Hungarian companies to invest $4 billion in South Sumatra

Rendi A. Witular, The Jakarta Post, Jakarta

South Sumatra's economy is to receive a massive boost following the signing of an agreement worth about US$4 billion on Monday, between the representatives of Hungarian investors and the province's administration.

Visiting Hungarian Prime Minister Ferenc Gyurcsany and economic and transportation minister Janos Koka, who witnessed the signing of the memorandum of understanding (MOU), said the deal would focus more on the development and construction of infrastructure.

"This morning, an MOU with the South Sumatra administration and representatives of Hungarian businesses was signed to develop power, coal mining, port and rail projects," Koka said at the State Palace.

South Sumatra Governor Syahrial Oesman said the projects would include the exploration of a coal mine in Banyuasin regency, the construction of a railroad from the mine to Bagan Siapi-Api port in Riau province and the construction of a power plant to support the mine.

"The $4 billion investment deal is a breakthrough for us. Usually, the central government deals with every major economic activity in our province. But now, we are managing to do it alone," said Syahrial after accompanying President Susilo Bambang Yudhoyono to meet Prime Minister Gyurcsany at the palace.

Syahrial said the coal mining site in Banyuasin was estimated to have a proven reserve of about six billion tons of coal, while its neighboring site in Muara Enim regency had about 13 billion tons.

He said the coal-fired power plant would have a capacity of about 4,000 megawatt (MG), which was significant given the electricity problem in the province.

The Hungarian government has also pledged to provide about $25 million in soft loans for the natural resource-rich South Sumatra to help develop a highway that would link several business areas in the province with Bagan Siapi-Api port.

Meanwhile, during a joint press conference with the President, Prime Minister Gyurcsany offered the government several of its information technology (IT) products and services, as well as a selection of its military equipment.

"Export of Hungarian products to Indonesia is 10 times smaller than imports from Indonesia. We would be very delighted if Indonesia explored several of our IT products as well as our military equipment industry," said Gyurcsany.

According to Indonesian Minister of Trade Mari Elka Pangestu, Indonesia's direct export to Hungary stands at about $96 million annually, while import from the country is less than $10 million.

Mari said that about 50 percent of Indonesian exports to Hungary was in the form of electronic goods, and the remainder was in the form of agriculture produce and food products.

Hungary, which has a population of about 10 million people, has also appealed to the Indonesian government, as well as its business community, to import wheat from Hungary.

Indonesia imports some five million tons of wheat annually, most of which is Australian.

Mari, however, said that importing wheat from Hungary would require greater effort due to the high transportation costs compared to importing it from neighboring countries.

"I think the products with the most potential for us are processing machinery for our forestry industry and IT products. Hungary excels in those sectors," Mari said.

Meanwhile, during a bilateral meeting, the two countries agreed to sign an agreement on economic cooperation and an MOU on the tourism sector.