Category Archives: Investment

Indonesia Can Achieve `Sustainable’ Economic Growth of 8%, Ambassador Says

Bloomberg, by Greg Ahlstrand and Femi Adi – Dec 30, 2010

Indonesia can achieve economic growth of 8 percent that is driven by domestic as well as international investment, if regulatory clarity and infrastructure in the country are improved, U.S. Ambassador Scot Marciel said.

Scot Marciel, U.S. ambassador to Indonesia.
Photographer: Dimas Ardian/Bloomberg
“Indonesia’s growing around 6 percent this year,” Marciel said in an interview in his office at the U.S. Embassy in Jakarta. “I think that could reach 8 percent sustainably, without tremendous difficulty, by addressing some of the infrastructure issues and opening up a little bit more.”

President Susilo Bambang Yudhoyono seeks to expand Southeast Asia’s biggest economy by as much as 7.7 percent and create 10.7 million jobs by the end of his second term in 2014, he said in his annual state-of-the-nation address Aug. 16. Indonesia also aims to cut the poverty rate by about a third to between 8 percent and 10 percent over the next four years.

“It’s not so much about making it attractive to foreign investors,” said Marciel, who was named ambassador in August. “To the extent Indonesia can work on infrastructure, and improve transparency and the regulatory environment and battle corruption, it creates a good environment for Indonesian businesses. Then foreign business will also find it attractive.”

Indonesia’s ranking in Transparency International’s 2009 corruption perception index improved to 111 from 126 in 2008, according to the watchdog’s website. It gained one place to 110 this year, 24 slots above the Philippines. The index measures the perceived level of public-sector corruption in 178 countries and territories around the world, the website says.

Roads, Ports, Rails

Inadequate roads, ports and railways mean orange juice from the Indonesian side of Borneo costs more than that from China, four times as far away, the Indonesia Logistics Association said in January. Logistics costs are the equivalent of 25 percent of gross domestic product in Indonesia, versus 19 percent in Thailand and 10 percent in the U.S., it said.

During U.S. President Barack Obama’s visit to Indonesia in November, he and Yudhoyono announced the Comprehensive Partnership, under which the countries will cooperate on education, environmental and climate change issues, defense and security, science and technology, investment and trade.

“We’ve made education a high priority; specifically trying to increase the number of students from Indonesia studying in the United States, and from the United States studying in Indonesia,” Marciel said. “Also to try to build partnerships between universities.”

Scholarship Drive

The U.S. will commit about $165 million over five years to promote cooperation on education, including scholarships such as the Fulbright program, funding for Indonesian students to study at U.S. community colleges and English-language training, Marciel said. Indonesia will provide 100 scholarships for American students to study in Indonesia, he said.

“We need to do a better job of making U.S. education accessible to Indonesians,” he said. “Over the past 10 to 12 years, the number of Indonesian students studying in the U.S. has actually fallen.”

The decrease is partly due to concern over costs, and partly to a “misperception” that a student visa is difficult to get, Marciel said. That misperception stems from revisions to visa procedures implemented after Sept. 11, 2001, he said.

“A lot of the problems or obstacles that came out of that have been dealt with, but the perception remains that it is extremely difficult to get a visa,” Marciel said. “We need to continue to explain to people that it’s very possible.”

Military Cooperation

In July, Defense Secretary Robert Gates said the U.S. will begin a “measured and gradual” relationship with the elite Indonesian military unit known as Kopassus after a 12-year gap. The decision to restore links was possible due to Indonesia’s progress in professionalizing the military since the fall of the dictator Suharto, Gates said at the time.

The move was criticized by New York-based Human Rights Watch, which said it “weakens U.S. standards for military cooperation globally.” U.S. Senate Foreign Relations Committee member Russ Feingold, a Wisconsin Democrat, also said he was “disappointed” by Gates’s announcement.

“Secretary Gates announced in July that we would begin taking limited steps toward re-engagement with Kopassus,” Marciel said. “That had not been possible in the past because of lack of accountability for past human-rights violations.”

