Indonesia Sets Ambitious $5bn Investment Target Ahead of Islamic Economic Forum

Jakarta Globe | January 17, 2009

Dian Ariffahmi & Janeman Latul

Indonesia may sign business investment deals worth up to $5 billion during the 5th annual World Islamic Economic Forum scheduled on March 2 and 3 in Jakarta.

Tanri Abeng, WIEF co-chairman, said on Friday that the event could produce a host of joint-venture and shareholder agreements between Arab businesses and Indonesian private and state companies across a wide range of sectors, including the telecommunications, infrastructure, transportation, electricity, banking, and oil and gas industries.

“Some state companies will sign business agreements with Middle Eastern investors,” Tanri said. He said these companies included PT Telekomunikasi Indonesia Tbk, or Telkom, state oil firm PT Pertamina, airline PT Garuda Indonesia and state utility PT Perusahaan Listrik Negara, or PLN.

Tanri also said local governments in East Kalimantan Province and South Sumatra Province had signed preliminary investment agreements with companies in the Middle East.

Sofyan Djalil, the state enterprises minister, said he supported the forum because it offered many opportunities for state-owned enterprises.

“Some of the previous forums have produced deals such as a plan to form a joint-venture Islamic bank in Indonesia with several banks from Qatar,” Sofyan said.

“I think foreign direct investment in Indonesia will remain high despite the economic crisis.”

Sofyan also said that in the future, he hoped that the WIEF would become as well known and respected as the annual World Economic Forum.

WIEF, with its predominantly Middle Eastern membership, represents a potential source of much-needed investment for private and state-owned Indonesian companies that have been affected by the global financial crisis.

“This is part of the government’s efforts to offset the impact of the global crisis before it further damages the national economy,” Tanri said.

“We can replace Western investors, who are withdrawing their investments here because of the global crisis, with those from the Middle East. Indonesia will be able to continue future projects in the energy, banking, telecommunication and agriculture sectors.”

Tanri said the government was eager to encourage and provide support to deep-pocketed business leaders from the Middle East to invest in Indonesia.

Gita Wirjawan, founder of Jakarta-based private equity firm PT Ancora Investment Capital Management, said the forum offered an ideal setting for the Islamic business community to discuss opportunities.

However, Fauzi Ichsan, an economist at Standard Chartered Bank, said the government was being overly ambitious when it set a Middle Eastern investment target of $5 billion. Middle Eastern investors have relatively little experience investing in Indonesia, especially in large-scale industrial projects, and this was not going to change overnight, Fauzi said.

“Indonesia is certainly popular [as an investment destination] with its commodities and infrastructure sectors, but where were the Middle Eastern investors when commodities were at all-time highs last year?” Fauzi asked.

He said Middle Eastern investors still preferred investing in stable markets such as the United States and Japan. “I don’t think shared religious faith will bring them here; it’s about business and profit,” he said.

The WIEF was established by the Business Forum of the Organization of the Islamic Conference in 2004 to enhance trade between member countries. This year’s conference will be attended by leaders from Australia, Canada, China, Dubai, Japan, Jordan, Kuwait, Nigeria, Morocco, Qatar, Turkey, the United Arab Emirates, the United Kingdom and Yemen.

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