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NEWS UPDATES 3 December 2009

Indonesia asks state firms to reconsider Dubai plans

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Indonesia’s state firms, including construction firms PT Adhi Karya and PT Wijaya Karya, may have to temporarily put a brake on their expansion in the Middle East as it is feared the fallout of the Dubai World default could trigger a knock-on effect, reported the Jakarta Post.

Secretary to the State Minister for State Enterprises Said Didu said on Monday that the Ministry has warned state companies engaging in business operations in the region to watch out for developments in the Dubai World’s debt crisis and its impacts, before investing further.

“State construction companies should stop or postpone their plans to expand their businesses in  Middle-East countries,” Said Didu told reporters after a hearing meeting with the commission VI of The House of Representatives.

Global markets are tumbling after Dubai World, the conglomerate that has long been the chief engine behind Dubai’s explosive growth, last Wednesday announced it needed at least a six-month reprieve from paying its debts.

According to Said, several state construction companies, such as Adhi Karya, and Wijaya Karya have been working on infrastructure projects there. Adhi Karya, for instance, has just completed the construction of a 35-floor apartment at Al-Burj in Dubai, the world’s highest tower complex.

It is aiming at several other projects in the region, including 1 trillion rupiah ($106 million) project in Oman, in cooperation with a local company, Adhi Oman.

Meanwhile, Wijaya Karya has two new projects that should be started by the end of the year. One of them is the construction of two power plants each having the capacity of 2 x 500 megawatts in Saudi Arabia, requiring 1.4 trillion rupiah in total.

The development of a resort project in Lombok, West Nusa Tenggara, to be largely financed by Dubai-based real estate developer Emaar Properties seems to have hit a snag with the Indonesian government now questioning the firms’s commitment to the project.

Emaar, a subsidiary of  Dubai World, signed a joint venture agreement with the Bali Tourism Development Corporation in 2008, under which it is committed to investing $600 million to build a resort.

“So far Emaar, which has a 85 percent stake, has only financed $65 million from the $600 million committed to the resort. We ask them to be fair about stake ownerships,” deputy to the State Minister for State Enterprises for logistics and tourism, Harry Susetyo Nugroho, said Monday.


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