Move to Democracy

Marciel said Gates stressed that the decision was based on Indonesia’s move to democracy, improved human rights record, and changes to the military, and that it would start with staff- level talks, which to date has been the extent of the engagement.

Regarding videos that surfaced in October showing men in military clothing torturing Papuan civilians, Marciel said: “The Indonesian leadership has made it clear the human-rights violations depicted in those videos is unacceptable. There’s nothing that I’ve seen that suggests that was Kopassus.”

Indonesian police had assured the U.S. that they were committed to investigating the videos and bringing the perpetrators to justice, he said.

“We are watching this very carefully,” Marciel said.

A challenge the U.S. faces in developing its relationship with Indonesia is convincing Indonesians it doesn’t have a hidden agenda, Marciel said.

“Indonesia is a democracy, and the people and the government have to decide what’s most important to them,” he said.

To contact the reporters on this story: Greg Ahlstrand in Jakarta at gahlstrand@bloomberg.net; Femi Adi in Jakarta at fadi1@bloomberg.net

To contact the editor responsible for this story: Greg Ahlstrand at gahlstrand@bloomberg.net


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Indonesia named one of top ten global investment targets

The Jakarta Post, Jakarta | Thu, 09/16/2010 1:46 PM

Indonesia has been identified as one of the top markets for global investors, according to new research published by UK Trade & Investment.

The ‘Great Expectations: Doing business in emerging markets’ report offers new insights from international investors about which markets they see as being the global growth engines of the future.

The report is based on a survey of more than 520 global executives from every sector. All respondents are already doing business in emerging markets or plan to do so in the next two years.

“The balance of global power is shifting and this is recognised in UK Trade & Investment’s research. Markets such as Vietnam, Indonesia, Mexico, Argentina, etc is tipped to be one of the global growth engines in the coming decades. UK firms are using their expertise to help promote that growth,” the UK Business Secretary Vince Cable said, while launching the new research in London.

Meawnhile, Deputy Head of Mission of British Embassy Jakarta Rebecca Razavi said he was very pleased to hear that Indonesia was named as one of the top markets for global investors this year.

“As the largest economy in SE Asia and as a member of G20, Indonesia has an increasingly important role on the world stage, and is a key trade and investment partner for the UK. This encouraging report by the UK Trade and Investment is another example of the positive view global investors have of Indonesia’s potential to grow stronger as an emerging market in this region. And the UK is fully committed to work with the Indonesian government to help make that happen,” Razavi said as quoted by the British embassy in Jakarta website
Key findings include: 
  • Emerging markets are viewed as sources of new consumer demand. 76% of investors see emerging markets as a source of new business growth.
  • Only one quarter of companies intend to rely on their existing products and services in emerging markets. Most companies intend to customise their offerings for new markets.
  • Indonesia has been selected as number two investment destination, beyond the BRICs, for 2010.
  • The top three markets for investors in the next two years are China (20%), Vietnam (19%), India (18%).
  • 71% of respondents agreed that emerging markets beyond the BRIC countries collectively offer an opportunity too big to ignore.
  • Companies are now prioritising a range of other countries alongside their well-established operations in the BRIC countries.
  • For many firms, emerging markets are increasingly familiar places. Nearly half of the respondents have been operating in one or more emerging markets for at least a decade and two thirds have been there for six years or more. Institutional knowledge of these countries is far higher than it was at the turn of the century.
  • Far more executives believe that the potential rewards far outstrip the risks within both the BRIC countries and other emerging markets. 52% expect growth prospects for their once-risky emerging markets business to be “significantly better” over the next two years.
  • Local companies in emerging markets are sought after for partnerships and alliances. Despite a greater ease with the risks of new places, the need to tap into local knowledge and contacts quickly remains strong.

