Chinese companies cater to Indonesia's need of infrastructure

Fishing boats near the Suramadu Bridge, the longest of its kind in Indonesia. The bridge was built by a consortium including China Harbor Engineering, one of many constructed by Chinese companies in the country in recent years. [Provided to China Daily]

China's economic and trade relationship with Indonesia is increasingly large and complex.

Over the last decade, China systematically overtook Indonesia's other trade partners like the United States, Singapore and Japan. Non-oil transactions worth $50.9 billion in 2013 made China the country's single largest trade partner. In 2003, non-oil trade was just $5 billion.

Indonesia is also a prime destination for Chinese investment. The country has a huge need of infrastructure, and Chinese companies have made themselves a global name building just that. In May, for example, the China-ASEAN Investment Cooperation Fund, which has both private and government capital, invested an undisclosed amount in an Indonesian telecom tower operator.

"Infrastructure is so important to Asia," Li Yao, chief executive officer of the fund, said at a China Daily forum in Hong Kong on Sept 21.

For Indonesia, it is particularly important. In fact, improving the quality of the country's infrastructure is one of the key goals for the new government of President Joko Widodo, who will be inaugurated on Oct 20.

As far as the economy goes, the challenges for the new government will be to cut energy subsidies, reform the bureaucracy, boost tax revenues and improve infrastructure, said retired General Luhut Pandjaitan, an adviser to Widodo－who is better known as Jokowi across the country. Over the next five years, Indonesia will need $545 billion in investment to support the development of its infrastructure, according to the government's mid-term development plan to 2019.

Most of this capital is likely to come from public debt and tax revenues, but the plan calls for $35 billion to come from international financial institutions and $83 billion from the private sector.

More than 2,000 Chinese companies have invested in Indonesia in industries ranging from coal mining, finance, insurance, telecommunications, transportation and machinery manufacturing, to project contracting, agriculture, chemical engineering and trading, says Liu Haosheng, president of the China Chamber of Commerce in Indonesia.

Many leading State-owned or private enterprises, as well as most of China's Fortune 500 companies, are already in Indonesia.

The first bank that tourists see when they land at the international airport in Jakarta is the Industrial & Commercial Bank of China. CNOOC, China's largest offshore oil company, has invested more than $6 billion in Indonesia.

Power companies like China Huadian, Dongfang Electric and Sinohydro have built both coal and hydropower plants.

Telecoms infrastructure maker and operator Huawei manages much of Indonesia's telecommunications in partnership with local operator XL Axiata.

In 2012, white goods maker Haier acquired the household goods business in Indonesia of Japanese group Sanyo.

China Harbor Engineering was part of a consortium that built the country's longest bridge between the islands of Java and Madura. Chinese conglomerate Sinochem says it is the largest supplier of Indonesian rubber.

Agribusinesses like Mazhongdu International and Hainan Baisha control enormous tracts of land. China Railway Construction wants to build a fast link between the capital, Jakarta, and the airport.

In July, Sinohydro announced that it is working with an Indonesian consortium to build the second-largest dam in the country. The Export-Import Bank of China is bankrolling the project.

When President Xi Jinping visited Indonesia in October 2013, he left behind signed deals for financing and investment from Chinese companies worth almost $33 billion, an Indonesian government official said at the time. In a sign of the growing links between the two countries, Xi was the first foreign leader to speak to Indonesian lawmakers in parliament.

Xi said he wants trade between China and the Association of Southeast Asian Nations to hit $1 trillion by 2020, three times as much as in 2012. ASEAN's 10 members have a population of around 600 million, and a little less than half of those people are in Indonesia.

Xi said bilateral trade between China and Indonesia should hit $80 billion next year. It was more than $66 billion in 2013.

As the number of Chinese companies keeps growing, the investment has become more diversified and much larger.

"Many of the companies have built their facilities in Indonesia and some manufacturing companies have transferred Indonesia into a part of the industrial chain instead of just a foreign market," says Liu from the China Chamber of Commerce.