Wed, 13 Feb 2008
From: The Jakarta Post
By Aditya Suharmoko, The Jakarta Post, Jakarta
Indonesia, the world's largest Muslim country, expects a downpour of investments from the Middle East following the creation of a massive fund by oil kingpins in the Islamic region, a powerful lobby group says.

The Indonesian Chamber of Commerce and Industry (Kadin) estimated Tuesday around US$1 billion of windfall oil proceeds from the Middle East would be invested in Indonesia this year.

"Most of the new investment will be allocated for infrastructure projects such as turnpike development," said the head of Kadin's Middle East Committee, Sudrajat.

He said Arab businessmen preferred to put their money in infrastructure projects because they could directly supervise the development process.

Confronted with an unfavorable business climate in the United States and Europe -- countries suspicious of funds from the Middle East as associated with terrorist networks -- many Arab businessmen feel more secure investing their money in Asia.

With oil prices hovering above US$83 per barrel, Middle Eastern countries have been enjoying windfall profits as their main business activities are primarily related with the production of oil and petrol.

Just last month, Jakarta's special envoy to the Middle East, Alwi Shihab, said the government expected to secure as much as US$5 billion in investment from the region.

The investment, he said, would be spent on financial services, natural resources, plantations, infrastructure and property projects.

Alwi said last year, investors from the Middle East had invested about US$2.55 billion through joint ventures in the infrastructure, chemical and tourism industries.

Emmar of Algeria, for example, invested money last year for the development of hotel and resort facilities worth $600 million in Lombok and West Nusa Tenggara, by cooperating with local firm PT Bali Lombok Tourism Development Center.

The Arab investors are concerned, however, that inconsistencies in regulations could discourage them from coming to Indonesia because of increased business uncertainty, according to Sudradjat.

"The inconsistency of regulations is the country's main problem that could hamper inflow of investment," he said.

Complicated licensing procedures as well as a complex bureaucratic system are also exacerbating the problem.

Kadin said the introduction of laws on sukuk, the Islamic equivalent of bonds, and sharia banking were important to help attract investors from the Middle East as they would provide a legal basis for Islamic-based investments.

The government and the House of Representatives are currently speeding up the deliberation of Islamic-related business bills, with the aim to lure more investment from the Arab world.

Kadin chairman M.S. Hidayat said the group would help find ways to attract more Middle East investors, especially those from Saudi Arabia and the United Arab Emirates, Indonesia's leading export recipients in the region.

"We need them even more as there is a possibility of a U.S. recession that could reduce demand for our products. Therefore, we need to diversify our market in order to phase out our declining exports," he said.

According to Sudrajat, Saudi Arabia and UAE mostly import garments, paper and foods from Indonesia.



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