INDONESIA NEWSLETTER – ISSUE 2 – AUGUST 2015
Chinese Investment in Indonesia
Recent data published by the Indonesia Investment Coordinating Board (BKPM) indicates that Chinese investment in Indonesia has steadily increased since 2010. China is currently the 10th largest investor in Indonesia, with USD 160 million invested thus far thru June of 2015. Total investment in 2013 was USD 297 million, and in 2014 it rose significantly to USD 800 million, the largest by far since 2010. Control Risks studied 114 cases of Chinese investment in Indonesia between 2013 and 2014. This article presents data from those cases in regards to investor type (public or private) and key sectors in which investments were realized.
Of the 114 cases Control Risks studied from January 2013 to January 2015, the most frequent sectors for investment were metals/mining (more than half involving nickel smelting or extraction), energy (including power plant construction and energy extraction), and construction (mostly infrastructure). The next most frequent sectors were IT/telecoms, finance, and manufacturing (each less than 10% of the total). SOEs comprised 68% of these cases, and private Chinese firms 32%. Private Chinese firms have increased investment from 2013 to 2014, while as a percentage of total investment private firms accounted for almost the exact same percentage in both years (32 percent). This is consistent with the broad trend of Chinese outbound investment, which according to the Chinese Ministry of Commerce may be increasingly comprised of private firms rather than SOEs in the future.
Chart 1: 114 Cases of Chinese Investment in Indonesia in 2013 and 2014, By Company Type and Top Sectors
As Chart 2 demonstrates below, the average size of investment deals since 2013 has been $1,705 million. This varied greatly, however, by sector, with average energy investments ($4,887 million) more than four times as valuable as those in metals/mining ($1,127 million). Likewise, average deals by SOEs ($2,232) were nearly double those by private Chines companies ($1,160).
Chart 2: 114 Cases of Chinese Investment in Indonesia since 2013, Average Size in USD $million
Investment in mining/metals increased from 2013-2014, while it decreased for other top sectors. China is highly reliant on Indonesian lateritic nickel ore, of which 55% came from Indonesia in 2012. According to China’s Ministry of Commerce, the majority of nickel investment in Indonesia in 2014 has been Chinese (in contrast to a conspicuous absence of Japanese investment in nickel smelting in 2014). As in other parts of the world, Chinese firms are taking a long-term view of their markets, and investing more in Indonesian metals/mining, just at the same time that other countries perceive greater risk.
Chart 3: Chinese Investment in Indonesia in 2013 and 2014, Top Sectors by Year