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Jakarta Post
The Jakarta Post
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Russia to pour in billions, for real

  • The Jakarta Post

    The Jakarta Post

Jakarta | Wed, February 26, 2014 | 09:27 am

After backtracking on investment pledges logged a couple of years ago, a strong delegation of Russian officials and businessmen revisited Jakarta Tuesday, and this time around they meant business.

Deputy Russian Prime Minister Dmitry O. Rogozin led a delegation of 40 companies that included the Russian Railway, Kamaz, Sukhoi Civil Aircraft, Vi Holding and NIIDAR.

Also in tow was Russian billionaire Oleg Deripaska, president of energy-related company En+ Group and CEO of United Company RUSAL, the world'€™s largest aluminum company.

The visit was part of the ninth Indonesia and Russia joint commission for cooperation in trade and economy.

Coordinating Economic Minister Hatta Rajasa said that several Russian investors had confirmed they would invest up to US$6 billion this year for smelters and railway projects.

'€œI think this time is for real,'€ said Hatta when questioned about the seriousness of the Russian investors.

'€œRUSAL and another company will build smelters in West and East Kalimantan with a total investment of $3 billion. Russian Railway will start a railway line in East Kalimantan to deliver coal, with a total investment of around $3 billion.'€

RUSAL announced in a statement Tuesday that it had signed a memorandum of understanding (MoU) during the event with local coal and nickel miner PT Arbaya Energi to build a smelter.

'€œWe have received confirmation that RUSAL will start building the smelter around October this year and complete it in three years,'€ said Indonesian Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto.

RUSAL and other global nickel producers are among the beneficiaries of Indonesia'€™s recent policy to ban the export of raw mining ore, including nickel and bauxite.

Nickel, used to make stainless steel, climbed 3 percent this year and beat all other base metals on the London Metal Exchange as Barclays Plc forecast that the curb would help shift the global market to a deficit from 2015, Bloomberg reported.

'€œRussia is our true friend. They support our ore ban policy, unlike Japan, which has threatened to file a case against us with the World Trade Organization,'€ said Suryo.

Vi Holding board chairman Valery N. Krasnov told The Jakarta Post that his firm would invest more than $100 million to build bauxite and nickel smelters.

Russia is Indonesia'€™s 27th largest foreign investor, mostly engaged in hotel and restaurant businesses, according to the Foreign Ministry.

A delegation of Russian businesses has visited Indonesia multiple times since 2010 and has pledged to pour billions in investment for railway and smelters. However, the commitments have not been realized.

Aside from investment, Indonesia will also boost cooperation with Russia in terms of people-to-people contact.

'€œGaruda Indonesia confirmed it will open its first direct flight between Bali and Moscow by the fourth quarter of this year,'€ he said, adding that the number of Russian tourists visiting Bali had surged in recent years.

Around 110,000 Russian tourists visited Bali last year, according to the Bali administration.

In terms of bilateral trade, both countries have yet to live up to their potential, as Russia is not among Indonesia'€™s top 10 trading partners, according to Hatta.

During the delegation'€™s meeting with Hatta, Russia wanted to boost bilateral trade to $5 billion next year, through the formation of working groups to deepen cooperation in particular trading sectors.

'€œThe target actually does not yet represent the real potential that we and Russia have. We expect the value to keep increasing,'€ said Hatta, adding that bilateral trade had actually increased by around 30 percent annually for the past five years.

Bilateral trade stood at $3.34 billion in 2012, according to Hatta.

Hatta said that Indonesia would need to boost the export of its prominent commodities, such as coffee, timber and palm oil to Russia.

'€œRussia has significantly increased manufacturing production by around 40 percent in recent years, while its oil and gas production has dropped. In such a situation, we can supply our commodities to support their industry,'€ he said.

Aside from having agreed to boost mutual trade, Indonesia and Russia also agreed to establish five working groups for legal affairs; trade, investment and industry;
culture and tourism exchange; energy; and transportation and infrastructure.

Russia'€™s Rogozin said that Russia had started to look eastward by vying to widen cooperation with Asia-Pacific countries as he believed the region would lead the 21st century.

'€œI believe that cooperation between Indonesia and Russia will have a brighter future as we don'€™t compete in any fields and we do not have conflicting views [in terms of politics],'€ he said. (koi)

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