UAE invests $10 billion in Indonesia

Partnership with country’s sovereign wealth fund will focus on energy, infrastructure, ports, tourism and agriculture

Sunset over Jakarta financial district skyline lined with office towers and luxury hotels in Indonesia capital city
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The UAE invested $10 billion with the Indonesia Investment Authority, or INA, the country’s sovereign wealth fund.

The funds will be used in strategic sectors such as road and port infrastructure, tourism and agriculture, as well as other promising industries that can contribute to Indonesia’s economic growth and social progress, according to UAE state news agency Wam.

The investment was made under the directives of Sheikh Mohamed bin Zayed, Crown Prince and Deputy Supreme Commander of the Armed Forces.

Indonesian President Joko Widodo set up the sovereign wealth fund last month and announced its board of supervisors and board of directors.

Formed under the Omnibus Job Creation Law passed in October, the INA seeks to attract investment for strategic projects that support national development, including infrastructure works and the construction of the new capital in Kalimantan.

Indonesia's President Joko Widodo and Abu Dhabi's Crown Prince Sheikh Mohammed bin Zayed Al Nahyan talk as they prepare to plant a tree during a welcoming ceremony at the presidential palace in Bogor, Indonesia, July 24, 2019. REUTERS/Willy Kurniawan
Sheikh Mohamed bin Zayed with Indonesian President Joko Widodo at the presidential palace in Bogor, Indonesia, on July 24, 2019. Reuters

The fund is a turning point in the governance and development of Indonesia’s investment landscape, Wam said yesterday.

The Widodo administration appointed former PT Bank Permata boss Ridha Wirakusumah as chief executive of the fund and Arief Budiman as his deputy.

Fitch Ratings said in a note yesterday that the fund can invest in projects led by the private sector and state-owned enterprises. It also has the authority to lend and borrow.

“We expect infrastructure projects such as toll roads, rather than oil and gas, to be the INA’s first priority due to their multiplier effect on economic growth,” said Fitch.

The credit rating agency said the INA would require additional capital to carry out sizeable infrastructure work but said its capacity to mobilise funds will be higher if it is able to attract more foreign partners.

“A number of foreign funds and state-backed development agencies such as the US International Development Finance Corporation have shown interest in investment partnerships with the INA,” it said.

The investment comes after UAE-Indonesia Week 2021, during which several co-operation agreements were signed relating to ports, logistics, strategic and defence industries, energy, tourism, the creative economy and mangrove farms.

The two countries enjoy strong political, economic and cultural ties. Diplomatic relations began in 1976, with the Indonesian embassy in Abu Dhabi opening on October 28, 1978. The UAE embassy in Jakarta was inaugurated in 1991, a year after a historic visit by Sheikh Zayed.

Wam said that diplomatic ties had strengthened in recent years with an increase in mutual visits by leaders and senior officials in both countries, most notably the visit by Mr Widodo to the UAE in September 2015 and the visit by Sheikh Mohamed to Indonesia in July 2019.

Mr Widodo also visited the UAE last year and investment deals worth $23bn were signed afterwards. During the 2020 visit, Adnoc signed a preliminary agreement with Indonesia’s Pertamina and Chandra Asri to explore the possibility of developing a crude-to-petrochemicals complex in the South-East Asian country, in addition to supplying naphtha.

Abu Dhabi’s clean energy company Masdar also signed a power-purchase agreement with Indonesia’s state electricity company, Perusahaan Listrik Negara, paving the way for the development of the country’s first floating solar photovoltaic plant.

There has been substantial growth in trade and economic ties between the two nations, with the volume of trade currently at $3.7bn.