BatamNOW AND TOMORROW

COMPILED BY THE SMILING HILL TEAM, BUKIT SENYUM, BATU AMPAR, BATAM 29457 - Tel +62 778 450 183

BATAM has undergone a remarkable transition over the past four decades and, in particular

over the 15 years from 2000. From a little-known island with around 6,000 ‘Sea People’

living in fishing kampongs along the seashore and a single state-owned oil industry services

base, it has become a modern island city of around 1.5 million people and a locomotive

of industrial growth for the region. This is a brief bullet points snapshot of the Batam of

today and a glimpse of what the next decade is likely to bring.

Batam in Brief

This summary of current facilities and developments and proposed projects is based on publiclyavailable information as at mid- 2015 – it is highly probable that further change and growthwill come with the advent of the ASEAN Common Market to be implemented from December2015 through 2018.The ASEAN integration of South-east Asian economies will create a market-place of some 620million - larger than the European Union or North America - the third-largest labor force inthe world behind China and India, and a growing consumer class. Existing trade and businessbarriers will be eased allowing easier movement of goods and skilled labor between the 10participating countries. Current foreign investment rules also will be eased. With its strategiclocation and established industrial base and infrastructure Batam is sure to be a majorbeneficiary.

LOCATION – Batam is an island city and centre of heavy industry andmanufacturing within the Riau Islands Province of Indonesia strategically located20 kilometres (12 miles) across the Strait from Singapore.

AREA – Batam (incorporating the Barelang islands of Rempang and Galang)covers 715 Sq km which is about the same as the area of Singapore (718 Sq Km).

GOVERNMENT – From the 1970s until 2000 the development and administrationof Batam was under the control of the central government in Jakarta through anappointed Batam Industrial Development Authority. Decentralized localGovernment commenced from 2001 with the establishment of a city administrationand an elected regional people’s assembly (DPRD).

POPULATION – in 1970 Batam had a population of only about 6,000 - mainlyethnic Malay “Sea People”. By 2010 the population exceeded a million. The 2015estimate is around 1.5 million. Over the inter-census period to 2010 the populationgrew at more than 11% a year – the fastest growth of any region in Indonesia.Batam is now estimated to be growing at about 8% a year. It is the third largestcity in Sumatra and in 2012 ranked as Indonesia’s 12th largest city. It is forecastto be 7th or 8th after the next census. (By way of comparison Perth and Brisbanewith populations of just over 2m are growing at around 2.5%.)

SPECIAL ECONOMIC ZONE – Batam has been designated a Special EconomicZone (SEZ) since 2007 under an agreement between the Governments ofIndonesia and Singapore. This makes it easier for capital, materials, components,products and labor to move between Singapore and Batam and has streamlinedapprovals and licensing processes for new investment.

FREE TRADE ZONE – The Indonesian Government formally declared Batam andthe neighboring SEZ islands of Karimun and Bintan a Free Trade Zone fromJanuary 2009. This provides exemptions from Customs rules and a range of taxesincluding import duties, sales tax, value added tax, and taxes on luxury goods tofurther boost investment.

INVESTMENT – The Batam SEZ administration puts cumulative direct investmentinto the Batam economy at almost US$18 billion as at the end of 2014 with nearly

Batam 2015

half of this being direct investment by foreign companies. Some 1,700foreign companies from 38 countries have established operations inBatam.

ECONOMIC GROWTH – Industrial development in Batam began in theearly 1970s with a services and logistics base for the national oil companyPertamina. Over the next 30 years it became recognized as the fastestgrowing economic region in Indonesia and one of the fastest growingregions in South-east Asia. Regional economic growth rates ranged from5.8% to 8.3% a year over the period from 2010 to 2014.

EXPORTS – According to the Batam Indonesia Free Trade ZoneAuthority, non-oil and gas exports from Batam averaged around US$9billion a year over the five years 2010 to 2014.

FOREIGN VISITORS – International tourist and business visitors toBatam totalled 1.45 million in 2014. This was exceeded in Indonesia onlyby Bali (3.24 million) and Jakarta (2.24 million).

