US to contribute US$5b to Indonesian development projects

11 January 2020

Indonesia is slated to secure US$5 billion in development funds from the United States’ financing arm for developing countries and more from the American private sector, following investments from China and the United Arab Emirates (UAE).

The US’ International Development Finance Corporation (IDFC), said to be a direct competition to China’s growing influence in projects across developing countries through the Belt and Road Initiative (BRI), arrived in Jakarta on Friday to cement its participation in Indonesia’s development projects.

“I welcome the [I]DFC’s commitment to supporting the Indonesian government’s priority programs, especially in infrastructure development, energy and digital technology,” President Joko “Jokowi” Widodo said in the opening remarks of his meeting with IDFC representatives and US delegates at the State Palace in Central Jakarta. “I was assured that the [I]DFC was ready to allocate $5 billion.”

The figure will add to expected funds from China’s BRI and the UAE to fuel development projects across the archipelago. Indonesia is stepping up efforts to attract investments and subsequently create jobs and stoke economic growth, which has slowed to its lowest level in more than two years.

The IDFC, which manages more than $200 billion in investments for emerging countries, has discussed investment opportunities in Indonesia’s infrastructure, health care, road construction and energy projects, said IDFC chief executive officer Adam Boehler.

“Our first visit is to Indonesia, which symbolizes how important the country is to the US and to affirm our friendship,” Boehler said after a meeting with Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan. “We were established only two weeks ago.”

Boehler also expressed the group’s appreciation of Jokowi for focusing on private capital in funding development projects, stating that the changes the President has made had “helped American businesses”.

“The investment is going to be multibillion dollars. That’s going to lead to tens of billions of dollars from our private capital,” he told reporters. “You will see the US very active, and we will come with our partners, Japan and Australia, to join hands and help Indonesia.”

Luhut told the press that the investment would be channeled to toll road projects in Java and Sumatra, as well as to tourism.

“Our team has already started working; we will start these projects immediately,” he said on Friday

without elaborating on the specific projects.

Luhut previously unveiled a plan to set up a sovereign wealth fund for Indonesia so that the country pool major funding from various sources, including from the US, China and the UAE. He targeted $5 billion to $10 billion for infrastructure projects and other development programs for the fund.

Last year, investments from Chinese companies accounted for 16.1 percent of overall foreign direct investment (FDI) in Indonesia, compared to 4.5 percent for the US.

China was Indonesia’s thirdlargest foreign investor in the first half of last year, accounting for 16. percent of overall FDI. The US, meanwhile, ranks seventh over the same period.

According to some observers, however, Indonesia should be prudent because the investments are still in the form of non-binding memorandums of understanding.

“Investment commitments could show big numbers, but the actual investment is often much smaller,” said Center of Reform on Economics (CORE) Indonesia research director Piter Abdullah. He predicted that only a quarter of the investment commitments would be realized.

To ensure that these commitments would follow through, the government must make it easier for other countries to invest in Indonesia, he added.

Source: The Jakarta Post, 11 January 2020