19/9/06 (NSTP)  - WHEN met at a networking session in Jakarta recently, chairman of Indonesia's privately-held Para Group, Chairul Tanjung, urged his Malaysian counterparts to seize the opportunities that his country has to offer in various sectors and invest more.

"Indonesia still has a lot of opportunities. To buy the future, come in and invest in the country now," said Chairul, who was listed by Forbes as one of Indonesia's richest businessmen.

The founder of Para Group started business as a shoemaker some two decades ago and his group now has expanded with holdings in financial services, broadcasting, properties and energy.

"You should have come directly after the crisis, Singapore has done it faster than you all," he told some 50 Malaysian corporate chiefs who were in the Indonesian capital recently on a networking trip organised by the Kuala Lumpur Business Club (KLBC).

Indonesia, with its huge population and close proximity to Malaysia, no doubt offers tremendous investment opportunities. However, many who went on the trip do not agree that Malaysian companies are late in the race to secure a significant foothold in Indonesia, or have missed the chance to pick up quality assets when they were still cheap.

In any case, Malaysian plantation companies have been the early birds, probably since 1980s or even earlier, and planting is a deep and long-term involvement.

"We may very well see more investment in this sector with all the encouragement for biodiesel development, signalling a significant and strategic move up the value chain," said KLBC president Datuk Dr Mohd Munir Majid, who headed the Malaysian team to Jakarta.

"Therefore, we should not under-estimate investment in the plantation sector where there is synergy between the two countries which Singapore, or indeed other countries, cannot replicate," he said.

Singapore, with its limited home market and huge reserves, would definitely have a different investment profile and needs.

In Kuala Lumpur, Datuk N.K. Jasani, managing partner of accounting and consulting firm Shamsir Jasani Grant Thornton said Indonesia also offers opportunities in certain areas that are not available in Malaysia, for example in plantations, timber and biodiesel.

"They have more land for plantations. Our plantations minister recently said that the issuance of biodiesel licences will be frozen temporarily. Some investors who definitely want to go ahead with biodiesel plans will look over there," Jasani said.

In addition, he said, Malaysian firms had also invested heavily in banking, telecommunications and aviation in Indonesia.

For instance, banking group Bumiputera-Commerce Holdings Bhd bought PT Bank Niaga during the Asian crisis while mobile phone companies like Maxis also made investments there.

"So it is not really true that we are late, although Singapore may have done more due to their excess funds and limited home market," Jasani said.

More recently, infrastructure group MTD Capital Bhd won a 35-year concession to build and operate a 34km tollroad in Jakarta, which will cost some RM1.13 billion to construct.

There are still tremendous opportunities for Malaysian players in Indonesia, especially in plantations, palm oil processing and biodiesel. Our players are also going into oil and gas exploration in Indonesia, Jasani said.

However, Chairul was right, Munir said, in suggesting that Malaysian investors seize opportunities now.

"The business mission which I led was also intended to expose KLBC members to the huge opportunities still available there," he said.

In Malaysia and Indonesia, biodiesel has become the new buzzword, especially when crude oil prices keep testing new heights.

Back home, a long queue for permission to build biodiesel plants has formed at the Plantation Industries and Commodities Ministry's door, causing it to freeze issuance of new licences for now on concerns that palm oil supply may not meet the rush.

In Indonesia, the National Biofuel Project is President Susilo Bambang Yudhoyono's pet programme, which he sees as an overall remedy for the country's many social, economic and even political problems that stemmed from a poor society. National projects like these create many jobs, crucial for Indonesia where many still live below the poverty line.

The National Biofuel Project is expected to create three million jobs till 2010, helping the country to achieve a targeted 5.5 per cent jobless rate by 2009. It will also help lift more Indonesians out of poverty and allow the country to reach its target poverty line of 17 million people by 2009.

Both countries, which together produce 85 per cent of the world's palm oil, recently agreed to allocate 40 per cent of total annual output for biodiesel.

So far, companies such as Sime Darby Bhd and Golden Hope Plantations Bhd are potential investors for Indonesia's biofuel project, while casino operator Genting Bhd is keen to develop one million hectares in the country into oil palm and sugar cane plantations for use in biofuels.

Yenny Wahid, a representative from the Indonesian President's office said her government has committed one trillion rupiah to the biofuel project and will set aside millions of hectares of land for the programme.

"Biofuel will be big. Malaysia and Indonesia can further explore opportunities in this area in the future," she told the Malaysian group in Jakarta.

Besides, the Indonesian Government is targeting US$426 billion (RM1.6 trillion) in investments in its five-year economic development plan, of which only about 17 per cent, or US$68 billion (RM250 billion) will come from the Government. This means that the country would still need about US$358 billion (RM1.3 trillion) from foreign investors.

Munir believes Malaysian investors can find opportunities in three main areas - infrastructure, natural resources, especially in alternative energy, and consumer durable goods that range from motorcycles and shampoos to shoes.

He said the KLBC business mission, while pointing to the two nations' deepening relationship in the plantation sector, was also intended to diversify business involvement through exposure, contacts and relationship-building.

"We also wanted them to understand and appreciate the changes that are taking place in Indonesia and meet central figures driving those changes in the Government and business sectors," added Munir.

He said council members were happy with the networking arrangements and it is now up to them to follow up based on their particular sectors and risk-reward profiles.

One of those in the KLBC group, chief executive officer of Peremba Constructions Sdn Bhd Rosman Abdullah, said his firm is looking to develop affordable houses in Indonesia. It has submitted a plan to the authorities and if approved, the project will be a new venture for the firm apart from its construction of gas pipelines in Indonesia.

Conglomerate Sime Darby Bhd, led by chief executive Datuk Ahmad Zubir Murshid, was scouting for opportunities to invest in some private power plants in Indonesia, in addition to its existing investments in plantations.

Telekom Malaysia Bhd, represented by chairman Muhammad Radzi Mansor, chief executive Datuk Abdul Wahid Omar and officials from its Indonesian unit PT Excelcomindo Pratama, voiced interest in getting an international gateway licence for mobile phone operations in that country.

Still, despite growing opportunities, there are the perceived legal and regulatory risks as well as the risk of political uncertainties to do business in Indonesia, Munir said.

Other issues such as a weak law enforcement, security problems and a financial market that lacks depth and breadth which makes funding hard to come by, continue to challenge investors in Indonesia.

Susilo Bambang's Government has vowed to cut bureaucracy and simplify business procedures to attract foreign direct investments. His Government has also assured investors that the country's policy, especially economic policy, will stay even as the leadership of the country changes. But it also admits that reforms have been slow and there is still a long road ahead.

With the assurance, some investors are encouraged enough while others want to wait and see, viewing Indonesia as a huge country and bureaucracy with considerable baggage.

Huge opportunities do carry risks, Munir said, and business acumen involves an ability to navigate and manage them.

Just as the Indonesia Coordinating Minister for the Economy Dr Boediono puts it, reforms are difficult and it takes a lot of patience to see them happen.

"Real improvements on the ground will take five years or more to be seen. For long-term investors who are prepared to stay for 10 to 20 years, I'm sure you will gain," he said.