Major Chinese electricity producer Guangdong Electric Power Design Institute Co Ltd (GEDI) is scheduled to begin construction on a 300 megawatt (MW) power plant worth US$350 million at Golden Integrated Industrial Port Estate (GIIPE) in the North Sumatra city of Percut Sei Tuan in the second half of this year.

In North Kalimantan, meanwhile, Chinese-owned aluminum producer PT Borneo Alumindo Prima has conducted a feasibility study to build an aluminum factory.

Industry Ministry industrial estate development director general Imam Haryono said once the construction of the power plant was completed, GIIPE would see accelerated development as an industrial park specializing in electronics and several other sectors.

“GEDI is currently running a three-month feasibility study to decide whether to use coal or gas to generate the power plant before starting construction around August,” he said recently.

GEDI signed an agreement with GIIPE developer Best & Grow Indonesia (BGI) Investment Group for the project on June 16, witnessed by Indonesia’s Coordinating Maritime Affairs Minister Luhut Pandjaitan

GIIPE is a newly developed integrated industrial park, which stands on a 2,000-hectare plot of land 16 kilometers northeast of the North Sumatra capital of Medan, the country’s third largest city.

The project, which requires over $7 billion in investments, is expected to become a strategic location for developing capital intensive and high-technology based sectors, like electronics.

Introduced in 2013, the OBOR initiative has so far seen more than $50 billion disbursed throughout Asia, Africa and Europe to develop a global trade network to and from China.

Last month, China President Xi Jinping invited leaders from 28 countries to a summit to discuss the OBOR initiative. He pledged to add $14.5 billion to the existing Silk Road Fund for the initiative.

Besides GIIPE, North Sumatra has other industrial parks and economic centers to attract Chinese investors, like Sei Mangkei, which specializes in rubber and palm oil processing, Kuala Tanjung, which specializes in
aluminum production and Lake Toba, an emerging tourism destination.

“A roadmap is now under discussion by the Coordinating Maritime Affairs Ministry to ensure that infrastructure development in the province connects each of these economic centers, cutting logistic costs and making everything more efficient,” Imam said.

Besides North Sumatra, two other provinces expected to enjoy rapid infrastructure and industrial development from Chinese’ investments are North Kalimantan and North Sulawesi.

In North Kalimantan, the government plans to allocate 10,000 ha of land to develop industrial parks focused on bauxite smelter and aluminum production. Tanah Kuning Industrial Park, managed by the regional administration, is one of the intended parks.

The development of the industrial parks has been relatively slow due to a lack of electricity.

In 2014, Chinese owned PT Kayan Hydro Energy commenced the groundbreaking for hydro power plants with a potential capacity of 9,000 MW on the Kayan River, but halted construction due to conflicts over land use permits.

It has recently re-initiated the project, with a planned construction of five dams, each requiring six years to build, as reported by Tribunnews.com.

In the meantime, PT Borneo Alumindo Prima and state-owned aluminum producer PT Indonesia Asahan Aluminum (Inalum) have stated their willingness to be the off-takers of the electricity from the power plants as well as to develop separate power plants if needed.

Borneo Alumindo has conducted a feasibility study to construct an aluminum factory while Inalum has signed a memorandum of understanding to build a similar facility, both in Tanah Kuning, nearby Kayan River.

Separately, Industry Estate Association (HKI) chairman Sanny Iskandar said industrial parks need to be managed by private firms, not by regional administrations, in order to accelerate progress.

“An industrial park needs to be managed by an independent body that’s able to access investors and others to develop it faster. If it’s still managed by government related bodies, it’ll be hard because basically, government functions as a regulator, not a business player,” he said.

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