From Aceh to Papua: Jokowi’s Infrastructure Visions

Jakarta Globe, Yanto Soegiarto, Apr 19, 2015

Cyclists crossing the Kelok 9 flyover in Payakumbuh, West Sumatra on
 July 3, 2013. GlobeAsia Both local and international investors have turned
 their attention to President Joko Widodo’s ambitious plans. (JG Photo/Afriadi Hikmal)

The building of infrastructure in Indonesia is the key to understanding the extent of progress in the country.

During the World Economic Forum on East Asia, a question will be asked: Is Indonesia doing enough to show the public and investors they can trust that infrastructure development is moving ahead toward growth and becoming competitive in the region.

Indonesia, meanwhile, has been given the opportunity to showcase development and attract investment while playing host to the WEF event.

The administration of President Joko Widodo has set an infrastructure target, to be achieved by 2019, in which 24 seaports, 15 airports, power plants with a capacity of 35,000 megawatts and nine million hectares of agriculture land will be developed.

This was reiterated by WEF Indonesia committee member and Trade Minister Rachmat Gobel in a recent briefing to ambassadors and prominent business leaders.

The administration is confident in its programs to build dams, toll roads and railways to boost the local economy and raise the living standards of local communities.

Joko traveled to Aceh in March to inaugurate a number of projects in the area.

In North Aceh, he presided over the groundbreaking of the Keureuto dam — the largest to be built this year and expected to increase agricultural output in the region.

The construction of the dam will allow the irrigation of other regions which are in a deficit of rice production.

The dam is being built by state-owned construction companies Brantas Abipraya, Hutama Karya and Wijaya Karya.

It will hold 167 million cubic meters of water and irrigate 4,768 hectares of agricultural land. The reservoir will also prevent flooding in the downstream region.

Joko then moved on to Sabang, Indonesia’s most western tip, where he jump-started the construction of the Seunara reservoir, which has been stalled for more than nine years due to land clearance issues.

The issue was eventually solved as Joko negotiated with over 200 local residents who had been holding out for a larger compensation package.

“After talking to the residents, they have no problem. We have the budget, what’s important is the reservoir will be completed this year and function,” said Joko, who was accompanied by Aceh Governor Abdullah Zaini and Public Works and Housing Minister Basuki Hadimulyono.

The reservoir will provide water and help the local community boost income through the development of water tourism and aquaculture.

Veteran infrastructure expert Scott Younger says the president’s move to resolve the stalled Seunara project provides encouragement.

“He has quickly recognized the serious issue of lack of water storage across the country and acted on it. It is also positive that he has inaugurated the long-defined Keureuto project.

“With this early action it would seem that the president will certainly be trying to meet the target of 13 dam projects for this year,” Younger said.

But, he says, the longer-term concern is the lack of engineering and construction industry capacity to carry out all the work planned in the administration’s term, not just in water storage but across the infrastructure space as a whole.

Undaunted, the president pressed on to Lhokseumawe, the home of Kertas Kraft Aceh.

The company stopped production years ago, but the president has voiced he would like to see it running again as to contribute to the local economy.

“For more than 15 years I have wanted the company to be in operation again. There is adequate supply of raw materials from the forests which can be managed by the local people.

“We can plant fast-growing sub-tropical trees such as albizia or pine and we don’t have to wait 15, 20 or 30 years,” he said.

The president is no stranger to Aceh. He spent his early working years there and his first child was born in the province.

“Ibu Jokowi and I are very familiar with Aceh,” he said.

In Arun, just north of Lhokseumawe, the president launched the Arun regasification and storage terminal, marking a milestone in the country’s efforts to shift its energy consumption toward gas.

The plant sits on the now-depleted wells of Indonesia’s first natural gas resource, now run by Perta Arun Gas, a subsidiary of state-owned Pertamina Gas.

“The facility will regasify LNG sent from Kilang Tangguh in Papua,” Pertamina Gas president director Hendra Jaya explained, adding that the plant will provide the state electricity company with gas to power its generators in Belawan, Medan.

Joko’s initiative in Aceh marks a significant move in the nation’s infrastructure building, no president before him has had a similar strategy.

Dams and roads

This year, the administration is at work building at least 13 of the projected 49 dams it wants to construct over the next five years. The cost of the 13 dams will be at least Rp 12 trillion ($934 million), excluding land-clearance costs. The projects will be funded by the state budget.

Rising transportation and logistics costs have also won the attention of the government.

Many toll roads are to be constructed and work on the 2,700-kilometer Trans-Sumatra toll road, which will link Aceh and Lampung, is due to start this month.

