Japanese investment will continue in Indonesia

As Indonesian businesses continue to assess the impact of the earthquake and tsunami in Japan, the country’s top economics minister sounded positive about Japanese investment in Indonesia.

Hatta Rajasa, the coordinating minister for the economy, said on Monday that Japan would continue to invest in Indonesia and that the effects of the disaster would not disrupt the domestic economy’s growth.

“Japan’s investment will continue as planned,” Hatta said.

Japan is set to begin a massive urban infrastructure development this month in Indonesia in an initiative called the Metropolitan Priority Area.

The memorandum of understanding on the project — which is worth $20 billion and will last until 2020 — was signed in December between the Japanese Business Federation (Keidanren) and the Indonesian government.

Other projects such as geothermal power plants, smelters and mass rapid transportation are also on course, Hatta said. “So far, there are no talks of delays.”

Japan is among the leaders of foreign direct investment in Indonesia, ranking third after Singapore and the United Kingdom. Data from the Investment Coordinating Board (BKPM) showed the realization of Japan’s direct investment last year reached $712.6 million in 323 projects.

Chairul Tanjung, chairman of the Indonesia Economic Committee (KEN), said Japan’s investment to help develop Jakarta would most likely be affected.

“It is likely that they will delay the investment as they are focusing on their domestic recovery. I am sure that they won’t cancel the investment, but let’s give them a chance to recover,” he said. Preliminary assessments from automotive companies and heavy equipment makers were mixed.

Arief Istanto, chief of corporate communications at Astra International, said Daihatsu’s plan to build a low-cost car factory worth 20 billion yen ($244 million) is still on course. The factory is scheduled to begin operations in 2013 and is expected to produce 50,000 cars in its first year.

“In terms of listed companies, United Tractors and Astra International could be negatively affected,” said Wuddy Warsono, an analyst from CLSA Indonesia. United Tractors is Astra’s heavy equipment arm.

“United Tractors’ Komatsu heavy equipment is produced in the affected areas. Heavy equipment represents about 40 to 50 percent of sales revenue, or around 10 percent of its earnings.