Indonesia is slated to secure $5 billion in development funds from the US’ financing arm for developing countries and more from the US private sector, following investments from China and the UAE.

The US’ International Development Finance Corporation (IDFC), said to be a direct competition to China’s growing influence in projects across developing countries through the Belt and Road Initiative (BRI), arrived in Jakarta on Friday to cement its participation in Indonesia’s development projects.

“I welcome the IDFC’s commitment to supporting the Indonesian government’s priority programmes, especially in infrastructure development, energy and digital technology,” President Joko “Jokowi” Widodo said in the opening remarks of his meeting with IDFC representatives and US delegates at the State Palace in Central Jakarta. “I was assured that the DFC was ready to allocate $5 billion.”

The figure will add to expected funds from China’s BRI and the UAE to fuel development projects across the archipelago. Indonesia is stepping up efforts to attract investments and subsequently create jobs and stoke economic growth, which has slowed to its lowest level in more than two years.

The IDFC, which manages more than $200 billion in investments for emerging countries, has discussed investment opportunities in Indonesia’s infrastructure, healthcare, road construction and energy projects, said IDFC CEO Adam Boehler.

“Our first visit is to Indonesia, which symbolises how important the country is to the US and to affirm our friendship,” Boehler said after a meeting with Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan. “We were established only two weeks ago.”

Boehler also expressed the group’s appreciation for Jokowi for focusing on private capital in funding development projects, stating that the changes the president has made had “helped American businesses”.

In the next two months, the IDFC will plot the amount of investment needed for each project, he added.

“The investment is going to be multibillion dollars, that’s going to lead to tens of billions of dollars from our private capital,” he told reporters. “You will see the US very active and we will come with our partners, Japan and Australia, to join hands and help Indonesia.”

Luhut told the press that the investment would be channelled to toll road projects in Java and Sumatra, as well as to tourism.

“Our team has already started working. We will start these projects immediately,” he said on Friday without elaborating on the specific projects, adding that the country was also expecting sovereign wealth funds from Japan and Australia to support Indonesia’s development projects.

Luhut previously unveiled a plan to set up a sovereign wealth fund for Indonesia so that the country can pool major funding from various sources, including from the US, China and the UAE. He targeted $5 billion to $10 billion for infrastructure projects and other development programmes for the fund.

The government previously offered regional comprehensive economic zones in North Sumatra, North Kalimantan, North Sulawesi and Bali for US investment. The four corridors in total have 28 projects worth $91.1 billion and were previously reported among the projects that the government offered to China’s BRI.

Last year, investments from Chinese companies accounted for 16.1 per cent of overall foreign direct investment (FDI) in Indonesia, compared to 4.5 per cent for the US.

China was Indonesia’s third-largest country of origin for FDI in the first half of last year, pouring in $2.29 billion in direct investment in the January-June period. The US, meanwhile, ranks seventh with investments worth $631.7 million over the same period.

According to some observers, however, Indonesia should be prudent because the investments are still in the form of non-binding memorandums of understanding.

“Investment commitments could show big numbers, but the actual investment is often much smaller,” said Centre of Reform on Economics Indonesia research director Piter Abdullah. He predicted that only a quarter of the investment commitments would be realised.

To ensure that these commitments would follow through, the government must make it easier for other countries to invest in Indonesia, for example, by easing the process for acquiring land or obtaining permits, as well as by forming clear regulations on employment and taxation, Piter added.

“I think the establishment of omnibus laws is already in line with the goal to ease investments.”

The government has been drafting at least three omnibus laws on job creation, small and medium-sized enterprises and taxation. The omnibus law on job creation will amend articles in more than 70 existing laws with the aim to remove barriers that deter investments.

Jokowi is scheduled to visit the UAE this week to strengthen economic ties between the two countries.

The government is expecting to secure deals worth around $3.9 billion in the energy sector during the official visit, primarily to upgrade Indonesia’s low-capacity oil refineries and slow-moving renewable energy development.

The Jakarta Post/Asia News Network