AIRLINE SERVICES - Batam’s Hang Nadim airport recorded around5..5 million passenger movements in 2014, making it Indonesia’s 7th

largest airport. Daily passenger aircraft movements averaged 116 flightsper day. Domestic services are increasing and direct international flightsto South-east and North Asian ports are being introduced.

ERRY SERVICES – Modern fast ferries provide more than 120 crossingseach way between Singapore and five Batam terminals every day. Ferriesrun from around 6 am until around 9.30 pm. Passengers both ways totalabout 10,000 on weekdays with this increasing by as much as 100% atweekends. Other Batam ferry terminals provide links to nearby islands,particularly Bintan and Karimun for domestic passengers and vehicles.

FOREIGN WORKFORCE – As at 2014 there were almost 6,000ex-patriot workers in Batam. The formal Indonesian workforce wasestimated at 330,000 plus. Batam has a significant informal economy.

Batam Centre Ferry Terminal - one of five international terminals

Horizonfast ferry -

one offour majoroperators

Batam 2015

Below - New US $70m gas fired power station nearing completion at TanjungUncang industrial area. The undersea gas pipeline to fuel the plant is costinga further US$50m. Batam electricity consumption is increasing by around13% a year due to increasing population and the growth of industry.

ELECTRICITY – Demand for electricity in Batam is estimated to beincreasing by around 13% a year, reflecting both population growth andgrowing commercial and industrial consumption. The present electricitysupply of some 510 MW (2014) is scheduled to be increased to more than700 MW by 2017.

WATER – Batam’s water is supplied from six man-made reservoirs witha treatment works meeting WHO quality standards and a capacity of 2,903litres per second. A new seventh water supply dam is nearing completion(2015) at a cost of some US$30m.

ROADS – Batam has around 1,200 km of sealed roads (2014). This ismore than 50% of the total for the whole Riau Islands Province yetBatam is only 1.9 percent of the total area of the Province. The impres-sive Barelang Bridges link Batam with Rempang and Galang islands.

AIRPORT – Batam’s Hang Nadim International Airport has a currentcapacity of 6 million passengers a year and works are underway toincrease this to 8 million. Hang Nadim has the longest runway inIndonesia at just over 4 kilometres and is capable of handling Boeing 747and the Airbus 380 aircraft. Services from Batam are predominantly todomestic ports around Indonesia. There are currently internationalservices to Malaysia and charters to Saudi Arabia for Mecca pilgrims.There are plans for international flights to other South-east Asian andNorth Asian ports to commence in 2015. The airport also handles heavyvolumes of air freight from throughout Indonesia.

SEAPORTS – Batam has five International ferry terminals plus domesticterminals and four cargo ports. Heavy volumes of freight move constant-ly between Batam and Singapore and to and from Batam and otherIndonesian ports.

COMMUNICATIONS – Major Indonesian telecommunications providersare present in Batam with advanced fibre-optic cabling, wireless links andtelcom data services providing ever faster broadband connections.International backbones are accessed via undersea cable systemsthrough Sumatra, Jakarta and Singapore. BATAMINDO industrial estate at Muka Kuning - light manufactures

ABOVE - Pax Ocean shipyardat Tanjung Uncang, one ofmore than 70 Batam yards

Infrastructure

LEFT - Busy apron at Batam’sHang Nadim Airport - morethan 5.5m passengers a year

INDUSTRIAL PARKS - There are 22 industrial parks in Batam housingmore than 1,000 foreign companies and 10,000 local companies. A who’swho of multi-national companies is engaged in heavy fabrication andmanufacturing ranging from ship-building, oil rigs and dump trucks tosailing dinghies, electronic chips, packaging and fashion handbags. Largerindustrial estates have their own water supply and waste water treatmentworks, workers dormitories, executive housing and supporting commercialfacilities such as banks, restaurants and food courts, shops, sport centers,and medical facilities. Some of the larger industrial estates also have theirown electricity supply system.

SHIPYARDS – Batam is Indonesia’s major ship building and repairscentre and becoming one of the major industry players South-east Asiawith more than 70 operating shipyards and others planned. The Batamyards build mainly smaller vessels (service vessels, drill ships, patrolboats, tugs, barges, etc) and undertake conversions and repairs. Theyalso fabricate jackets, topsides, modules and other heavy structures forthe oil and gas industry.

