Singapore investment lifts Batam economy as lower operating costs attract firms, but experts flag competition from Johor-Singapore SEZ

SINGAPORE: Investments from Singapore firms have lifted Batam’s economy, as they get drawn by the Indonesian island’s lower operating costs, particularly for manufacturing and tech, and its growing pool of local talent.

Notably, Singapore remains the island’s largest investor, having poured S$632 million in the first half of 2025, although experts warn it could face stiffer investment competition from the upcoming Johor-Singapore Special Economic Zone (SEZ).

Still, with renewed discussions on economic integration within the Association of Southeast Asian Nations (ASEAN), experts said the island could attract even more industries seeking to leverage its strengths.

According to Channel News Asia (CNA), some Singapore firms on the island include media firm Infinite Studios, which has been operating in the Nongsa area since 2005, before the area was formalised as Nongsa Digital Park. The company has grown from three employees to nearly 400, most of whom are Indonesians.

Infinite Studios CEO Mike Wiluan said they were able to grow the business thanks to the island’s “more cost-efficient real estate” and “abundant talent”.

Nongsa Digital Park now hosts a mix of Indonesian and international firms, including Singaporean companies and global tech giants such as Apple and Infineon. The park has also become a hub for AI-related work, with 13 data centres already operating and more planned. These facilities supply the computing power needed for AI development, alongside reliable power, water, and connectivity infrastructure.

Mr Wiluan, who also leads Nongsa Digital Park, said such infrastructure gives companies confidence in consistent operations and a safe business environment.

Another business park in central Batam is the Batamindo Industrial Park, owned by Singapore-listed Gallant Venture, which has grown by more than a third since 2021 and hosts a cluster of electronics manufacturers. The investment holding company opened in 1990.

CNA reported that many Singapore firms there follow a “twinning model,” with manufacturing in Batam and research and development or other functions in Singapore.

The park’s location in the Batam Free Trade Zone and near five SEZs provides tax concessions and customs benefits, cutting export costs and attracting foreign investment.

Batam, together with Indonesia’s Bintan and Karimun islands, Malaysia’s Johor state, and Singapore, forms the Sijori Growth Triangle, established in 1989 to integrate trade and investment flows. Singapore indicated in October that it plans to revisit the concept and explore new collaboration opportunities.

With the upcoming JS-SEZ looming, experts said Batam may need to upgrade its workforce to remain competitive.

Dr Francis Hutchinson of the ISEAS-Yusof Ishak Institute said that while basic assembly jobs are easy to fill, more skilled positions requiring diplomas or undergraduate degrees are harder to fill, noting that the island has no base of local universities that are plugged into what firms want.

He added that artificial intelligence could eventually reduce demand for some outsourced jobs, though its full impact remains uncertain.

Still, he noted that Batam is expected to continue attracting established manufacturers, e-commerce firms, and creative companies. /TISG

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