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World
Print Edition> World
UPDATED: March 31, 2012 NO. 14 APRIL 5, 2012
Ramping up Investment in Indonesia
Indonesian president's visit to China cements bilateral ties economically and politically
By Yu Lintao
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BRIDGE TO COOPERATION: The 5.4-km Suramadu Bridge, built by the China Road and Bridge Corp. along with Indonesian partners, links the islands of Java and Madura (YUE YUEWEI)

Entrepreneurs from China and Indonesia signed cooperation agreements worth at least $17 billion during Indonesian President Susilo Bambang Yudhoyono's visit to China in late March.

"The agreements focus on infrastructure construction cooperation, which is of strategic significance. It is not only that the deals are large; more importantly, they will lay a good foundation for future cooperation between the two sides," said Tang Qifang, an assistant research fellow on Southeast Asian studies with the China Institute of International Studies.

Xu Liping, a research fellow with the Chinese Academy of Social Sciences, said China and Indonesia complement each other in many fields. In recent years, Indonesia has launched a large number of infrastructure construction projects, presenting tremendous opportunities for Chinese enterprises.

Booming investment

The agreements, which included nine memoranda of understanding and several letters of intent, cover 15 projects in the fields of iron and steel, textiles, hydropower, mining and agriculture.

"The projects will help Indonesia to improve the environment for investment, thus paving the way for more investment from China," said Tang.

In 2010, Susilo put forward the Master Plan on the Acceleration and Expansion of Indonesia's Economic Development from 2011 to 2025, which involves a total investment of $200 billion. The plan offers business opportunities to investors from foreign countries including China.

Qu Xing, President of the CIIS, said there is great demand for funds and technology in Indonesian domestic infrastructure construction. Meanwhile, China is highly experienced in building railways, highways, bridges and irrigation projects and considers Indonesia one of its major prospective investment destinations. The two have bright prospects for cooperation in this area.

The $12-billion Sunda Strait development project between the China Railway Construction Corp. and Indonesia was the largest of the agreements signed during Susilo's visit. The Sunda Strait Bridge included in the deal will be the longest bridge of the island nation when it is completed.

During a meeting with Chinese and Indonesian entrepreneurs after signing the agreements, the Indonesian president said while China is the world's second largest economy, Indonesia is the biggest economy in the Association of Southeast Asian Nations (ASEAN). As two emerging markets, China and Indonesia can strengthen cooperation and expand mutual investment in sectors such as machinery manufacturing, infrastructure, energy and telecommunications, he said.

With a population about 240 million, Indonesia has a large potential market, Xu said. Besides its abundant natural resources and low labor cost, Indonesia has been politically stable and economically resilient in the last decade. Therefore, it is attractive to Chinese investors, Xu said.

In addition to the Sunda Strait project, the Industrial and Commercial Bank of China signed a long-term credit financing agreement with Indonesian national steel company Krakatau Steel. The China National Heavy Duty Truck Group Co. (CNHTC) signed an agreement with Indonesia's PT Intraco Penta to build a commercial vehicle plant in Indonesia.

The CNHTC said the deal was worth more than $100 million. In the past, the main business of the CNHTC in Indonesia was vehicle trade, but now the company will invest and build a plant there.

Last May, another Chinese heavy equipment manufacturer, the Sany Heavy Industries Co. Ltd., announced a $200-million investment in Indonesia to build an industrial park in the country's Karawang area, in West Java.

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