President Joko 'Jokowi' Widodo renewed the government's commitment to spur economic growth in the eastern part of the country with a promise to build a large seaport in Sorong, West Papua, calling it an important step to lure investors to the area.
Speaking during the Trade and Investment Forum on East Indonesia on Monday, the President acknowledged that poor infrastructure was a major factor discouraging investors from setting up businesses in the underdeveloped region.
'We can see that there is an enormous potential [...] that can be developed in eastern Indonesia. But we need to provide infrastructural support, and that's the only way it can really be done,' he told business players involved in the Indonesian Chamber of Commerce and Industry (Kadin).
Jokowi said the government would kick off in July the construction of a seaport stretching across a 7,000-
hectare area in Sorong, West Papua, along with an industrial zone and power plant. The project in Papua follows the ground breaking of another seaport project that took place last week in Makassar, South Sulawesi.
Statistics from the Investment Coordinating Board (BKPM) showed that 56.9 percent of the total investment of Rp 463.1 trillion (US$35.15 billion) realized last year was spent in Indonesia's most densely populated island, Java. A large number of investors have found that areas outside Java, notably in the eastern part of the sprawling archipelago, are less attractive because of poor infrastructure and a shortage of skilled labor.
Jokowi said that to support its goal of food self-sufficiency, the government would soon start a project to develop large-scale farming in Merauke, Papua, and would be committed to building supportive infrastructure, such as roads, seaports and irrigation channels. This project will cover 1.2 million hectares and will focus on key crops, such as paddy, corn and sugarcane, he added.
'We invite any investment [in that project]. The 70 percent share can be held by state-owned enterprises, while the remaining 30 percent can be owned by private firms.'
Plans for integrated farming, often dubbed 'food estates', were earlier revealed by State-Owned Enterprises Minister Rini Soemarno. According to Rini, the project to 'synergize the whole process from seeding to fertilizing' will involve state-owned fertilizer producer PT Pupuk Indonesia Holding Company, seeding firm PT Sang Hyang Seri and agribusiness firm PT Pertani.
Kadin head of investment, banking, finance and business development in eastern Indonesia, Reza V. Maspaitella, said that to speed up development in eastern Indonesia, Kadin would launch within weeks a holding company named PT Investasi Indonesia Timur.
The company will support small and medium enterprises that plan to set up joint ventures with foreign firms. Apart from this, it will also establish an organization called East Indonesia Development Funds, which will pool funds from foreign investors through local fund managers to carry out their projects here.
'At present we have secured a commitment of funds totaling US$1 billion, but we expect it can increase to around $5 billion in the future,' Reza said, adding that three banks ' HSBC, Barclays and Deutsche Bank ' would store the funds from foreign investors and provide them with a guarantee on their investment.
Currently, investments in eastern Indonesia have reached $50 million. The money has been channeled into fishing, agriculture and animal husbandry sectors, according to Kadin.