•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   
•    EYEWITNESS   

Indonesian business leaders and government officials on Sunday hailed a commitment by China to invest more in Indonesia’s infrastructure, although some observers expressed concern that China might use the investment as an opportunity to increase its influence here to the detriment of local companies.

Strong signals that the world’s most populous country will help Indonesia in revamping its infrastructure were sent after President Susilo Bambang Yudhoyono met Chinese President Hu Jintao on the sidelines of the G-20 summit in Toronto over the weekend.

Coordinating Minister for the Economy Hatta Rajasa told Antara news agency on Saturday that China was committed to increasing its investment in Indonesia, particularly in the infrastructure sector, and was also looking to grow its two-way trade with Indonesia.

Investment and trade is expected to grow to $50 billion by the end of 2014, Hatta said, without giving breakdowns.

According to the Trade Ministry, Chinese investment in Indonesia totaled only $265.5 million over the past four years. Two-way trade between China and Indonesia amounted to $25.5 billion in 2009, up from $12.5 billion in 2005.

Chris Kanter, deputy chairman for investment at the Indonesian Chamber of Commerce and Industry (Kadin), said he was positive about China’s commitment to Indonesia.

“Of course this will benefit us,” he said. “The investment will create jobs and spur our industry.”

Aviliani, an economist at the Institute for Development of Economics and Finance, said greater investment from China would speed up infrastructure development in Indonesia. However, she warned that “doing business with China usually involves us having to use their products, which means that more Chinese goods will flood the market.”

Djimanto, deputy chairman of the Indonesian Employers Association (Apindo), said he was also wary of China gaining too much influence over the labor-intensive downstream parts of the Indonesian economy.

“China’s downstream investments could result in the Chinese gaining majority control and leaving local companies unable to compete,” he said. “Don’t let them play a dominant role in Indonesia’s economy.”

The head of the land acquisition bureau at the Ministry of Public Works, Wijaya Seta, said Chinese companies were more productive and efficient than their Indonesian counterparts, which should enable infrastructure to be developed cheaply.

“I think from this alone we can gain, seeing more infrastructure built with less money. Although, I don’t see their technology, particularly in infrastructure, as being superior to ours,” Wijaya said.

“After the infrastructure has been completed it will create multiplier effects,” he said. “It doesn’t really matter whether the money or materials come from China or somewhere else.”

Sandiaga Uno, a former leader of the Indonesian Young Entrepreneurs Association (Hipmi) and a candidate for the Kadin chairmanship, said the Indonesian government needed to be organized and prioritize projects to take advantage of Chinese investment.

Ports, roads, railways, electricity generation and urban mass transportation are the areas that should be prioritized, Sandiaga said. The government also needs to simplify bureaucratic red tape and speed up land acquisition, he said.

Indonesians shouldn’t be too paranoid that the investment might be used by China to flood the Indonesian market with cheap goods, Sandiaga said.

Ideally, 2 percent to 5 percent of gross domestic product should be spent on infrastructure, he said, adding that currently Indonesia’s infrastructure spending was less than 3 percent.