Investment forum disappoints

Published in Van Zorge Report Vol.X No.8-9 — June 3, 2008


A number of potential foreign investors walked away from last week’s Indonesian Regional Investment Forum (IRIF 2008) disappointed by the lack of preparedness of local government officials. The forum aimed to attract between US$6 billion and $8 billion in investment, up from $6 billion offered in the first IRIF in 2006.

Opening the conference President Susilo Bambang Yudhoyono claimed local government had become more savvy and realistic about how they attracted foreign investment. But his views were not shared by some of the forum’s participants.

One Chinese investor complained that he could not meet local government officials with a genuine understanding of the projects they were attempting to market. He expressed frustration that after spending two days at the forum he did not have the opportunity to invest his money.

Other businessmen were also baffled by local government officials who could not come up with the required information, including basic data such as the Return on Investment (ROI) and business plans. One investor could not hide his amazement after his attempt to get an email address from a Central Java regent failed because he did not have one. The man half-joked that the regent probably did not have any slightest idea of what the Internet was.

Basic manners and etiquette were also found wanting at the seminar with many officials preferring to play with their mobile phones instead of talking to investors, many of whom had hired translators. Another complaint was that officials had a limited scope in projects and tried to push investors into “pet projects” that they had no interest in.

Questioned by the Report, the forum committee said many of the regions did not send their top officials to the gathering. This was strange because up for grabs were about 200 investment projects worth a whopping US$18.9 billion. The projects spread across 35 regions and provinces and were in the agribusiness, plantation, biofuel, infrastructure, oil and gas, mining, energy, property and tourism sectors.

The highest number of projects on the table were for infrastructure development, totalling 44. Among these were the Batam-Bintan and Penajam-Balikpapan bridges, the Cilegon-Bojonegoro toll road, the new Maloy port and Sangkinah airport in Kutai Timur, as well as a railroad and industrial zone in Dumai regency and an international container terminal in Kutai Kertanegara regency.

In the agribusiness sectors, there were 40 projects on offer, including a fish processing plant in West Sumatra, plantation and tea processing in West Java province and an integrated animal husbandry and agribusiness operation in Tulang Bawang regency.

In the mining and energy sector, projects offered included geothermal power plants in Cisukarame, Cisolok and Tampomas (West Java); steam power plants in Lati Berau (Berau regency, East Kalimantan) and Kolese (Bau-Bau regency, Southeast Sulawesi). The Regional Representatives Council (DPD), which organised the forum, said domestic and foreign investors were following up on at least 62 of the projects offered.

Banten province, which offered projects worth $5 billion alone, has attracted a number of investors, an official from the local administration said. He said International Enterprise Singapore was interested in funding the development of a $4 billion oil refinery at Bojonegara (the largest project by value offered at IRIF 2008), a $792.2 million Bojonegara international port and an agribusiness terminal at $4.37 million.

Ramky International Singapore expressed interest in establishing the waste management industry in Banten, which had a high concentration of chemical factories. Local companies PT Tirta Cisadane and PT BaratJaya Sentosa Perkasa were looking to be involved in the construction of the Karian Dam and water supply project valued at $319,000.

Meanwhile, Australian-based Consolidated Rutile Limited was exploring the possibility of investing in bauxite and zircon mines in Kalimantan. The 2008 IRIF offered regions a chance to meet investors in an aim to spur economic growth and job creation in the country. Other investors attending the forum were RimAsia Capital, Saratoga, Merrill Lynch, UOB, Deutsche Bank, HSBC, Lehman Brother, BNP, Morgan Stanley, CIMB, Khazanah,
Temasek, DBS, Bain Capital Société Générale and Renaissance Capital.

Also in attendance were former Thai prime minister and founder of Shin Corp. Thaksin Sinawatra, Sime Darby president commissioner Tun Musa Hitam and Khazanah Nasional CEO Dato’ Azman bin Hj. Mokhtar. Yudhoyono singled out Sragen and Sidoarjo in East Java as examples of regions that had enacted a one-door investment policy to cut bureaucratic red tape.

Indonesia has been working to improve its investment climate, with the government set to issue its final package of economic policies this month to attract investment.

The draft package called the “Focus of Economic Programs 2008-2009” comprises a series of regulations by economic ministers, including policies seeking to improve the country’s investment climate and a revision of Government Decree No. 1/2007 on income tax facilities for investment.

Investment Coordinating Board (BKPM) data shows that the country secured $9.94 billion in foreign direct investment between January and April this year, a 104 percent increase on the corresponding period last year. The BKPM noted that foreign direct investment in Indonesia was up from $5.97 billion in 2006 to $10.3 billion in 2007 on the back of political stability and an improving economy.

Leading business and corporate strategist Kenichi Ohmae said regional marketing was a crucial factor for Indonesia to attract investment, adding that Indonesia could be as successful as Brazil, India, China and Russia if it developed its regions’ potential.

Labels: Business

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