Grace Nadia Chandra, Triyan Pangastuti, Jakarta – Indonesia has secured $44.6 billion of investments commitment in agriculture, healthcare, digitalization, downstream mining, renewable energy, infrastructure, and development of the Southeast Asian country's new capital in East Kalimantan, following President Joko "Jokowi" Widodo's visit to the United Arab Emirates last week.
The value was larger than the government expected before Jokowi's trip to the Expo 2020 Dubai Trade Exhibition and the Indonesia-UAE Business Forum on Nov 4. The president met with global investors and UAE companies from different sectors already interested in investing in Indonesia.
Among those companies are UAE's Amea Power, Damac Properties, Emirates Global Aluminum, and American industrial gas maker Air Products and Chemicals.
Minister of Investment Bahlil Lahadalia said UAE businesses sought to invest in several sectors, namely infrastructure, agriculture, healthcare, digitalization, downstream mining, and renewable energy. Previously, UAE's investments in Indonesia have been dominated by crops and plantation sectors, with a total of about $109 million already invested flowing into these Indonesian industries.
Bahlil said the investment commitment includes a $10 billion fund from UAE earmarked to develop Indonesia's new capital in east Kalimantan. The fund would be part of the Middle-East country's investment in the Indonesian Investment Authority (INA), the country's sovereign wealth fund, Bahlil said.
"Be reassured that the allocation value of investments towards capital city development will be far higher than the value committed in the beginning," Bahlil said.
"That's because, in discussions between Mr. Jokowi, Mr. Luhut, and the UAE, the figure will surpass $10 billion," he said, referring to the Coordinating Minister of Maritime Affairs and Investment Luhut Binsar Pandjaitan.
Coal to dimethyl ether
Bahlil said the $44.6-billion investment commitment also comprises an agreement with Air Products and Chemicals to build a gasification plant to turn low-calorie coal into dimethyl ether, a substitute for propane in liquified petroleum gas (LPG), standard fuel in home kitchens throughout Indonesia.
According to a statement from the investment board, Indonesia's Investment Coordinating Board (BKPM) and Air Products and Chemicals signed the "long-term investment agreement " agreement" agreement in Dubai on Nov 4.
"This $44.6 billion commitment includes the agreement with Air Products with the value of approximately $13-15 billion. That was done to ensure the down streaming of low-calorie coal," Bahlil, who is also the head of BKPM, said.
Indonesia has been seeking a replacement for its costly fuel import, making its current account in the red for most of the past decade. Currently, Indonesia imports around 5.5-6 million metric tons of LPG per year, costing $3.9-4.9 billion annually.
In comparison, Indonesia's current account deficit narrowed to $2.23 billion in the second quarter this year, or about 0.8 percent of the country's gross domestic product, from $2.9 billion a year earlier.
Bahlil said replacing imported LPG with locally-produced dimethyl ether would lead to energy sovereignty for Indonesia, a healthy external balance, and more jobs. Also, the investment would prevent Indonesia – the world's largest coal exporter – from depending too much on the global market for the commodity, he said.
"So, for us not shipping our coal abroad all the time, Air Products with several state-owned companies and the national private sector will invest in a downstream industry to substitute LPG with dimethyl ether derived from coal," Bahlil said.