China and Indonesia are two growing investment giants in Asia region, and both countries have tied tighter relation in investments. Despite mixed reviews, China investment in Indonesia is projected to grow bigger, especially with Indonesian President Joko Widodo’s commitment to developing infrastructures outside Java. Here is what to know about the current investment trend between the two countries.
OBOR Initiative and China’s Large Investments
China is the most populous country in the world and an economic powerhouse, so the country’s investment partnerships with Indonesia are not news. According to Indonesia Investment Coordinating Board (BKPM), China has already spent more than USD676 million in investment with Indonesia, just in the first quarter of 2018.
China’s large investment numbers are the effects of Xi Jinping’s One Belt One Road (OBOR) initiative, an ambitious infrastructure development project that seeks to create the modern “silk road”. Created in 2013, the plan aims to connect various regions in China (including the less-developed ones) with the more developed cities and neighboring countries, including Indonesia, Malaysia, and Singapore.
In 2017, China sealed the record as a country with the third-largest investments in Indonesia, with around USD3.7 billion investments that went to various projects, from infrastructures to public transportations and tourisms. Now, China and Indonesia are seeking more profitable investment deals for future partnerships.
China’s Investment Plans in Indonesia
Indonesia and China signed five partnership contracts in April 2018, which consists of five mega projects worth more than USD23 billion. BKPM described several development plans in Indonesia that will or have been achieved with China’s investments, such as:
New tourist destinations
Bali is notably the most popular tourist destinations in Indonesia, with numerous local and foreign investors building resorts, nature parks, restaurants, and holiday getaways. However, the Indonesian government has planned for the developments of “new Bali” in at least 10 areas outside this island.
The growing trend of clean energy for the large-scale industry does not escape China and Indonesia. The new contract includes the development of hydropower plant that will supply electricity to small towns and remote areas. Unreliable power grids are one of Indonesia’s persistent problems, which affects the country’s investment climate.
Hospitality industry development
Indonesia has potentials in the hospitality industry, which goes along with tourism development. China seeks to invest in the building of various services, such as restaurants and hotels for all budgets.
Transportation and infrastructures
China and Indonesia have worked together in the development of transportation and infrastructures. Indonesia aims to develop the country’s public transportation systems, along with new roads, commuter lines, and railways. The future development plans also include the developments of ports, cruise terminals, and airports.
Metal and energy
China plans to invest in the building of new smelter facilities, with Sulawesi Island as the most potential areas for this industry’s development. Another planned facility will help to convert coal to dimethyl ether, which is a potential substitute for propane in LPG.
Currently, the Indonesian government is trying to improve the investment climate, and taking care of old regulations that can hinder the future economic development. With Asia’s future as the next regional powerhouse, China investment in Indonesia will create a great platform for investors to join.