JAKARTA: Less than an hour by ferry from Singapore, Batam Center Point International Ferry Terminal is the entry point for Singaporeans doing business in Indonesia’s free trade zone Batam.
For years, it has been a busy terminal with crowds of people arriving and departing the harbour daily.
But everything changed when COVID-19 struck in early 2020.
Many countries moved to limit travel, including Indonesia and Singapore. When CNA visited the ferry terminal at the end of November, it was almost empty with barely anyone in sight.
“Before the COVID-19 pandemic, I could see the constant flow of people at the harbour from my office. Now it is deserted,” said BP Batam acting chairman Mr Purwiyanto, who goes by one name. BP Batam, an agency under the Coordinating Ministry for Economic Affairs, oversees the Batam free trade zone.
The lack of activity could be seen as a possible indicator of how the pandemic has disrupted business between Singapore and Batam, even while the city state remains the biggest investor in Indonesia.
For Batam, investments from Singapore have decreased from US$123.47 million in 2019 to US$81.15 million in the first three quarters of 2020, according to BP Batam.
But that is a very narrow indicator of how business between the two Southeast Asian neighbours has fared in 2020.
In fact, a look at the wider situation paints a very different picture.
Across Indonesia, Singapore accounted for a total investment realisation of US$7.2 billion during the first three quarters of 2020, ahead of China (US$3.5 billion), Hong Kong (US$2.5 billion) and Japan (US$2.1 billion).
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That’s an increase of 30 per cent compared to the same period last year, noted Singapore’s Ambassador to Indonesia Anil Kumar Nayar.
Even though the pandemic has affected the connectivity and investment climate globally, Singapore has managed to increase its investments in Indonesia, he said. Mutual trust and confidence have a key role in this, he added.
“(There’s) underlying trust and confidence between the key players in Singapore and Indonesia, which is why, despite the fact that we cannot visit each other as much as possible, we cannot have direct contact, the investments have gone up based on existing businesses and economic interaction,” he said.
The 30 per cent increase in investments showed that Indonesians see the value in the Singapore brand and in working with investors from Singapore, especially in these challenging times, the envoy said.
“It’s also a signal on the part of Singapore’s investors, their confidence in Indonesia.
“Despite all the challenges and problems that all of us are facing, we believe in Indonesia, its stability will continue to grow. Therefore, our investors are confident in increasing their investments in Indonesia, despite the fact that we are now faced with the somewhat uncertain situation arising from COVID-19,” he said.
The envoy said economic ties are part of the overall multifaceted relationship between the two countries.
“It is also very important that when you look at trends in the economic relationship between Singapore and Indonesia, bear in mind that underpinning the economic relationship is the trust and confidence that the two countries have in one another,” he said.
“So we are not just talking about numbers in terms of investments going up or down this year. We are talking about the trust and confidence that our two countries have in each other, which is the foundation of many aspects of this relationship including the economic and investment relationships,” he added.
The envoy stressed that Singapore is constantly looking at the quality of investment it brings into Indonesia and not just about “making a quick buck and leaving”. The aim is for investments which are “strong and sustainable”.
“It’s not about making sure we’re always the top investor every year,” he said.
Singaporean companies are mainly investing in a few sectors, such as consumer products and services, manufacturing, transportation, logistics and infrastructure developments, according to Mr Khairul Anwar, the regional group director (Indonesia) of Enterprise Singapore.
Big corporations aside, many Singaporean small- and medium-size entreprises (SMEs) are present in Indonesia, he said, adding that they are interested in investing in the country since it is the largest market in Southeast Asia.
While COVID-19 has presented unprecedented hiccups and disruptions in economic activities, many Singaporean businesses have remained resilient, striving to adapt and overcome the challenges.
There have also been success stories of companies identifying opportunities amid the pandemic and emerging stronger than before.
“Despite the challenges, we have not held back or slowed down completely. In fact, in key areas, we have continued to do well,” said Mr Nayar.
“Yes this is an unprecedented challenge for all of us but of course, through friendship and genuine partnership, we will always emerge stronger after a challenging test. I’m also very confident that investments, connectivity and engagements that we have will be even stronger when we come out of this pandemic,” he added.
