Japan in talks with Indonesia over $4bn in transport funding

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Japan in talks with Indonesia over $4bn in transport funding

11 December 2020 | By GCR Staff | 0 Comments

Japan has offered to invest $4bn in Indonesia’s brand new sovereign wealth fund, with the money intended for toll roads, seaports and airports.

Luhut Pandjaitan, Indonesia’s influential coordinating minister for investment, said the money would come from the state-owned Japan Bank for International Cooperation.

As reported in Nikkei Asia, Pandjaitan, who is sometimes referred to as Indonesia’s “minister for everything”, said: “There are many projects in Indonesia, and those are all long term. Where can you see such a high return now in Japan?”

Indonesia’s sovereign wealth fund for infrastructure investment, called the Nusantara Investment Authority, was founded last month.

Tokyo has a long-running rivalry with China over investment in Indonesia’s transport infrastructure, as both countries compete for the region’s largest construction market (see further reading).

The sector is likely to experience sustained growth in coming decades to improve communications across the archipelago’s 17,508 islands.

The Indonesian economy is growing at an average rate of 5% a year, however the country suffers from “notoriously high” logistics costs, which means that imported goods are often cheaper than those it makes itself. 

The negotiations with Japan follow talks with the US last month, which led to the signing of a memorandum of understanding for $750m in infrastructure financing with the US government’s Export-Import Bank.

Image: Jakarta’s Japanese community celebrating the Ennichisai festival (Seika/CC BY 2.0

Further reading:

Japan searches soul after losing Indonesia high-speed rail bid to China

Indonesia reveals plan to integrate Japanese and Chinese rail projects

Japan offers to help Indonesia move its capital to Borneo