China agrees to invest $3 billion in Indonesian sovereign wealth fund

JAKARTA, July 4 (Reuters) – China’s Silk Road Fund (SRF) has signed an agreement to invest up to 20 billion yuan ($2.99 ​​billion) in Indonesia’s sovereign wealth fund, the funds said on Monday. Indonesian fund investors.

The agreement allows investment in all sectors open to foreigners in Indonesia, especially projects with economic connectivity between countries, the Indonesian Investment Authority (INA) and SRF said in a joint statement.

“We believe that investments in Indonesia and the region have high potential, especially when conducted with INA,” said Yanzhi Wang, chairman of SRF.

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Unlike many other sovereign wealth funds that manage excess oil revenues or foreign exchange reserves, the INA seeks to attract foreign co-investors to help finance economic development.

The agreement provides the general conditions and the principles allowing the FRU and the INA to select and decide on joint investments.

After its launch in February 2021, INA set up a $3.75 billion toll road fund with Canadian and Dutch pension funds and a unit of the Abu Dhabi Investment Authority. The United Arab Emirates has pledged to invest $10 billion with INA. Read more

Indonesia said global agencies such as the US International Development Finance Corporation and the Japan Bank for International Cooperation have also shown interest.

The SRF, established in 2014, is backed by China’s foreign exchange reserves, China Investment Corp, the Export-Import Bank of China and the China Development Bank.

Trissia Wijaya, a researcher at the Center for Indonesian Policy Studies, a think tank, said the SRF was less politically sensitive because it did not provide debt like other China-led Belt and Road Initiative (BRI) projects. .

The INA could, however, face difficulties in attracting potential co-investors, with geopolitical factors also at play, she said.

“The G7 just launched a $600 billion infrastructure plan to counter China,” Wijaya said, referring to funds pledged at the Group of Seven leaders’ meeting last month. Read more

“Then comes a big question mark, would they want to be put side by side with China in an INA-facilitated platform?”

BRI projects and economic ties with China are often a bone of contention in Indonesia due to the perception that Beijing has influence over the government and projects using imported rather than local labor.

Indonesia’s most publicized BRI project, a multi-billion high-speed railway in Java, has been plagued with cost overruns and delays. Read more

($1 = 6.6937 Chinese yuan renminbi)

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Reporting by Gayatri Suroyo Editing by Ed Davies, Martin Petty

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