HOSPITALS AND MEDICAL – Batam has five major government andprivate hospitals plus a number of smaller hospitals and health clinics inlocal communities and outlying areas. There also are many privatemedical practices, usually with associated pharmacy services, and labora-tory services. A major national in-service training centre for healthprofessionals opened at Marina City, Batam in 2011.

EDUCATION – Batam has six private universities and a public Polytechnicproviding tertiary education. The universities are generally small campus-es typically offering a limited range of degree and diploma courses in law,business management, accounting, marketing, languages, computing andIT. Batam Polytechnic also offers degrees in technology sciences. Thereare two private international schools and a growing number of public andprivate schools offering classes from kindergarten to senior high school.There is a public Maritime University and an Islamic University in TanjungPinang on the neighboring island of Bintan.

Massive J Ray Mcdermott oil and gas industry

Modern and well equipped Awahl Bros private hospital, Baloi

Infrastructure

Administration offices are clustered ina precinct at Batam Centre whichincludes the Batam branch of theBank of Indonesia, The ImmigrationDepartment, Electricity and Gasauthorities, the law courts, Telcos,local government offices and the SEZand Free Trade Zone authorities.

TOP - Office of the Mayor and Batam cityadministration (left) and the People’s ElectedAssembly (right)

ABOVE - City Central Park area, under on-going development at Batam Centre

LEFT - Striking Telcomsel headquarters,Batam and RIGHT - Batam Polytechnic.

AdministrationPrecinct

Harris Resort Hotel at Marina City,Batam (Above), new Nagoya Hill Hotel(Right) opened in May 2015, and(below) I-Hotel Penuin, opened inearly 2015. Seaside pool area at Turi

Beach Resort, Nongsa

EIGHT modern shoppingmalls - Interior Mega Mall(above) at Batam Centre,ice skating (Left) at KepriMall and (below) Kepri Mallentrance one.

ResortsNew hotelsShopping

SHOPPING CENTRES – As at 2015 there are 10 major shoppingmalls in Batam with plans for more. Most have been built andopened since 2006. Another is under construction in the dormi-tory suburb of Batu Aji and there are plans for more. The centresoffer a wide range of modern shopping outlets plus, restaurants,food halls, games areas and cinemas.

GOLF COURSES – Batam has six quality championship standardgolf courses – five of 18 holes and one of 27 holes. There is afurther 9-hole resort course at Nongsa and three internationalstandard courses a short ferry journey away on the island ofBintan. Golf enthusiasts from Singapore and Malaysia regularlyvisit Batam to enjoy the high quality facilities and relatively lowgreen fees and other costs. Golf tour groups travel from as faras Korea, Japan and Australia.

HOTELS & RESORTS – Batam boasts more than 75 star-ratedhotels more being built and opened every year. There also aremany non star-rated properties catering for budget visitors.Major international brands are now moving into the Batamaccommodation market with five major brand developmentsunder way in 2015. There are two resort areas on the island withfour high quality resort properties located in the Nongsa area tothe north and two properties in the suburb of Waterfront City tothe south.

MOVIE STUDIO – The US$10 million Infinite Studios opened atNongsa in 2011 with two sound stages and a one-hectare backlot. International features and TV mini-series have been filmedthere. Facilities include an animation studio producing syndicat-ed work for local and international markets. The studios comple-ment film and TV production and post-production facilities inSingapore. There are plans for an associated residential resortnow being marketed as “The Scene”. Batam View Resort at Nongsa, Batam

Infrastructure

As at mid -2015, massive infrastructure developments are underwayand planned for Batam. These include:

AIRPORT – Extensions to Terminal 1 and upgrading of air bridge facilities at Hang Nadim airportcosting US$30 million now underway will take passenger capacity to 8 million a year.Building of a second terminal and eight extra air bridges is scheduled tocommence in 2017. This will take total passenger capacity to 16 million.

