Here's How Indonesia Can Benefit From China's Belt and Road Initiative

Indonesia benefits from the belt and road project will boost connectivity with its neighbors in Southeast Asian amid the nation’s infrastructure redesign.

Indonesia benefits from the belt and road project will boost connectivity with its neighbors in Southeast Asian amid the nation’s infrastructure redesign.

During the third Belt and Road Summit in Hong Kong on June 28, China emphasized the seriousness of its ambition to foster economic cooperation between countries, including Indonesia, located on this modern-day Silk Route.

“Our government has been really focused on building infrastructure. We have been focusing on four regions that are part of the Belt and Road Initiative: North Sulawesi, North Kalimantan, North Sumatra and Bali,” Indonesian Chamber of Commerce (Kadin) deputy chairwoman Shinta Kamdani said during last week’s summit.

China launched the initiative in 2013 as part of an ambitious plan to accelerate infrastructure development and trade cooperation between itself and countries in Southeast Asia, Central Asia, the Middle East, Europe and Africa, in part by connecting the Indian Ocean and the South China Sea.

According to the Lowy Institute, an independent Australian think tank, the “belt” aims to connect China’s underdeveloped countryside to Europe via Central Asia, while the “road” is aimed at connecting China with Southeast Asia through the so-called Maritime Silk Road.

A separate report by consulting firm Baker & Mckenzie said Indonesia could be the biggest beneficiary in the region, potentially attracting more than $87 billion in infrastructure projects under the initiative.

China is reportedly keen to invest in international port developments and industrial areas in several locations in Indonesia under the Belt and Road Initiative.

Shinta cited a statement by the Hong Kong Trade Development Council (HKTDC), which said China had promised to invest a total of $9 billion in 50 projects Indonesia, which were supposed to be completed by now.

However, slow land acquisition and financing hurdles have hampered progress of these projects, resulting in the completion of only nine. These include a stainless-steel processing area in Morowali, Central Sulawesi.

Most of Belt and Road Initiative projects in Indonesia are funded through long-term, low-interest-rate loans from Chinese banks, with some of the projects reportedly being undertaken by Chinese companies.

During a meeting between President Joko “Jokowi” Widodo and Chinese President Xi Jinping last year, it was agreed that the two countries would strengthen cooperation in several areas, including the Belt and Road Initiative.

China is Indonesia’s fourth-largest investor, having contributed 8.3 percent of total foreign direct investment in the first quarter of this year. Chinese investment in Indonesia increased 16.8 percent to $700 million between January and March this year.

Hong Kong meanwhile, is Indonesia’s fifth-largest investor, having contributed 6.3 percent of total foreign direct investment in the first quarter. Investment from Hong Kong rose 24 percent to $500 million in this period.

Hong Kong’s Role

Hong Kong, a special administrative region of the People’s Republic of China, plays a key role in the Belt and Road Initiative as facilitator and matchmaker.

Jimmy Chiang, associate director general at Invest Hong Kong, a government agency focused on facilitating foreign direct investment in the city, said they provide professional services in a myriad of sectors, which enable the city to act as an integrator and help Chinese businesses make inroads in other regions.

“Hong Kong can provide a lot of benefit in this initiative, especially from an economic perspective, as we have experience in logistics and financial services,” Chiang said.

He said Hong Kong and China are very serious about Southeast Asia, as is evident from the fact that the agency recently established a representative office in Jakarta, with plans to open another in Thailand soon.

Hong Kong Chief Executive Carrie Lam said 97 Chinese state-owned enterprises have been responsible for around 1,700 projects in 65 countries under the Belt and Road Initiative over the past five years. It is estimated that China needs total investment of $5 trillion in the countries along the New Silk Road.

This investment will cover projects in traditional sectors, such as roads, seaports, railways and tourism, while also tapping into more advanced sectors, such as artificial intelligence, smart cities, financial technology and biomedical technology.

More than 5,539 participants from 55 countries attended the summit, organized by the Hong Kong government and the HKTDC.

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