The government has assigned Hutama Karya to undertake the project, as it is the only large state infrastructure firm not listed on the stock exchange.

Construction of the road has been estimated to cost Rp 300 trillion, with the government asking other state enterprises and local governments to cooperate without reservation.

The first stage of the project is to build 1,300 kilometers of road. Hutama Karya has been given an additional injection of funds by the government to get the job done.

Earlier Hutama Karya and other state enterprises, including banks, were ready to finance the project without relying on the state budget but the government deemed it would create too much of a burden.

During the previous administration of president Susilo Bambang Yudhoyono, the project was also to be managed by Hutama Kaya. The project proved difficult to get started due to financial concerns with investors reluctant to commit to such a long-term project.

The focus then turned to building the Medan-Binjai toll road, but that plan has also changed, with the focus now on the link between Bakaheuni in Lampung and Palembang, the capital of South Sumatra.

The April ground-breaking date was chosen at a limited cabinet session presided over by Joko, Vice President Jusuf Kalla, Public Works Minister Basuki Hadimulyono, State-owned Enterprises Minister Rini M. Soemarno and Finance Minister Bambang Brodjonegoro.

An important part of the decision was the revision of the previous presidential decree number 100/2014 which put an emphasis on land acquisition as a priority.

In a recent development, Rini revealed that four state enterprises — Hutama Karya, Jasa Marga, Waskita Karya and Wijaya Karya — will be tasked to jointly commission the project.

“The project will be done in sections. For instance Waskita Karya will do section 1, Wijaya Karya section 2 and so forth, Part of it will hopefully be completed in 2018,” she said, adding that some sections of the road will be commissioned by local governments involving the private sector.

Railway development

Following Joko’s pledge last year to develop railways in Papua, the Transportation Ministry will allocate at least Rp 105.6 trillion over the next five years to build railway networks beyond Java.

“We have evaluated the budget needs of the Directorate General of Railways at the ministry for the next five years and according to the new master plan pushed by the president, completion of the project is slated for 2019,” Director General for Railways Hermanto Dwiatmoko said.

In business terms, railway development beyond Java can be complex because of feasibility and financing, and as a result funding for railway development has to come either from the state budget or through public-private partnership, he said.

The plan may appear ambitious but Hermanto insisted that the project will begin in 2016.

It will contribute to what will become a total national railway network stretching 3,258 kilometers and be the longest railway project since the Dutch occupation of Indonesia.

Meanwhile, a feasibility study for the construction of the Trans Papua Railway has already begun. The new railway track will span 595 kilometers connecting Sorong and Jayapura.

Home Affairs Minister Tjahjo Kumolo said that development outside Java is one of the president’s priorities.

“There are many regions and border areas which are still untouched by infrastructure development.

“The president is committed to developing the eastern part of Indonesia where infrastructure is less developed.

“We at the Ministry of Home Affairs have reached a consensus with the Ministry of Public Works to support and develop infrastructure mainly in Papua, East Nusa Tenggara and the Kalimantan border areas,” he said.

House Commission V members who have visited Papua to see the prospective railway plan say they back the government’s initiative.

They have also encouraged the people of Papua to support it.

At the local level, regional officials have discussed the railway project with the central government but still have questions about the source of finance.

“We will have certainty on that in one or two months,” said regional secretary Ella Loupatty.

“We think that the project will begin from Sorong in West Papua and connect the Sarmi district in Papua province. If the project is realized, the distribution of goods will be easier and prices will go down in many areas.”

Hermanto added that he had asked regional officials to help in the process of land clearance, which poses one of the major hurdles to any infrastructure project.

He believes it is feasible to complete the Papua railway project within five years.

“We expect the project to be expedited although we note that any infrastructure development in Papua is not easy. But, we can’t delay it,” he said.

Higher commodity prices

Without the development of better infrastructure in the area, the price of cement could go as high as Rp 2 million for a 50 kilogram sack, while basic commodities such as sugar could cost between Rp 15,000 and Rp 50,000 a kilogram, many times over the price for such staples on Java.

Commenting on the rail plans, Younger, the infrastructure expert, says the target dates are highly optimistic.

“While railways must be part of the transportation infrastructure build-out, an emphasis for off-Java railway construction seems difficult to reconcile,” he says.

“There is still much to do in rail in Java and especially around the main urban centers, such as Jakarta and for fast rail links between the major cities. Railways make sense when there are many people and/or a large volume of commodities to transport.

