Jakarta looks to China for infrastructure investments

Indonesian minister heads to China to offer investors 15 projects worth more than $37b

JAKARTA • The Indonesian government, which is in dire need of funds to finance several construction projects in the pipeline, will approach Chinese investors and ask them to engage in infrastructure development across the archipelago.

Coordinating Minister for Maritime Affairs Luhut Pandjaitan departed for China on Wednesday to offer 15 infrastructure projects to the investors.

"The progress so far is that the Chinese government will officially appoint a counterpart for me to discuss (the matter with)," he said on Wednesday.

The projects offered to Chinese investors were located in Bali, North Kalimantan, North Sulawesi and North Sumatra, including Kuala Tanjung Port, he added.

The locations suggest that the projects are related to Indonesia's offering made at the Belt and Road Forum in Beijing in May last year.

The Indonesian government took along proposals for projects in North Sumatra, North Kalimantan and North Sulawesi valued at more than US$28 billion (S$37 billion).

Mr Luhut spelt out the government's four conditions for foreign-funded infrastructure projects: environmental safety, the use of local workers, an industry with added value and a transfer of technology during the construction.

The projects are the Sei Mangkei special economic zone in North Sumatra, infrastructure development in North Sumatra's tourist destination of Toba Lake and North Sulawesi's Sam Ratulangi International Airport, as well as a hydropower plant with a potential capacity of 9,000 megawatts on the Kayan River in North Kalimantan.

Mr Luhut spelt out the government's four conditions for foreign-funded infrastructure projects: environmental safety, the use of local workers, an industry with added value and a transfer of technology during the construction.

He also planned to introduce the projects to a wider crowd of investors at the World Economic Forum to be held in Washington next Wednesday.

Regarding the domestic availability of skilled workers, Mr Luhut acknowledged that the country might not have enough technically savvy workers for the projects outside of Java, so the use of local workers might be limited.

President Joko Widodo has made infrastructure development a priority of his administration.

However, the government might be able to put forward only 40 per cent of the required funding of 4.7 quadrillion rupiah (S$450 billion) for infrastructure projects to be implemented by next year.

Mr Joko has signalled that the state budget allocation for infrastructure next year may not increase from this year's 410.7 trillion rupiah, given the shift in focus from infrastructure to social and human capital development.

That shift takes place ahead of the 2019 presidential election, in which Mr Joko is seeking a second term in office.

Given the expected stagnation in public infrastructure spending, ministries are encouraged to seek private investment to ensure further growth.

Railway director-general at the Transportation Ministry Zulfikri said the government had already received letters of interest from 14 investors for the 145km Makassar-Parepare railway project in South Sulawesi, including that from two Chinese firms .

The investors from China are China Construction Eighth Engineering Division Corp and PowerChina, according to data seen by The Jakarta Post.

Mr Zulfikri said the ministry would offer the investors the rights to operate and maintain the infrastructure, with the government set to pay the investors annually under the availability payment scheme.

THE JAKARTA POST/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on April 14, 2018, with the headline 'Jakarta looks to China for infrastructure investments'. Print Edition | Subscribe