Batam hopes to become digital powerhouse

Young Indonesian animators working in the studio belonging to Infinite Studios, a Singapore-based integrated media entertainment and creative service company. Infinite Studios has produced movies and animated TV series at its Nongsa facility, includi
Young Indonesian animators working in the studio belonging to Infinite Studios, a Singapore-based integrated media entertainment and creative service company. Infinite Studios has produced movies and animated TV series at its Nongsa facility, including HBO Asia’s Serangoon Road and The Garfield Show. ST PHOTO: ARLINA ARSHAD
Young Indonesian animators working in the studio belonging to Infinite Studios, a Singapore-based integrated media entertainment and creative service company. Infinite Studios has produced movies and animated TV series at its Nongsa facility, includi
By next year, a flyover half a kilometre long leading to Batam’s main Hang Nadim international airport will be ready to cut peak-hour jams. PHOTO: BP BATAM
Mr Imanuel Titar Nugroho and his team do their work out of Liquid Pay's temporary office in Nongsa, Batam.
Mr Imanuel Titar Nugroho and his team do their work out of Liquid Pay’s temporary office in Nongsa, Batam. ST PHOTO: ARLINA ARSHAD

Electronics manufacturing, shipbuilding among key economic drivers, but technological services are rising

Young and hungry for new opportunities, Indonesian Imanuel Titar Nugroho could not have been happier when Singapore mobile-payment start-up Liquid Pay hired him and flew him from Jakarta to work in Batam last November.

Now, the 24-year-old computer science graduate is among a 10-strong Indonesian team there, customising the company's cashless system for the local market.

"Batam may be a small place and bare now, but, in the next 10 to 20 years, I believe this place will be really good for IT," he told The Straits Times. "I want to invest my time and skills from now because I don't want to miss the boat."

The "boat" here is the Indonesian government's plan to transform the island - just a 40-minute ferry ride from Singapore - into the country's digital powerhouse.

When Prime Minister Lee Hsien Loong met Indonesian President Joko Widodo at the Leaders' Retreat in Semarang, Indonesia, last November, they discussed potential ways to expand bilateral cooperation in new sectors including the digital economy.

Mr Hatanto Reksodipoetro, appointed chief of free trade authority in Batam in April last year, told The Straits Times late last month that the Indonesian leader had instructed him to "show we have the right to be next to Singapore".

"In other words, we are compatible with Singapore. When we talk about complementary, we are good for Singapore and Singapore is good for us," added the chairman of BP Batam, or Batam Indonesia Free Zone Authority.

The island of 1.24 million people is part of what is collectively known as the Batam, Bintan and Karimun free trade zone or the BBK FTZ in the Riau Islands province, which has been a "growth engine" for Indonesia for 46 years, said BP Batam.

Its total export value last year reached US$8.41 billion (S$11.62 billion). Total imports topped US$6.13 billion, with Singapore accounting for US$3.89 billion of exports and US$2.1 billion of imports.

Batam contributes 60 per cent to the Riau Islands' gross domestic product, and is ranked No. 17 of more than 500 regencies and cities across Indonesia in terms of income contribution.

Electronics manufacturing and heavy industries such as shipbuilding have been traditional drivers of the economy but the digital service sector has been making inroads in recent years, businesses say.

Software houses have sprouted, offering services from developing mobile applications and websites to building software and automating the assembly and manufacturing facilities in factories.

Singapore entrepreneurs have been utilising these services, citing lower operating costs and close proximity to the Republic.

Mr Ho Wee Teck, managing director of Singapore-based IT-solutions provider BSS Group, has been impressed with the standard of work and the talent available in Batam.

His company had engaged Batam-based Tugu Sena Sinergi to develop a school management system which helps to maintain students' academic records and print report cards.

If English standards in Batam can be improved, this will take the island's IT services to a higher level, and make it easier for Batam firms to offer their services in not just Singapore but across the globe, he said.

Other companies like Liquid Pay are using Batam as a launch pad into Indonesia. "Our target is to build an organisation that complements our Singapore operations with a varied skill set," head of operations Robert Stables said. "For us, this is a real win-win commercial scenario."

Seeing the potential growth in the digital economy sectors in the two countries, Infinite Studios, a Singapore-based integrated media entertainment and creative service company, announced in April it was developing the $700 million Nongsa Digital Park in the upscale Nongsa area.

The first large-scale private initiative, the 100ha technological park is expected to provide an international data centre, an incubator for start-ups and apartments for technopreneurs and programmers.

While Batam is keen to become the pioneer in the digital economy, challenges remain.

Critics question whether Batam can triumph over regional competitors and resolve longstanding issues in the decade-old free trade zone such as red tape. Infrastructure, they added, also remains a bugbear.

Basic infrastructure at present is "adequate but to respond to opportunities and challenges will need optimisation and acceleration", Danareksa Sekuritas analyst Lucky Bayu Purnomo said.

BP Batam's Mr Hatanto said the new management was appointed by Jakarta in April last year to address these concerns and "to correct what was not correctly done".

Last year, BP Batam opened a one-stop centre for land management matters and an investment licensing service that processes business permits in three hours, down from one to two years previously.

Infrastructure plans to support a "high-tech and eco-green" Batam are also under way, he said.

By next year, a flyover half a kilometre long leading to the main Hang Nadim international airport will be ready to cut peak-hour jams.

In five years, a bigger airport with new terminals serving direct international routes and a larger seaport to accommodate rising cargo volume can be expected.

In future, he envisions a light rail transit, highways linking the main Mukakuning industrial estate to the port and airport, and a 6.97km seabridge linking Batam to neighbouring Bintan island.

Indonesia has a "backyard" comprising 260 million people, an attractive potential market which no other regional country has, he said.

"Singapore has always been our No. 1 (investor)," Mr Hatanto added. "I'm here to advise potential investors on what I've been doing to try to switch their minds from an old Batam to a new Batam."

A version of this article appeared in the print edition of The Straits Times on June 19, 2017, with the headline 'Batam hopes to become digital powerhouse'. Print Edition | Subscribe