Eyes on Asia powerhouse as China expands investments in Indonesia

The Investment Coordinating Board (BKPM) announced Monday it would soon establish a “China desk”, on par with special desks for East Asian giants Japan and South Korea that have been set up previously.

 

The desk, which will employ Chinese-speaking staff including two to three Chinese Embassy employees, is expected to address issues that have hindered potential Chinese investors, such as slow responses on land inquiries and language barriers.

 

“With the presence of the desk, we want to increase investment realisation from China,” BKPM head Franky Sibarani told reporters on the sidelines of a China-Hong Kong investor forum. “The rapid growth of Chinese investment in Indonesia, as well as intensive communication between investors and the government, require assistance from those familiar with the Chinese language.”

 

Investment realisation from the world’s second largest country into Indonesia is on the rise, with 14 per cent of investment interests being realised last year, from 7 per cent per year during 2010 to 2014. China, however, is still ranked seventh on the list of foreign direct investors in Indonesia with investment value of $628 million last year, according to BKPM data.

 

Investment commitments also doubled to $22 billion last year, from an average of $11.3 billion per year in the five-year period ending 2014. Hong Kong, an autonomous territory that belongs to China, also recorded an increase in investment commitment to Indonesia to $3 billion in 2015, from an average of $2 billion per year from 2010 to 2014.

 

The trend is in line with Chinese companies’ drive toward global expansion to widen their market outreach beyond their home country, which has seen economic growth slowdown to levels unseen in a quarter of a century.

 

“It is, therefore, our responsibility to provide support so that the investment commitments are realised,” said Franky.

 

Chinese Ambassador to Indonesia Xie Feng said in his opening remarks during the investor forum that Indonesia was a priority destination for Chinese companies and that most Chinese investors put high hopes on the administration of Joko “Jokowi” Widodo. 

 

“Less than two years after his inauguration, I think we have seen changes. We hope for more changes in years ahead,” he said. 

 

The government has issued 10 economic stimulus packages since September last year to reform the country’s red-tape issues, including by speeding up permit processing to three hours for companies that invest more than 100 billion rupiah ($87 million) and employ 1,000 local workers. The facility had attracted five Chinese investors with investment value of $2.34 billion by mid-February. 

 

“Although the world economy continues to slow down, the economy of Indonesia has continued to obtain impressive performance over the last few years. Its growth potential is tremendous,” said Zhang Min, chairman of the China Chamber of Commerce in Indonesia. 

 

A local arm of Chinese tire giant Shandong O’Green Group, PT Eastern Ogreen, has said it is investing $501 million to build a tire plant in Indonesia as the country provides raw materials and lower export tariffs to its main markets in Europe and the US. 

 

Eastern Ogreen project coordinator Fitri Zenitia said her firm would also benefit from a niche market in Indonesia as it specialised in truck and bus tires.