Indonesia’s Jokowi roots for private investment as Freeport dispute lingers

An elevated track for the Jakarta Mass Rapid Transit (MRT) stands under construction as vehicles wait in congested traffic in this aerial photograph taken in Jakarta, Indonesia, on Sunday, Aug. 13, 2017. Photographer: Dimas Ardian/Bloomberg

Indonesia will turn to private investors for the hundreds of billions of dollars in investment needed to develop the archipelago’s infrastructure and natural resources, President Joko Widodo said, brushing off claims he was increasingly becoming an economic nationalist.

All major projects will be offered to the private sector, Widodo, also known as Jokowi, told Bloomberg Television’s Haslinda Amin on Saturday in an interview on a hilltop overlooking the picturesque Lake Toba. Government companies would partner with private investors only if there wasn’t enough interest among such players, with funding from the national budget the last resort, he said.

Halfway through his term in office, Jokowi is seeking to balance the need for more foreign investment with pressures at home to keep the economy, especially its mineral resources, in local hands. A dispute between the government and Freeport-McMoRan Inc. over the transfer of majority ownership of the U.S. miner’s Indonesian unit demonstrates that challenge, while also stoking concern that investors may turn their back on the country.

“Is Indonesia a protectionist? No. We are open for investors,” Jokowi said in the interview. “We have cut the negative list to allow more foreign investors. It shows that Indonesia is open.”

Jokowi has attempted to wean the country off commodities and push investment in value-added manufacturing and services to emulate the success of countries like South Korea. He wants mining companies to build smelters rather than export raw commodities, and divest majority stakes in their businesses.

While that nationalist strategy may help his prospects of being re-elected, it’s also undermining efforts to generate more jobs and boost growth. Newmont Mining Corp. and BHP Billiton Ltd. pulled out of Indonesia in 2016, and DP World Ltd., the Dubai-owned company that operates ports from China to South America, said last month it won’t renew a concession to jointly operate a terminal in the Southeast Asian nation beyond 2019 as conditions set by the government weren’t favorable.

Budget Pressure

With a legal cap on the  fiscal deficit of 3 percent of gross domestic product, and revenues under pressure, Jokowi needs foreign investment to finance his ambitious infrastructure plan. The World Bank estimates Indonesia will need $500 billion over the next five years to build roads, ports and bridges.

Jokowi, who completes three years in office this week, rode to power on a wave of political nationalism, pledging to renegotiate contracts with foreign companies. He recently ordered stricter enforcement of a policy requiring manufacturers use more local components, saying the rule was needed to reduce dependence on imports and encourage investment in factories.

At the same time, he’s implemented some business reforms to lure investors. He’s pledged a one-stop shop for approvals to speed up projects and allowed full foreign ownership of businesses, such as those operating toll roads, cold storage and cinemas.

Business Reforms

That’s helped Indonesia steadily improve its ranking on the World Bank’s ease of doing business index — jumping 18 places to 91 this year. But regulations around land acquisition and permit processes continue to hold back investors, with only about a third of domestic and foreign investment pledges actually realized, according to government estimates.

Jokowi said the government isn’t done with reforms yet and will review labor laws.

“We will continue to have more sectors open for foreigners to invest their money in Indonesia,” he said. “Indeed, our focus is still on industry, manufacturing, film, theaters and creative industry. There are many and the most important is tourism, we will also open it.”

Click here to read more about Indonesia’s protectionist push

After agreeing in August to hand over a controlling stake in its Grasberg mine to the government, Freeport has been at loggerheads with authorities over how to value the miner’s Indonesian unit.

Jokowi said he expects to conclude a “win-win” deal with Freeport in three months. The wrangling over the ownership and license hasn’t discouraged investors, he said, adding that foreign companies continue to make fresh investment in sectors including nickel.

Another possible deterrent to investment is the dominance of state-owned enterprises in the economy. World Bank President Jim Yong Kim said in July that Indonesia should lower its reliance on state firms to undertake projects and instead tap the private sector and foreign funds to finance them.

Jokowi said he’s ordered the State-Owned Enterprises Ministry to shrink the number of public companies running everything from airlines to gasoline stations and salt factories to 130 from about 800 by merging some of them.

Also read:

Indonesia on track to be trillion-dollar economy in bittersweet triumph

Indonesia: President Joko Widodo launches online marketplace for farmers

By Rieka Rahadiana, Thomas Kutty Abraham and Rosalind Mathieson

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.