LACK OF FACE-TO-FACE INTERACTION A MAJOR HURDLE
Businessmen who are experienced in operating in Indonesia would typically agree that trust is the basis for business in the archipelago. And having face-to-face meetings is very important to build a stronger business relationship.
However, this proved to be impossible when travelling is discouraged in Indonesia as the COVID-19 situation remains challenging. There have been more than 600,000 reported cases so far.
Among those who are feeling the negative impact of the lack of in-person meetings is the management of Kendal Industrial Park (KIP) in Central Java province.
Inaugurated by Singapore’s Prime Minister Lee Hsien Loong and Indonesia’s President Joko Widodo in 2016, the industrial park is a joint venture between the two countries and one of the largest industrial parks in Indonesia. It is also a special economic zone (SEZ), one of the 15 in Indonesia.
It is 51 per cent owned by Indonesia’s Jababeka, a premier township developer, and 49 per cent by Sembcorp, a leading Singaporean developer which has more than 30 years of experience in Asia.
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KIP aims to be a 2,200ha industrial park for companies focusing in sectors such as the fashion industry, electronic, food and beverage, construction materials, logistic and warehouse, furniture industry and packaging.
Furthermore, a town centre, shopping district, high-rise residential area, and an international seaport are planned to be built in the industrial park, while a furniture polytechnic was opened in 2017.
The development of the industrial park has two phases, with each estimated to last about 10 to 12 years. The first phase is being developed on a 1,000 ha land while the second phase will take on an additional 1,200 ha of space.
A total of 300 tenants are expected to join the industrial hub in the first phase. So far, it has about 60 committed tenants.
When CNA visited the industrial park in mid-November, some construction work could be seen.
KIP’s president director and CEO Stanley Ang told CNA that business is still running, although not as much as initially forecasted.
“We imagined it to be faster than it is now, but we were not so aggressive (in our forecast).
“In 2019, when we forecasted 2020, we foresaw the caution of the American election. We also foresaw that when Jokowi went from the first term to the second term (in October 2019), there would be some transition.
“Now if you take a look at Indonesia at the end of 2019, you see that the Indonesian economy was not really in good shape. So you don’t suddenly expect Indonesia to (accelerate). We expected Indonesia to be a little bit slow moving in 2020, we also expected a bit of slowdown from investors, but not COVID-19,” Mr Ang said.
COVID-19 has led to a 50 per cent drop from their initial projection, Mr Ang shared, without revealing the original forecast. Unable to meet in person meant deals could not be closed, he said.
“The major reason is because they (potential clients) cannot travel. (Even though they might be interested,) they make a decision, but the fact that they cannot visit you, you have to delay (closing a deal),” he said.
The drop in deals has nothing to do with potential clients holding back on their capital, Mr Ang stressed. He shared that a foreign potential investor, for instance, wanted to expedite the deal but could not travel to Indonesia because his visa was rejected.
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Even though Indonesia has reciprocal green lanes for essential business with China, South Korea and Singapore, this does not automatically mean that investors were willing to travel to Indonesia, said KIP’s head of marketing Juliani Kusumaningrum.
“Of course with all the digital meetings, everything can be done that way unless it is time for them to see the site.
“So there are stages when they eventually need to come to Indonesia, but I guess it is a matter of whether they are willing to travel and then being quarantined after the travel.”
Mr Nayar noted that KIP has taken off within a relatively short period of time. “This is no mean feat,” he said.
NO TRAVEL, NO NEW CLIENTS
Inability to travel within the vast archipelago due to the restrictions has also proved to be frustrating for some Singaporean businesses.
Eng Ngiap, which focuses on plastic injection moulding for multinational companies, is having a hard time gaining new clients, said its managing director Andrew Tay.
“There are jobs available from our existing customers, but for potential new customers, there are some delays. There are some potential jobs but not confirmed due to COVID-19,” he told CNA.
Headquartered in Singapore, Eng Ngiap has been present in Batam for the last 19 years following the relocation of one of its major clients to the city in Riau Islands province. It has about 100 employees in Indonesia.
Mr Tay was also of the opinion that the travel disruption – and not the lack of capital to invest – was the factor hindering deals.
“It is more because they cannot travel. (The potential clients) cannot travel here to set up a factory,” he said, adding that many Chinese customers had planned to come to Batam after Chinese New Year, but then COVID-19 hit.
