https://arab.news/r25pt
- Fund will be used to finance top infrastructure projects, boost connectivity across the nation
JAKARTA: Indonesia on Wednesday welcomed the UAE鈥檚 commitment to invest $10 billion in its recently launched sovereign wealth fund, which a senior official said made the emirates the 鈥渓argest major investor鈥� in the initiative.
鈥淲ith this investment, so far the UAE has become the largest major investor in the Indonesia Investment Authority (INA),鈥� Husin Bagis, Indonesia鈥檚 ambassador to the UAE, told Arab News on Wednesday.
鈥淭he joining of the UAE further shows the high level of international confidence to invest in the INA and would attract other world investors to join and invest,鈥� he added.
The UAE helped Indonesia establish the INA through its Abu Dhabi Investment Authority (AIDA) in February this year, with the AIDA serving as one of its advisers.
The sovereign wealth fund, introduced during the same period, will be used for major infrastructure projects and will boost connectivity in the world鈥檚 largest archipelago, with nearly 17,000 islands.
鈥淲e believe that more investors would be interested in a number of high-potential opportunities in Indonesia, which range from stable brownfield assets to greenfield projects with potential value in the future,鈥� Jodi Mahardika, a spokesman for the Coordinating Ministry of Maritime Affairs and Investment, told Arab News on Wednesday.
On Tuesday, the UAE鈥檚 state-run news agency, WAM, reported that the emirates鈥� commitment to invest in Indonesia鈥檚 sovereign wealth fund was as per the directives of Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al-Nahyan.
The investment will focus on strategic infrastructure projects 鈥� particularly in the infrastructure, roads, ports, tourism, agriculture and other promising sectors 鈥� that 鈥渃an contribute to growth, as well as economic and social progress.鈥�
According to Bagis, the investment pledge is the 鈥渟weet result鈥� of talks between Indonesian President Joko Widodo and Sheikh Mohammed on Friday last week, when the two leaders discussed bilateral cooperation and touched upon the INA.
鈥淭he UAE鈥檚 investment in the INA would strengthen bilateral relations between the two countries in various fields, and it reflects the close personal relations between the two states鈥� leaders,鈥� Bagis said.
The investment pledge came two weeks after a UAE delegation, headed by Energy and Infrastructure Minister Suhail Al-Mazrouei, visited Indonesia earlier this month to attend the Indonesia-UAE Week.
During the week-long visit, both sides inked several business deals, including agreements to develop a $500 million tourism resort on an island in the Aceh province and a $1.2 billion port and industrial zone development scheme in Gresik, in the province of East Java.
In addition to that, officials also participated in the groundbreaking ceremony for a replica of the Sheikh Zayed Grand Mosque in Widodo鈥檚 hometown in the Central Java province.
At the time, Al-Mazrouei had said that the UAE was studying investment options for infrastructure development projects in Indonesia before injecting more financial support.
The INA was launched with an initial capital of up to $5.3 billion in cash and assets that the government will inject until the end of the year toward various infrastructure and development projects. It has a target to develop an initial $20 billion financing pool.
Indonesian officials said other countries such as the US, Japan, Canada and the Netherlands had expressed interest in injecting a total of $9.5 billion into the INA through their respective development, financing and pension fund agencies.
Analysts, for their part, said that the funds secured by the INA could provide some respite to state-owned construction companies鈥� leverage, several of which have been struggling to secure finance for infrastructure projects by issuing global bonds.
According to Fitch Ratings, these companies have a total debt of over 170 trillion rupiahs ($11.77 billion) as of the end of September 2020, while state-owned energy company Pertamina鈥檚 debt amounted to almost 300 trillion rupiahs as of June 2020.
Meanwhile, in a statement on Monday, the international credit rating agency said that the INA is unlikely to cause any short-term reduction on the state-owned companies鈥� debts 鈥渟ince its capital is modest relative to the scale of debt鈥� among state-owned enterprises engaged in construction, toll roads, oil and gas, and other strategic sectors.
鈥淭he INA鈥檚 capacity to mobilize funds may be amplified if it is able to channel overseas capital into Indonesian infrastructure investments. It is possible that the authority鈥檚 privileged legal and political positions may provide greater assurance to foreign partners wanting to invest in infrastructure,鈥� Olly Prayudi, corporate director at Fitch Ratings Indonesia, said.