Distinguished guests

Ladies and gentlemen

I am very happy to be back again with Minister Rini in Bintan after our visit in April last year with US Trade Representative Robert Zoellick. In the last nine months, the global situation has changed dramatically. The Bali bombing of October 12 was a grim reminder of the terrorist threat in the region but it has stiffened our collective resolve to fight it.

Globalization has intensified economic competition around the world. In Southeast Asia, we have to offer investors an attractive business environment and make full use of the natural advantages we enjoy. From the beginning of this year, ASEAN is substantively a Free Trade Area, not counting the new members. However, this is not enough because big countries like China and India have also entered the global marketplace offering very low costs of production. We have to integrate ASEAN further by removing non-tariff barriers and opening up our services sectors so that we have a single economic space of 500 million people. If we are fragmented into ten separate economies, each of us will not be able to play to his full strength.

For example, Indonesia and Singapore are both more competitive when we work together. Indonesia has ample land, abundant natural resources and a large workforce. Singapore is a city-state with excellent logistics, transportation and financial facilities, and home to some 6000 multinationals and 100,000 small-and-medium companies.

As Riau Province is nearest to Singapore, it is natural that our economic partnership here should be the easiest to start and develop. A successful model of co-operation between Singapore and Riau Province will lead to an extension of this co-operation to other provinces.

When our first joint project on Batam was started in 1990, it took off rapidly. Our co-operation then extended to Bintan and Karimun. Together, we offer a globally competitive manufacturing base to international investors with a good-quality workforce. The investments in these islands have created many good jobs and transformed the local economy.

The flow of investments to Batam and Bintan continues to be healthy despite the uncertainties caused by political change in Indonesia. Last year, Batam and Bintan attracted over US$300 million worth of investments, with 80 new foreign companies coming in, adding to the over 570 foreign companies already here. The export value of their output was over US$6 billion. At a time when the employment situation elsewhere in Indonesia got worse, 11,000 new jobs were created in these two locations.

According to Singapore’s Economic Development Board, the Riaus continue to attract strong investor interest. When Chairman EDB, Teo Ming Kian promotes the Singapore-Riau combination to companies in the US, Europe and Japan , many of them respond positively. They see the obvious advantages of complementing the strengths of Singapore and the Riaus. They are evaluating closely the improvements in administration announced by Minister Rini and the advantages which the US-Singapore Free Trade Agreement (USSFTA) can bring to their operations. I was delighted to hear that the Batam Industrial Development Authority received a surge in enquiries in the last few months.

The Integrated Sourcing Initiative (ISI) under the USSFTA was announced by Ambassador Zoellick during our visit here last April. What it means is that companies in Singapore producing IT products under the US IT Act, as well as some medical products, can source their parts and components outside of Singapore, say from Bintan, and treat them as if they are made in Singapore. The final products are then able to qualify for preferential tariffs in the US more easily, and be exempt from the 0.21% Merchandise Processing Fee which is otherwise applicable to all manufactured goods entering the US. The ISI will enable companies to configure their manufacturing operations optimally to exploit the competitive advantages of various locations, provided the assembly, testing and shipping of the final goods are done in Singapore before they are exported to the US.

US Trade Representative Robert Zoellick said in April that Indonesia, and the Riaus in particular, will benefit from the ISI. When the US-Singapore Free Trade Agreement (USSFTA) comes into force, probably early next year, investors in a broad range of IT and medical equipment components can use Bintan to benefit from the ISI.

So, here we have two powerful reasons why international investors are looking at Bintan, the Singapore-Riau partnership and the ISI to bolster it. EDB has been working with Indonesian authorities to attract investors and ensure that their needs are taken care of. Implementation is all-important, which is why I am glad that Minister Rini has reported progress on a number of measures which she announced here in Bintan in April last year.

I know Minister Rini has been working very hard to create an internationally-competitive investment zone here in Bintan. The significant improvement of customs procedures in Bintan has enabled a flow of goods and materials between Bintan and Singapore that is almost seamless. Visa fees and fiscal tax have been waived to make it easier for genuine investors to operate here.

More importantly, the newly established tripartite system for labour, employers and government authorities provides the platform to ensure that increases in wages reflect global competition. We are already seeing the first fruits from this tripartite arrangement. The increase in the minimum wage for Batam this year is a reasonable 4.7%. For Bintan, there is no change. Going forward, it is important that the tripartite system should continue to maintain harmonious industrial relations and prevent labour issues from alarming investors.

Minister Rini’s advisory panel and the dedicated team she has put in place for Bintan will help to ensure that problems that crop up are quickly resolved. This is crucial. Minister Rini’s decision to include international executives in her advisory panel shows her determination to get the widest feedback and the best advice on the investment environment in Bintan.

We in Singapore will of course do what we can to help. We will continue to market the Singapore-Riau combination and facilitate the flow of investments here as the environment becomes more conducive for international companies. What Singapore does is keenly watched by other countries. Last year, Singapore was the leading investor in Indonesia, injecting US$3.3 billion into the Indonesian economy. This is a measure of our confidence in Indonesia’s growth potential.

