Fri, 29 Apr 2011

From: Reuters

China Investment Corp. plans to offer $4 billion in loans for Indonesian infrastructure, part of a package of deals Jakarta is hoping for during a visit this week by Chinese Prime Minister Wen Jiabao, officials here said on Thursday.

The plans by the $300 billion wealth fund are likely to be announced during a two-day visit to Indonesia by Wen, who arrived in Jakarta late on Thursday, in an effort to boost bilateral trade and gain access to the archipelago’s resources.

“CIC plans to provide about $4 billion in the form of loans to Indonesia’s infrastructure projects … and the loans are supposed to be for Indonesian firms,” said Gita Wirjawan, head of the Investment Coordinating Board (BKPM).

In addition, Bank of China and Industrial and Commercial Bank of China plan to lend several billion dollars to Chinese firms for investing in Indonesian industry, said Agus Tjahajana, the director general for international industry cooperation at the Industry Ministry in Jakarta.

Indonesia is trying to attract more than $100 billion from investors to overhaul poor infrastructure among its 17,000 islands, while China is on a global hunt to secure long-term resource supplies to fuel its fast-growing economy.

So far, Chinese infrastructure investment in Indonesia has lagged behind that of other Asian countries such as Japan, South Korea and India, though China is the largest trading partner for Indonesia, the world’s top exporter of coal for power plants.

CIC is in talks with Indonesia’s largest coal firm, Bumi Resources, on the possible swap of $600 million debt into equity, the miner said last month. Bumi owes a total of $1.9 billion to the sovereign wealth fund.

Gita said China’s State Development and Investment Corp., a state-owned investment holding firm, also planned to invest up to $200 million to build a cement factory in Papua and may invest in power plants there.

It would be the first cement factory in Papua, cutting costs in a province lacking infrastructure but home to the world’s largest gold mine, huge natural gas deposits and forests that the government wants to turn into food plantations.

“They [SDIC] plan to invest in Papua or West Papua,” Gita said. “This is a follow-up from their visit to Papua.”

Poor logistics have been blamed for the high cost of doing business in Papua. Richard J. Lino, president director of state seaport operator Pelindo II, said earlier this month that cement was 10 times more expensive in Papua than in Jakarta.