‘Largest deal in Indonesia’s history’: UAE pledges to invest in deal worth $22.8b

The United Arab Emirates (UAE) will invest in a third of US$22.8 billion worth of development projects in Indonesia as Southeast Asia’s largest economy looks to the world’s wealthiest countries to fund infrastructure and human capital development projects.

The investment plan was announced during President Joko “Jokowi” Widodo’s official two-day trip to Abu Dhabi that ended Monday. Foreign Minister Retno LP Marsudi said that, under the deal, the UAE would invest $6.8 billion into five government-to-government projects and 11 business-to-business projects in agriculture, education, energy and mining, among other sectors.

“As the President conveyed, this deal with the United Arab Emirates might well become the largest deal in Indonesia’s history,” Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan said in a statement on Monday.

The UAE, Indonesia’s largest Middle Eastern investor last year, adds to a list of countries, including Japan, China and the US, to which the Jokowi administration is approaching to secure $137 billion for infrastructure projects, most of which are energy-related.

Luhut said the UAE would also invest in Indonesia’s new capital city and the upcoming sovereign wealth fund (SWF), which is currently being developed by the State-Owned Enterprises Ministry. “Those that will join the SWF include the UAE, Softbank, the IDFC (International Development Finance Corporation) from the United States and other parties that would want to join,” he said.

The IDFC, a fund competing with China’s Belt and Road Initiative, which finances developing countries, pledged to invest $5.5 billion in Indonesia during its first international trip to Indonesia on Friday.

Japan-based Softbank Group founder and CEO Masayoshi Son also on Friday met with Jokowi to discuss investment plans in Indonesia.

Investment Coordinating Board (BKPM) chairman Bahlil Lahadalia took the opportunity to lambast critics that said Indonesia relied too much on China to jack up investment and stoke economic growth. In 2019, Indonesia proposed 28 projects worth $91.1 billion for China’s Belt and Road Initiative.

“It’s not true that Indonesia only seeks investment from China and Singapore. We seek investment from any country,” Bahlil said in a statement on Sunday. Bahlil, Luhut, Retno and Coordinating Economic Minister Airlangga Hartato were among the many ministers accompanying Jokowi on the UAE trip.

Indonesia’s top five foreign investors have historically been Asian countries, with the exception of the Netherlands, which was the third-largest investor in the January-September period last year. The UAE ranked 20th over that same period, according to BKPM data. 

The major investments signed with the UAE include the development of state-owned oil company Pertamina’s refineries, state utility company PLN’s solar power plant and state mining holding company Inalum’s aluminum smelter.

Pertamina signed on Monday two agreements with UAE’s state-owned oil company ADNOC. Under the first agreement, Pertamina will import up to 528,000 tons of liquefied petroleum gas from ADNOC by year-end. In the second, ADNOC will conduct studies on upgrading the former’s Balongan refinery in West Java. The upgrade would turn the facility from an oil refinery into a petrochemical processing plant.

ADNOC Group CEO Sultan Ahmed Al-Jaber said in a joint statement the agreement “will potentially help ADNOC to secure additional in-market presence in one of Southeast Asia’s fastest-growing economies”.

Pertamina president director Nicke Widyawati added the agreement would enable the company to “better serve the domestic market through our vast distribution networks across the whole archipelago and access new opportunities to meet growing global demand for petrochemical products”.

Pertamina also signed on Monday a deal with the UAE’s Mubadala Petroleum to develop the $5.5 billion Balikpapan refinery in East Kalimantan.

Indonesian Chamber of Commerce and Industry (Kadin) member Mohamad Bawazeer, who represents Kadin in the Middle East, said previously that businesspeople had high hopes over Jokowi’s UAE visit, especially after the Indonesian government failed to materialize investment commitments during an official visit to Saudi Arabia in April 2019.

“Don’t let the Saudi Arabia case happen again. Ever since Jokowi went there, the Cilacap refinery’s valuation still remains unsigned,” Bawazeer told The Jakarta Post.

Pertamina and Saudi energy giant Aramco have yet to agree on investment conditions and figures for the Cilacap refinery despite years of negotiations following an investment commitment.

Meanwhile, Inalum signed on Sunday an agreement with metal producer Emirates Global Aluminium (EGA) to study development of a new smelter in Indonesia.

Inalum president director Orias Petrus Moedak said in a joint statement that the Indonesian company eyed the potential deployment of EGA technology in Indonesia. EGA managing director Abdulla Kalban said it sought to become Inalum’s technology supplier, “potentially [developing] even in the future a vertically integrated alumina refinery”.

PLN signed on Sunday an agreement with renewable energy company Masdar to develop the 145 megawatt Cirata solar power plant in West Java. Once fully operational, the $129 million Cirata facility would be Indonesia’s largest solar power plant, taking over the title from a 15 MW Likupang plant in North Sulawesi. 

Jokowi urged more UAE investment in Indonesia’s renewables industry, particularly in developing domestic battery factories and in increasing the use of domestic biodiesel.

“Ten years from now, whenever you see a smartphone, you will remember that you are carrying a part of Indonesia,” he said at the Abu Dhabi Sustainability Week conference on Monday.

The government is also considering installing Abu Dhabi Crown Prince Mohammed bin Zayed Al-Nahyan as a member of the new capital’s development steering committee. Luhut noted government buildings in the new capital would be funded by the state budget but that “anything else requires the private sector and investments”.

President Jokowi’s first overseas trip in 2020 to the UAE follows up Crown Prince Mohammed bin Zayed Al-Nahyan’s visit to Indonesia in July. The Crown Prince’s visit, the first state visit of a UAE leader in almost three decades, was made to improve economic ties between the two nations.

Source: The Jakarta Post