Indonesian minister in China to woo investors for infrastructure projects

Indonesian Coordinating Maritime Affairs Minister Luhut Pandjaitan listens to Chinese Premier Li Keqiang (right) during their meeting at the Great Hall of the People in Beijing on April 12, 2018.

THE JAKARTA POST (ASIA NEWS NETWORK) - In dire need of funds to finance several construction projects in the pipeline, the government will approach Chinese investors and ask them to engage in infrastructure development across the archipelago.

Coordinating Maritime Affairs Minister Luhut Pandjaitan departed for China on Wednesday (April 11) to discuss the issue and 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 PROJECTS]," he said on Wednesday.

Luhut said the projects offered to Chinese investors were located in Bali, North Kalimantan, North Sulawesi and North Sumatra, including Kuala Tanjung Port.

The locations suggest that the projects are related to Indonesia's offering made at a global meeting on China's One Belt One Road (OBOR) initiative last year.

At the international summit, Chinese President Xi Jinping had invited leaders of 28 countries, including Indonesia, to discuss the OBOR initiative, under which China wants to upgrade the legendary Silk Road trade route into an advanced global trade network connecting Asia, Africa and Europe.

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

The projects were 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.

Luhut added that toll road and railway projects would also be brought to China.

He said a US$20 billion project for the hydropower plant might be signed. "But, I want to see [THE DEAL]first, if it is true. I won't sign anything that does not seem plausible," he said.

Luhut said the government had four conditions for foreign-funded infrastructure projects: environmental safety, the use of local workers, an industry with added value as well as a transfer of technology during the construction.

Luhut also plans to introduce the projects to a wider crowd of investors at the World Economic Forum (WEF) to be held in Washington next Wednesday. "So the [INVESTORS]that can grab the [PROJECTS]faster at suitable cost will be chosen," he said.

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

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

However, the government might only be able to put forward 40 per cent of the required funding of Rp 4.7 quadrillion (S$447 billion) for infrastructure projects to be implemented by 2019.

The President has signalled that the state budget allocation for infrastructure next year may not increase from this year's Rp 410.7 trillion, given the shift in focus from infrastructure to social and human capital development. That shift takes place ahead of the 2019 presidential election, where Widodo 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.

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

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

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 (AP) scheme.

"It will be put up for bidding. Whatever [INVESTOR]wants the lowest AP will win. We are settling the final business case, we expect to [choose an investor] in October," he said.

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