Corruption, Maze of Rules Hinder British Investment

Jakarta Globe, Muhammad Al-Azhari | August 04, 2010

Jakarta. Indonesia could be a prime target for UK investment if it cleared some pitfalls, British Ambassador Martin Hatfull said on Tuesday.
The government must overcome corruption, confusing regulations and impediments like the negative investment list if it wanted to realize its full potential as an investment magnet, he told the Jakarta Globe.
Hatfull said Britain under the leadership of Conservative coalition Prime Minister David Cameron was trying to rebuild the economy by shifting its focus “away from Europe to more emerging markets.”
According to the Indonesian Investment Coordinating Board (BKPM), British investment topped $587 million in 2009, after falling to $513 million in 2008 due to the global economic crisis. The figure in 2007 was $1.69 billion.
Hatfull, who was posted to Indonesia two years ago after a stint in Japan, said it was vital for Indonesia to tackle corruption if it wanted to expand trade with Britain.
This was especially pertinent as the UK was preparing a law that would prosecute British firms found to have engaged in corrupt business practices overseas.
“It will make all British companies look much harder at any market to see what the risks are,” the envoy said.
He said most foreign investors were reluctant to deal with the Indonesian judicial system because they did not trust it.
“A British guy from one private-sector business who has experienced working in Indonesian said: ‘Do not get involved in litigation in Indonesia — stay out of the courts.’ Clearly there’s a problem that needs to be resolved.
“There are lots of British companies interested in investments,” because Indonesia offers real growth opportunities, but they needed reasons to be confident, Hatfull added.
He welcomed Indonesia’s recent move to ease limits on foreigners wanting to invest in certain sectors but said it was merely a small adjustment that did not significantly enhance business opportunities.
Indonesia has relaxed investment restrictions in the health care, agriculture and creative sectors, but still holds up walls for foreigners hoping to tap into sectors like telecommunication towers, broadcasting, education and alcoholic beverages.
The ambassador also pointed out inconsistencies with halal, or permissible, and haram, or forbidden, food requirements, as well as general regulations for setting up food production operations.
The country’s highest authority on Islamic affairs, the Indonesian Council of Ulema (MUI), is reportedly planning to require all imported halal foods to obtain its certification before it can be sold in the country.
Only about 20 percent of products that are now sold in Indonesia are certified as such by the council.
Hatfull said the problems faced by those wanting to enter the food business reflected the rest of the country’s regulatory nuisances.
Compared to the rest of Southeast Asia, the ambassador said “Indonesia is by far the strictest in terms of the numbers of different pieces of information” required to enter the industry.

Investment in Indonesia Increases: Government

Jakarta Globe, July 26, 2010

Office buildings in Jakarta. Domestic and foreign investment in Indonesia increased 40 percent in the second quarter of 2010 from the same period a year ago. (JG Photo/ Afriadi Hikmal)


Jakarta. Investment in Indonesia, including from both foreign and domestic investors, rose 40 percent in the second quarter of 2010 from the same period a year ago, said the country’s investment chief Gita Wirjawan on Monday.
The increase could show that strong economic growth and increasing consumer demand in Indonesia is leading more investors to make longer-term bets on the country, which has struggled to attract as much foreign direct investment as regional peers.
“Q2 investment growth rose more than 40 percent in total, year-on-year. Both domestic and foreign investment grew significantly. Investor confidence to our investment climate improved,” Wirjawan said after a meeting of government ministers.
He did not give the total investment level or a breakdown between foreign and domestic investment, but said further details would be released this week.
The state investment agency forecast that foreign direct investment would rebound 15 percent this year, after falling 27 percent to $10.8 billion last year.
Foreign investors staked $3.8 billion in Indonesia in the first quarter of 2010.
Indonesia has so far failed to match the levels of direct foreign investment attracted into regional powerhouses China and India, as investors are often put off by red tape, rampant corruption, and a shaky legal system.
Investors have, however, poured into the country’s markets in the past year, with the stock index and net foreign ownership of local debt both hitting record highs this month.
Reuters

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Japan rating agency ups Indonesia to investment grade

Reuters, HONG KONG | Tue Jul 13, 2010 7:33am EDT

July 13 (Reuters) – Japan Credit Rating Agency (JCR) raised Indonesia’s sovereign debt rating to investment grade in a move that could be followed by major rating agencies, reflecting growing confidence in the management of Southeast Asia’s largest economy.

