China Pledges Larger Role in Indonesia’s Development

President Susilo Bambang Yudhoyono and Chinese Prime Minister Wen Jiabao agreed on Friday to promote stronger relations between their two nations in a number of sectors, including trade.

“[China] will provide preferential export buyers credit of $1 billion, and $8 billion of commercial funding will go to the Indonesian government to support infrastructure development and Indonesian industry,” Wen said during a joint news conference with Yudhoyono at the State Palace.

“I will also lead a delegation of investment and trade promotion that will sign commercial agreements worth $10 billion.”

Agus Tjahajana, the director general for international industry cooperation at the Industry Ministry, said the Industrial and Commercial Bank of China and Bank of China would provide lending for the industrial sector as part of the international investment package.

“They will provide financing for Chinese companies to invest in our industry here. ICBC will commit $4 billion, while another $4 billion will come from Bank of China,” Agus said.

Which areas of the industrial sector would receive Chinese investment was not yet known, he said. “It could be anything, but we have investment priorities such as sugar mills, fertilizer and transport machinery.”

Yudhoyono encouraged China to become involved in Indonesia’s development through its economic corridor plan.

“I told [Wen] that Indonesia will develop its economy in six corridors nationwide,” the president said. “I invite cooperation from our partners in China to coordinate with their Indonesian partners to build infrastructure, electricity, clean and renewable energy, and manufacturing. I’m glad that he agrees.”

The government plans to make Indonesia the world’s 12th-largest economy by 2025 by developing six economic corridors and using natural resources —such as coal and timber in Kalimantan and palm oil in Sumatra — to create value-added industries.

Chinese investment in Indonesia has been minimal to this point. According to Industry Minister MS Hidayat, China’s current investment in Indonesia is dwarfed by the trade volume between the two nations. While trade between China and Indonesia reached $40 billion last year, investment in Indonesia was a paltry $170 million.

“China does not like foreign investment. It only wants to sell,” Hidayat said. “They want the industry to be developed [in China] and then export it worldwide. That is something that we do not want.”

There are signs the imbalance is improving, though. Hidayat said on Tuesday that China pledged to invest $200 million in Indonesia’s heavy equipment industry in August.

Wen said he was optimistic that the trade volume between Indonesia and China would reach $80 billion by 2015. Yudhoyono and Wen agreed that the initial target of $50 billion in trade volume would be attained well ahead of the projected date of 2014.


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