China to Plow $6.6b Into Indonesian Infrastructure

Jakarta Globe, Camelia Pasandaran | November 08, 2010

Jakarta. A high-level Chinese trade and investment delegation wrapped up a four-day visit to Indonesia on Monday by signing an agreement to invest $6.6 billion in various Indonesian infrastructure and development projects.

In October, Vice President Boediono, seen in this file
photo, visited Beijing to meet with Premier Wen Jiabao|
and others to discuss investment. These negotiations
appear to have paid off as the Chinese government has
pledged $6.6 billion dollars worth of infrastructure
investment. (SP Photo)

Coming on the eve of US President Barack Obama’s state visit, the news emphasized growing ties between Beijing and Jakarka in recent years.

The timing seemed an attempt to upstage the American president.

Privately, some US business analysts have complained that the high-profile Obama visit is long on politics and short on economic initiatives at a time when American companies seem to be at a regulatory disadvantage in Indonesia over issues ranging from logistics services to shipping and pharmaceuticals.

Monday’s announcement also follows long-standing lobbying efforts by Indonesian officials to secure infrastructure funding from various partners.

In October, officials announced a commitment by Japan to invest more than $50 billion in infrastructure here over the next 15 years.

President Susilo Bambang Yudhoyono has pledged to spend $150 billion over the next five years to boost infrastructure in areas such as seaports, airports, water and roads, to boost growth to reach his pledge of 7 percent per year by the end of 2014, at the end of his second-five year term.

“The $6.6 billion will be given over a certain period of time,” Zhang Zijun, China’s deputy foreign affairs minister, said at the vice presidential palace.

“Part of the $6.6 billion is for Chinese banks to offer financial support for infrastructure projects in Indonesia.”

Zhang said further discussions would be held with the Indonesian government through the Ministry of Trade to discuss project implementation.

The infrastructure investment pledge, Zhang noted, came as a result of numerous discussions held between Indonesian and Chinese leaders.

In October, Vice President Boediono visited Beijing to meet with Premier Wen Jiabao and others to discuss investment, with both countries pledging a significant increase in deals.

“We have long experience in infrastructure development, and now we have the budget as well as the technology,” Zhang said.

“The investment will play an important role in Indonesia and will strengthen cooperation between China and Indonesia.”

Some of the projects that have been agreed between the two nations are for coal mine development in Kalimantan, electric power generation in Central Java, palm oil plantations and a cement factory.

Zhang said Indonesia has enormous potential and that China, given its massive population and emerging market, is a great customer for Indonesia. “We hope that businessmen from both nations will intensify their cooperation,” Zhang said.

“We hope to see further developments in economy and trade to support the economies of both nations.”

This year marks the 60th anniversary of diplomatic relations between Indonesia and China, although relations were suspended by Jakarta for ideological reasons for more than 20 years during the Suharto era. In 2005, both nations signed a strategic partnership.

Indonesia also recently asked China for permission to open a Bank Mandiri branch in Shanghai.

Zhang announced on Monday that the government had agreed to give the permit.

“We hope it will help Indonesian companies in China,” Zhang said.

In addition, Wu Bangguo, the head of China’s National People’s Congress, announced a 10 million yuan ($1.5 million) donation for disaster relief, in addition to Chinese government donations of medical assistance, medicine and food.