“Java and off-Java highly-populated centers, such as Medan, fill the first criterion and off-Java in certain specific locations for the movement of commodities.”

And, he adds, the public-private partnership concept has been around for more than a decade, but a workable model is still to be found.

More needs to be done to encourage private investment.

Meanwhile, a number of countries in the East Asia region such as Singapore, Japan, and China have expressed interest to invest power plants projects in Indonesia, according to the Investment Coordination Board (BKPM).

The BKPM has received 12 new applications for investment permits from foreign investors to build power plants worth $8.9 billion, or around Rp 116 trillion.

It’s not just foreign investors looking towards Indonesian infrastructure — many domestic investors are interested as well.

BKPM chairman Franky Sibarani said that his office has also received applications for investment permits from 17 local investors.

GlobeAsia and the Jakarta Globe are media partners of the World Economic Forum on East Asia. Parts of this article originally appeared in the April issue of GlobeAsia.

GlobeAsia

Indonesia Passes Land Acquisition Bill

Jakarta Globe, December 16, 2011

Indonesian members of parliament approved the final draft of a long-awaited
 land bill on Wednesday that investors hope will speed up land acquisition for
 government infrastructure projects in Southeast Asia’s biggest economy.
(Antara Photo)     

         

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Jakarta. Indonesia’s House of Representatives on Friday approved a long-awaited land acquisition bill investors hope will give a big boost to government infrastructure projects in Southeast Asia’s top economy.

The bill is an attempt to break the bottleneck in infrastructure development that has long been seen as holding back growth in Southeast Asia’s top economy.

It also presents major investment opportunities in a country where roads, ports and airports are overloaded.

The House, also known as the DPR, on Wednesday signaled it would pass the bill. 

A day later, Fitch Ratings gave Indonesia an investment grade rating, which could act as a spur to much-needed investment. 

Fitch had cited weak infrastructure as one reason why it had delayed the upgrade.  

The controversial bill was passed despite a barrage of interruptions from members of the 560-strong parliament.

Shares in Indonesian construction, property and toll road firms have rallied this week on hopes the bill would be passed.

Bankers say the delay in passing the bill has been holding up the dispersal of loans to companies for infrastructure development this year.

The main toll road operator, Jasa Marga had described the impact of the delay on its business as like a race car waiting for a track.  

Sucorinvest sees the bill as positive for firms such as PT Wijaya Karya, PT Citra Marga Nusaphala Persada and PT Adhi Karya. 

Though the bill only applies to government projects, it is likely to benefit privately operated projects on government-bought land.

The government is relying on about $150 billion of private investment between 2010 and 2014 to overhaul its roads, railways and ports.

Without better infrastructure, analysts say the country’s growth may start to slow because of capacity constraints. 

Human rights groups say the bill disregards traditional land rights and could lead to more conflict over land and forced expropriation of property.

Reuters

Indonesia Legislators Give Green Light to Land Bill

Reuters

Slovakia to invest $1 bn in Indonesia

The JakartaPost, Mon, 10/10/2011

Slovakia was planning to invest US$ 1 billion in Indonesia, visiting Slovakia President Ivan Gasparovic told reporters on Monday in Jakarta.

He said the investment plan would be included in seven agreements due to be signed on Tuesday.

Gasparovic delivered the plan after meeting with President Susilo Bambang Yudhoyono in Merdeka Palace Jakarta on Monday.

“There are fields to be explored in the areas of trade, agriculture, electricity, power plant generators and heavy machinery,” President Gasparovic said.

President Yudhoyono said Slovakia planned to construct a cement factory in Central Java and West Papua, a tire factory in Banten and electrical power plants in Lombok (West Nusa Tenggara) and Batam (Riau islands.

“Indonesia has sent nine proposals to Slovakia. The proposals are in food and agriculture, renewable energy, trade and investment, banking, education, mass media, infrastructure and manufacturing, tourism and culture,” he said.

RI gets US$500,000 in assistance from ADB

Esther Samboh, The Jakarta Post, Jakarta, Mon, 09/19/2011

The Asian Development Bank (ADB) has announced plans to channel grants and loans to improve the Indonesian government’s capacity in developing infrastructure projects through public and private partnership (PPP).

“The technical assistance, amounting to US$500,000, provided by the government of Japan through the Japan Fund for Poverty Reduction (JFPR) will support the government in preparing PPP projects that are economically sound, financially attractive to private sector financiers and affordable to the government,” the Manila-based regional development lender says in a statement released Monday.

The technical assistance is planned to be implemented in 2011, with the National Development Planning Agency (Bappenas) as an executing agency and Sarana Multi Infrastruktur

state infrastructure fund manager being responsible for implementing the activities.

