The Free Trade Zone (FTZ) concept has been a focal point of discussion among investors, business owners, the Indonesian government, and the local community regarding the economic development of Batam.
In mid-2006, the Presidents of Indonesia and Singapore met in Nongsa, Batam, and agreed on several cooperative initiatives, including a framework for economic investment collaboration.
Subsequently, on January 19, 2009, the President of Indonesia officially declared Batam, Bintan, and Karimun as a Free Trade Zone (FTZ). This designation exempts the area from certain local customs regulations, taxes, and levies. Within the FTZ, trade is regulated under a specific set of policies designed to attract investors and facilitate business establishment in the region.
In December 2018, during a meeting at the Indonesian Presidential Office, President Joko Widodo announced that the Batam Indonesia Free Zone Authority (BIFZA) would be placed under the management of the regional government to eliminate administrative dualism on Batam Island.
“The President and Vice President have decided to eliminate the dualism. There must be one unified authority to ensure clarity and effectiveness,” said Coordinating Minister for Economic Affairs Darmin Nasution on December 12, 2018.
President Widodo emphasized Batam’s strategic importance:
“We want Batam and its surrounding areas to be strategically developed to become competitive and attractive as a Special Economic Zone (SEZ),” he stated.
The development of the Nongsa Digital Park marked a concrete step in this direction. This initiative stemmed from a 2017 agreement between President Widodo and Singaporean Prime Minister Lee Hsien Loong to foster collaboration between private sector players in both countries and to promote the growth of the digital economy in Batam. The park represents the initial phase of a broader plan to develop digital hubs across Indonesia.
President Widodo added that the dissolution of BIFZA is expected to take place the following year. Preparations are underway, including the review and transfer of assets, legal documents, data, and related records.
This restructuring aligns with the government's plan to transition Batam from a Free Trade Zone to a Special Economic Zone (SEZ). To succeed, the SEZ must offer high logistical efficiency, including fast goods movement, competitive labor conditions, and simplified documentation processes.
