Batam lies across the strait from Singapore. And it already has special economic zones with Singapore.
I expected Batam to be among the top 5 wealthiest cities in Indonesia. But it’s ranked 9 instead.
I guess I was expecting Batam to resemble Singapore more than it really does. Even bu population Batam has 1.2m vs SG’s 5m.
What do other prominent cities have that Batam does not have? Are there other factors that get in the way of its development, perhaps SG policy and/or ID politics? Or maybe competition from Johor?
Overall that region seems to have so much potential to be a powerhouse economically but it does not live up to that.
Very ignorant but interested in this topic. Pls help. Thank you!
In: Economics
Not a major population center – not even in top 10, while being out of the way for rest of Indonesia.
Majority of economy is tourism related, while the tourists that go there (Singaporeans) view it as just a place to go to for cheap massages rather than being any sort of a premium destination.
The more interesting question that would be more directly comparable, is why is Johor Bahru (the Malaysian city that is directly across a bridge from Singapore) not as well off despite having had the potential to be what Singapore became by being located next to the same shipping routes, having access to far more land and natural resources, being better connected to rest of the country etc.
But to answer that, it’s a much deeper dive into cultures, political systems, religion etc
Singaporean here:
1) Singapore being close to Batam is a boon for the latter but also imposes a ceiling on its success. Why do business in Batam when you can do business in Singapore? Let’s talk about shipping for instance, where location is a big deal. I could open a workshop in Batam to take advantage of the cheap labor and land. Why would I put my execs there, though? Would I not instead prefer Singapore for our main office, where there are business connections, a nicer city center to attract international talent, and better infrastructure? In fact this is exactly what many offshore firms do: the companies open a workshop in Batam, main office in Singapore, and just ferry over when they have to.
2) Indonesia is not a very investment-friendly nation. Consider this: Indonesia is the 4th most populated country in the world, right behind India, China and the USA. Yet investment lags. The reason is that the economy is quite protectionist; requiring a minimum local ownership and at least one local director. I don’t want to criticize overly but there is also a significant corruption problem where it is basically impossible to get contracts without bribery. Considering most rich investors with tons of cash are western with strict anti-graft policies, it is quite difficult to navigate.
3) The central Indonesian government neglects Batam. The local government certainly tries, but Indonesian politics is strongly oriented towards the capital. Batam has poor investment not just from foreign sources but also from Indonesia itself.
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