Indonesian provinces reach out to Russian investors

Vincent Lingga, The Jakarta Post, Moscow | Wed, 09/14/2011 8:00 AM\

Four Indonesian provincial governments competed with each other here on Monday to attract Russian investors to develop resource-based ventures and infrastructure in their respective regions.

North Sulawesi Governor Sinyo Harry Sarundajang offered railway, toll road and geothermal projects. North Sumatra acting governor Gatot Pujo Nugroho promoted toll road projects and palm oil-based industries. East Kalimantan Regional Secretary Irianto Lambire highlighted opportunities in coal-transportation, palm oil and cacao plantation projects, while the West Nusa Tenggara Regional Investment Board chief promoted seaweed and tourism-related businesses.

“The six governors in Sulawesi will meet next month in the North Sulawesi provincial capital of 
Manado to discuss the development of the 1,200 kilometer Trans-Sulawesi railway project,” Sarundajang said at the Indonesia-Russia investment forum here on Monday.

He said the railway project is commercially feasible because it will connect the six provinces on the island of Sulawesi, which is naturally rich in mining and maritime resources, as well as agriculture and tourism opportunities. 

“We are only 20 minutes by air from the famous resort island of Bali and we have tremendous investment opportunities in tourism-related industries. Yet more interestingly, our new Lombok international airport will soon open for wide-bodied jetliners,” the West Nusa Tenggara investment chief said.

North Sumatra’s acting governor Nugroho promoted railway and tollroad projects which will connect the main growth centers in that province, pointing out that several of the projects had been supported with feasibility studies.

East Kalimantan offers four railway-projects, mostly for transportation of coal and plantation commodities such as palm oil and rubber. 

Indonesian Ambassador to Russia Hamid Awaluddin and Investment Coordinating Board (BKPM) chairman Gita Wirjawan, both of whom organized the business gathering, described it as a good start in promoting economic linkages between the two countries.

Gita said Russia, with its US$1.6 trillion economy and foreign reserves of more than $480 billion, has been a major provider of technology and financial capital to foreign countries, but its investment in Indonesia is almost negligible compared to most other countries.

“It is our fault that your investment in our country is still very small. We should have come here more often, knocking at your doors,” Gita said.

Over the past few years Gita has told journalists that Russia had set its eyes on investment opportunities in the Middle East, but the recent political turmoil in several countries in the region investors to seek other safer and more stable investment destinations. 

“I think we now have many advantages to attract [Russian] investment to our country, especially because of the long [almost 60 year] history of our relations,” he added, citing the recent tax-incentive package launched in Jakarta for high-priority investment projects in infrastructure and natural resource-based ventures. 

Russia itself seems to be very enthusiastic about developing broader economic relations with Southeast Asia, as it will for the first time take part as a full-fledged participant in the upcoming East Asian Economic Summit in Bali in mid-November.

Russian-Indonesian Business Council executive director Mikhail Kouritsyn also hailed the investment forum as a good start for Russian businesspeople in exploring and developing businesses in Indonesia.

“But this is only the first step on a very long journey,” Kouritsyn cautioned.

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BKPM chief woos investors from Germany, Russia

Vincent Lingga, The Jakarta Post, Moscow | Mon, 09/12/2011 8:00 AM

Seizing on the sustained momentum of high flows of foreign direct and portfolio capital to Indonesia, the Investment Coordinating Board (BKPM) chief Gita Wirjawan opened a business forum on Monday to brief Russian businesspeople on investment opportunities in Indonesia. 

The delegation also included regional leaders and investment board chiefs from North Sumatra, North Sulawesi, East Kalimantan and West Nusatenggara.

“I deliberately asked several regional leaders to join this mission to enable them to interact with, and brief, potential investors on investment opportunities in their areas,” Gita said Sunday, arriving from another promotion in Germany.

“A joint mission like this will also promote better understanding and cooperation between the central government and regional administrations in attracting investors from overseas.”

Earlier on Friday, at an Indonesian Business Day as part of the Asia-Pacific Week Berlin 2011, Gita enlightened businesspeople on the wide range of business opportunities and the new tax incentive package the Indonesian government will be offering to investors. 

Gita seemed confident about attracting more foreign investors to Indonesia, primarily because of the severely limited investment opportunities in developed countries due to the lingering debt woes in Europe and the economic slump.

The Indonesian government, after several years of debates, finally launched in August a tax incentive scheme which provides income tax holidays between five to 10 years and tax allowances for projects in high-priority sectors and in remote areas, in a bid to ramp up investment in infrastructure and resource-based manufacturing industries.

The tax holiday facility will be offered to manufacturing projects in base metals, oil refining, petrochemicals, machine tools and renewable energy, with a minimum investment of about US$117 million. 

Tax allowances — a reduction of taxable income up to 30 percent of total investment carried over six years — will be offered to labor intensive projects in remote areas with a minimum investment of 
Rp 50 billion ($5.82 million). 

Indonesian Ambassador to Moscow, Hamid Awaludin, also saw the investment mission as quite opportune. Russia has been enthusiastic about its interaction with the dynamic Southeast Asian region as, for the first time, it will attend as a fully fledged member, the East Asian Economic Summit, due to take place in Bali in the middle of October.

As part of the preparations for the summit, ASEAN economic ministers held a consultation with a Russian delegation in Manado in August to chart out a road map for their economic, commercial and investment cooperation.

The ASEAN region, with its 10 member states, a total population of 600 million people and $1.7 trillion economy, is strategically nestled between India and China, and has become an attractive alternative for investment amid the global volatility triggered by concerns about the European sovereign debt crisis and economic slowdown in the US.

For the $1,500 billion Russian economy, with a total population of 142 million and per capita income of $15,200, deeper economic linkages with Southeast Asia also seem quite strategic.

Indonesian Trade Minister Mari Elka Pangestu led a trade mission to Russia last September in a concerted bid to expand trade ties with the world’s 11th largest economy.

According to the data collected by the Indonesian embassy, bilateral trade between the two countries more than tripled, to US$1.91 billion last year, from figures in 2009, with a deficit of $180.3 million for Indonesia. During the first half of this year, bilateral trade totaled $980 million, with a surplus of $290 million for Indonesia.

Indonesian exports consisted mainly of palm oil, coconut, coffee, tea, electronic goods and footwear, while imports from Russia comprised defense/military equipment, chloride, iron ore, metal, synthetic fibers and aluminum.

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