INDUSTRIAL DEVELOPMENT IN BATAM

Abstract

Batam island is now being aggressively promoted by the government of Indonesia as "Indonesia's Gateway to Asia". For the past two years, the island went through rapid development guided by a comprehensive master plan covering the island's industrial, commercial as well as tourists sectors. This study looks into the industrial sector of Batam, critically examining the economic environment for industrial operation and assesses the potential demand and supply of industrial space on the island. The findings reveal that industrialists see Batam's low labour cost and its bonded zone status as its two main advantages. This would mean that most manufacturing processes expected to locate in Batam are labour intensive in nature and with the aim of exporting the processed products. The island has the potential to be fully developed into an industrial region but the pace is not expected to pick up if the current status of its infrastructure and utilities supply are not improved significantly. One major stimulus to industrial development in Batam is the development of industrial estates, which are now open to both private and foreign developers. With the development of these estates, the industrial property market of Batam is going through a significant change where completed factory buildings are available for sale or lease. Analysis of the market reveals that there will be surplus of industrial space in the next three years, as demand is not expected to pick up rapidly.