Indonesia to sign $15bn deals with India

Indonesia will sign 17 deals worth more than $15bn this week during a visit to India by Susilo Bambang Yudhoyono, Indonesia’s president, along with a dozen of his key ministers. The deals will be a significant boost to ties between Asia’s two largest democracies.

The agreements, to be formalised on Tuesday, are part of an ambitious push by Indonesia, a member of the group of 20 and south-east Asia’s largest economy, to attract $150bn in infrastructure investment.

Among the projects to be implemented over the next three years are multibillion-dollar investments by Indian energy companies Reliance Group, Archean, Adani and Tata, according to a list given to the Financial Times by the Indonesian Investment Co-ordinating Board.

One memorandum of understanding will be with Indian infrastructure developer GVK, the company building Bombay’s new airport, which will construct airport terminals on Indonesia’s resort island of Bali and in Yogyakarta, a city in central Java.

Adani, the energy group, will build a 270km railway and a coal terminal in southern Sumatra with the provincial government in a deal worth $1.6bn. Other deals include the building of coal-fired power plants, railways and shipyards.

Indonesia urgently needs infrastructure investment to meet growing demand for services and goods both at home and abroad.

For decades the country has been a leading source of coal, metal and minerals for richer neighbours but, as an emerging regional power governing 240m people, Jakarta hopes profits from Indonesia’s abundant resources can deepen development.

“It’s not the old paradigm of extracting, it’s the new paradigm of digging, but also creating value, in Indonesia,” Gita Wirjawan, head of the Indonesian Investment Co-ordinating Board, said on Sunday. “This will be a big bang. I am very excited about the fact that the Indians are keen on coming to Indonesia.”

Indonesia is also negotiating similar deals with companies from South Korea, China and Japan that are willing to invest billions in infrastructure to secure supplies of coal, oil and gas.

Mr Yudhoyono will oversee the signing of dozens of other bilateral agreements and will discuss expanding trade in India and the 10 countries of Asean, the south-east Asian regional grouping. Bilateral trade between India and Indonesia is worth $11.8bn per year, while Indonesia is India’s second-largest Asean trading partner, importing large quantities of wood pulp, palm oil and minerals. India invested $26.2m in Indonesia in 2009.