The agency raised Indonesia’s foreign currency rating by a notch to BBB-minus and said the country could “sustain modest economic growth while maintaining macroeconomic stability and fiscal soundness in the years to come.”

The move could be a boost to Indonesia’s plan to issue samurai bonds toJapan’s debt investors who, although yield-hungry, are cautious of junk-rated issuers.

In February, Philippines issued samurai bonds, or yen bonds issued in Japan by non-Japanese entities, to raise 100 billion yen, much below the initial target of $1 billion. Philippines is rated BBB-minus by JCR.

 (Reporting by Umesh Desai; Editing by Hugh Lawson)

Red Tape Blocks Clean Energy Investment in Indonesia: US

Jakarta Globe, Arti Ekawati, May 26, 2010

US Commerce Secretary Gary Locke, right, and Coordinating Minister for People’s Welfare Agung Laksono, third right, examining tuna ready for export at the Muara Baru Port in Jakarta on Wednesday, the final day of the US official’s trade mission to Indonesia. (JG Photo/Yudhi Sukma Wijaya)

Red tape, conflicting regulations and legal uncertainties keep US companies from investing in clean-energy projects in Indonesia that could help reduce carbon emissions and fight global warming, US Commerce Secretary Gary Locke said during his visit on Wednesday.

Locke said US companies were eager to invest in Indonesia, but a lack of government transparency was a huge obstacle, making it difficult for businesspeople to under stand the country’s regulations.

“As I have discussion with American business leaders, one of the most concerning thing to them is lack of government transparency. They do not know how regulations are implemented or how the government comes up with its decisions,” Locke said at the end of a two-day trade mission to Jakarta.

He said businesses “frequently don’t know what the rules are, how they will be enforced or how decisions are made,” while “bureaucratic bottlenecks” can caused development projects to be delayed for years.

“Especially in the energy sector, where upfront capital investments can be in the hundreds of millions of dollars, this uncertainty has the potential to inhibit foreign corporate investment here,” he said.

Locke arrived in Jakarta with representatives of 10 US companies eager to invest in clean energy, especially in geothermal power plants, solar plants and wind power.

They included General Electric, Lockheed Martin, Osh kosh, Peabody Energy and Pratt & Whitney Power Systems. They met with business leaders and government representatives during the mission.

The trip comes ahead of a visit to Indonesia next month by US President Barack Obama, who is expected to sign a comprehensive partnership with President Susilo Bambang Yudhoyono covering trade, investment and the environment.

Indonesia has enormous potential in geothermal resources, as about 40 percent of the world’s geothermal reserves can be found in the country. So far, only about 4 percent of that potential has been explored.

However, Indonesia is believed to be the world’s third-largest emitter of greenhouse gases, largely because of large-scale deforestation.

Yudhoyono has promised to reduce greenhouse-gas emissions by at least 26 percent by 2020, and 41 percent with foreign assistance. His energy policy calls for increasing the production of renewable energy from 7 percent of generating capacity to 15 percent by 2025, while sharply boosting supply.

Locke said Indonesia had the potential to be a major player in clean energy, and to help the world fight climate change while providing the fuel for the global economy.

He said the world’s demand for energy was expected to double by mid-century. With conventional energy, people needed to build at least two power plants with 1,000 megawatts of capacity every week to meet demand. Therefore new and innovative energy sources were needed.

“This new energy has to be clean to avoid catastrophic climate change and it has to be cheap to keep our economies growing,” he said.

But Locke said Indonesia’s energy and development goals were being undermined by such regulations as the Negative Investment List (DNI), which limits foreign investment in power plants producing less than 10 MW.

