Jeddah-based IDB sets up
business forum in Indonesia

The Jeddah-based Islamic Development Bank (IDB) Group set up its office of business forum (thiqah) at the Investment Coordinating Board (BKPM) in Jakarta on Monday.

With its first office outside of Saudi Arabia, IDB is hoping to further mobilize its resources and promote Indonesia as a major investment destination for its members.

Khaled Al-Aboodi, CEO of the Islamic Corporation for Development of Private Sector (ICD), IDB’s arm which focuses on private sector cooperation, said that the move would be important to connect more investors from fellow Muslim countries with Indonesia, a vibrant economy that offers lots of investment potential.

“We intend to make it easier for our investors to come to Indonesia and introduce them to various prospective sectors. Presently, Indonesia is not very well-known by these investors and this has prevented them from doing business here,” he said after signing a memorandum of understanding on the bank’s new partnership on information sharing with the board.

Established in 1973, the global financial institution currently comprises 56 members and aims to promote economic and social development of its members and Muslim communities worldwide, according to Islamic law.

The IDB has been conducting a three-year program in Indonesia under the IDB member country partnership strategy, which distributes a total US$3.3 billion in loans until 2014 to the development of the country’s public sector, including infrastructure, education and sharia-based finance and economy. Previously, the bank also channeled funds to speed up infrastructure development in the country under the multi-country Islamic infrastructure funds it set up together with the Asian Development Bank (ADB).

Through the ICD, the bank also holds a stake in Bank Mualamat, one of the country’s largest sharia banks, and is looking into possibilities to acquire a local bank to convert it into a sharia one. The bank is authorized to accept deposits as well as mobilize financial resources compatible to sharia rules.

Khaled said that a number of potential investors, particularly from Gulf Cooperation Council (GCC) including Saudi Arabia, Kuwait and Qatar, had already expressed interest in investing in Southeast Asia’s largest economy. Specific interests were in the untapped sectors, including natural resources processing, power generation and Islamic finance.

“They [investors] are very interested because there’s a lot of liquidity there and they’re looking for destinations for investment and one of these nations is Indonesia,” he said.

The business forum could also facilitate expansion of local companies with excellent business models overseas, particularly within IDB’s member countries, Khaled further added.

BKPM chief Chatib Basri said that the presence of IDB’s business forum would significantly help Indonesia attract larger foreign direct investment (FDI) from Muslim countries.

“In terms of investment, there has been very limited flow of FDI from Muslim countries to Indonesia,” he said, citing United Arab Emirates, the second biggest Muslim investor after Malaysia, which injected $7 million.

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