Indonesia Seeks China's Help to Double Foreign Investment to $35 Billion

Indonesia’s streamlined permit process may entice China to help the government double foreign participation in infrastructure projects by 2014, said Gita Wirjawan, head of the country’s investment coordinating board.

“I have reasons to be optimistic with what we’re doing,” Wirjawan said in an interview April 18. “Now you don’t have to go to 15 ministries for a signoff to get your permit, you can just come to my office.”

Foreign direct investment into Southeast Asia’s biggest economy may increase to between $30 billion and $35 billion over the next four years, compared with $14 billion last year, Wirjawan said in Jakarta. Investment is targeted to grow by 15 percent in 2010, he added.

“I’ve been in discussions with local partners and their Chinese conglomerates for toll-road concessions and also for power-generation concessions in Sumatra, Java and Kalimantan,” Wirjawan said in Jakarta. “I think a lot of Chinese companies are very much interested in infrastructure, on top of the fact they have been and continue to be interested in natural resources in Indonesia.”

Indonesia aims to more than double spending on bridges, roads, seaports and airports to support President Susilo Bambang Yudhoyono’s economic growth target of 6.6 percent average per year over the remainder of his second term, which ends in July 2014.

Of the targeted $150 billion and $160 billion, the government would spend $50 billion to $60 billion and the rest would come from private capital, Wirjawan said.

Japan, Korea, the Middle East, European countries, the U.S. and the members of the Association of Southeast Asian Nations are also seeking opportunities to invest in Indonesia, he said.

Indonesia expects to see more public-private partnership investments with Chinese companies, Trade Minister Mari Pangestu said April 14.

“We’re open for business and if you don’t come now, you’re going to miss the boat because Indonesia is a growing market,” Pangestu said. “We’re growing rapidly and we’re talking about a large market.”

Infrastructure Creation

China and Indonesia agreed on several projects during a visit by Chinese Commerce Minister Chen Deming to Jogjakarta in central Java on April 3. The two countries committed to maximize the allocation of $1.8 billion of preferential exports buyers’ credits to help finance several projects, including a power plant in Parit Baru, West Kalimantan province, and a toll road in North Sumatra, the Ministry of Trade said April 4.

“Investment in Indonesia should not just be about natural resources; it should involve the creation of infrastructure whether soft or hard,” Wirjawan said. “We have a lot of islands but don’t have as many roads. The government has taken a view in the next five years to build 20,000 kilometers (12,400 miles) of roads, which I think will significantly connect people in different parts of the country.”

Power Generation

The government is also committed to elevate electrification by adding 15,000 megawatts of power generating capacity through a partnership between PT Perusahaan Listrik Negara and local and foreign investors, Wirjawan added.

“For all the deals, I think we’re looking at about $4 billion to $5 billion with the Chinese companies in terms of roads, power generation, and energy,” Wirjawan said.

In the mining sector, PT Aneka Tambang, Indonesia’s second- biggest metal company by market value, plans to team up with a Chinese partner to build a $1.2 billion alumina smelter, Wirjawan said, declining to identify the company.

The infrastructure and Aneka’s smelter deals will be signed when China’s Premier Wen Jiabao visits Jakarta, he said. Wen postponed a planned visit to Indonesia last week after an earthquake in China.

China’s investment in Indonesia has totaled $265.5 million in the past four years, mainly in infrastructure, according to a Trade Ministry statement posted on its Web site April 1, which cited data from the investment board. Two-way trade more than doubled to $25.5 billion in 2009 from $12.5 billion in 2005.

$650 Billion Economy

Creating a positive alert on Indonesia to the world is the key to lure investment to the country, Wirjawan said.

“For a long time we’ve been known as the country of natural disaster by a lot of people who don’t know much about Indonesia,” he said. “That’s one of the big hurdles that we have to overcome. People don’t realize this is going to be a $650 billion economy this year, by far the largest in Asean.”

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Liza Lin in Singapore at llin15@bloomberg.net

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