Ramping up Investment In Indonesia

Indonesian president’s visit to China cements bilateral ties economically and politically By Yu Lintao

Ramping up Investment In Indonesia

Indonesian president’s visit to China cements bilateral ties economically and politically By Yu Lintao

Entrepreneurs from China and Indonesia signed cooperation agreements worth at least $17 billion during Indonesian President Susilo Bambang Yudhoyono’s visit to China in late March.

“The agreements focus on infrastructure construction cooperation, which is of strategic significance. It is not only that the deals are large; more importantly, they will lay a good foundation for future cooperation between the two sides,” said Tang Qifang, an assistant research fellow on Southeast Asian studies with the China Institute of International Studies.

Xu Liping, a research fellow with the Chinese Academy of Social Sciences, said China and Indonesia complement each other in many fields. In recent years, Indonesia has launched a large number of infrastructure construction projects, presenting tremendous opportunities for Chinese enterprises.

Booming investment

The agreements, which included nine memoranda of understanding and several letters of intent, cover 15 projects in the fields of iron and steel, textiles, hydropower, mining and agriculture.

“The projects will help Indonesia to improve the environment for investment, thus paving the way for more investment from China,” said Tang.

In 2010, Susilo put forward the Master Plan on the Acceleration and Expansion of Indonesia’s Economic Development from 2011 to 2025, which involves a total investment of $200 billion. The plan offers business opportunities to investors from foreign countries including China.

Qu Xing, President of the CIIS, said there is great demand for funds and technology in Indonesian domestic infrastructure construction. Meanwhile, China is highly experienced in building railways, highways, bridges and irrigation projects and considers Indonesia one of its major prospective investment destinations. The two have bright prospects for cooperation in this area.

The $12-billion Sunda Strait development project between the China Railway Construction Corp. and Indonesia was the largest of the agreements signed during Susilo’s visit. The Sunda Strait Bridge included in the deal will be the longest bridge of the island nation when it is completed.

During a meeting with Chinese and Indonesian entrepreneurs after signing the agreements, the Indonesian president said while China is the world’s second largest economy, Indonesia is the biggest economy in the Association of Southeast Asian Nations (ASEAN). As two emerging markets, China and Indonesia can strengthen cooperation and expand mutual investment in sectors such as machinery manufacturing, infrastructure, energy and telecommunications, he said.

With a population about 240 million, Indonesia has a large potential market, Xu said. Besides its abundant natural resources and low labor cost, Indonesia has been politically stable and economically resilient in the last decade. Therefore, it is attractive to Chinese investors, Xu said.

In addition to the Sunda Strait project, the Industrial and Commercial Bank of China signed a long-term credit financing agreement with Indonesian national steel company Krakatau Steel. The China National Heavy Duty Truck Group Co. (CNHTC) signed an agreement with Indonesia’s PT Intraco Penta to build a commercial vehicle plant in Indonesia.

The CNHTC said the deal was worth more than $100 million. In the past, the main business of the CNHTC in Indonesia was vehicle trade, but now the company will invest and build a plant there.

Last May, another Chinese heavy equipment manufacturer, the Sany Heavy Industries Co. Ltd., announced a $200-million investment in Indonesia to build an industrial park in the country’s Karawang area, in West Java.

In a joint statement issued as Susilo wrapped up his state visit to China, the Indonesian side encouraged Chinese enterprises to participate in efforts to augment Indonesia’s industrial capacity, and said it will continue to create a favorable investment atmosphere for foreign investors. Indonesia also expressed a desire to have Chinese enterprises invest more in its mining industry.

BRIDGE TO COOPERATION: The 5.4-km Suramadu Bridge, built by the China Road and Bridge Corp. along with Indonesian partners, links the islands of Java and Madura

Indonesia is rich in natural resources. One fourth of China’s coal imports are from Indonesia, Xu said. It is also a big crude oil exporter in ASEAN. Many Chinese enterprises have participated in Indonesia’s resource exploitation. Since Indonesia is weak in oil exploration technology, there is a lot that Chinese enterprises can do to help Indonesia with oil exploration, Xu said.

Upgrading ties

In recent years, high-level official visits have been frequent between China and Indonesia. Prior to this trip, Susilo also visited China in 2005, 2006 and 2008.

“I think the latest visit aimed to further advance the bilateral strategic partnership established in 2005 during President Hu Jintao’s visit to Indonesia,” said Tang.

During his visit from March 22 to 24, Susilo visited Tsinghua University in Beijing, one of China’s top institutions of higher learning, and gave a speech there. He also received an honorary doctorate from the university.

“Awarding a foreign leader with an honorary degree usually reflects a harmonious bilateral relationship,” said Tang. “The Sino-Indonesian relationship has upgraded greatly in the last decade, from both economic cooperation and trade to political relations and regional security collaboration.”

After the honorary doctorate award ceremony, Susilo said the honor is not only for himself but for the Indonesian people. He said more Indonesian students would come to study in China, and his government supports strengthening bilateral cultural exchanges and deepening mutual friendship.

With the sound growth of its economy, Indonesia’s status and influence in regional and global affairs are on the rise. Indonesia plays an important role in ASEAN and in the Islamic world, Qu said. A smooth Sino-Indonesian relationship under multilateral cooperation frameworks such as ASEAN Plus China, ASEAN Plus China, Japan and South Korea and the East Asia Summit contributes to a better Sino-ASEAN relationship as well as efforts to address global challenges and regional hotspot issues, he added.

“Indonesia is very active in regional affairs and wants to play a leading role among ASEAN countries. With its growing national strength, it has a louder voice in the region,”said Tang.

Given its rapid development in recent years, Indonesia needs more multilateral forums so that it can play a bigger role in world affairs, Tang said. The country is a member of the Group of 20, a premier forum for global economic cooperation, and has showed interest in joining the BRICS club of emerging economies, currently consisting of Brazil, Russia, India, China and South Africa.

“As a newly emerging economy, Indonesia is eligible to join BRICS,” Tang said. With shared aspirations for sustainable economic growth, China and Indonesia would work together closely in the grouping if Indonesia were to be admitted, she added.