South Korean Samsung C&T Corporation is seeking an investment opportunity in the construction of the Kertajati International Airport in Majalengka, West Java,Indonesia. Meanwhile, Korea was looking into the possibility of establishing a mobile phone manufacturing plant in Indonesia.
Samsung C&T urban development division director Woo-jin Choi, aviation urban development division associate director Lorenzo di Loreto and chief representative for Indonesia office Han Joong-jin visited the office of West Java Governor Ahmad Heryawan in Bandung on Thursday, 10 January 2014.
The company delegates discussed the investment plan in a closed meeting chaired by West Java Development Planning Agency head Deny Juanda.
“This will be the first time ever for a province-owned company, a state-owned company and a foreign investor to build an airport,” said Ahmad.
The airport will be located on 1,800 hectares of land with two runways of 4,000 meters each.
A housing and industrial complex, dubbed Aerocity, will be built on 3,200 hectares of land near the airport.
Deny said that the province administration offered three investment options for Samsung C&T.
“The first option is that the company may hold shares in PT Bandara International Jawa Barat [BIJB] with the provincial administration as the major shareholder,” he said, adding that the same option was also offered to state-owned airport operator PT Angkasa Pura II (AP II).
The West Java Legislative Council (DPRD) agreed to allocate Rp35 billion for the establishment of PT BIJB in April, Deny said.
He estimated that PT BIJB would manage business worth around Rp2.5 trillion.
The second option is for the Seoul-based company to carry out business-to-business cooperation with PT BIJB, once the latter had been established, Deny said.
“While the third option is for Samsung C&T to fully act as our private partner in developing Aerocity,” Deny said.
Samsung C&T, which was involved in the construction of Incheon International Airport in South Korea, could also take part in the construction of passenger and cargo terminals in the airport.
“We hope that Samsung C&T will invest in the construction of the terminals as the Transportation Ministry already committed to helping us build the runways,” Deny said, adding that it would cost between Rp2.5 trillion and Rp3.5 trillion to build quality terminals.
West Java DPRD Commission C chairwoman Diah Nurwitasari said that she welcomed the participation of foreign investors in the project.
“Foreign investors may hold a certain amount of shares in a province-owned company as regulated in a provincial regulation,” she said.
She also said that the provincial administration could hold an open selection to choose the PT BIJB board of directors. A province-owned company must be managed by at least two parties.
“It is also possible for district or city administrations to invest in PT BIJB. The investment scheme is quite similar to provincial shares in PT Bank Jawa Barat [BJB], previously known as Bank Jabar Banten,” Diah said.
She said, however, that the West Java administration should also start constructing the Cisumdawu toll road to connect Cileunyi, Sumedang and Dawuan to the airport.
“It would be a problem if the airport was built before there was a toll road,” she said.
The Kertajati International Airport is expected to start operating in 2020 with a capacity of up to 20 million passengers.
It has been previously reported that a ministerial decree excluded the construction of the airport from the state budget.
The Transportation Ministry, however, declared that it would revise the decree and that an allocation from the state budget would depend on approval from the National Development Planning Board (Bappenas).
The West Java administration has so far spent Rp200 billion to acquire part of the 5,000 hectares needed to build the airport and the nearby Aerocity.
Phone manufacturing plant
South Korean-based Samsung Electronics Co., the world’s biggest technology firm by revenue, is looking into the possibility of establishing a mobile phone manufacturing plant in Indonesia, one of the world’s largest mobile phone markets.
Executives of PT Samsung Electronics Indonesia, the Korean giant’s local arm, expressed the firm’s interest in setting up a mobile phone factory during a meeting with Industry Minister MS Hidayat on Tuesday in Jakarta.
The construction of the airport is expected to cost around Rp8 trillion (US$656.11 million).
“Samsung has yet to reveal the value [of its total possible investment], but I told them about various tax incentives that we may provide for the investment,” he told reporters after the meeting at his office.
Samsung’s plan would help the firm cut down mobile phone imports from regional peers, such as Vietnam, and such an investment would be economically feasible due to Indonesia’s lucrative market, according to Hidayat.
The plan is important to Indonesia, which is among the most attractive emerging markets for overseas investors, as it attempts to cut imports after recording its first-ever trade deficit last year, totaling US$1.65 billion, as well as to attract a sizable amount of investment to develop more value-added goods.
Indonesia, Southeast Asia’s biggest economy, has seen demand for consumer goods — including mobile phones — rise markedly in recent years thanks to an emerging middle class that makes up more than half of the population.
It imported approximately 50 million mobile phones worth $4.5 billion last year. Samsung, which last year globally overtook Apple for smartphone sales and Nokia for mobile handsets, contributed around $1.2 billion to the total, according to the Industry Ministry’s statistics.
The producer of Galaxy smartphones and tablets claimed it supplied 80 percent of all Android smartphones used in the world’s fourth most-populous nation.
Indonesia is now among the world’s largest mobile phone markets. The figure of subscriber identification module (SIM) cards in the country is more than 120 percent of its overall population.
To curb illegal phones and stimulate investment in the domestic mobile phone industry, the government issued a new ruling, effective as of Jan. 1, that only allows registered importers, with licenses issued by the Trade Ministry, to import a wide range of mobile phones, including smartphones, hand-held devices and tablets.
Samsung’s plan followed on the heels of another move by Taiwan-based Foxconn Technology Group — the world’s largest electronics manufacturer that supplies components to major clients such as Apple Inc., Dell Inc., and Microsoft Corp. Earlier, Foxconn reported plans to spend up to $10 billion in investment over the span of five years to develop manufacturing plants in Indonesia.
Investment Coordinating Board (BKPM) chairman Chatib Basri said the government was currently in the final rounds of negotiations with Foxconn over a few issues, but declined to comment further.
“What is certain is that the progress is positive,” he told The Jakarta Post in a text message.
Samsung has operated in Indonesia for several years producing a wide range of electronic products and exporting components to at least 80 countries. (Arya Dipa AND Linda Yulisman, The Jakarta Post)