And two of Asia's biggest players have identified Indonesia as a major target. Both South Korean and Japanese businesses are expanding their operations there to ride the Indonesian growth wave.
As Gita Wirjawan, chairman of Indonesia's Investment Coordination Board, told the Financial Times recently: "When I was in Seoul, there was a queue of manufacturing giants showing a thirst to relocate, or move their manufacturing hub for Southeast Asia to Indonesia."
In one of the largest deals to date, Posco, South Korea's biggest steelmaker, recently signed a $6 billion agreement to build a plant in Indonesia with PT Krakatau Steel. And that's not all:
1. Hankook Tire, the world's seventh-largest tire maker, plans to build a $500 million plant in Indonesia next year.2. LG Electronics is considering making Indonesia a regional manufacturing hub, according to those close to the investments. 3. Korea Electric Power, South Korea's state electricity producer, is acquiring a 20% stake in Indonesian coal company Bayan Resources. 4. In July, Samchully, a South Korean gas supplier, said one of its units would form a joint venture with Indonesian state energy firm Pertamina to build a liquefied petroleum gas plant in southern Sumatra. It will invest $190 million to achieve an annual production capacity of 240,000 tons by 2012. And with regard to Japan, construction has started on a $1.2 billion thermal power plant that will supply electricity to some of the most densely populated islands. PT Paiton Energy (partly owned by Mitsui & Co.) and Tokyo Electric Power are building the 815-megawatt expansion in East Java, with funding from the Japan Bank for International Cooperation and a consortium of Japanese lenders. The deal adds to already solid Japanese-Indonesian import-export ties. Trade between Japan and Indonesia reached $28.4 billion last year, making Japan a larger trading partner than China, where the number totals $25.5 billion, or the U.S., with trade worth $17.9 billion. In addition, Japan sources most of its coal and liquefied natural gas from Indonesia, while Indonesia imports large quantities of Japanese electronics. And there are currently more than 1,000 Japanese projects under way, worth more than $30 billion. So where does this leave the United States in the equation? Is America Falling Behind These Emerging Markets?: Think strategically about U.S. security issues and you'll realize that Indonesia's importance to the United States goes far beyond economics, as it borders several key sea lanes. America needs to build a much broader and deeper relationship with Indonesia by growing through investment, trade and partnerships like Japan has done. The Financial Times reports that the Japan-Indonesia partnership is just one of several trade agreements that Japan has. It's also sealed bilateral free-trade agreements with Brunei, Chile, Malaysia, Mexico, Singapore, the Philippines, Thailand, Vietnam, Switzerland and the Association of Southeast Asian Nations (ASEAN).
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