Principle Regulations Governing Batam Island and Its Effect on Property Sector

Batam has a strategic geographical location as the closest island to Singapore and Malaysia, which strategically located in the international shipping route. As the special zone for multinational trade area, Batam has a special treatment from the Government of Indonesia. This specialization can be seen from the several regulations on Batam status, which are as follows:

  1. Batam Island as the business area of Bonded Warehouse regulated in the Presidential Decree of Republic of Indonesia Number 41 of 1978 as amended lastly by the Presidential Decree of Republic of Indonesia Number 25 of 2005.Batam, Rempang and Galang (which also declared as an Industrial area), is developed to serve several main functions, namely: industrial, warehouse, trade, and transshipment.
  2. Free Trade and Free Port Zone regulated in the Government Regulation Number 46 of 2007 on the Free Trade Zone and Free Port Zone Batam.Batam has been determined as a Free Trade Zone (“FTZ”) and Free Port Zone (“FPZ”) which it gives the guarantee and the protection for all investors to conduct their business in Batam.
  3. Tax liberation regulated in the Government Regulation Number 2 of 2009.Batam was not only determined as place of warehousing, but also for place of processing with the liberation for Import Duties (Bea Masuk), Customs and Excise (Bea Cukai), Value Added Tax (PPN), and Luxury Goods Tax (PPnBM) which can be enjoyed by the entrepreneur who has obtained permission in Batam.
  4. Economic Cooperation regulated in Joint Statement by the President of the Republic of Indonesia and the Prime Minister of the Republic of Singapore.On June 25, 2006, the President of Republic of Indonesia and the Prime Minister of Republic of Singapore committed the joint statement of the Framework Agreement on Economic Cooperation between the Government of the Republic of Indonesia and the Government of the Republic of Singapore in the Islands of Batam, Bintan and Karimun.

The stipulations of Batam in becoming a free trade area have been attracting the investors both of foreign and local investors. A large amount in the investment flows on Batam also gives a large impact in some businesses in Batam. With regards to the development of Batam island as a FTZ and FPZ, Batam would need a high-quality infrastructure for supporting the investment development; such as residential, entertainment facilities and other supporting facilities. Furthermore, one of the potential businesses in Batam is in the property area.

The great amount of business opportunities in Batam invites many entrepreneurs to establish their business in Batam. There are new properties projects in Batam, with many types and segmentation, such as:

1. Very low-class and middle-class housing development;

2. Low-class houses;

3. Middle-class apartment;

4. The trade center;

5. Luxurious trade center and a high-class apartment in the certain location;

6. Condominiums.

In order to maintain the local and foreign investment in Batam, the Government always assures the legal certainty in the use of property services. There are a several Government Regulations to support the investment itself, which are as follows:

  1. The Government Regulation Number 46 of 2007 on Batam Free Trade zone and Free Port Zone On the Management and the Usage of Land in the Industrial Area of Batam Island;In this regulation, the Government gives the authority to Free Trade Zone and Free Port Zone Management Body (Badan Pengelolaan Kawasan Perdagangan Bebas dan Pelabuhan Bebas) for developing investment, including regulating the allocated land permit or business permit.
  2. The Government Regulation Number 40 of 1996 on Right to Cultivate, Right to Build and Right to Use of Land and the Government Regulation No. 41 of 1996 about residences ownership by foreigners who are domiciled in Indonesia;
  3. Regulation of State Minister of Agrarian/Head of National Land Authority No. 8 of 1996 about changes on Regulation of State Minister of Agrarian/Head of National Land Authority No. 7 of 1996 about the conditional residences ownership by foreigners who are domiciled in Indonesia.
  4. Circular letter of State Minister of Agrarian/ Head of National Land Authority No. 110 –2871 of 1996 about the implementation of Government Regulation Number 41 of 1996.

The Government determines the rights of land which can be owned by foreigner who wish to stay in Batam in order to maintain and manage their investment.

All of these things reflect the commitment of the Indonesian government to fully support the development of Batam island. The development of Batam Island as FTZ and FPZ also make Batam one of a strategic investment area on property and real estate projects in Indonesia.

Grace Tobing

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Principle Regulations Governing Batam Island and Its Effect on Property Sector
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