Middle East's growing investment apetite in Indonesia

Indonesia is the country with largest Moslem population in the world. But it's not easy to bring in funds from rich countries in Middle East. The development in the last few months, however, might reflects a growing apetite among the Middle East investors on Indonesia.
Emirates, for example, announced its plan to cooperate with Indonesian flag carrier Garuda Indonesia airline. State-owned oil and gas company Pertamina had agreed last week to work with Saudi Aramco in the Tuban refinery project in which the Saudi Arabia company would feed up to 400,000 bpd of crude. China's Sinopec is Pertamina's partner in the project. Pertamina agreed also to work with International Petroleum Investment Company (IPIC), a company owned by Saudi Arabia government.

An investor from Dubai, Abu Dhabi IslamiInternational Petroleum Investment Company (IPIC),c Bank, was also reportedly planning to acquire small-size banks in the country and convert it to a sharia bank.
Kuwait Finance House would do the same. The company would invest US$25 million to acquire small-size bank and convert it to a sharia bank too.
So far, Bank Muamalat, the first sharia bank in Indonesia, could be considered the biggest Middle East investment in Indonesia. The bank has total asset of Rp7.42 trillion as of December 2005, grew significantly from Rp5.2 trillion in December 2004. The bank booked net profit of Rp156 billion last year. Islamic Development Bank hold 28% shares in the bank, followed by Boubyan Bank Kuwait (21.28%), and Atwill Holdings Limited (15.32%).
Egyptian Orascom, the largest cement producer in Middle East, is preparing to build two cement plants in Central Java with investment up to Rp5.2 trillion (US$540 million).
Late last month, Jakarta Governor Sutiyoso flew to Dubai, Uni Arab Emirates, to meet executives of Dubai Bank Islamic for a proposed US$500 million monorail project funding.
Late last year, for the first time, executives of six major financial institutions visited Indonesia in one team. They were from Islamic Development Bank, Bank of Sharjah (Dubai), National Commercial Bank (Arab Saudi), Saudi Economic and Development Company, Blue Star Group, and Amlak Finance (Uni Emirat Arab).
IDB executive claimed that after WTC bombing in New York (9/11), Middle East investors pulled out 1.4 trillion US dollars from USA and Europe.
Sultan Kamal Bawazier, investor from Saudi Arabia, involved in the US$250 million financing of airstrip project in Kutai Kartanegara (Kukar), East Kalimantan. Kukar is one of the richest regencies in Indonesia, home to major oil, gas, and coal mining operations.
And just days before president Susilo Bambang Yudhoyono start a state visit to some Middle East countries, state-owned PT Bank Negara Indonesia (BNI) Tbk announced its plan to work with Kuwait investor to acquire Indonesian bank and conver it to a sharia bank.

State-owned enterprises minister Sugiharto meanwhile claimed that investment bankers from Middle East are ready to invest US$8 billion in sharia-based instruments such as bonds issued to finance infrastructure projects, including the ambitious 8,000 MW electricity capacity to be developed in the next few years.
President Susilo is scheduled to visit Saudi Arabia, Kuwait, Qatar and Uni Arab Emirates next week in a move to lure in more investors from Middle East countries. If history counts, it seems not easy to attract FDI from Middle East which is long-term investment in nature.
Vice President Jusuf Kalla has better idea. Last month, he asked tourism board in Bali to bring in more visitors from Middle East to the Island. Hm...bold idea. Early success is the decision of Partai Bintang Reformasi (Islamic party) to have its national convention in the beautiful island this week.

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