Indonesia Rising: Billions Pegged for Investment

By William J. Furney
Managing Editor
The Bali Times

SEMINYAK/JAKARTA ~ Japanese businesses are to invest up to US$7 billion in Indonesia over the coming five years, a visiting trade delegation said this week, reflecting a year thus far that has seen soaring investor interest in the country and government moves to lubricate the flow of foreign funds.

The government of President Susilo Bambang Yudhoyono has been making marked efforts in recent months to attract – and keep – foreign investment, cutting back on overwhelming red tape and the length of time it takes for approvals to be made and companies established here.

In a bid to further garner investor sentiment, the central government has unveiled massive increases in spending to put Indonesia’s infrastructure on a par with that of neighboring, affluent nations.

At the Transport Ministry, a 61.4-percent increase in funding for fiscal year 2008 will see it spending Rp16.2 trillion ($1.7 billion) on improving airports, seaports and the railway network.

The Public Works Ministry is to get a 41.1-percent rise in its budget for next year; Rp35.6 trillion will go on developing roads and maintaining or repairing highways.

Both increases in funding were announced by President Yudhoyono in his annual state-of-the-nation address last week.

On Monday the president met with Japanese Prime Minister Shinzo Abe, who was here on a two-day state visit, before jetting off to India and Malaysia.

During the trip, accompanying chairman of the Japan Business Federation Fujio Mitarai said $7 billion would be invested by Japanese firms in Indonesia within half a decade.

“More than 800 billion yen or $7 billion of total investment is planned over the next five years,” he said in a speech before the president and prime minister.

Sectors gaining from the hefty investment were energy, machinery and automobiles, he said.

Adding to the positive trade outlook for Indonesia, Yudhoyono and Abe signed during the state visit a free trade agreement between both nations.

After two years of talks, The Indonesia-Japan Economic Partnership Agreement was signed and means tariffs will be slashed or lifted entirely for more than 10,000 products traded between the two countries.

The value of Indonesia’s exports to Japan was $21.7 billion in 2006, a large chunk of it natural gas and coal. Indonesia imported goods worth $5.5 billion in the same year, chiefly manufactured items and machinery, according to government data.

And while the two countries are focused on investment and infrastructure improvements, they are also keenly aware of the global pressing problem of climate change.

Officials from both sides said global carbon emissions must be halved by 2050 and would sign up to a pact to supercede the Kyoto Protocol, which expires in 2012.

In December, Bali hosts a major United Nations climate conference in which some 10,000 delegates from around the world are expected to thrash out a new climate accord.

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