Chinese investors putting more money in Indonesia

Realisation of investment in first nine months is up 291% from the same period a year ago

JAKARTA • China has further cemented its role as one of Indonesia's strategic partners going forward with its commitment to step up investment, government data shows.

Speaking at a forum attended by Indonesian and Chinese businesses, Chinese Ambassador to Indonesia Xie Feng said China saw great potential for bilateral cooperation.

China's realisation of foreign direct investment in Indonesia grew by 291 per cent to US$1.5 billion (S$2.2 billion) from January to September compared with the same period last year, according to Investment Coordinating Board (BKPM) data. "China will continue to encourage more enterprises to invest in Indonesia and help speed up Indonesia's economic growth," Mr Xie said on Wednesday.

China is now a top five foreign investor in the country.

President Joko Widodo has held five meetings with Chinese President Xi Jinping in the past two years, a sign of deepening ties between the two countries seeking to expand cooperation from electricity generation and mining to new sectors such as e-commerce and tourism.

Joint investment cooperation over the past five years totalled more than 3,000 projects. About a quarter of Indonesia's electricity is generated by power plants built by China.

QUICK DEALS, SLOW EXECUTION

In terms of doing business, they are pretty fast at making cooperation agreements, but then it becomes very difficult in the execution phase.

MS SHINTA KAMDANI, Indonesian Chamber of Commerce and Industry (Kadin) vice-chairman for international relations, on challenges Indonesia faces when doing business with the Chinese.

Tourism is another key area, with Mr Joko targeting half of his 20 million foreign tourist target by 2019 to come from China. As of September this year, 1 million Chinese tourists had visited Indonesia.

This year, most of the investments from China have been in the steel and mineral processing sector, which includes smelters in Sulawesi. Chinese investors are also targeting cement and automotive industries, signalling a commitment to Indonesia's infrastructure push, with ventures in cement plants in Kalimantan and Papua.

Since 2006, the investment commitment from China Development Bank (CDB) has totalled US$14.4 billion for 57 projects, although only US$9.7 billion of the commitment has been realised.

Going forward, CDB is looking at projects in power plants and maritime infrastructure. "Indonesia and China have... synergy on the Chinese Silk Road concept and Indonesia's aim to be a global marine fulcrum. CDB wants to actively cooperate in that sector," general manager Yang Aiwu of CDB's Xiamen branch said.

The bank, however, gave no comment on the reason behind the delayed disbursement for Indonesia's first high-speed railway connecting Jakarta and Bandung.

This requires an investment of US$5.1 billion that may well be mostly funded by a CDB loan.

Chinese investors previously saw a low ratio of investment realisation-to-commitment from 2005 to 2014 - only 7 per cent of Chinese investment commitment was realised during the period, BKPM data shows.

"In terms of doing business, they are pretty fast at making cooperation agreements, but then it becomes very difficult in the execution phase," said Indonesian Chamber of Commerce and Industry (Kadin) vice-chairman for international relations Shinta Kamdani.

In tackling the issue earlier this year, BKPM launched a special information desk - the "Chinese desk" - to assist Chinese investors with their investment plans.

The Chinese Embassy in Indonesia highlighted land acquisition difficulties, a changing policy environment, as well as difficulties in acquiring work permits for foreign workers as the top three hassles Chinese business players faced when investing in the country, said Counsellor for Economic and Commercial Affairs Wang Liping.

JAKARTA POST/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on November 25, 2016, with the headline 'Chinese investors putting more money in Indonesia'. Print Edition | Subscribe