This thesis describes the investment cooperation between Indonesia and Singapore concerning the Free Trade Zone (FTZ) in Batam Island in 2005-2009. The research examines how the development and the progress of FTZ Batam since the establishment and how the FTZ Batam affected the level of bilateral investment cooperation between Indonesia and Singapore. Among concepts that are used in this research are economic liberalism, interdependence, international cooperation, bilateral relations, international trade, national interest, international investment, trade agreement, and free trade zone. The research uses descriptive analysis method with qualitative approach. The research found that Indonesia and Singapore have their own national interest in the bilateral investment cooperation. Indonesia’s national interest is the need to attract foreign investment to increase economic growth. On the other hand, Singapore’s national interest is to make investment outside the country because of limited natural resources and land. Batam Island is established as a free trade zone due to its economic potential as well as its geographical proximity to Singapore. The bilateral investment cooperation between Indonesia and Singapore is positively affected by the FTZ policy and the establishment of bilateral framework on economic cooperation between Indonesia and Singapore. This bilateral framework strengthens the ties and implementation of FTZ in Batam. Indonesia may reach its national interest, which is gain more investment from Singapore, especially from Singapore’s investment in Batam. Singapore also reaches its national interest by sending investment to Batam due to the land availability and lower operational cost. FTZ Batam enhances the bilateral investment cooperation between Indonesia and Singapore into the higher level of integration.