The Indonesian and Qatar governments have signed a memorandum of understanding (MoU) for the establishment of a trust fund that will provide investment funds of up to US$1 billion for infrastructure projects in Indonesia.
"The signing of the MoU represents a follow up to President Susilo Bambang Yudhoyono's recent roadshow in the Middle East," State Minister for State Enterprises Sugiharto said Friday.
The President visited several Arab countries in May to introduce 25 proposed Indonesian infrastructure projects to Middle Eastern investors.
Sugiharto explained that the MoU with Qatar would serve as a benchmark for similar agreements with other Middle Eastern countries, such as Bahrain, Kuwait, the United Arab Emirates, Qatar and Saudi Arabia.
Besides the MoU with Qatar, Indonesia has also signed an agreement with the Islamic Development Bank (IDB). Under this agreement, the IDB will provide $65 million in loans to partly finance a project by state gas distribution company PT Perusahaan Gas Negara to construct pipelines linking gas fields in Pagardewa and Grissik in South Sumatra to West Java.
The IDB is also expected to provide loans for construction projects by state railway operator PT KAI, in addition to opening "trade-line" facilities for Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri and Bank Ekspor Indonesia.
Together with Bank Ekspor Indonesia, the IDB is also planning to provide a loan to finance projects by state railway producer PT INKA in Bangladesh.
The Qatar Islamic Bank has also promised to invest up to US$100 million to establish a foothold in Indonesia through the taking of a stake in an existing bank here.
"The Qatar Islamic Bank wanted to set up a new bank, but instead we've offered them the chance to purchase a local lender or a local sharia bank," Sugiharto said.
The Dubai-based Qatar Islamic Bank is following in the footsteps of other overseas lenders from emerging markets, such as China's Industrial & Commercial Bank, in investing in Indonesia, Southeast Asia's largest market by population.
In addition, Bank Syariah Mandiri has signed an MoU with Standard Chartered Bank Dubai for cooperation in correspondent banking and trade-line facilities, international financing syndication for Indonesian projects and other crossborder transactions.
Most Middle East banks are sharia-based. Sharia forbids investment in businesses with high levels of indebtedness or those connected with proscribed activities, such as gambling and alcohol production.
Apart from the banking and financial sectors, state-owned PT Krakatau Steel has signed an agreement with Al-Tuwairqi Group, a manufacturing company from Qatar, for cooperation in the development of a steel and cold rolling mill worth $326 million.
Also benefiting from the cooperation with the Middle East is state-owned dredging company, PT Rukindo, which has signed an agreement with SMS Global Dubai for a joint land reclamation venture worth US$50 million over a period of five years.
Meanwhile, one of the country's largest construction firms, PT Adhi Karya, is expected to cash in on its experience by constructing a monorail in Mecca, Saudi Arabia, while another construction company, PT Waskita Karya, has signed a deal to build three office towers, each 85 stories high, in Dubai.
Also in the action is airports operator, PT Angkasa Pura I, which will team up with financial firm EMAAR Dubai to build an airport in Lombok.
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