Photo by North Kalimantan Regional Office

JAKARTA (TheInsiderStories) – North Kalimantan, the youngest province in Indonesia, has apparently become a favorite destination for foreign investors. Two major firms, one each from China and South Korea, have decided to sink US$28 billion to build power plants and industrial parks in the region.

Two Chinese companies, namely, China Power Investment Corporation and Shanghai Electric Power Construction Co., Ltd have set up a joint venture company with local partner PT Kayan Hydro Energy to build a 9,000 MW hydropower plant project, plus major dams along the Kayan River, with an estimated cost of $17.8 billion. Construction is expected to begin at the earliest in 2018.

“We expect them to complete permits before beginning construction. The first stage dam will generate 900 MW of electricity. They plan to build a total of five major dams with a cumulative 9,000 MW output,” explained Irianto Lambrie, Governor of North Kalimantan last week at the sidelines coordinating meeting with CMMA Luhut Panjaitan.

Kayan hydropower plant electricity will supply the province, which has historically suffered power shortfalls, including to the industrial zones and the international port in Tanah Kuning, Bulungan. The Chinese investment in North Kalimantan could eventually reach $20 billion, as they plan to build infrastructure in the industrial zone as well.

Meanwhile South Korean Hyundai Group has allocated up to $1 billion through its subsidiary to build a 300 MW hydropower plant on Mentarang River, Malinau Regency. The Seoul-based firm is also planning to become involved in Tanah Kuning industrial zone, setting aside $7 billion.

“Hyundai has also expressed its intention to build an international port. Currently, they are preparing a feasibility study after surveying the location,” he said.

According to Irianto, a number of investors have begun surveying locations in North Kalimantan. State-owned aluminum processor PT Indonesia Asahan Aluminium (Inalum) has decided to put big money in the region to build an aluminum smelter, as that industry requires a huge quantity of electricity.

“North Kalimantan has the potential to provide a huge output of electricity. It might even be able to supply electricity to other regions, such as West Kalimantan or even, to Sabah, Malaysia,” added Thomas Lembong of the Indonesia Investment Coordinating Board Head.

He pointed out how North Kalimantan has huge economic potential, thanks to its natural resources and position near the Makassar Strait. Beside power plants, he said, investors may want to build manufacturing or mining industries related to energy.

“Considering that many ships carry iron ore or coal across the Makassar Strait, we should build an industry in North Kalimantan to process those raw resources,” he stated.

To expedite progress, the government is ready to debottleneck constraints to investment, including the permit issue. He admits many rules in Indonesia still overlap, to create a confusing investment climate, thus discouraging investors from becoming involved. In addition, he said, the government is also aware of onerous land acquisition issues.

North Kalimantan is part of the “One Belt One Road” (OBOR) initiative from China, the world’s second-largest economy, as a destination for Chinese investment. Since its establishment in 2013, the OBOR initiative has placed more than $50 billion, while Indonesia as a member of the OBOR initiative, only reaped $5-6 billion of these funds.

 

The Indonesian government has proposed $28 billion worth of infrastructure projects during to China during the recent Belt & Road Forum (BRF) in China, National Development Planning Minister and Head of National Development Planning Agency Bambang Brodjonegoro has said. The BRF was launched on Nov. 30, 2016 at the National Press Club in Washington DC.

The BRF initiative aims to connect Asia and Europe in a vast network of roads, railways, pipelines, airports, sea ports, transnational electrical grids and fiber optic lines of communication through the creation of an economic land belt traversing Central Asia and the Middle East as well as a maritime road that links China with the ports of the Indian Ocean, East Africa and Mediterranean.

Brodjonegoro said the Indonesian government has proposed projects close to the South China Sea such as North Sumatera, North Sulawesi and North Kalimantan in areas of tourism, industrial zone and infrastructure projects such as toll roads, ports and airports to support economic development in those areas.

The remaining investments will be for projects in Bitung and Pal Beach, Likupang, North Sulawesi. The other potential projects are plantation, mini LNG terminal, coal-fired power plants and smelter projects.

Since being declared a new Province in 2012, North Kalimantan is in need of major infrastructure improvements, such as roads, ports, railways, airports, irrigation, clean water, and others.

The Ministry of Public Works and Public Housing has allocated Rp1.18 trillion to build roads, major dams and irrigation while the Ministry of Transportation has allocated another Rp1 trillion to build airports, beyond the Rp1.3 trillion for Sebatik airport development.

Writing by Rahmat Fiansyah, Email: rahmat.fiansyah@theinsiderstories.com

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