However, the company’s profit is still stable, he revealed. Eng Ngiap currently has six major clients and three potential projects on hold.
ONLINE MEETINGS CAN’T DO EVERYTHING
Even though online conferences can be held as the next best alternative, in-person interaction is still the most effective form of communication, as some companies realised during the pandemic.
A fatigue in conducting constant online meetings has kicked in, no matter how tech-savvy people are, said Mr Marco Bardelli, director of Infinite Studios, a tenant of Nongsa Digital Park (NDP) in Batam.
“If it’s something like reviews, budgeting or day-to-day operations, it’s okay. But when it comes to creativity and brainstorming, it is very tough without physical meetings,” he explained.
NDP is a 166 ha integrated digital park for digital businesses and a data centre designed to be the digital bridge between Indonesia and Singapore.
Dubbed by some as the Silicon Valley of Indonesia, NDP was launched in 2018 by Indonesia’s Foreign Minister Retno Marsudi and her Singaporean counterpart Vivian Balakrishnan.
Two years on, about 90 companies have established their presence in NDP, including Apple with a developer academy, according to Mr Nayar, the ambassador. More than 300 people have been employed.
“This is a show of confidence in terms of the long-term benefits that investors can see in the synergy between Singapore and Indonesia, and what people see can see (taking place) in Batam, Bintan,” he said, adding that it is a very important part of the investment map.
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The joint venture between Indonesia and Singapore is a win-win for both parties, said Mr Peters Vincen, director of NDP. Singapore has world-class tech talents, while Indonesia has abundant space, he said.
For Infinite Studios, the pandemic and the subsequent remote working this year have resulted in less-than-satisfactory results in its in-house mentoring programme, for instance.
“Sitting down next to a mentor is totally different from having lessons online,” Mr Bardelli said.
He opined that despite how technology has supported digital businesses to survive amid COVID-19, a hybrid type of work situation might be needed in the future.
ADJUSTING WORKFLOWS AND ADAPTING TO THE PANDEMIC
Another NDP tenant, Glints, is a talent and recruitment platform headquartered in Singapore. It helps Singapore-based companies to find digital talents in Indonesia.
It was quick to adapt when the pandemic struck, switching to remote hiring. The move proved to be rewarding. All hirings in Indonesia are now done via Zoom.
“It’s the new normal,” said Glints CEO Oswald Yeo.
He shared that the company initially saw a slowdown in business during the early days of the pandemic, but things picked up soon after.
“What we saw was an initial slowdown for one or two months. I think the market was just generally updating to whatever was going on. And people were hiring fewer people.
“But actually, after that, there was a quick recovery, especially for remote hiring and now it actually has helped us. More and more are now used to remote working, they use Zoom calls,” he said.
Mr Yeo claimed that Singapore-based clients like the idea of having a remote team set up in Indonesia, and the pandemic has resulted in the demand doubling year-on-year.
“For a Singaporean company to hire in Indonesia in the past, they would have to set up a local entity, they had to worry about local payrolls and the local taxes. And that’s very time consuming and costs a lot of money.
“We can actually take care of that for them because we have entities in both markets. So they just have to work with us … We help them find the talent and also manage them,” Mr Yeo said.
FOR GRAB, CHALLENGES BRING NEW OPPORTUNITIES
Finding new opportunities amid challenges is exactly what ride hailing and everyday services company Grab has done, and this has enabled the Singaporean firm to weather the tough conditions.
In the early stages of the pandemic, there were many complaints from Grab riders in Indonesia that their income had shrunk as a result of a partial lockdown in some cities.
Subsequently, Grab set aside 260 billion rupiah (US$18.4million) to help all partners. It provided incentives to riders, free rapid tests, and equipped riders with hand sanitisers, disinfectants and shield protectors, among others.
Despite the general downturn, Grab opened a new tech centre in Jakarta in early November.
The facility, its largest in Indonesia, serves as its regional innovation hub for micro entreprises and SMEs, focusing on researching, designing and testing tools and technology for the Indonesian market.
At the launch of the tech centre, Grab Indonesia managing director Neneng Goenadi said: “So far, COVID-19 has not disrupted Grab’s investment in Indonesia. Absolutely not.”
