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Indonesia vies for BRI investment
On December 5th Ridwan Djamaluddin, the deputy for infrastructure at Indonesia's Co‑ordinating Ministry for Maritime Affairs, told the media that Indonesia was looking to offer up to US$60bn-worth of infrastructure projects to Chinese investors in a bid to attract funds from the Chinese government's Belt and Road Initiative (BRI).
Although the president, Joko Widodo (known as Jokowi), has been a regular participant in China's annual Belt and Road summits, Indonesia has yet to receive a large volume of Chinese investment. According to data from Bank Indonesia (BI, the central bank), between the first quarter of 2015 and the third quarter of 2018 (latest available data), China was the source of only 3.3% of the total foreign direct investment (FDI) that entered Indonesia. The archipelago's largest sources of FDI have long been Singapore and Japan, and this has remained unchanged since Chinese authorities launched the BRI in 2013.
However, the country is home to a few notable Chinese projects under the BRI umbrella, including a US$6bn high-speed rail project linking Jakarta, the capital, and Bandung, the capital of West Java province. The project—Indonesia's largest under the BRI—was shovel-ready in 2016 after China outbid Japan with better financial terms in the previous year. Nevertheless, the project has faced continual delays owing to land acquisition issues and intermittent halting of construction by law enforcement authorities.
Although these issues are typical of most foreign-funded large-scale projects in Indonesia, they have to some extent cooled Chinese interest in building infrastructure there. Moreover, although Jokowi has been keen to improve conditions for investors, and has been eyeing the BRI in particular for potential funding, others in Indonesian political circles are less interested in opening up to Chinese investment. Indeed, investment from China has become a hot-button political topic in the current general election campaign (polls are set to be held in April 2019). Prabowo Subianto, Jokowi's main opponent for the presidential ballot, has claimed that, if elected, he would review all infrastructure projects that have been funded by Chinese investors. Such uncertainties will keep Chinese investors hesitant to expand their presence in Indonesia.
Regardless of the political uncertainty, we still expect investment from China into Indonesia to rise gradually over the forecast period. We have already factored this into our forecast, and so no changes are necessary.
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