Jakarta (ANTARA News) - The 200-billion U.S dollars worth of infrastructure business in Indonesia seems too good to be just flipped over by U.S. businesses, and Washington might not hesitate to back up as the Chinese were first.

The Indonesian Investment Coordinating Agency (BKPM) and the US-ASEAN Business Council signed a Memorandum of Understanding (MOU) in Jakarta last week (Oct. 11). Under the MoU, the parties outlined their plan to work together in expanding investment in infrastructure through public-private partnership.

BKPM was represented by its chairman Gita Wirjawan, the US-ASEAN Business Council by its President Alexander Feldman, Caterpillar Asia by its chairman, and the US-ASEAN Business Council Infrastructure Working Group by its chairman Kevin R. Thieneman on behalf of U.S. Businesses.

The signing of the MoU was witnessed by representatives from the U.S. Embassy, officials of the Coordinating Ministry of Economics, Ministry of Finance, Ministry of National Development Planning, Ministry of Energy and Mineral Resources, Ministry of Transportation, Ministry of Public Works, Ministry of Industry, some local government authorities (Governors of East Java, Central Java, North Sumatra, Bali, Jakarta, West Java and Banten).

"The cooperation between BKPM and the US-ASEAN Business Council is an important milestone in efforts to attract direct investment to Indonesia. We established the agreement with the Council as they are well known as the most effective and trusted advocacy group for the U.S. Corporations in ASEAN," Wirjawan said.

Wirjawan added that the Indonesian government had also early this year signed an agreement with Overseas Private Investment Corporation (OPIC), another American investment wing. As the partnership takes effect, US investments in Indonesia would increasee, he said further.

The government, the BKPM chief added, recognizes the vital role of infrastructure in attracting investment, and BKPM is to encourage expanded use of the Public-Private Partnership Program. "Indonesia is projected to require at least US$200 billion in infrastructure investment over the next four years. Currently, five projects worth around US$4.5 billion have been designated as showcase projects," he emphasized.

Focus on infrastructure

"Improving Indonesia`s infrastructure is important to companies operating in Indonesia, and includes building roads, ports, and bridges," US-ASEAN Business Council President Alexander Feldman said.

In addition, Feldman added, it also means improving energy security, expanding access to quality health-care and education, and laying the building blocks for increased use of technology especially through increased access to and speed of Indonesia`s broadband system.

U.S. companies offer world-class technology, equipment and services to help speed up the development of infrastructure projects outlined by President Susilo Bambang Yudhoyono. "We look forward to working with BKPM and the Indonesia government on ensuring American companies and financial firms are engaged and active in this process," he said.

"U.S. businesses praise Indonesia, and our partners in BKPM in particular, for their impressive focus on infrastructure," said Kevin Thieneman, President of Caterpillar Asia and Chairman of the US-ASEAN Business Council Infrastructure Working Group.

He also said that the Council and its members were eager to find ways to match the commitment of the Indonesian government. "We look forward to creating dialogues and partnerships focused on developing Indonesia`s comprehensive infrastructure."
The MoU lays out plans for investment promotion partnership focused on infrastructure.

The Council and BKPM will work together to provide U.S. investors with expanded access to information about potential investments, create information exchanges focused on how to invest in Indonesia, and support BKPM`s efforts to better market available opportunities.

China ahead

Indonesia, which needs over Rp2,000 trillion to build its infrastructure and achieve an economic growth of about 6-7 percent in the next five years, expects investment from overseas partners. It hopes that up to 70 percent of infrastructure development, aimed at spurring economic activities would be financed and carried out by the private sector.

President Yudhoyono has said Indonesia would continue to encourage infrastructure development cooperation with private parties because it did not have enough money to do that.

"Foreign investors will be invited because our infrastructure sector is of high value," Yudhoyono told the press on his way to the G-20 conference in Toronto, Canada, last June.

Based on an estimate of the Indonesian Chamber of Commerce and Industry (Kadin), Indonesia will need Rp2,855 - Rp2,910 trillion (over 200 billion dollars) to finance its infrastructure development in the 2010 - 2014 period.

The National Development Planning Agency (Bappenas) puts forward the figure and said the government would stimulate investment in infrastructure development to boost economic growth to about 6-7 percent by 2014.

The government has to promote its infrastructure development to the private sector as it could only finance 30 percent of the total funds needed for the projects. Some 70 percent of the infrastructure projects expected is to be financed by private companies, among others through the so-called private public placement (PPP) scheme.

The president specifically said that Indonesia hoped the cooperation between Indonesia and China could be further expanded in various sectors to bring more benefits to both countries.

"As we know, the cooperation and relations between Indonesia and the People`s Republic of China have been very good and continued to develop. We hope the strategic partnership as well as cooperation and friendship will grow further," he said at a meeting with Chinese President Hu Jintao at Hotel Intercontinental in Toronto.

"China is an important partner and a good friend of Indonesia. We hope the cooperation would continue. I wish to hear that more can be done in the future," he said. Hours after the meeting, media reported that China had agreed to increase investment on infrastructure that by end of 2014 its investment in Indonesia would reach 50 billion dollars.

According to Chief Economic Minister Hatta Rajasa, Chinese President Hu Jintao and President Susilo Bambang Yudhoyono had discussed the matter in their meeting on the sidelines of the G20 summit. "The talks have been very productive and the two sides agreed to continue increasing economic relations."

Whereas, Deputy Minister of Public Works Hermanto Dardak said recently four infrastructure projects funded with loans from China would likely be carried out entirely by Chinese contractors. "The packages will be one hundred percent carried out by Chinese contractors. We are now still trying to ask for the involvement of local contractors in the projects," he said.

"In reality and according to experience it was possible like in the construction of the Surabaya-Madura bridge to be also funded with loans from China. Indeed China controls up to 60 percent of the project with the rest going to local contractors," Dardak revealed.

The four infrastructure projects to be carried out by Chinese contractors are the 25-km long Medan-Kualanamu toll road in North Sumatra worth US$150 million, the Cileunyi-Sumedang-Dawuhan toll road in West Java and the Tayan bridge in West Kalimantan and the Kendari Bay bridge in Southeast Sulawesi.(*)

Editor: Jafar M Sidik

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