Minister of Home Affairs, Tjahjo Kumolo, announced that he intends to initiate the disbanding of BPK FTZ this year.

The announcement generated deep concern from various sectors of the economy, which viewed such moves as a threat to the allocated investments for the agency. Instead of disbanding the outfit completely, the government could resort to integrating the two overlapping bodies or transform the BPK FTZ into a state-owned enterprise (BUMN).

… Adri Wanto is an Associate Research Fellow with the Indonesia Programme of the S. Rajaratnam of International Studies (RSIS), Nanyang Technological University (NTU), Singapore. Santi H. Paramitha is a Research Associate with the Indonesia Programme.