SEAPORT – A US$31 million upgrading of the Port of Batam, the island’smain cargo seaport at Batu Ampar, is nearing completion. Theproject has provided additional wharf space, new cranes andcontainer handling equipment. The upgraded port will have anannual capacity of 600,000 twenty-foot equivalent units (TEUs),compared with 230,000 previously.

Current and Future Projects

LAND DEVELOPMENT - Reclamation,land clearing, road building andinstallation of services for housing andindustrial and commercial developmentsis on-going in Batam.

POWER GENERATION – A US$70m gas turbine power station is nearingcompletion at Tanjung Uncang industrial area on the south of the island.Dual turbines will initially produce an additional 70 MW of electricity. AUS$50 million undersea pipeline has been built and laid from PempingIsland to fuel the turbines. There are plans for a further 35% expansionof Batam’s electricity output to meet increasing demand.

ROADS – Work is due to begin in 2016 on a new toll freeway to linkBatam’s key centres and ease increasing traffic congestion. The freewaywill run from the Airport and Kabil industrial estate in the North to BatamCentre, the Batu Ampar seaport and Nagoya and then south to Sekupangand Tanjung Uncang. There also will be a link to the Muka Kuning andPanbil industrial areas. The project is to be built in several sectionssimultaneously which authorities say will reduce completion time to twoto three years.

MONORAIL – The preliminary tendering process began in 2014 for aproposed mono-rail passenger transport system to link Batam’s dormitorysuburbs with industrial estates, the main CBD areas, the airport, healthprecincts, resort areas and ferry terminals. The project is planned to bebuilt progressively over the period to 2027.

DEEP WATER CONTAINER PORT – Long held proposals for developmentof a deep water container port at Tanjung Sauh, a small off-shore islandbetween Batam and Bintan, has been given a high priority in the newnational government’s plans for the development of Indonesia’s maritimeand shipping infrastructure. Planning provides for an initial 2km ofwharves handling four million TEUs (twenty-foot container equivalentunits). It is estimated the project would require an initial investment ofmore than US$1 billion. It is intended to be part of a 'sea corridor' alongwith the six large ports of Medan, Jakarta, Surabaya, Makassar andSorong, serving as transit points for smaller feeder ports for exports andimports across the Indonesian archipelago.

ProjectsThis National In-service HealthTraining Centre opened atTanjung Uncang in 2011 andprovides training for doctors andhealth professionals fromthroughout Indonesia

HEALTH TRAINING CENTRE -

Dragon fruit farm at Barelang - agriculture is a minor activity inBatam but fishing, fish farming and processing is substantial.

BATAM TO BINTAN BRIDGE – The Batam Special Economic ZoneAuthority has been sounding out overseas interest in building a6.7-kilometre bridge between Batam and Bintan. The bridge wouldconsist of a 2.2-kilometer stretch between Batam and Tanjung Sauh

Island, a 3.9-kilometer stretch connecting Tanjung Sauh and BuauIsland and a 700-meter stretch connecting Buau and Bintan. It wouldcost an estimated US$580 million. When linked Batam and Bintan willtogether represent an area about four times the area of Singapore.

FERRY TERMINAL UPGRADE – The Harbor Bay Ferry Terminal isundergoing a major upgrade with new arrival and departure halls, offices,lounges and retail space. The terminal will link with the new Marriott Hotelbeing built on adjacent foreshore land. The original terminal opened onabout six years ago but became inadequate to handle passenger volumes.

OIL REFINERY – Government authorities are reviewing two separateproposals for the development of oil refineries in offshore locations offBatam. An Azerbaijan proposal provides for a $4.8 billion refinery, with aplanned production capacity of 600,000 barrels per day. A second proposalfrom an Indonesian company is for a US$500 million refinery project onNIpa Island between Batam and Singapore. National government policycalls for the development of new refineries around Indonesia with Batamnominated as a selected regional location.

Section of Terminal 1at Batam’s Hang Nadim Airport -Construction of Terminal 2 planned to start in 2017

ABOVE - Artist’srendering of BestWestern Condotel andapartments project atKabil - one of five majorbranded hotels nowunder construction inBatam.

