Chinese equipment giant signs $8.5b LOI on Palu SEZ project. A major Chinese state-owned company has recently invested Rp120 trillion (US$8.5 billion) in a factory development project in the Palu Special Economic Zone (SEZ).
Metalworking equipment manufacturer China First Heavy Industries (CFHI), the latest in a growing list of foreign companies that have channeled funds for large-scale projects in the country in recent months, is to begin rolling out the fund in installments in the coming year.
“We will begin by investing $3 billion in the first phase, which is in January,” said CFHI chairman Liu Mingzhong after signing the letter of intent (LOI) on Tuesday at the Central Sulawesi Governor’s office.
Liu stated that CFHI was the world’s largest supplier of smelting products and equipment, and claimed that the company’s reactor pressure vessels had a capacity of 3,000 tons, far exceeding the 1,500- and 1,200-ton capacity vessels produced respectively by Japanese and Indian manufacturers.
Palu SEZ Project
CFHI was a main supplier for nuclear power plants around the world, Liu added. In addition, the company also produced equipment for the automotive and defense industries.
“After a survey of the Palu SEZ, we are willing to invest in and manage 1,500 hectares of the region,” he said.
The project is good news for the Indonesian government as it strives to net more foreign investment to anchor sluggish growth in the economy.
Statistics Indonesia (BPS) data shows that year-on-year (yoy) growth in investment, which accounts for a third of gross domestic product (GDP), was 4.21 percent in the third quarter of 2019, significantly lower than the 6.96 percent booked in the third quarter of 2018.
Meanwhile, Investment Coordinating Board (BKPM) data shows that investment realization in September reached Rp601.3 trillion, a 12.3 percent yoy increase. Domestic investment grew 17.3 percent yoy to Rp283.5 trillion, while foreign direct investment (FDI) rose 8.2 percent yoy to Rp 317.8 trillion.
General director Andi Mulhanan Tombolotutu of PT Bangun Palu Sulawesi Tengah (BPST), the company in charge of developing and managing the Palu SEZ, said that the CFHI planned to fast-track the construction of its factories in the region.
“CFHI expects to build three factories that produce steel, nickel and copper in the next six months,” he said.
Central Sulawesi Governor Longki Djanggola responded positively to CFHI’s investment, saying that the Palu SEZ was considered a priority investment destination in accordance with the 2020-2024 National Medium-Term Development Plan (RPJMN).
Longki said that CFHI had also struck a deal with BPST to set up a new subsidiary to manage its investments in the Palu SEZ.
“After signing the letter of intent, CFHI and BPST will immediately form a team to compose a memorandum of understanding that will formalize [our] partnership on the project,” he said.
Earlier in November, Industry Minister Agus Gumiwang Kartasasmita said Japan’s Toyota Group and Honda Motor Company would respectively invest Rp28.3 trillion and Rp5.1 trillion in Indonesia in 2019-2023.
Other companies that have invested in the Palu SEZ include pine sap processor PT Hongthai International and asphalt producer PT Asbuton Jaya Abadi. Chinese equipment giant signs $8.5b LOI on Palu SEZ project (rfa, Ruslan Sangadji, The Jakarta Post)