Just an hour by fast ferry from Singapore lies the island of Bintan in Indonesia. The north coast is populated by golf resorts frequented by Singaporean and international tourists. Many of the resorts only take Singaporean or American dollars, not Indonesian rupiah. For most Australians, Bintan is a holiday footnote. But for Australian policymakers serious about unlocking Australian investment in Indonesia, Bintan – and neighbouring Batam and Karimun islands – may be the key that has been hiding in plain sight.
The Australian government is entering new territory as it builds the capability to support outbound investment – one of the key recommendations of the Southeast Asia Economic Strategy. Establishing a new investment deals team in Jakarta reflects Indonesia’s importance. But it’s a long-term endeavour. Investment growth remains stubbornly slow. Indonesian government data shows investment increased to more than US$1 billion in 2024, up 57 per cent from 2023. While the trend is positive, it is off a low base with Australia ranked as the 11th-largest investor.
For the government to accelerate investment in Indonesia, it should leverage Singapore.
Singapore is the most popular investment destination in Southeast Asia. It is Australia’s sixth-largest trading partner and source of foreign direct investment (FDI). Familiar and business-friendly, it’s the natural jumping-off point into the region for Australian companies eyeing Southeast Asia.
To compensate for its limited land and workforce availability, Singapore is pursuing a hinterland strategy through partnerships with adjacent regions. The recently announced Johor–Singapore Special Economic Zone (SEZ) is the most recent manifestation of this strategy. Johor is a Malaysian state adjacent to Singapore. This innovative SEZ will boost cross-border business and investment through improved connectivity and tax incentives. In the first quarter of 2025, the Johor–Singapore SEZ accounted for close to 90 per cent of the A$9.75 billion in global FDI into Johor.
Australia could jumpstart the BBK SEZ by supporting a trilateral review in partnership with Indonesia and Singapore.
Singapore has already flagged its interest in revitalising the Batam, Bintan, and Karimun (BBK) free trade zone (FTZ), potentially connecting it to the Johor–Singapore SEZ. The BBK zone would be an easy stepping-off point for Australian businesses investing in Indonesia. Australian employees could live in Singapore and commute to the islands, benefiting from Singapore’s infrastructure, business-friendly environment, and high quality of living while maintaining access to the Indonesian market.
Revitalising the BBK zone won’t be easy. It sits in a bureaucratic maze, governed by multiple layers of overlapping regulatory bodies with inconsistent rules across its free trade and special economic zones. If these issues could be addressed, the area has the potential to evolve into a more dynamic investment zone. Australia could jumpstart the BBK SEZ by supporting a trilateral review in partnership with Indonesia and Singapore. The review could draw on lessons from the successful Johor–Singapore SEZ model, especially around investment incentives, labour mobility, and infrastructure planning.
Indonesian President Prabowo Subianto has put FDI at the heart of his economic growth strategy. Indonesia wants to move up the value chain – from raw commodities to downstream processing and advanced manufacturing. To do that, it needs outside capital and skills. Special economic zones were designed to be the vehicle for this. But many, including the BBK, have not delivered. A review backed by Australia and Singapore could help reset the zones, tighten governance, and target high-potential sectors such as electric vehicle supply chains, the digital economy, or clean energy.
Given the evolving discussions between Singapore and Indonesia, the timing is right for Australia to signal its intent and help shape the zone’s next phase while aligning investment ambitions with Indonesia’s reform agenda. The path to investing in Indonesia won’t always be found in Jakarta – sometimes it starts with a short ferry ride from Singapore.