ADB’s technical assistance program is aimed at assisting developing countries in planning and executing projects that it finances with grants and loans, its website says.

“This will support the government’s objective in increasing the number and value of commercially attractive and sustainable PPP projects offered to the private sector,” ADB's principal infrastructure specialist Bob Finlayson said.

The government is seeking to mobilize about $140 million worth of investment in infrastructure over the next five years, of which 60 percent is to be sourced from the private sector. While the government has developed a number of PPP projects, they have not attracted significant market interest due to concerns over project design, preparations and implementation, the ADB statement says.

ADB Provides $100 Million for Rural Infrastructure, Sanitation in Indonesia

ADB, 8 Aug 2011

MANILA, PHILIPPINES – The Asian Development Bank (ADB) is providing Indonesia with a $100 million loan to finance community-driven projects that upgrade basic infrastructure in rural villages and improve sanitation services in poor urban neighborhoods.

The loan will expand ADB’s support for the National Program for Community Empowerment (PNPM Mandiri) for poverty reduction by providing direct assistance to poor communities.

While Indonesia has made significant progress in fighting poverty and achieving the Millennium Development Goals (MDGs), about 31 million people, many of them in rural areas, remain trapped in poverty. The causes of poverty include lack of access to basic services, absence of economic opportunities, limited access to capital, and poor rural connectivity and infrastructure.

About half of rural villages are not connected by asphalt road, and one in every ten villages are inaccessible at certain times of the year. In addition, only about half of the national population has access to improved sanitation. Consequently, some 30% of Indonesians suffer from water-borne diseases, including diarrhea and typhoid fever, that are linked to the use of untreated water and poor sanitation.

“The project will provide block grants directly to the communities to improve basic infrastructure facilities and sanitation services, including the construction of public baths, toilets and washing facilities, as well as waste treatment and disposal systems,” said Wolfgang Kubitzki, ADB Principal Social Sector Economist.

“Around 1.3 million people in rural communities and urban neighborhoods in nine provinces in Indonesia will benefit from the project,” he added.

The project will also improve the capacity of the communities to carry out their own design and implementation of the projects to ensure that the investments reflect the need of the communities and are sustainable.

The ADB loan, from its ordinary capital resources, covers about 73% of the total project cost of $135.6 million, with the government financing around 19% and beneficiaries providing the balance in the form of counterpart contributions to community investments.

The Ministry of Public Works is the executing agency for the project, which is due for completion around March 2015.

About ADB

AT&T Wins Indonesian License to Expand Multimedia Services

Jakarta Globe, June 08, 2011

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AT&T Inc., the second-largest US wireless provider, said it won a license to provide multimedia services in Indonesia, allowing it to expand into services including teleconferencing and managing computer networks.

PT AT&T Global Network Services Indonesia, the local venture 95 percent owned by ATandT, is the first foreign operator granted the permit in Indonesia, Roman Pacewicz, AT&T senior vice president of marketing and global strategy for business solutions, said in a telephone interview from Dallas On wednesday.

AT&T will invest about $1 billion this year to enhance services on its global network offering cloud computing and mobile applications to help businesses increase productivity and cut costs, the Dallas-based company said in May.

Indonesia’s economy, Southeast Asia’s biggest, will probably expand 7 percent annually on average in the next five years, Nomura Holdings Inc. said in a report on Tuesday.

“This operating license will allow us to deliver services more seamlessly and effectively as the Indonesia market grows,” Pacewicz said.

Previously, AT&T relied on local partners to help set up virtual private networks for customers, Pacewicz said. The company’s local venture will now expand to provide services including video conferencing directly to customers, he said.

The wireless service provider’s worldwide sales from business solutions including Ethernet, virtual private networks and hosting gained 19 percent in the first quarter from a year earlier.

AT&T will also look for opportunities in Vietnam, where government is easing controls, he said.

Bloomberg

INDONESIA : Indonesia gets US$ 890 million World Bank loans

Tendersinfo News, June 1, 2011

Indonesia gets US$ 890 million World Bank loans to support infrastructure projects in the country. The first loan, worth US$ 640 million loan will be allocated for the construction of a pumped storage hydropower plant to support the increasing electricity needs of the nation. The Upper Cisokan Pumped Storage Hydropower project will be the first facility of its kind in Indonesia. The facility will be located near Bandung in west Java.

