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China deepens economic ties with Indonesia as investment doubles

Tuesday, November 1, 2016 - 07:08

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China's investment in Indonesia has more than doubled since 2015 as President Joko Widodo's five meetings with Xi Jinping in the past two years start to pay off.

[MUMBAI] China's investment in Indonesia has more than doubled since 2015 as President Joko Widodo's five meetings with Xi Jinping in the past two years start to pay off.

Foreign direct investment from China stood at US$1.6 billion in January to September, up from about US$600 million for the whole of last year, according to figures from the Indonesia Investment Coordinating Board. Between January and September, Chinese investors had pledged US$6.1 billion in investment in Indonesia.

China is now the No 3 investor in Indonesia behind Singapore and Japan, overtaking the US this year, as the world's second-largest economy looks to shift more of its excess manufacturing capacity offshore.

It reflects China's deepening ties with Indonesia after becoming the nation's biggest trading partner five years ago and is a win for Mr Joko as he pushes ahead with an ambitious programme to build roads, ports and railways.

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"The potential of realised investment from China will remain high in the coming years and it will remain in the top five," said Azhar Lubis, the board's deputy chairman for investment supervision.

"The biggest challenge is how that interest or those plans can be realised soon."

Neighbouring Philippines is also seeking more investment from China, with President Rodrigo Duterte announcing an easing of ties with the US, a military ally, after meeting Mr Xi in Beijing in October. The Philippine government said the trip would yield US$24 billion of state and business deals.

Mr Lubis said Chinese investment was mainly directed to mineral smelters, such as nickel and bauxite, as well as in the cement, automotive and steel industries. Chinese FDI in the nine-month period went to 1,205 projects.

FDI from the US slumped to about US$400 million from US$2.4 billion in 2013.

Singapore remains the top investor in Indonesia, with US$7.1 billion in the first nine months of the year, compared to US$5.9 billion in 2015.

"We need investment and China they have excess capacity," said David Sumual, chief economist at PT Bank Central Asia in Jakarta.

"The two countries need each other."

The growing economic ties comes at the same time that political tension between the two nations intensifies over lucrative fishing grounds in the South China Sea. Indonesia's Fisheries Minister Susi Pudjiastuti has said tensions with China are now manageable.

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