“I have been told Indonesia is working to amend this law, and I do hope the government will continue to roll back this and other anticompetitive regulations,” he said.

Last year, Obama signed the Recovery and Reinvestment Act, a stimulus package that includes investment in clean energy of as much as $80 billion.

“Ultimately, all the United States is seeking is a level playing field for its companies, where the cost and quality of their products determine whether or not they win business,” Locke said.

“I have been discussing these and other concerns with my Indonesian counterparts. As you might expect, we do not always agree.”

Indonesia Losing Luster for Oil & Gas Investors: Survey

Jakarta Globe, Yessar Rosendar, April 29, 2010

International oil and gas executives have growing reservations about investing in Indonesia, according to a survey by PWC. (Antara Photo)

The “shine” is wearing off of Indonesia as an investment destination for international energy companies, despite the global energy rush and the country’s massive reserves of oil and natural gas, according to a survey released by PricewaterhouseCoopers on Thursday.

According to PWC, executives from oil and gas companies cited rising concerns about uncertainty over cost-recovery legislation, corruption, interference by government agencies, the sanctity of contracts and the general regulatory structure of the upstream and downstream oil and gas industry. The executives said they were increasingly skeptical about the chances for positive change in these five areas in the near term, according to PWC.

“Indonesia still regarded as attractive. However, the shine seems to be wearing off,” said William Deertz, lead technical adviser for energy, utilities and mining practices at PWC Indonesia. “There is a shift of sentiment, survey participants seems less optimistic in near term improvement, which is not good for investment.”

PWC surveyed 317 executives from 76 foreign and domestic oil and gas companies. The findings come at a time when the government is struggling to find ways to reverse the gradual decline in national oil production.

Once a member of the Organization of Petroleum Exporting Countries, Indonesia is now a net importer of crude, and is struggling to reverse steadily declining output, targeted this year at 965,000 barrels a day.

The government provided some measure of relief and certainty to investors this week when it announced it would not proceed with a plan to limit the amount of expenses oil and gas companies could claim under the cost-recovery process.

The unsettled regulation and the issue of limits has been a major concern for investors.

“Cost-recovery that changed midway is unacceptable,” Deertz said.

Ron Aston, president of the Indonesian Petroleum Association, which represents almost all oil and gas producers in the country, said Indonesia was still attractive as long as the investment climate remained positive. Indonesia still has basins that contain large reserves, he said.

“The fundamental thing for the oil and gas industry across the world is geological prospectivity, so it’s certainly attractive,” Aston said.

However, the government needed to take steps to make the sector more attractive to international investors, he said.

Over the next few years energy companies are set to invest around $1 billion to explore the blocks around the Makassar Strait, even though it was uncertain whether oil was in the area, Aston said, adding that this highlighted the high level of risk involved.

“It’s a staggering fact that they invest billions of dollars just to see if something is there.”

The government should complete the cost-recovery regulation very soon, because it will enhance production activities in oil and gas, he said.

“There is a misconception. Cost recovery is not a reimbursement, it’s government investment so that production can increase,” Aston added.

Edy Hermantoro, director of upstream oil and gas at the Energy Ministry, said Indonesia still has enormous oil and gas potential. According to ministry data, in January 2009 the country had potential oil reserves of 3,695.39 million barrels of oil and proven reserves of 4.303.1 million barrels of oil.

Investment Funds

Foreign fund flows into Indonesia and the major mutual and exchange traded investment funds.


As the JSX Composite Index has continued pushing into record territory just above the 2900 mark, seeing it ranked as top yearly performer out of 20 Asia-Pacific benchmarks, there is concern that the market is in a greatly over-valued bubble, ready for a burst with disastrous consequences.

Jakarta Composite
12 month performance of JCI

Much of the rise in values has been caused by an influx of foreign funds, with some bankers and officials calling for controls on capital inflows to be put in place as a brake.