World Bank senior energy specialist Leiping Wang said, Pumped storage is the only form of technology that allows you to efficiently store large amounts of energy and quickly respond to peak electrical demand. The Upper Cisokan project will make Indonesia one of very few developing countries to have such a power plant. Pumped storage plants generate energy by transferring water from two reservoirs built at different heights - energy is generated by releasing water from the high reservoir to the low reservoir to drive turbines. The water is pumped back to the higher reservoir at off-peak times. US$ 800 million plant will be developed by Indonesia's state-owned electricity company PLN, with the support of World Bank and the proposed facility will have the capacity to generate more than 1000 MW of electricity.

The second loan worth, US$ 250 million, will go towards the development of roads along the Western Sumatra corridor of the nation. The Indonesian Ministry of Public Works will manage the project, which aims to enhance around 716 km of national roads along the Western Sumatra corridor. The project will cover laying new asphalt wearing courses, replacing 194 m of bridges, improving drainage as well as widening the roads where necessary.

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Govt Announces 17 Infrastructure Projects Worth Rp190 Trillion

Antara News, Fri, May 27 2011

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Jakarta (ANTARA News) - The Indonesian government announced 17 new infrastructure projects worth Rp190 trillion as part of its 2011-2025 Indonesia Economic Development Expansion and Acceleration Master Plan.

"The number of projects officially started is 17 and they are part of all infrastructure projects to be carried out until 2014 worth Rp400 trillion," coordinating minister for economic affairs Hatta Rajasa said in his speech at the launching of MP3EI here on Friday.

Hatta said the projects were launched in four locations namely Sei Mangke in the province of North Sumatra, Cilegon in Banten, Lombok Timur, East Nusa Tenggara and Timika, Papua, with funds coming from state-owned companies, national private companies, foreign direct investment and national budget.

"The groundbreaking is a start for MP3EI other projects. In the months and years to come it will continue to be done and therefore a solid team is needed to conduct monitoring so that no obstacles are to be found by prioritizing transparency and accountability.," he said.

Hatta said the launching of MP3EI would be the start of "business not as usual" to accelerate economic development across the country sustainably and equally through synergy building involving all components in the central and regional governments.

"The master plan is expected to be able to eradicate various obstacles of development such as `bottleneck` that disrupt business climate and certainty," he said.

In Sei Mangke there will be three projects which are to be developed namely an oil palm area development project by PT Perkebunan Negara III with an estimated investment of Rp2.5 trillion.

The other ones are the Peusangan 1 and 2 (2x44MW) hydro-powered plants (PLTA) in the Aceh province worth Rp1.53 trillion and the Broadband Access and Through Broadband Access Plan by PT Telkom.

Five main projects in Cilegon in the West Java province of Banten meanwhile are the modern steel plant development project by PT Krakatau Steel and POSCO of South Korea worth Rp60 trillion and energy gasification project worth Rp59 trillion.

The third project is the extension of Samping, engine, casting and assembling plant for motor vehicles by PT Astra Daihatsu worth Rp2.4 trillion.

The fourth project meanwhile is the Tanjung Priok toll road worth Rp1.6 trillion by JBIC, the central government, the Jakarta administration, PT Angkasa Pura and PT Jasa Marga and the fifth is the aluminium grad chemical plant worth an investment of Rp4.3 trillion in Sanggau, West Kalimantan.

Four projects meanwhile will be carried out in East Lombok namely the Pandan Duri dam with an estimated investment of Rp728 billion, the Titab dike worth Rp481 billion, the Ngurah Rai airport expansion worth Rp1.94 trillion and the development of new Garuda Airlines routes o 13 cities in the Indonesian eastern regions.

Four projects to be carried out in Timika, Papua, meanwhile include the 135-kilometer long Timika-Enarotali highway with an investment of Rp600 billion and the 600-kilometer long Merauke-Waropko worth Rp1.2 trillion.

The others include a mining project and a cobalt and nickel processing plant worth Rp50 trillion and 150 KWp and 200 KWp solar power projects (PLTS).

Editor: Ella Syafputri

Chinese investors eye infrastructure, energy projects in RI: Govt

Rangga D. Fadhilah, The Jakarta Post, Jakarta | Thu, 05/26/2011

Up to 300 Chinese investors have expressed a strong interest in infrastructure and environmentally friendly energy projects in Indonesia, projects that are hoped to accelerate Indonesia's economic growth, the government says.

According to a press statement made available on the website of the Indonesian Embassy in Beijing, China, Indonesia was seen as an attractive investment destination for Chinese companies aiming to expand their business networks on an international level.

