Indonesia has set its sights on securing $3.9 billion from investors in the United Arab Emirates during President Joko “Jokowi” Widodo’s three-day official visit to the Middle Eastern country next week amid Indonesia’s investment push to stoke economic growth.

Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan said on Tuesday that the UAE’s investments would be funnelled into 14 projects, mostly in the energy sector. With a total investment value estimated at $18.8 billion, the UAE would fund one fifth of the projects, while other sources of financing will come from other countries, including Indonesia.

“But that value can change. This is still first phase of negotiations,” he told reporters after a pre-visit meeting with Indonesia’s energy minister, foreign minister and Coordinating Investment Board head in Jakarta on Tuesday.

Indonesia is looking to the UAE, China and the US to fund its massive infrastructure projects and boost investment and development against the backdrop of a domestic economic slowdown, Luhut has said previously.

Among the energy projects under discussions with UAE investors are an upgrade of Balongan and Balikpapan refineries in West Java and East Kalimantan, respectively, which are both owned by state-owned energy giant Pertamina. Renewable energy investment is also on the UAE’s radar with the floating Cirata solar power plant in West Java slated to be the biggest of its kind in the country.

“We are still calculating everything. That’s why we had a meeting with ministries and the private sector [on Tuesday],” said Foreign Minister Retno LP Marsudi,

“Negotiations will continue on Wednesday and Thursday. That is why, up to this point, we cannot provide details on the exact investment value but, Insya Allah [God willing], it will be significant.”

UAE Energy Minister Suhail Mohamed Faraj al-Mazrouei told reporters during a visit to Jakarta in July last year that “we are very interested to invest in renewables. We have a company named Masdar that has invested in several countries”.

Solar power

Masdar will support the development of the $129 million Cirata floating solar power plant project, which will be developed by Pembangkitan Jawa Bali, a subsidiary of state-owned utility company PLN.

“After signing the power purchase agreement [in the UAE], we aim to reach a financial close within a year. So by early 2021, we can begin construction,” said PLN strategic procurement 1 director Sripeni Inten Cahyani.

Once fully operational in 2022, the plant will have a capacity of 145MW, making it the biggest such plant in Indonesia, a title currently held by the 15MW Likupang plant in North Sulawesi.

Meanwhile, Pertamina previously said that, once upgraded, the Balongan refinery’s capacity would be increased from 125,000 barrels per day (bpd) to 150,000bpd by 2026. The Balikpapan refinery’s capacity will be increased from 260,000bpd to 360,000bpd by 2022.

Indonesian Chamber of Commerce and Industry member Mohamad Bawazeer, who represents the chamber in the Middle East, told the Jakarta Post on Tuesday that the UAE was a major investor in Indonesia’s oil and gas industry.

“As far as I’ve observed, after Kuwait with Kufpec, this is the only other Arab country to invest in Indonesia’s upstream oil and gas sector, which is a high risk sector,” he said.

Kuwaiti state-owned oil exploration company Kufpec committed $35.2 million in July last year to explore the Anambas oil and gas block in the Riau Islands. Kufpec has been in Indonesia since 1985, when it signed an agreement with Pertamina to develop the Anoa field.

However, continued Bawazeer, Middle Eastern investors – similar to other foreign investors – also faced hurdles related to, among other things, regional permits, land acquisition and workforce regulations when entering Indonesia. He warned that such hurdles might deter future investment from the region.

A case in point, Pertamina and Saudi Arabian oil company Aramco continue to disagree over the development plans of the Cilacap refinery in Central Java. According to the former company, both parties aimed to reach an agreement by December last year based on an independent valuation by Kuwaiti consultancy International Financial Advisors.

“We hope the visit will knock on the doors of other Arab countries, including Saudi Arabia, to stimulate them to do business in Indonesia,” said Bawazeer.

This is President Jokowi’s first overseas trip this year in which he will visit Dubai and Abu Dhabi. It follows up Abu Dhabi’s Crown Prince Mohammed bin Zayed al-Nahyan’s visit to Indonesia in July, which was the first state visit of a UAE leader in almost three decades, to improve economic ties between the two nations.

The Office of the Coordinating Maritime Affairs and Investment Minister previously said that $137 billion worth of investments was in the pipeline for infrastructure projects in Indonesia. Forty-six per cent of the investments is slated for oil and petrochemical refinery projects and 34 per cent is earmarked for mineral processing facilities. Major investors include the UAE, China, the US and Japan.

THE JAKARTA POST/ANN