Perry Warjiyo, a former Executive Director of the IMF and now head of Bank Indonesia economic research and monetary policy division agrees that the market is considerably over-valued, but says that Bank Indonesia will persist in its policy of no restrictions on inflows, even while BI is becoming increasingly “cautious” about the volume of money coming in.

Foreign Mutual & Exchange Traded Funds

Meanwhile of the most well-known foreign and offshore funds in Indonesia, these sectors of the market attract the most interest:

  • Financial (20%)
  • Energy (15%)
  • Consumer Staples (10%)
  • Telecommunications (10%)
  • Materials (10%)
  • Industrials (10%)
  • Consumer Discretionary (8%)
  • Utilities (5%)
  • Money Market (5%)

And the most commonly owned companies in rough order of precedence:

  • Telkom
  • Astra International
  • Perusahaan Gas Negara
  • Bank Central Asia
  • Bank Rakyat Indonesia
  • Semen Gresik
  • Gudang Garam
  • Adaro Energy
  • Bumi Resources
  • United Tractors
  • Unilever Indonesia
  • Bank Mandiri
  • Tambang Batubara Bukit Asam

Fund Performance

The major mutual and exchange traded funds focused on Indonesia. Given that most invest in the same sectors and companies, their returns largely mirror each other. In all the charts below the blue line is for the actual fund, the red line for the fund’s benchmark index.

Allianz RCM Indonesia

Allianz RCM Indonesia

Cumulative % performance of Allianz RCM Indonesia fund:

YTD 3m 6m 1y 3y 5y
14.06 6.46 14.96 153.14 51.00 134.97

Fidelity Indonesia

Fidelity Indonesia

Cumulative performance of Fidelity Indonesia fund:

YTD 3m 6m 1y 3y 5y
15.87 7.03 16.83 113.73 70.78 196.87

JP Morgan JF Indonesia

JF Indonesia

Cumulative performance of JF Indonesia fund:

YTD 3m 6m 1y 3y 5y
16.50 7.23 17.58 125.14 74.96

Market Vectors Indonesia ETF

Market Vectors Indonesia

Cumulative performance of Market Vectors Indonesia ETF:

YTD 3m 6m 1y 3y 5y
15.88 7.98 15.70 121.07

Investment Funds is brought to you by Indonesia Matters, which also features listings of Indonesia hotels, like Kuta hotels, Ubud hotels, hotels in Jakarta, and more.

Red Tape Removal Aims to Lure Chinese Investment to Indonesia

Jakarta Globe, Yoga Rusmana & Liza Lin, April 19, 2010

Energy investment helps, but the government would prefer Chinese aid on infrastructure. (Antara Photo)

The nation’s efforts to streamline permit processes may entice China to help the government double foreign participation in infrastructure projects by 2014, said Gita Wirjawan, head of the Investment Coordinating Board.

“I have reasons to be optimistic with what we’re doing,” Gita said. “Now you don’t have to go to 15 ministries for a sign-off to get your permit, you can just come to my office.”

Foreign direct investment into Southeast Asia’s biggest economy may increase to between $30 billion and $35 billion over the next four years, compared with $14 billion last year, Gita said in Jakarta. Investment is targeted to grow by 15 percent in 2010, he added.

“I’ve been in discussions with local partners and their Chinese conglomerates for toll-road concessions and also for power-generation concessions in Sumatra, Java and Kalimantan,” Gita said.

“I think a lot of Chinese companies are very much interested in infrastructure, on top of the fact they have been and continue to be interested in natural resources in Indonesia.”

The country aims to more than double spending on bridges, roads, seaports and airports to support President Susilo Bambang Yudhoyono’s economic-growth target of 6.6 percent average per year over the remainder of his second term, which ends in July 2014.

Of the targeted $150 billion to $160 billion, the government would spend $50 billion to $60 billion and the rest would come from private capital, Gita said.

Japan, South Korea, the Middle East, European countries, the United States and the members of the Association of Southeast Asian Nations are also seeking opportunities to invest in Indonesia, he said.

