The people of Rempang and Galang Island, Batam City (Kepri Province) Indonesia, have been living in an atmosphere of anxiety for the last few months. The development of new island economic areas for which the government seems increasingly willing to ignore the people in its search for investments has created trouble for the new investors.

On 11 September 2023, riots occurred between security forces and Rempang residents as the latter refused to leave their hometowns for the construction of a new Eco-City. The new development also includes a glass factory construction project from the Chinese company Xinyi Glass Holdings under the framework of National Strategic Projects (SPN), with the hope of attracting investment reaching IDR381 trillion, the equivalent of US$25 billion.

The Xinyi Glass factory itself will take up 2,000 hectares (ha) of land from a total of 17,600 ha of land managed by PT Makmur Elok Graha (MEG) – the holder of regional management rights on Rempang Island since 2004. The head of Batam Indonesia Free Zone Authority (BP Batam), Muhammad Rudi, has said that Rempang’s potential to absorb investment is still very large.

According to Bahlil Lahadalia, the Minister of Investment and Head of the Investment Coordinating Board (BKPM), such investments will act as the new economic engine for Indonesia. Xinyi Glass Holdings, for instance, has committed to investing US$11.6 billion. In the initial stage, Xinyi Glass and BKPM signed a collaboration agreement worth IDR175 trillion in Chengdu, China on 28 July, 2023.

According to the local government, this project will have a positive economic impact on the surrounding community, employing around 30 thousand workers in the Rempang and Galang areas.

One challenge standing in the way, however, is the government’s increasingly repressive approach to forcing the investment plan through. 7,500 people have been affected by the construction of the Eco-City project, and people from 16 villages are expected to be relocated. These villages are built on the traditional land of the Ancient Malay Village or Kampung Tua. For local residents, the village has an important meaning in maintaining their traditions from generation to generation.

Meanwhile, the government promises compensation in the form of 45 new houses, equivalent to 120 million rupiah or US$7,800, and a land area of ​​500 square meters. The government will also provide IDR1 million for each head of family.

To date, there has been no construction of houses, social facilities, or public services, despite the promise by government that the houses will be complete before construction is completed.

As a democratic country that emphasises deliberation, the government’s actions have baffled local residents, who have not been included in discussions about the investment. This has sparked notable anger and demonstrations against the government’s plans among the people in Rempang.

The source of this problem occurred in 2004, when Batam City Government signed an investment agreement with PT MEG which is owned by a Chinese-Indonesian tycoon Tomy Winata. In this agreement, PT MEG was given the concession right to manage industrial land on Rempang Island by the state, beginning in 2023.

It should be noted that, before the agreement was reached, the land was already occupied by several residents. Since 2004, however, the population has increased with few recognising the management rights of PT MEG. Over time, this land turned into a settlement with little input from the government to either stop the settlements from growing or to socialise them to the upcoming transition, as PT MEG takes over.

The government also did not issue clear regulation regarding the transfer of land use to residential areas and neglected supervision more broadly. The chaos from the new development and the failure of government has soured the image of investment companies like Xinyi Glass Holdings, impacting the broader investment environment in Indonesia.

What to do?

To improve on the investment climate, the government needs to build dialogue and approaches that are based on deliberation among the Rempang community. This is especially the case regarding compensation. The local people are not anti-investment, but they are asking for justice and clarity. The government also cannot blame the people for using the land as a settlement, given that no clear government regulation regarding land rights or transfers was employed. Nor has there been land monitoring or regular outreach to the people there.

In moving forward, the government must make sure that project operations are sustainable both for the environment and corporate governance. Based on the results of two disclosure rating agencies Refinitiv and Sustainalytic, Xinyi Glass Holdings sits at only 49 points out of 100, indicating that the company is likely to pose more social and environmental issues if it is not monitored carefully.

In this case, the Indonesian government needs to be more careful and must ensure that the planned investment will not harm society and the environment.

Dr Muhammad Zulfikar Rakhmat is a researcher at the Center of Economic and Law Studies, Jakarta. His research focuses on China-Indonesia-Middle East relations. Yeta Purnama is a researcher at the Center of Economic and Law Studies.

This article is published under a Creative Commons Licence and may be republished with attribution.