Public Works deputy minister Hemanto Dardak said investment by Chinese companies would assist Indonesia's efforts to boost its economic growth through improved infrastructure and access to energy.

“With their experience, technology and financial strength, investment from Chinese companies will play a pivotal tole in achieving the Indonesian government’s target to accelerate and expand infrastructure development,” Hemanto said in his opening remarks at the Indonesia-China investment forum in Beijing on Wednesday.

Many Chinese big companies including Sinohydro, China Road and Bridge Corporation (CRBC), Gezhouba, CITIC and the China National Offshore Oil Company (CNOOC) joined the forum.

South Korea eyeing Sunda Strait bridge project

Antara News, Otniel Tamindael, Thu, May 19 2011

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Jakarta (ANTARA News) - As the sixth largest investor in around 1,400 projects in Indonesia at present, South Korea also has an interest to invest in the construction of Sunda Strait bridge.

With cumulative investment of US$3.35 billion over the past 10 years exuding oil, gas, and banking sectors, the country is also eyeing other infrastructure projects in Indonesia.

"South Korea is interested in a number of infrastructure projects in Indonesia, including Sunda Strait bridge development," Coordinating Minister for Economy Hatta Rajasa said in Jakarta on Thursday.

Speaking after a coordination meeting to discuss ways to overcome traffic congestion problems in several Indonesian major cities, the economic minister said South Korean interest in infrastructure projects in Indonesia was discussed at his meeting with the country`s Economic Minister Choi Joong Kyung in Bali on Wednesday.

It was in Bali on Wednesday that the governments of Indonesia and South Korea signed nine memorandum of understandings (MoUs) on investment and economic cooperation between the two countries.

Signed by the two countries` senior government officials and business representatives, the MoUs covered cover partnership agreements in the fields of of among others technology, textiles, machinery, maritime, aerospace, defense and solar photovoltaic.

According to Hatta Rajasa, the business partnership agreements could make Indonesia as South Korea`s main overseas investment hub in the world.

He said the MoUs included hydroelectric power plan projects in Lampung province, shipyard collaboration between Daewoo Shipbuilding and Marnie Engineering and PT Dok & Perkapalan Kodja Bahari to build projects for vessels and offshore facilities.

In addition, Hatta said that the South Korean economic minister also expressed his country`s support to the implementation of the Indonesian Economic Development Acceleration Master Plan (MP3EI). Hatta said.

"At the meeting, South Korean economic minister expressed his country`s support to the implementation of the Indonesian Economic Development Acceleration Master Plan (MP3EI)," Hatta said.

According to him, Choi Joong Kyung was specifically sent by South Korean president to Indonesia to discuss what projects to be undertaken.

"Specifically the country conveyed its interest to participate in the development of Sunda Strait bridge, and the country wanted it to be considered," Hatta said.

He added that South Korea was probably interested not only to be the contractor of Sunda Strait bridge project but also the other ones.

"But we have yet to come to term, just the interest to participate in the projects," Hatta said, adding that the value of investment in the projects reached around US$20 billion.

Earlier in February this year, Hatta said that of the total $20 billion investment plans, $12 billion was already in the pipeline while the remaining $8 billion remained to be discussed.

Some South Korean companies that have expressed commitment to investing in Indonesia are among others Hankook Tires US$1.2 billion investment plans to build tire production plants, Lotte Groups US$5 billion petrochemical factory in Banten, East Java, or in Kalimantan, as well as electronics giants LG and Samsungs estimated US$500 million to US$1 billion investment to expand their businesses in Indonesia.

The South Korean investment plans are part of the Indonesian governments efforts to raise funds in the process of realizing the 2011-2025 economic master plan.

Indonesia is really South Korean main overseas investment hub and therefore many more companies from the country have made commitment to investing in various sectors in East Java, South Sulawesi.

Earlier this month six South Korean companies made commitment to investing a total of of US$52 million in East Java which was formalized in memorandum of understandings (MoUs) singed by their heads before before East Java Governor Soekarwo and Gyeongsangnam-Do Governor Kim Do Kwan.

The six companies from South Korea are Bo-Kyung, C02 Byo, PT Leader Music, PT Seong Dong Abadi, PT Agro Deka Industri, PT Mitra Lestari Hanjaya.

Bo-Kyung, a company engaged in the footwear industry, is to invest US$15 million in Bangil, Pasuruan district.

PT Leader Music would invest US$2 million in the music instrument industry in Mojosari, Mojokerto district.

Also in Mojosari, PT Seong Dong Abadi is to invest US$ 10 million in the chemical industry.