The ability of the Bintan Industrial Estate (BIE) to attract new investments in this challenging economic climate shows that if the business environment is right, we will always be able to attract good-quality investments. The steps taken to simplify procedures and approvals have been helpful. We support Minister Rini’s efforts to create a one-stop service centre for investors.

Over the last 10 years, investments in Batam and Bintan have generally done well. The Batamindo Industrial Park and the Bintan Industrial Estate have together attracted US$1.7 bn of investments and employ 80,000 Indonesians.

Minister Rini wants Bintan to be an economic showpiece and lead the way for other regions in Indonesia. She is determined to streamline customs and visa procedures and ensure good labour relations through a tripartite negotiation process involvement the government, employers and labour. In addition, as earlier announced, to promote healthy competition among the provinces, they will be officially rated according to the quality of infrastructure, security, regulation and investment-friendliness. Such information will be helpful to foreign investors and point them to the relative merits of different parts of Indonesia.

Labour and other costs in Indonesia are in fact more competitive than many coastal cities in China. American, European and Japanese investors have told EDB that parts of Indonesia (like the Riaus) and Singapore combined can be more attractive for some of their investments than China and other places in the world. This is of course provided that the administrative procedures in Indonesia, and between Indonesia and Singapore, continue to be improved. If we can combine our strengths between Indonesia and Singapore, and in ASEAN generally, our region as a whole can be an alternative manufacturing base to China for multinationals that want to diversify.

We have reasons to be confident that Southeast Asia will remain competitive in manufacturing, even as China continues to grow. First, Southeast Asia has a longer history in advanced manufacturing and has built up strong competencies over the years, with well-developed knowledge clusters. For many years, leading companies in the world have partnered ASEAN to develop and produce goods and services for the global market, with many of them using Singapore as their HQ managing regional operations.

Second, while China is a fierce competitor in some sectors, China’s growth and prosperity will benefit us in Southeast Asia, as has always been the case in history. The ASEAN-China FTA will give products manufactured in Bintan and elsewhere in ASEAN easier access into Chinese markets.

Third, India’s growth will also bring benefits to ASEAN. Like China, India desires an FTA with ASEAN in 10 years. Singapore is likely to launch negotiations with India on the India-Singapore Comprehensive Economic Co-operation Agreement (CECA), including a Free Trade Agreement, in April this year.

What we are doing in the Riaus should be an example for other parts of ASEAN. The Singapore-Riau partnership enables manufacturers to combine Singapore’s capabilities in R&D, product development, prototype manufacturing, mass production, testing and distribution, with lower-cost labour and land in Batam and Bintan. This synergistic cooperation is win-win.

Today, I would like to congratulate Nam Lee Pressed Metal and Cheng Heng Paper Products on the establishment of their factories in Bintan. My congratulations also to Add-Plus Technologies, E2O Communications and Nidec on their successful expansion programmes. These companies have found Bintan to be a conducive environment for growing their businesses.

Nam Lee Pressed Metal, a metal engineering specialist engaged in the design, fabrication, supply and installation of a wide range of aluminium and steel products, decided on Bintan after having thoroughly evaluated several locations in the region, including China. The management tells me that they are drawn by Bintan’s integration with Singapore and Bintan’s competitive workforce. I was also told that Nam Lee had originally decided on another location in the region, but changed its mind after seeing the strong commitment shown by the Indonesia Government and EDB Singapore in enhancing the Bintan business environment.

Nidec, a leading Japanese manufacturer of motors, fans and pivot assemblies, has seen the staff strength of its Bintan plant grow from 50 to 900 in just 4 years. Nidec’s Bintan plant manufactures high precision machining components for the fluid dynamic bearing motors manufactured by its Singapore plant. This company has maintained its global competitiveness by distributing its production between its plants in Singapore and Bintan.

Another example is Add-Plus Technologies, an electronics manufacturing services company, which started its Bintan plant in Year 2001. The products it manufactures in Bintan, such as radio transmission sets, are so reliable and cost-competitive that some customers have stated a clear preference for their products to be made in Bintan. After just one year of operations, Add-Plus is convinced of Bintan’s potential as a manufacturing base and has decided to expand its operations here.

Just two weeks ago, E2O communications, a fast-growing U.S. manufacturer of fibre optic subsystems, also announced its decision to double its Bintan operations. All of these companies produce here to serve world markets. All create good jobs. Batam has also seen progress. Nine companies in the Batamindo Industrial Park expanded their operations last year. Singapore will work with Indonesia to expand the range of capabilities available in the Riaus. Then we can be sure that the islands will take off and be a demonstration for the rest of Indonesia. We need more success stories. We want more MNCs and SMEs to see the benefit of locating some of their production facilities in the Riaus. Once there is a critical mass, the growth will be self-sustaining.

The recent decision by Bintan Industrial Estate to increase its investment and enhance the infrastructure it provides is a good sign. It shows confidence in Indonesia’s development and the long-term viability of the Singapore-Riau partnership. When the world economy picks up again, the additional facilities will pay for themselves.

I congratulate the owners, managers, tenants and workers of Bintan Industrial Estate on its expansion into the next phase, and wish everyone success. I look forward to coming back to Bintan more often with Minister Rini to celebrate achievements and announce new initiatives.

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