“There are no obstacles at all because we are committed to Indonesia,” she stated.
Indonesia is home to more than 64 million micro entreprises and SMEs, of which only 16 per cent are digitalised. This makes the country an ideal testbed for Grab’s technologies that aim to make it easy for even the smallest business to go online and thrive online, the company said in a statement.
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The disruptions to everyday life presented opportunities for Grab to sign more businesses onboard its platform, and in a way accelerating the digital transformation that the Indonesian government has been pushing for.
Grab CEO and co-founder Anthony Tan said they set up more than 35 partnerships with central and local governments this year to help people and businesses to earn income through the digital economy.
To name a few, craftsmen in Makassar, traditional wet markets in Solo and several towns in Central Java, fisheries in Ambon and farmers across Indonesia have gone online for the first time.
“It was a huge operational task for Grab to train and onboard these traditional businesses. We were determined that it would be one of our top priorities, because this was their only way to sell their products during PSBB (large-scale social restrictions),” Mr Tan said in his speech during the launch of the tech centre.
Grab has welcomed more than 430,000 micro and SMEs and more than 35,000 traditional traders to its platform over the past few months.
The decacorn also added 7,000 traditional markets to the Grab maps, and app users can hire GrabAssistant (a personal concierge service) to order daily necessities.
The opening of Grab’s tech centre was lauded by Indonesia’s investment minister Luhut Pandjaitan.
“Investors like Grab that are deeply committed to the long-term development of Indonesia play a critical role in helping us achieve our ‘Making Indonesia 4.0’ targets.
“For Indonesia to become the largest digital economy in Southeast Asia, we need partners like Grab who are willing to commit not only capital but resources to help develop tech talent and infrastructure in our country,” he said.
In 2019, Grab contributed 77.4 trillion rupiah or US$5.4 billion to the Indonesian economy, according to a CSIS and Tenggara Strategic research report.
Apart from launching a new tech centre in Jakarta, Grab also declared Indonesia as its second headquarters during the launch, in addition to Singapore.
SOME SMALLER COMPANIES ARE MAKING HEADWAY DESPITE PANDEMIC
Smaller companies, too, have gained some measure of success through remaining steadfast and seizing the limited opportunities.
A Singaporean firm in Batam, material handling solution and storage system provider Singalift, has also been largely unaffected by COVID-19.
Its director Doris Heng told CNA that business has even increased by about 20 to 30 per cent due to higher demand.
“There are companies which are doing well during this pandemic, thus they expand their production area so they need more equipment.
“For companies that are not doing well, they need to minimise their space by using storage systems. This year I also managed to lease out to a few new customers,” she revealed.
Singalift specialises in leasing battery forklift, reach truck and also providing storage solutions systems. Its customers are mainly Singaporean investors.
As a result of the higher demand, all 18 of Singalift employees in Batam still have a job, and have to clock in many overtime hours, she added.
The only personal downside for Mdm Heng was that she could not return home to Singapore regularly to visit her family.
“Before the pandemic, I normally went back every week on Fridays, and then I travelled back to Batam on Mondays because my children are in Singapore. But due to this (pandemic) I am unable to go back,” she said.
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Novade Solutions, a field management software startup, has not slowed down since the pandemic hit Indonesia.
While its clients back in Singapore were financially impacted and projects were halted because of the “circuit breaker”, Novade Solutions continued to operate in Indonesia.
It even witnessed a growing level of digital adoption, which is in line with its focus, said CEO Denis Branthonne.
Novade Solutions has been investing in Indonesia since 2017 from Singapore but started to have a team in Indonesia in 2019. Based in Jakarta, a team of five people works with clients who are housing developers and contractors.
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Its country sales manager Christopher Anthony said they saw a change in the type of clients from high-rise apartment developers in the past to developers focusing on landed houses now.
This is probably because the pandemic has made people aware that living in a house is more comfortable than in an apartment, when one must stay cooped up for a certain period of time, he said.
With the bullish prospects, Novade Solution is aiming to double its growth at minimum for 2021.
RECIPROCAL GREEN LANE A BOOST TO BUSINESS?
Both countries understand that there is a need to travel in order to do business, hence Singapore and Indonesia established a reciprocal green lane (RGL) at the end of October.