The country expects to see more public-private partnership investments with Chinese companies, Trade Minister Mari Elka Pangestu said last week.

“We’re open for business and if you don’t come now, you’re going to miss the boat, because Indonesia is a growing market,” Mari said. “We’re growing rapidly and we’re talking about a large market.”

China and Indonesia agreed on several projects during a visit by Chinese Commerce Minister Chen Deming to Yogyakarta on April 3.

“Investment in Indonesia should not just be about natural resources; it should involve the creation of infrastructure whether soft or hard,” Gita said.

“We have a lot of islands but don’t have as many roads,” he said. “The government has taken a view in the next five years to build 20,000 kilometers of roads, which I think will significantly connect people in different parts of the country.”

The government is also committed to elevate electrification by adding 1,000 megawatts of power-generating capacity through a partnership between PT Perusahaan Listrik Negara and local and foreign investors, Gita added.

“For all the deals, I think we’re looking at about $4 billion to $5 billion with the Chinese companies in terms of roads, power generation, and energy,” Gita said.

In the mining sector, PT Aneka Tambang, Indonesia’s second-biggest metal company by market value, plans to team up with a Chinese partner to build a $1.2 billion alumina smelter, Gita said, declining to identify the Chinese company.

The infrastructure and Aneka’s smelter deals will be signed when Chinese Prime Minister Wen Jiabao visits Jakarta, he said. Wen postponed a planned visit to Indonesia last week after the earthquake in his nation.

China’s investment in Indonesia has totaled $265.5 million in the past four years, mainly in infrastructure, according to a Trade Ministry statement posted on its Web site on April 1, which cited data from the investment board. Two-way trade more than doubled to $25.5 billion in 2009 from $12.5 billion in 2005.

Bloomberg

Taiwanese Groups Commit to Big Indonesian Projects

Jakarta Globe, Arti Ekawati, April 15, 2010

President Susilo Bambang Yudhoyono, UN official Noeleen Heyzer, center, and Coordinating Minister for the Economy Hatta Rajasa at an infrastructure conference in Jakarta on Thursday. (Antara Photo/Pandu Dewantara)

Two Taiwanese companies plan to invest billions of dollars in Indonesia’s petrochemical and biofuel industries, Coordinating Minister for the Economy Hatta Rajasa said on Thursday.

He said that Taiwan-based oil and gas firm CPC Corporation planned to build a $2.8 billion petrochemical center in Kalimantan, adding that the company had yet to decide exactly where to establish the project.

“They’re looking for the perfect location for the petrochemical center,” Hatta told reporters on the sidelines of the Asia-Pacific Ministerial Conference on Public Private Partnerships for Infrastructure Development 2010.

He said CPC chose Kalimantan because of the availability of raw materials for the petrochemical project and the rapid development in the region.

He added that CPC planned to team up with a local partner, whether a private company or state-owned enterprise such as oil and gas company PT Pertamina, to develop the project. Teaming up with Pertamina would help ensure the supply of the necessary raw materials.

Hatta said that another Taiwanese company is seeking to develop a jatropha plantation to produce biofuel. He said the company has already obtained the necessary license from the local administration to develop a 100,000 hectare jatropha plantation in East Kalimantan. He did not disclose the name of the company nor the size of the planned investment.

Hatta said the Taiwanese investor asked the government to make the plantation area a special economic zone (SEZ), which among other benefits would allow the investor to be exempted from paying duties and taxes when importing equipment and raw materials.

He added that several investors from Japan, South Korea and China had also asked for similar treatment before investing in various business sectors in Indonesia.

“Many investors have expressed an interest in developing businesses here under the SEZ system,” he said.

He said the requests were in line with the government’s plan to develop several SEZs. For instance, the SEZ in East Kalimantan would be focussed on energy-related industries such as biofuels and petrochemicals.

Meanwhile, the SEZ in Sumatra will focus on oleo-chemicals as the region has vast palm oil plantations.


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