Money
CIC may invest up to $25b in Indonesia
(Agencies)
Updated: 2010-08-03 17:36
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China Investment Corp (CIC) may invest up to $25 billion in Indonesia, an Indonesia minister said on Tuesday, potentially providing a huge boost to foreign direct investment and improving the country's hopes of an investment-grade rating.
Indonesia, Southeast Asia's biggest economy, has abundant natural resources, including coal, palm oil, copper and timber -- resources which are in strong demand in China.
Mustafa Abubakar, the minister, told reporters that China's $300 billion sovereign wealth fund had said it was interested in investing in three of Indonesia's state firms -- coal miner PT Tambang Batubara Bukit Asam, state electricity firm PLN, and state port operator Pelindo.
"CIC will form a joint venture and for the first batch it will invest $2 billion, but the ceiling (for their investment) could be up to $25 billion," said Abubakar.
CIC invested $58 billion overseas last year, after sitting on a large cash pile in 2008, and a lot of its investments were in sectors where Indonesia is strong, such as natural resources and agriculture.
It had 28.4 percent of its diversified equity portfolio in Asia-Pacific at the end of 2009, according to its annual report.
The fund has already invested in Indonesia's biggest coal company, Bumi Resources.
"China has been active lately in Indonesia, including by indirectly investing in Bumi," said Anton Gunawan, economist at Bank Danamon.
"It is part of its strategy to secure its energy needs, including coal but it is linked with our infrastructure needs. So it's a two-way investment," Gunawan said.
Indonesia's economic growth and development has been hampered by a lack of adequate infrastructure including ports, power plants and roads.