Massive Australian investment in Indonesia hinges on law change

Jakarta (Antara News) - Billions of dollars of Australian investment to Indonesia hinges on new legislation being passed through Indonesia's parliament, Australia's trade minister said during a visit here Tuesday.

Trade Minister Warren Truss said that about 2.5 billion Australian dollars was currently invested in Indonesia by Australian companies.

"But there are many projects currently under consideration which would multiply that figure many times over -- some of these projects are almost that big in themselves," Truss was quoted by AFP as telling reporters.

"So there's enormous potential with Indonesia's new investment laws, its mining laws... to encourage investors to participate in Indonesia," he said, speaking at the ministry of state enterprises in Jakarta.

"Most of these laws are still passing through the Indonesian parliament so investors will require certainty and confidence about the regulatory regime that's going to be in place before they are prepared to commit the money that will be necessary."

An investment law passed by Indonesia's parliament in April included equal treatment for domestic and foreign firms in some areas and the right of foreign firms to seek redress through "binding" arbitration in cases of disputes with government.

Authorities however are still formulating a variety of regulations to support the law, including investment approval procedures and tax reforms.

"So as the laws come into place and as the confidence builds, these projects are likely to commence," Truss said.

Truss presided over a ceremony Tuesday that saw Australian fertiliser firm Incitec Pivot Limited (IPL) sign a preliminary agreement with two Indonesian partners to investigate the feasibility of investing in a gasification plant to convert Indonesian coal into synthesised gas.

If it goes ahead, the project would see IPL invest 700 million to 800 million US dollars in the plant, which would provide three fertiliser plants in Indonesia's westernmost province of Aceh with feedstock, electricity and steam.

The plants have a production capacity of more than 1.7 million tonnes annually but currently produce only 300,000 tonnes because of limited natural gas supplies, an embassy press statement said.

The pact was signed with Pupuk Sriwijaya (PUSRI), the holding company of Iskandar Muda, which owns the three plans, and the state-owned engineering company, Rekayasa Industri.

The feasibility study is expected to be completed by the first quarter of 2008. (*)
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