Govt seeks investment from Mideast trip

The Jakarta Post ,  Jakarta   |  Tue, 04/25/2006 10:48 AM  |  Business

Urip Hudiono, The Jakarta Post, Jakarta

The government hopes to secure at least US$8 billion in investment from Middle Eastern enterprises during President Susilo Bambang Yudhoyono's 10-day visit to the region starting Tuesday.

The funds would be used to help finance the development of a number of major infrastructure projects in Indonesia, including the construction of several power plants from a deal the government recently sealed with Chinese investors.

State Minister for State Enterprises Sugiharto said Monday the funds were expected to be raised through sharia bonds -- more commonly known as sukuk bonds -- the government plans to offer to prospective investors during the trip.

""We're looking at a figure of around $8 billion from the bond offering, and that's just for the power sector alone,"" he said, adding the money also would be used for other infrastructure projects, such as the construction of ports and turnpikes.

Under the scheme, Sugiharto said, the investors would jointly own project equipment and assets in exchange for their financing. Islamic law prohibits interest, so sukuk are usually zero-coupon bonds sold at discount prices, with investors receiving profit-sharing installments paid out of the underlying bond assets.

Yudhoyono's official state visit will take him to Saudi Arabia, Kuwait, Qatar, the United Arab Emirates (UAE) and Jordan. Sugiharto, chief economics minister Boediono and Investment Coordinating Board (BKPM) chairman M. Lutfi, along with a number of other top officials, will accompany the President.

Attracting investment from the region is among the trip's main objectives, with the government particularly interested in strengthening cooperation and investment in the energy sector. Indonesia and Middle Eastern countries are major oil and gas producers.

Lutfi said the government was looking to investors in the region to help finance the construction of coal-fired power plants -- worth $6 billion and with a combined capacity of 7,000 megawatts -- that state power firm PT PLN agreed to develop with a number of Chinese firms last Saturday.

The plants are part of the government's crash program to provide 10,000 MW of additional power supply within the next three years.

Lutfi said Chinese investors would most likely supply the required technology but would not be able to supply all the necessary financing.

""That's why we need the Middle Eastern investors with their abundant investment funds,"" he said. ""During the visit, we will present all our proposed projects and deals that they might be interested in, including the plants.""

Despite sharing a common Islamic heritage, Indonesia, with the largest Muslim population in the world, has not managed to attract many investments from Middle Eastern countries. Figures from the BKPM show that Saudi Arabia and Jordan only invested $2.4 million here last year.

Dubai and Kuwaiti lenders have expressed interest in acquiring small Indonesian banks, while the UAE has said it is interested in flag-carrier Garuda Indonesia.

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