ASEAN KEY DESTINATIONS
Indonesia to push China to realize investment
The government will try to push Chinese investors to follow through on their plans to invest in Indonesia, as the realization of previous Chinese-backed investments has been lacking at best.
Of the total US$24.27 billion in planed investments between 2005 and 2014, only $1.8 billion, equal to 7 percent, were realized, statistics from the Investment Coordinating Board (BKPM) show.
Among the major obstacles hampering the fulfillment of investment plans were investors’ failure to find appropriate local business partners, their lack of knowledge about Indonesia and the lengthy procedures to process investment licenses, BKPM chief Franky Sibarani said.
Absence of supporting institutions or business communities to help provide investment-related information such as the Japan External Trade Organization (JETRO) for Japan or the Korean Trade Center (KOTRA) for Korea, also contributed to the low realization, he added.
“Our next step is to be more proactive in our approach to Chinese investors. We will maximize our special investment management team and collaborate with our embassy and affiliated economic bureau in China,” Franky said.
Another move will be to open an investment promotion office in China’s capital, Beijing, in a bid to help garner interest from Chinese firms, according to Franky.
Securing investments from the world’s second-biggest economy has been an Indonesian interest for some time and, as suggested by some economists, is a way to offset trade deficits arising from bilateral trade.
Since the implementation of the ASEAN-China Free Trade Agreement (ACFTA), Indonesia has been more dependent on imports from China, including raw materials and intermediary inputs.
The trade gap consistently followed an upward trend in recent years, climbing to $13.02 billion in 2014 from only $4.73 billion in 2010.
Indonesia has repeatedly asked for higher Chinese investments through formal requests, including one made by then vice president Boediono to then Chinese premier Wen Jiabao during his visit to China in 2011.
A number of memorandums of understanding were sealed between Chinese investors and Indonesian partners, but little has been actualized.
During the recent visit of President Joko “Jokowi” Widodo to China, a number of Chinese firms expressed their interest in pouring investment into Indonesia and inked at least 30 deals with Indonesian business partners.
The agreements amounted to $63.40 billion in direct investment with $24.9 billion of it to be tunneled into infrastructure projects, such as the development of power plants, seaports, telecommunication networks and railways.
The new administration suggested that $460 billion in investments are needed to finance numerous infrastructure projects to better connect the sprawling archipelago of more than 17,000 islands. Of this immense figure, the government can only contribute 22 percent from the state budget, meaning that the majority should be generated from other sources.
“As Chinese investors are keen on investing in infrastructure, we will encourage them to channel their funds to their preferred infrastructure projects,” Franky said, adding that another Chinese source that Indonesia could benefit from would be the Asia Investment Infrastructure Fund.
The Chinese-led fund, announced five months ago, is committed to providing credit to infrastructure projects in developing nations across Asia.
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