Despite the seemingly robust investment coming from China, the government claims it has not forgotten Japan and stresses that its foreign investment and trade policies are not all about China.
China beat Japan to secure the contract for Indonesia’s first high-speed railway project connecting Jakarta and Bandung in West Java. Furthermore, President Joko “Jokowi” Widodo has met with Chinese President Xi Jinping five times since the former was elected president in late 2014.
Meanwhile, Jack Ma, founder and chairman of Chinese e-commerce giant Alibaba Group, previously agreed to become Indonesia’s e-commerce advisor and may continue to do so.
This series of events, and several others, may suggest that Indonesia has shifted its economic orientation more toward China, the world’s second largest economy, from its “traditional” partners, including Japan.
The government, however, strongly dismisses this notion. “There is a perception that we have only made deals with China recently,” Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan said after a meeting at his office recently.
“But investments from Japan are still larger than those from China,” he added, trying to reassure those concerned that Japan remained Indonesia’s priority partner.
Japanese investments are indeed larger than China’s and the amount of foreign direct investment (FDI) from Japan to Indonesia is set to reach between US$3.5 billion to $4 billion by the end of the year, according to the Japan International Cooperation Agency (JICA).
Nonetheless, data from the Investment Coordinating Board (BKPM) show that Japan and China do appear to be locked in a tight race.
While Japan has consistently put itself on the list of top three foreign investors and places in second position as of September, China has crept up over the past two years and has entered the big league as well.
China even trailed behind Japan at number three in terms of realized foreign investment in the first nine months of 2016.
The government, however, is inching closer to signing major agreements with Japan, a move that will strengthen the latter’s investment dominance.
The agreements will see Indonesia reach financial closure from Japan for the deep-sea port development project in Patimban, West Java, in early 2017.
The project is among various national strategic projects that will generate more ease in the distribution of goods shipped into the country.
As much as US$1.7 billion in foreign loans are expected to be channeled into the project and the Indonesian government will also provide an additional $595 million to finance it.
The Patimban Port will be located about 70 kilometers from the Karawang Industrial Estate in West Java.
It will have a container capacity of 1.5 million 20-foot equivalent units (TEUs) once it is partly completed by 2019 and then 7.5 million TEUs by 2027, which is half the capacity of Tanjung Priok Port in Jakarta.
Luhut said Japan would be involved in managing Patimban once it was completed, which is a plus in the government’s view as the Japanese are expected to transfer their knowledge in port management to their Indonesian counterparts.
Luhut said the government would expedite the settlement for all administrative problems in the project, including ones related to spatial planning (RTRW) within the next two weeks.
During that two-week period, the government will also formulate a financing scheme for another strategic project, a railway line connecting Jakarta to Surabaya in East Java.
The government recently offered Japan the opportunity to take part in the railway project, estimated to cost Rp 102 trillion (US$7.64 billion). However, other countries will participate as well in the bidding process, including rival China, thus opening up the possibility of another round of heated competition.
“There’s a preference for Japan to be chosen for the railway project,” Transportation Minister Budi Karya Sumadi said. Budi added, however, that Japan would still have to meet all the requirements set by the government.
The new railway line will enable trains to run at 165 kilometers per hour and will shorten the travel time between Jakarta and Surabaya to around six hours from the current time of 13 hours. The project is slated to begin construction by the end of 2017 and is expected to be completed by late 2019.
