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China may be Indonesia's top investor if Widodo can smooth the way

Monday, June 15, 2015 - 19:31

[JAKARTA] China could quickly leapfrog Singapore and Japan to become Indonesia's biggest foreign investor, if President Joko Widodo can simplify the way business is conducted in Southeast Asia's largest economy.

China is eyeing more than US$83 billion in investment in Indonesia since Widodo took the helm in late October, far outpacing Japan's US$11.6 billion and Singapore's US$185 million, according to the Investment Coordinating Board (BKPM), which excludes banking and the oil and gas sector from its data.

China, which is interested in investing in smelters, cement and power plants, had promised a flood of cash in the past but these have mostly failed to materialise.

The realisation of Chinese investment in Indonesia from 2005-2014 was only around 7 per cent, the investment coordinating board said. Mr Joko's administration wants that to increase to at least 30 per cent.

Indonesia's investment board plans to establish a special marketing team focused on facilitating investment from China. Teams will also be created for other countries.

"If they have problems dealing with the regional permits, with dealings with the central government, BKPM (will help)," Azhar Lubis, a deputy chairman at the agency, told reporters.

"We will try to keep in contact with them and discuss the problems." The vast majority of China's potential investment, or around US$78.4 billion, was not yet considered serious, BKPM chairman Franky Sibarani said. The board places potential investments in three categories and currently only US$4.6 billion is deemed in the "serious" category.

President Joko desperately needs foreign investment to fund a current account deficit and revive economic growth, but critics and even some of his own advisers say the economy has actually gone into reverse because of incompetent ministers and bungling bureaucrats.

"With increasing contribution to the GDP, direct investment is expected to be the major source of economic growth, aside from government spending for infrastructure," Mr Sibarani said.

China's realised investment totalled US$800 million last year, up from US$300 million the previous year. That was significantly lower than top investors Singapore at US$5.8 billion and Japan at US$2.7 billion in 2014.

REUTERS

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