Chinese firms to spend US$ 1,6b on alumina smelter

JAKARTA. Chinese investors have expressed their intention to build an aluminum smelting plant in West Kalimantan and develop an industrial park in Bekasi, West Java, which would both absorb investments of up to US$1.6 billion, a minister has said.

Industry Minister MS Hidayat said on Friday that the Chinese firms were seeking local partners to jointly build and operate the smelter.

“They may source raw materials from the eastern part of Indonesia,” he told reporters after meeting officials from the Guangxi Zhuang Autonomous Region of China.

Hidayat added that the Chinese investors were also preparing for the construction of the industrial park, set to be located in a 1,000 hectare area in Bekasi, near Jakarta.

Indonesia has become a major investment destination for Chinese companies.

In the past two years, Indonesia has seen a robust direct investment flow from China thanks to a new commitment from the world’s second largest economy to improve its economic relations, which were previously dominated by trade.

Since 2010, Indonesia has booked a widening trade deficit each year with its largest trading partner, when the ASEAN free trade agreement with China was implemented. Concerns had mounted due to the huge trade gap and the government then requested that China deal with the imbalance in economic relations through investment.

During a meeting between Chinese President Xi Jinping and President Susilo Bambang Yudhoyono in October last year, a number of Chinese firms expressed their commitment to invest more than $30 billion in total in a wide array of sectors ranging from infrastructure to mining.

Some investments such as in cement, mineral processing and industrial estate development are underway.

Earlier this week, several Chinese firms revealed plans to spend up to $5 billion to develop an industrial park in Bantaeng regency, South Sulawesi, which is set to serve as Indonesia’s first integrated iron-and-steel industrial park.

China’s second-biggest aluminum producer Shandong Nanshan Aluminium Co. Ltd. recently began the construction of its processing facilities and supporting infrastructure, totaling $5 billion in Bintan Island, Riau Islands province. The facility will be capable of producing 2.1 million tons of alumina and 570,000 tons of aluminum ingots each year.

A portion of the total output will be exported to several countries, including China, Japan and the US, while the rest will be allotted domestically.

Guangxi People’s Government Office deputy secretary general Wei Ren said the alumina project in West Kalimantan could commence in the next two or three years by a consortium of Chinese firms, particularly from the Guangxi region.

“At present, we are carrying out a feasibility study on the project,” he said, adding that the investors were now seeking some local partners to take part in the project.

Apart from building the smelter, the consortium would also construct a seaport and power plant to shoulder operational activities there, Wei further said.

Wei also said the planned industrial park would serve as a basis for manufacturing, such as electronics and auto parts, and would be equipped with a logistical center to maintain a supply of raw materials necessary for the industry.

“We’re trying to attract investment from China and other parts of the world,” Wei said. (Linda Yulisman)