PT Agro Deka Industri with an investment value of US$2 million is to operate in an agricultural industry in Bangil, Pasuruan, while PT Mitra Lestari Hanjaya would invest around US$20 million.

Soekarwo said six more companies from South Korea would also invest in East Java later and the memorandums of understanding was signed when he visited Seoul last April 5-7, 2011.

While in Makassar, South Sulawesi, South Korea`s PEM Korea Co.Ltd also plans to build a polyethylene pipe plant on two hectares of land at Makassar industrial estate in June this year.

PEM Korea Co. Ltd. President Director Jin Hwan Ho signed a cooperation agreement for the construction of the plant with South Sulawesi Governor Syahrul Yasin Limpo at the gubernatorial residence in Makassar on Monday, May 16, 2011.

"In the first phase of the project, we will build two production lines to meet demand in South Sulawesi and neighboring provinces. Later we will develop them into four lines that we project will be able to meet demand in the eastern part of Indonesia," Jin said.

He said PEM Korea Co.Ltd. would team up with two local companies -- PT Hanwoo and Bahana Cipta -- to build the plant which would cost US$5 million to US$10 million.

Editor: Aditia Maruli

EU will inject €30m to boost RI trade, investment climate

Esther Samboh, The Jakarta Post, Jakarta | Wed, 05/04/2011

The European Union’s (EU) 27 member states will inject €30 million (US$44.66 million) into Indonesia to strengthen the trade and investment climate, according to the countries’ joint press statement.

“[The €30 million support] includes a program to support Indonesian business organizations (ACTIVE), the Trade Support Program (TSP) II to support the Indonesian government in the field of export quality infrastructure and the Trade Cooperation Facility (TCF), a flexible mechanism to support attracting investments to Indonesia,” said an official statement issued following EU Trade Commissioner Karel de Gucht’s visit to Indonesia.

The EU member states provided over €66 million in 2009.

Negotiations between Indonesia and the EU would facilitate the export of wood and paper products from Indonesia to European companies, De Gucht said at a news conference at the Kempinski Hotel in Jakarta.

Indonesia is Europe’s largest investment destination and second largest market. The EU invested a total $2.78 billion in Indonesia -- excluding the oil and gas, banking and financial sectors – for a total of 521 projects, Investment Coordinating Board (BKPM) data shows.

In his first visit to Indonesia, De Gucht met with Trade Minister Mari Elka Pangestu to discuss bilateral trade and investment issues, including and several issues of market access

The high-level gathering assessed the EU-Indonesia Vision Group’s recommendations to boost commercial relations between the countries. Established in 2009, the vision group was formed to invigorate the relationship between Indonesia and the EU by strengthening economic growth and the alleviation of unemployment and poverty through investment and trade in key sectors.

“One important step recommended by the Vision Group after the completion of its report is to have early consultation with stakeholders to generate widely shared interests and support from businesspeople, government officials and civil society in both countries on the idea of Indonesia-EU comprehensive economic partnership agreement,” the joint statement said.

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Indonesia Opens Tender For $15.5 Trillion Jakarta MRT Project Official

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JAKARTA -(Dow Jones)- PT Mass Rapid Transport Jakarta Friday opened the tender for the construction of the first commuter rail line in the country, which is estimated to cost IDR15.5 trillion ($1.8 billion) an official said.

"This is for the construction of the first section, for which IDR12 trillion will be financed by JICA," Railway Director General Tunjung Inderawan told reporters, referring to the Japan International Cooperation Agency.

"Hopefully the construction can start this year and be completed by 2014," Inderawan added.

PT MRT Jakarta announced in several local newspapers Friday that the main contractors for the surface and underground sections of the rail line must be Japanese companies, while the subcontractors may be companies from any country.

Applications must be submitted by May 31, the company said.

Indonesia's capital badly needs a mass rapid transport system as its road network hasn't kept up with the growing number of cars. The city's notorious traffic jams are estimated to cause around IDR12.8 trillion in losses annually.

President Susilo Bambang Yudhoyono has also ordered a study into moving the capital to another area to help ease the chronic traffic problems.

-By Joko Hariyanto and I Made Sentana, Dow Jones Newswires; +62 21-39831277; i-made.sentana@dowjones.com

Govt offers infrastructure projects totaling $15 billion

The Jakarta Post, Jakarta | Tue, 04/12/2011

The Public Works Ministry offered dozens of infrastructure projects worth a total of US$15 billion to the private sector while it opened the Indonesian International Infrastructure Conference and Exhibition (IIICE) 2011 on Tuesday.

