From Government of Indonesia

China Leads Investment Interest

A Chinese official has said his government intends to increase investment in Indonesia, particularly in the power and resources sectors, as a number of other investment deals were taking shape.
The reports provided an optimistic note to the end of a year in which investment realizations have been sharply down on 2005 levels, and well off pre-crisis levels.

Zhao Guobao, vice chairman of the Chinese National Development and Reform Commission (NDRC), made the promise of more investment after a meeting with Energy and Mineral Resources Minister Purnomo Yusgiantoro on Friday (22/12/06).

Indonesian sources said China had been offered the chance to take part in a crash program to build a total of 10,000 MW in new power capacity.

In other investment news, Korean electronics manufacturer LG Electronic announced that it was making Indonesia a regional production base for four types of products, while China’s Geely and Cherry automotive groups both said they would set up shop in Indonesia.

Russia’s Alfa Group said it was willing to spend up to $2 billion on an entry into the telecommunications market.

A local company, PT Lamicitra Nusantara, said it is preparing to build a $1.44 billion industrial seaport city in Madura. Its plan recognizes overcrowding at Surabaya’s Tanjung Perak port and the opportunities for growth on the island once a bridge to the provincial capital is completed.

Hopes of stronger investment interest in the coming year were driven by Trade Minister Mari Pangestu, who told a briefing for embassies, multinational institutions and business groups that implementing regulations had already been framed ready to put into action when the investment law is completed early next year.

Strongly positive comment came from the World Bank, which said it had approved a loan package of $600 million to support reforms.

"Indonesia has shown strong commitment to restoring sound economic fundamentals," said Andrew Steer, the bank's country director for Indonesia.

World Bank economist William Wallace said the reforms had already produced results. "Growth is accelerating, the financial sector is diversifying, red tape that impedes businesses is being cut, credit ratings are improving and infrastructure projects are getting underway," Wallace said.

On the macroeconomic front, Bank Indonesia said the US dollar might sink to below the Rp9,000 to the US dollar mark during the coming year, based on the country’s improving fundamentals.
"The rupiah is affected by our fundamental (macroeconomic) factors so the better our fundamentals, the better the rupiah," deputy governor Aslim Tadjuddin said

Tadjuddin said the central bank doesn't want the rupiah to "over-strengthen" because it would undermine the competitiveness of exports, without elaborating on possible central bank intervention to stall the rupiah's rise.

Governor Burhanuddin Abdullah brushed off the effect of concern over regional economies following Thailand’s shock introduction – and almost immediate retraction - of capital controls. The rupiah ended the week at Rp9,077 to the greenback.
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