RIGHT - Constructionprogress on BestWestern project as atJune, 2015

Projects

AIRCRAFT MAINTENANCE HUBS – Lion Air hasrecently occupied a US$250 million aircraftmaintenance base for its fleets of Boeingand Airbus jets on land adjoining the HangNadim airport. When completed in 2016 itwill have four wide-body hangars andemploy some 2,000 technicians. Garuda,the national flag carrier, has announcedplans for a similar facility. The airlines arerelocating maintenance operations toBatam due to chronic crowding and lack ofavailable space at Soekarno-Hatta airport inJakarta.

BATAM is linked to the nearbyislands of Rempang and Galangand smoe smaller islands by aseries of six iconic bridges.These areas are beingdeveloped as part of the totalmuniciplaity. Two of the bridgesare pictured at right.

BARALANG BRIDGES

FIVE NEW major branded hotels are now underconstruction in Batam (July 2015) signaling a “coming ofage” of the city’s accommodation industry. They includea Marriott Hotel at Harbor Bay, an Aston Hotel (andapartments) at Pelita, a Raddison Hotel at Suka Jadi anda Best Western Condotel at Kabil. A Starwood Hotel (aSheraton brand) is included in the Bliss Park developmentnear Baloi. Two major unbranded hotels have just opened(2015) – the Nagoya Hill Hotel and Batam’s second I-Hotelat Penuin. The Holiday Inn, Mercure, Harris and Alliumbrands are already established in Batam.

BrandedHotels

MARRIOTT

ABOVE - Artist’s rendering of Aston Hotel and Residencenow under construction (see inset) at Pelita, Batam

ABOVE- Rendering of new Raddisson Hotel at Sukajadiand (RIGHT) construction progress

Apartment Projects

BATAM’S largest apartments project, Bliss Park, commenced in 2014 and isscheduled to continue until 2022. The first tower of more than 30 storeys is risingat the rate of two floors a month (and is around 80% pre-sold). The complex willhave 2,000 apartments, 11,000 sq m of retail and commercial space and a 150-keySheraton Four Points Hotel plus associated undercroft parking. Batam’s largestcompleted Apartments project is the 20-floor Mansions complex which has 600apartments and also houses a 4-star hotel. It has been occupied from 2013. Theseand other big projects are dramatically changing Batam’s skyline.

Construction is wellunderway on theBliss Park project.The distant building isthe Mansionsapartments

A STEADY FLOW of new industrial undertakings isbeing attracted by Batam’s strategic location, low costs,available labor and developed infrastructure. Recentnewcomers have included the American Caterpillarmulti-national who have opened a US$120 millionassembly and fabrication plant at Tanjung Uncang (andare already planning expansion) and Yokohama whoare just opening a major belting plant at Kabil.

BELOW - The new fabrication plant for PT Caterpillar Indonesia at TanjungUncang will produce dump truck chassis and bodies for the mining industrythroughout the Asia-Pacific region.

Austin Engineering plant atKabil industrial estate

Dump truck bodiesassembly line at

Austin Engineeringat Kabil, Batam

Industry

SINGAPORE- BASED fabrication company SMOEspecialises in offshore fixed and floating Productionfacilities and established an 85-hectare yard at Kabil,Batam in 2003. It is now (2015) expanding into anadditional North Yard opposite the original facility. Overthe past three years the yard has been producingmodules for the Curtis Island gas trains in Queenslandand the Wheatstone project in Western Australia inconjunction with Bechtel.

ABOVE- Heavy liftload out of CurtisIsland module fromSMOE yard.

LEFT and BELOW -The original SMOEyard at Kabil nowbeing expanded withnew North Yard

Industry

Fish FarmingExtensive inter-island waterways, tides of around 1.5 metres andcleanwaters make the Barelang area to Batam‘s south a preferred location foraquaculture. The joint French-Indonesian hatchery venture pictured belownear Barelang Bridge 1 aims to produce 2 million Barramundi and 1 millionGroupe fingerlings a year.

Fish hatchery on the Barelanag Island of Rempangjust south of Batam Island. Note the toweringbridge pylons in the top right of this picture.

Local fish farms grow out the hatchery fingerlings