Beginning in the 1970s, the island underwent a major transformation from a largely forested area into a major harbor and industrial zone. The island's economy benefits from being close to Singapore, and, with lower labour costs and special government incentives, is the site of many factories operated by Singaporean companies. Shipbuilding and electronics manufacturing are major industries on the island; there are also several resorts and tourist destinations on the island.
At the end of 2010 almost 58 percent of foreign tourists came from Singapore, followed by Malaysia at 13 percent. Most of the foreign tourists entered Batam through Singapore using ferry services as Batam has limited international flights.
Under a framework signed in June 2006, Batam, along with parts of neighboring Bintan and Karimun, are a part of a Special Economic Zone with Singapore; this zone eliminates tariffs and value-added taxes for goods shipped between Batam and Singapore.
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