China Backs BRI-related Indonesian Tourism and Infrastructure Plans

18 Oct 17

Agreements reached on investment in Sulawesi tourism facilities, while talks continue on support for Likupang SEZ.

Photo: On course for investment: Sulawesi heads for a massive mainland cash injection in its tourism sector. (Shutterstock.com)

On course for investment: Sulawesi heads for a massive mainland cash injection in its tourism sector.

Last month, the Indonesian government announced that negotiations were under way to secure substantial Chinese investment in the Likupang Special Economic Zone, a major development project in the country's North Sulawesi province. The news follows a sustained charm offensive by Indonesia as it looked to woo mainland Chinese backing for its major infrastructure redevelopment programme, one seen as having a significant crossover with the aims of China's own Belt and Road Initiative (BRI).

While some progress has clearly been made on securing backing for the Likupang Special Economic Zone, other Indonesian infrastructure projects have fared less well. According to the North Sulawesi Provincial Government, five other initiatives are still struggling to find the required funding.

These projects are believed to include the Manado-Bitung Rail Link, which will run alongside a locally financed toll road that is already under construction. In addition, there is the 28 km-long access channel required to connect the toll expressway to the national road network, a tramline linking Wori and Tateli, the Sawangan Dam, and a new waste-disposal facility.

In all of the above instances, attracting BRI money has proven to be not quite so straightforward. Highlighting the reasons many mainland businesses are reluctant to commit to Indonesia-based projects, Zhao Baige, Vice-chair of China's Foreign Affairs Committee, said: "Jakarta really needs to give Chinese companies more support, especially with regard to tax incentives, enhanced clarity in terms of policy and regulations and better communication with local communities.

"Above all, there needs be greater transparency surrounding the policies and legal issues relating to labour, taxation and land usage. Chinese companies need detailed information and, if there's no land allocated to a project, they consider there is no business to be done."

One area where there has been substantially more progress with regard to Sino-Indonesian collaboration is the tourism sector. In May this year, an International Conference on Tourism was held in Manado, the regional capital of North Sulawesi. Staged partly as a shop window for Chinese investors, the event showcased a series of proposed tourism infrastructure developments designed to woo mainland tourists.

As part of the conference, Indonesia's Investment Coordinating Board led a session dedicated to China's growing engagement with the region. In particular, it focused on the contribution that Sulawesi could make to the wider objectives of the BRI.

By the end of the event, agreement had been made on several collaborative ventures designed to boost the local tourism sector. Among the most high profile of these was a US$200 million commitment from China's Anhui Conch Investment Company to develop a 30-storey hotel and a range of tourist facilities in Manado.

As part of the deal, Anhui – the mainland's largest cement manufacturer – will also invest $600 million in establishing a production facility in the region. Once completed, the plant is expected to have an annual output capacity of some 4.4 million tons.

For both parties, greater collaboration on the tourism front was seen as making a great deal of sense. Indeed, Manado has already proved something of a draw for mainland visitors, with 4,000 said to be arriving in the resort every month. At present, Chinese tourists account for 80% of the island province's total number of overseas visitors, a 230% year-on-year increase and a figure that is expected to continue to rise.

At least part of the region's success is down to its geographical advantages. Set within three to five hours flight time of the majority of substantial East Asian residential areas, the city is also the closest tropical Indonesian destination to China. Its tourism numbers got a further boost last year when the Indonesian government gave the go-ahead for direct charter flights between Sulawesi and six mainland cities – Chengdu, Chongqing, Guangzhou, Wuhan, Nanchang and Changsha – as well as Hong Kong and Macau.

Marilyn Balcita, Special Correspondent, Manado

Content provided by Picture: HKTDC Research

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