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Mr Nayar, Singapore’s ambassador, said this arrangement could slowly but surely restore connectivity for the business community in a safe manner.
“That means we do it systematically. Once that happens, and we are able to improve how the interaction takes place, we believe we can then broaden it to other people,” he said.
The envoy cautioned against opening up too fast, or it would become counter-productive.
“The expectation is that as we do it, slowly and in a deliberate way. Hopefully, the COVID-19 situation also starts to improve globally and stabilise, and then we will be able to do more between Indonesia and Singapore,” he said.
The entry points for RGL in Indonesia are Soekarno-Hatta International Airport, which serves Greater Jakarta, and Batam Center Point International Ferry Terminal.
Geographical proximity is a big factor drawing Singaporean investors to Indonesia, Mr Nayar noted.
“If we look at Singapore’s investments in Indonesia, a lot of it is obviously in the part of Indonesia that is closest to Singapore like Batam, Bintan and Karimun (BBK), for example,” he said.
“We have been major investors there for a significant period of time. The BBK region, as you know, is an important part of that economic relationship, and from decades ago, from the 90s all the way to the present, even with the pandemic,” he added.
Singapore is an active contributor in terms of bringing investments from abroad to the BKK region, Mr Nayar said. He cited the relocation of Pegatron, a Taiwanese electronics manufacturing company, to Batam as an investment project in which Singapore played a significant role.
While most of the companies interviewed by CNA said they have not utilised the green lane, citing the 14-day mandatory quarantine back in Singapore as a hindrance, Mr Bardelli, the director of Infinite Studios, said they have sent production crew from Singapore to NDP via this agreement.
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Mr Nayar said the protocols are put in place to balance the risks when dealing with a public health situation. “Given the situation in terms of COVID-19, whether it’s in Singapore, Indonesia, regionally or internationally, there are certain protocols that have to be adhered to,” he said.
“In Singapore, we have our frontliners working very, very hard to bring the situation down to where it is today, so people feel safe and interact daily, going to school, going to work, going out, within limits. We have been able to get back to that situation with a lot of efforts that have gone to it. Unfortunately, we have also lost some lives in that process.
“So it would be quite irresponsible of us to say, okay, we’ve succeeded, let’s just open up. So we can’t. But you are right to say if and when the situation improves regionally, internationally, yes, we can make adjustments to the RGL going forward. But it may take some time,” he added.
CRUCIAL TIME FOR PARTNERS TO SHOW CONFIDENCE IN ONE OTHER: ENVOY
Enterprise Singapore’s Mr Khairul said moving forward, the future remains bright for Singaporean companies to invest in Indonesia, as the country is starting to adapt digitalisation and this is Singapore’s strength.
“The appetite from Singaporean companies is generally healthy.
“And Indonesia by virtue of sheer size – 260 million of population and its growth rate and scale – is not a country companies can ignore in ASEAN,” he said.
Among the areas for Singapore and Indonesia to look at in terms of economic engagements in a post-COVID-19 situation are supply chain, artificial intelligence and digitalisation, Mr Nayar said.
“These are areas where there will be opportunities,” he said.
A Bilateral Investment Treaty, which Singapore and Indonesia signed in 2018, came into effect in September this year.
“To us, this is a very, very important step because with the ratification of the bilateral treaty, there is a very strong signal sent to the international community about Indonesia’s readiness to attract investments from abroad, including from partners such as Singapore, and also through Singapore,” said Mr Nayar.
He noted that there is an Avoidance of Double Taxation Agreement on the table, which hopefully would be ratified soon.
“That will be another important building block in terms of increasing the flow of investments into Indonesia,” he said.
While COVID-19 has been challenging, Mr Nayar said, it is a very important time for partners to show confidence in one another.
“As part of our demonstration of confidence in Indonesia and its prospects, the Monetary Authority of Singapore has extended the US$10 billion bilateral financial arrangement (BFA) (by another year),” he said.
The arrangement comprises a local currency bilateral swap agreement and a bilateral USD repurchase agreement.
“It’s a very important signal and show of confidence that we believe despite all the challenges that we are facing, Indonesia will pull through in the end.
“We believe that when Indonesia comes out of this situation, it will be stronger. So as a friend, neighbour and partner, this BFA renewal for another year is also a very important signal to the international investment community,” he said.