Public Works Minister Djoko Kirmanto said the projects were spread across a number of Indonesian provinces, including Jakarta, Banten, West Java, Yogyakarta, North Sumatra and North Sulawesi.

“The [total] value of those projects is predicted to reach US$15 billion, or Rp 143 trillion,” Djoko said at the event.

He said the projects included 15 toll road construction projects that the government was currently prioritizing, including the Medan-Kuala Namu-Tebing Tinggi highway in North Sumatra and the Cileunyi-Sumedang-Dawuan tollway in West Java.

There are 16 other potential tollway projects, including the planned Manada-Bitung highway in North Sulawesi and the Bukit Tinggi-Padang Panjang-Lubuk Alung-Padang tollway in West Sumatra.

“As of March, we're still preparing for the bids,” Djoko said of the 16 projects, as quoted by tempointeraktif.com.

He also said the ministry was offering clean water facility projects in four locations, which required Rp 14.6 trillion in investments, and waste management and sanitation facilities in 11 areas, worth a total of $41.6 million.

Rp 80b for expansion of Bandung’s Husein Sastranegara Airport

The Jakarta Post, Jakarta | Tue, 04/05/2011

Airport operator PT Angkasa Pura II says Rp 80 billion (US$9.2 million) has been allocated to expand the passenger terminal at Husein Sastranegara Airport in the West Java capital of Bandung.

The terminal now covers 5,051 square meters of area and can accommodate up to 350,000 passengers per year. The plan is to expand the area to eventually cover 8,650 square meters of land and boost capacity to serve up to 1 million passengers annually.

“[The expansion work] is expected to be completed by 2013,” PT Angkasa Pura II director Tri S. Sunoko said Tuesday, as quoted by tempointeraktif.com.

He said the first stage of the expansion plan comprised renovation of the existing terminal this year.

Tri added Angkasa Pura II was currently working on the 7.5-centimeter overlay of the airport’s runaway, which was scheduled for completion in mid-April.

He said the overlay work would cost about Rp 40 billion.

Husein Sastranegara serves both domestic and foreign routes, with AirAsia Indonesia contributing 79 percent of the international routes to and from Kuala Lumpur and Singapore.

United States Companies Eye Railways, Airports in Indonesia: Official

Jakarta Globe, April 04, 2011

United States firms are eying investments in Indonesian infrastructure
such as railways and airports but are concerned about graft and a lack of
protection of intellectual property rights, the US under secretary of
commerce said on Monday. (Reuters Photo)

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United States firms are eying investments in Indonesian infrastructure such as railways and airports but are concerned about graft and a lack of protection of intellectual property rights, the US under secretary of commerce said on Monday.

Under President Barack Obama, the United States is trying to improve ties with the world’s most populous Muslim country, including through investment and by boosting bilateral trade of $23 billion a year, which is two thirds of Indonesia’s trade with China.

“We have some American companies that are interested in supporting Indonesian transportation infrastructure needs, particularly in the railway system,” Francisco Sanchez said in an interview with Reuters.

He declined to identify the companies.

Indonesia’s government plans next week to offer investors $32 billion worth of infrastructure projects, including a railway, toll road and power plant, as Southeast Asia’s largest economy struggles to fund an overhaul of its transportation network.

Inadequate infrastructure is seen as both an investment opportunity and an obstacle to growth, and was cited by Fitch Ratings last month as a key risk to the chances of the country winning an investment grade rating in the next 12-18 months.

Other sectors US investors are interested in are health care, agriculture and green energy, said Sanchez, in Jakarta to explore closer commercial ties.

Indonesia opened up health care for foreign investment last year, and is looking to boost food security and expand geothermal power, where U.S. energy major Chevron is already an investor.

Foreign direct investment has picked up in Indonesia in the past year, but there has been far more investment from Asia than from US or European firms, with Japan having pledged more than $50 billion in infrastructure investment.

Indonesian President Susilo Bambang has vowed to tackle corruption, a concern for many investors, though progress appears to have stalled.

Sanchez said further reforms on transparency were needed to attract more investment.

“Corruption, protection of intellectual property rights and overall transparency, all of these will have more long-term impact and positive impact on the Indonesian economy,” he said, adding businesses also wanted an opportunity to have a say on proposed regulations and laws.

Policy flip-flops have been a major concern for investors, particularly in the resources sector with rules aimed at reducing foreign ownership or involvement.

ExxonMobil has been in protracted negotiations over gas fields, while Indonesian regional authorities are competing with the national government to grab a stake in a nickel mine operated by US miner Newmont.

Reuters