President Joko “Jokowi” Widodo’s meeting with executives of Japanese oil giant Inpex on Tuesday opens a new chapter for both countries following stained business relations due to the Asian giant’s failed projects in the country
President Joko “Jokowi” Widodo’s meeting with executives of Japanese oil giant Inpex on Tuesday opens a new chapter for both countries following stained business relations due to the Asian giant’s failed projects in the country.
The meeting agreed to support development of the multi-billion dollar Masela onshore liquefied natural gas (LNG) plant in South Maluku.
“He [Jokowi] made it clear that he would fully support this project. This is a big project. This project is also a symbolic project between Japan and Indonesia,” said Inpex Indonesia vice president for corporate services Nico Muhyiddin.
Inpex previously proposed to build a US$22 billion gas facility offshore, but the government opted for an onshore plant instead, forcing the company to redo its business plans and lose investment already put into the offshore scheme.
The hurdle emerged at a time when Japan, Indonesia’s biggest creditor and one of its biggest investors and export markets, faced uncertainty over a major seaport project and lost out to China in a contest to secure Indonesia’s first high-speed railway project.
All the while, China’s investment in Indonesia is emerging. Apart from the high-speed railway, China pledged billions of dollars worth of financing for local banks and infrastructure projects, including the government’s strategic Sumatra and Sulawesi railway projects.
But Indonesia and Japan can put those setbacks behind them as recent developments work in favor of Asia’s second-largest economy.
Apart from progress made on Inpex’s Masela gas block, Japan Bank for International Cooperation (JBIC) recently agreed to provide a $2.05 billion loan to develop the 2,000 megawatt (MW) Batang coal-fired power plant that is touted as the largest in Southeast Asia and part of Jokowi’s ambitious plan to boost power supply by 35,000 MW by 2020.
Also, the Patimban deep-sea port, which will serve as an alternative to the nation’s largest port Tanjung Priok, has recently been named as a strategic project, meaning the government will provide guarantees for the $3.09 billion project, which will be partly financed by Japan.
“Although there was a four-to-six-months vacuum in Japanese investment, they were very enthusiastic and are highly interested in investing again,” Investment Coordinating Board (BKPM) chairman Franky Sibarani told The Jakarta Post.
Despite recent setbacks in bilateral relations, Japanese investors continue to have a keen interest in the country, the BKPM concluded after recent meetings with potential investors.
For example, one investor is reportedly interested in developing fire-fighting technology worth Rp 600 billion (US$44.9 million) and is currently assessing potential production sites in industrial estates in Sumatra. It is set to cooperate with the local administration, so the technology can be dispatched during forest fires.
Other investors are keen to build camera lenses and car parts. “We expect Japanese investment to increase significantly this year,” Franky said.
The Japanese Embassy confirmed that the country had big plans to invest in Indonesia. Economic Minister counsellor Mari Takada said Japan was looking into several other projects in Indonesia’s oil and gas industry, apart from Inpex’s Masela block.
Separately, Japanese Embassy counselor for information and culture Kenichi Takeyama said the country continued to consider Indonesia an important partner and its businesses would continue to invest in the country.
“Japan has had relations with Indonesia for almost 60 years now, and we have established positive economic, political and social relations. One or two problems won’t strain this relationship,” Takeyama told the Post.
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