French Firms Eye $10b of Investment in Indonesia

Jakarta Globe, Dion Bisara & Shirley Christie | February 25, 2011

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Indonesia could see upwards of $10 billion in investment from an unexpected source, ministers said, as French companies expressed interest in participating in infrastructure and energy projects.

Finance Minister Agus Martowardojo walks together with
French Economy, Finance and Industry Minister Christine
Lagarde before their meeting in Jakarta on Friday.
(AFP Photo/Bay Ismoyo)

French investment only played a minor role in the country in recent years. According to data from the Investment Coordinating Board (BKPM), its investment in Indonesia only amounted to about $307 million from 2006 to 2009.

Hatta Rajasa, the coordinating minister for the economy, met with French Minister for Economic Affairs, Finance and Industry Christine Lagarde and a delegation of 40 French business leaders on Friday. It is the first visit made by France at a ministerial level in 14 years.

He said French businessmen planned to invest $175 million in a project called the Bandung Metropolitan Railway, a network of railways connecting Cicalengka and Padalarang in the West Java city.

Hatta also said that French companies would participate in a $5 billion nickel smelter project in Halmahera, North Maluku. “They are also interested in geothermal and environmentally friendly industries,” he added.

In a separate announcement, Finance Minister Agus Martowardojo said Eramet, a French firm, would work with Japanese firm Mitsubishi and state-owned miner Aneka Tambang on the Halmahera project.

“There are two investment agreements that have materialized with the French in a short amount of time,” he said.

Lagarde confirmed the intention of French companies to boost their investment in Indonesia, although she declined to provide details.

The French chief executives and chairmen who met with Hatta came from sectors such as energy, transportation, water treatment, weather forecasting, railroad development, construction and retail, she said.

“Those companies are determined to improve investment,” she said, adding that the deals ranged in the billions of euros.

Last week, L’Oreal Group, a Paris-based cosmetics and beauty company, declared its plan to construct its largest factory in Indonesia. The new factory will be built at the Jababeka industrial estate in West Java and is expected to be operational by the end of this year.

The 200,000 square meter plant will be able to produce 300 million units annually by next year, with maximum production forecast at 500 million units.

Apart from boosting investment, Lagarde said, the French want to double the growth rate of trade between the two countries. She said the growth rate of trading, which is currently at 5 percent, is too small.

Last year the total value of two-way trade between the two countries stood at $2.5 billion.

France is the 23rd-largest importer of Indonesian commodities. The main exports to France include electrical transformers, static converters, furniture, cocoa butter, fat and oil.

Indonesia is the 13th-largest importer of French commodities, mainly bulldozers, excavators and other heavy machinery.

Indonesia registered a deficit of $762.9 million in trade with France in 2010. The deficit was spurred by declining exports of commodities and items such as natural rubber, paper pulp, footwear and radio and telephone parts.