23/1/06 (The Star)  -  MALAYSIAN companies are expected to intensify their investments in Indonesia this year.

Local players are broadening their scope in the republic by venturing into strategic sectors like infrastructure, ports, banking and finance, telecommunications, oil and gas and power, from just oil palm plantations, which topped the list more than a decade ago. 

 
Datuk Dr Michael Yeoh
Industry players and analysts concur that Malaysian companies are now more confident of Indonesia's prospects, given the steady recovery in business climate, policy reforms and strong government support to attract foreign direct investments (FDIs).

Malaysia-Indonesia Business Council (MIBC) executive director Datuk Dr Michael Yeoh told StarBiz in Kuala Lumpur that it was timely to invest in Indonesia, given the anticipated FDI boom.

“Prospects are good,” he said, adding that the viable sectors included plantations, infrastructure as well as consumer products, due to the recovery in consumer spending. 

He said the financial sector was also showing more interest in Indonesia, with Malaysia's largest investment bank, CIMB Bhd, and others like Public Bank Bhd and AmSecurities Bhd making strong inroads there. 

Yeoh also expects more collaboration between Malaysian and Indonesian companies in Indonesia's oil and gas sector.

In infrastructure, he said an important event for Malaysian companies would be the two-day Infrastructure Summit organised by the Indonesian government in Jakarta next month.  

 
Tan Sri Mohd Ramli Kushairi
A list of major infrastructure-related projects would likely be unveiled at the summit, including six tolled roads estimated at over US$1.35bil.

Yeoh said: “This summit will generate strong interest, especially from those in the infrastructure, construction, energy and utilities sectors.”

While Malaysian companies are “gungho” about Indonesia's prospects, MIBC member Tan Sri Mohd Ramli Kushairi said there were major issues to be addressed when undertaking infrastructure-related projects in Indonesia.

“These include land acquisition law, acquisition costs, the mechanism on periodic toll reviews (for toll road projects) and the issue of local financing.

“Hopefully, the Infrastructure Summit will spell out new terms that will provide a clearer picture to Malaysian investors expanding into Indonesia,” Ramli added.

Yeoh said apart from the private sector, the Malaysian government’s investment arm, Khazanah Nasional Bhd, was also looking at investing in Indonesia. 

It was reported recently that Khazanah was investing RM5.7bil in Indonesia while Perbadanan Nasional Bhd has invested RM4bil. 

Khazanah, to-date, has 87.5% stake in PT Bank Lippo, Indonesia's ninth largest lender by assets. 

 
Datuk Sabri Ahmad
An analyst with a bank-backed brokerage said big groups like Maxis Communications Bhd, CIMB and YTL Power International Bhd had become more prominent in Indonesia over the past two to three years.

Pioneering plantation groups like Kumpulan Guthrie Bhd, Kuala Lumpur Kepong Bhd and Golden Hope Plantations Bhd had been there for over 10 years.

He noted that in the banking and finance sector, investment units of major Malaysian banks like CIMB and Public Bank were making forays into Indonesia due to their cash-rich positions.

Citing CIMB, the analyst said the group was making a presence in the republic through PT CIMB Niaga. 

Managing director and chief executive Datuk Nazir Razak said recently that the group planned to further tap the potential of Indonesia's equities market.

YTL Power, meanwhile, is investing in Indonesia's second largest independent power producer PT Java Power, while Telekom Malaysia Bhd has a 28% stake in Indonesia's third largest cellular company, Excelmindo.

As for the oil and gas sector, a local company is bidding for a 1,700km gas pipeline from east Kalimantan to Java. Another company, PECD Bhd recently won a US$140mil project to build a 161km pipeline linking Sumatra and Java.

 
In the power sector, a local company is also bidding for a RM2.5bil coal-fired power plant in Ceribon, West Java, while another is in discussions to build two 100 megawatts coal-fired plants costing about RM7.5mil in south Sumatra.