Indonesia-Singapore twin hub set-up can help businesses strengthen supply chains: EDB

SINGAPORE - More Singapore companies are adopting a “twinned operations” model by pairing domestic activities with lower-cost bases in Indonesia’s Batam, Bintan and Karimun (BBK), creating a complementary two-hub set-up, said the Economic Development Board (EDB).

Singapore is one of the largest foreign investors in the BBK, and has also been recorded as Batam’s top foreign investor since 2023.

In the first half of 2025, businesses in the Republic channelled investments worth 7.9 trillion rupiah (S$614 million) into Batam, or 69 per cent of the island’s total foreign direct investment.

“For Singapore-based manufacturing companies, BBK offers an economic and strategic hinterland. It provides manufacturers with the land and manpower resources in a location that is close to their operations in Singapore,” EDB chairman Png Cheong Boon told a BBK business forum on Nov 18.

Mr Png added that “the region is a competitive base for companies looking to expand their footprint and strengthen supply chains in South-east Asia, and develop new market opportunities in Indonesia, which is South-east Asia’s largest economy”.

It is a strategy which has worked for Schneider Electric for more than two decades.

The French electrical and electronics manufacturer makes components used in power systems at its smart factory in Batam. These are brought to its distribution centre in Singapore before being sent to customers around the world.

The Indonesian island “offers a strong industrial ecosystem, skilled labour and a cost-competitive environment”, the firm’s vice-president for planning and logistics for East Asia Pradeep Singh told The Straits Times.

“Batam’s proximity to Singapore, which is a global logistics hub, also means the two locations are complementary. By leveraging the strengths of both markets, we enhance our corporate resilience and production agility,” he added.

Foreign investment has fuelled growth in the Riau Islands province, which saw its economy expand by almost 7.5 per cent in the third quarter of 2025 compared with a year earlier.

This was the third-best performance across Indonesia in terms of economic growth, its governor Ansar Ahmad said.

Over the period, the province received around 32 trillion rupiah in foreign investment and 16.9 trillion rupiah in domestic investment.

Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto said the government remains committed to lowering barriers to investing in the BBK region. “The policies have been driving forces of the investment that has increased in Batam, Bintan and Karimun,” he said.

A bilateral working group between the EDB and Indonesia’s Coordinating Ministry for Economic Affairs has improved cross-border connectivity, supported by BBK’s move in October 2024 to extend visa-free entry to Singapore permanent residents and 13 other nationalities.

The initiative, together with the introduction of e-gates at ferry terminals connecting Singapore to Batam, has improved the flow of visitors, Mr Png said.

He said agreements signed by Singapore and Indonesia in June 2025 will also support industrial decarbonisation and facilitate new investments in BBK’s green economy space.

In addition, Mr Png said the Nongsa Digital Park in Batam is becoming a technology and data centre hub for Singapore-based companies.

Tech giants like IBM, Apple and Unreal Engine have trained 8,000 trainees through their programmes in Nongsa since 2021.

In the months ahead, Schneider Electric plans to deepen its investments in innovation, automation and advanced manufacturing in BBK.

It is also evaluating the potential of expanding into the Johor-Singapore Special Economic Zone.

Mr Singh said: “As with the setting up of any new location, we look closely at three things: the strength of existing ecosystems, the availability of skilled labour and the level of government incentives provided to enable long-term, sustainable growth.

“In Johor, we see progress developing on all three of these criteria. Based on the maturity of the manufacturing industry in Johor in the coming years, we will evaluate our future investment strategy.”