INTRODUCTION

Batam's development process has been quite unique among medium-size cities in Indonesia, as it has developed virtually from scratch. In the late 1960s, there were 6,000 people on the island, essentially fishermen and their families. Since then, Batam's population has been growing by leaps and bounds, and the number reached approximately 1.37 million people by 2019 (BPS 2019).

Over the decades, due to its proximity to Singapore and, through it, international capital, Batam has always been accorded one or another form of special status with certain privileges. Beginning in 1971, the government promulgated a series of regulations that were pivotal to the subsequent development of Batam. Then, it was merely an outpost station of the national oil company, PN Pertamina, which provided logistics and operational support to its offshore exploration activities. In 1972, Nisho-Iwai, a Japanese consultancy firm and Bechtel Corporation of the United Sates prepared a master plan for the development of Batam (Pertamina, Nisho-Iwai, and Pacific Bechtel 1972).

In 1973, the central government passed the Presidential Decree No. 41 which declared all of Batam island as an industrial zone (BIDA 1980). One important provision of the decree was the establishment of Batam Industrial Development Authority (BIDA) as the sole entity responsible for the island's economic development. BIDA was endowed with an extensive range of responsibilities to, among other things: develop and manage Batam as an industrial area; handle transshipment activities; plan and manage the island's infrastructure development; and expedite business licensing processes. B.J. Habibie, the Minister for Research and Technology, became BIDA Chairman in 1978 and took a direct interest in the island. He saw it as a means of concentrating scarce resources in a given location and bypassing many of the infrastructural problems facing other parts of the country. This support also allowed BIDA to deal with the relevant local governments within Riau Province effectively and, hence, enabled it to roll out infrastructure and promote business development on the island (Hutchinson 2017).

In 1978, the government designated all of Batam island as a bonded warehouse zone. Often referred to simply as a bonded zone, this is an area where dutiable goods may be stored, processed, or manufactured without paying duty.