Chinese Eye $50b Stake in Indonesia

Agencies & Jakarta Globe, June 28, 2010

China is claiming it wants to boost investment in and trade with Indonesia to $50 billion by 2014.

China is pledging to increase its direct investment in Indonesia, specifically in infrastructure, and to boost trade between the countries so that together the value reaches $50 billion by 2014, the top economics minister has said.

That figure would dwarf current levels of investment: the Trade Ministry in April estimated investment from China at only $265.5 million over the past four years, mainly in infrastructure, and two-way trade at $25.5 billion in 2009.

Hatta Rajasa, coordinating minister for the economy, reported that President Susilo Bambang Yudhoyono and a number of his economics ministers met Chinese President Hu Jintao on the sidelines of the Group of 20 meeting in Toronto over the weekend, and discussed a plan to improve strategic economic and trade partnerships, alongside deepening defense cooperation and international affairs under the framework of the United Nations and the G-20 economies.

Yudhoyono said: “As we know, cooperation and relations between Indonesia and China have been very good and continue to develop. We hope the strategic partnership as well as cooperation and friendship will grow further.”

The two countries have a good relationship, the president said, expressing hope the meeting would help reinforce that. “China is an important partner and a good friend of Indonesia. We hope the cooperation will continue,” he said. “I want to hear anything we can do [to build it] in the future.”

Indonesia’s $514 billion economy needs over $200 billion in investment each year, much of it going toward overhauling its ailing infrastructure. The government hopes 70 percent of infrastructure development in the next five years will be financed and carried out by the private sector. Thus, the government plans to continue to encourage cooperation with private parties, Yudhoyono said.

Xinhua news agency reported Hu said China attached much importance to boosting its strategic partnership with Indonesia. He specifically supported Chinese companies taking part in major infrastructure development projects in Indonesia.

However, China’s investments seldom come without conditions. Deputy Public Works Minister Hermanto Dardak said recently in Jakarta that four infrastructure projects funded with loans from China would likely be carried out fully by Chinese contractors.

“That is what the Chinese ambassador has said,” Hermanto said. “The packages will be 100 percent carried out by Chinese contractors. We are trying to ask for the involvement of local contractors in the projects.” He said his office would continue to negotiate so that local contractors could be involved in the projects.

Hu also said the two sides should maintain exchanges, welcoming Yudhoyono to visit China for the Shanghai World Expo and the expo between China and the Association of Southeast Asian Nations, Xinhua said.