US Firms Eye Railways, Airports in Indonesia

U.S. firms are eyeing investments in Indonesian infrastructure such as railways and airports but are concerned about graft and a lack of protection of intellectual property rights, the U.S. under secretary of commerce said on Monday.

Under President Barack Obama, the United States is trying to improve ties with the world’s most populous Muslim country, including through investment and by boosting bilateral trade of $23 billion a year, which is two thirds of Indonesia’s trade with China.

“We have some American companies that are interested in supporting Indonesian transportation infrastructure needs, particularly in the railway system,” Francisco Sanchez said in an interview with Reuters.

He declined to identify the companies. Indonesia’s government plans next week to offer investors $32 billion worth of infrastructure projects, including a railway, toll road and power plant, as Southeast Asia’s largest economy struggles to fund an overhaul of its transport network.

Inadequate infrastructure is seen as both an investment opportunity and an obstacle to growth, and was cited by Fitch Ratings last month as a key risk to the chances of the country winning an investment grade rating in the next 12-18 months. Other sectors U.S. investors are interested in are healthcare, agriculture and green energy, said Sanchez, in Jakarta to explore closer commercial ties.

Indonesia opened up healthcare for foreign investment last year, and is looking to boost food security and expand geothermal power, where U.S. energy major Chevron is already an investor. Foreign direct investment has picked up in Indonesia in the past year, but there has been far more investment from Asia than from U.S. or European firms, with Japan having pledged more than $50 billion in infrastructure investment.

Indonesian President Susilo Bambang has vowed to tackle corruption, a concern for many investors, though progress appears to have stalled. Sanchez said further reforms on transparency were needed to attract more investment.

“Corruption, protection of intellectual property rights and overall transparency, all of these will have more long-term impact and positive impact on the Indonesian economy,” he said, adding businesses also wanted an opportunity to have a say on proposed regulations and laws.

Policy flip-flops have been a major concern for investors, particularly in the resources sector with rules aimed at reducing foreign ownership or involvement. Exxon Mobil has been in protracted negotiations over gas fields, while Indonesian regional authorities are competing with the national government to grab a stake in a nickel mine operated by U.S. miner Newmont.