Indonesian officials said on Monday that the Dubai World debt crisis would not effect commitments from investors in the United Arab Emirates to finance several major projects here, although they warned local companies to â€śseriously reconsiderâ€ť plans to expand into the Middle East.
Coordinating Minister for the Economy Hatta Rajasa said Dubai Worldâ€™s postponement of billions of dollars in debt repayments would not derail projects getting their funding from the UAE.
â€śDubai investors are still expressing their commitment to us, despite the situation. Two days ago, Al Khaimah, which planned to invest in railway projects in Central Kalimantan and South Sulawesi, came to me saying they would continue because the railway was vital to support their plan to establish a smelter business here,â€ť he said in Jakarta.
Dubai, a member state of the UAE, rocked the financial world last week when it said it would ask creditors to defer Dubai Worldâ€™s payments $59 billion of debt as a first step to restructuring, sending a warning sign interbank lending with the second-largest Arab economy could face a downturn this year. The UAEâ€™s central bank set up an emergency facility on Sunday to support bank liquidity in the first policy response to Dubaiâ€™s debt woes, which threatened to paralyze lending in the region and derail its economic recovery.
â€śI hope that the UAEâ€™s response to Dubai World will limit this problem and not create more systemic risks,â€ť Hatta said.
In March, the UAE-based Ras Al Khaimah Investment Authority and its subsidiary RAK Mineral and Metal Investments (RAKMMI) announced plans to invest in a 125-kilometer coal railway and an international port worth about $1 billion to support a planned smelter for nickel, copper and gold. The railway would also transport coal and palm oil from provincial capital Balikpapan. RAKMMI expects the project to be finished by 2012.
Meanwhile, the State Enterprises Ministry urged state-owned firms to â€śseriously reconsiderâ€ť expanding in the Middle East because of the Dubai debt problem. Two of the largest state builders, PT Adhi Karya and PT Wijaya Karya, are involved in several ongoing projects in Dubai and Qatar.
â€śThe ministry urges SOEs, especially construction companies, to seriously reconsider their plans to work on projects offered by Middle Eastern countries,â€ť said Muhammad Said Didu, the secretary for the ministry.
Adhi Karya is currently embroiled in a contractual dispute with Dubai-based Al Habtoor Enginering over the building of the Shangri-La Hotel in Doha, part of the $380 million Doha City centre expansion project.
Two other state construction firms, PT Pembangunan Perumahan and PT Waskita Karya, this year signed preliminary agreements with the Bin Ladin Group to work on major projects in Saudi Arabia. These include an extension to the famous Haram Mosque in Mecca and building expressways near the house of worship, worth a total of Rp 1.5 trillion ($159 million).