UPDATE 2-Indonesia says UAE to invest in aluminiumUPDATE 1-Indonesia says UAE to invest $9.5 bln in aluminium smelters - Reuters, Oct 19 2011 7:42AM
Wed Oct 19, 2011 11:34am GMT
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(Recasts with UAE comments)
JAKARTA Oct 19 (Reuters) - The United Arab Emirates (UAE) may make possibly the largest-ever investments in Indonesia's industrial sector by pumping $9.5 billion into aluminium smelter projects in Kalimantan, Indonesia's ambassador to the UAE said on Wednesday.
However, the United Arab Emirates' Ras al-Khaimah emirate, one of the investors mentioned, has refuted suggestions by the Indonesian official that it is to invest billions of dollars in an aluminium smelter in Southeast Asia's largest economy.
The ambassador, M Wahid Supriyadi earlier said that Emirates Aluminium (EMAL) would invest $4 billion, and the Ras Al Khaimah Investment Authority (RAKIA) would provide $5.5 billion, to build two different aluminium smelter projects in Kalimantan province.
The investment would have been a massive one by Ras al-Khaimah, one of the less wealthy emirates in the UAE.
"RAKIA will not be contributing $5.5 billion to this project, whether as an individual entity or through the RAK government," said a person familiar with the matter.
"It is not a project we are involved in."
EMAL, a 50:50 joint venture between Dubai Aluminium Company and Abu Dhabi investment vehicle Mubadala, directed inquiries regarding overseas investments to Mubadala. Officials there were not immediately available for comment.
When the news broke earlier on Wednesday, analysts noted that announced projects in Indonesia had often been scrapped before they got off the drawing board.
"These big projects get announced all the time and then get scrapped later," said a metals analyst, who asked not to be named. "Indonesia has got some bauxite and it's got a lot of thermal coal, so you have the power.
"It all depends on the timing of the deal and how long it takes to sort out, because aluminium capacity expansion for the next decade is quite large."
RICH RESOURCE
Earlier this month, Indonesia's trade minister said India's state-run National Aluminium Co Ltd (NALCO) will invest $4 billion in an aluminium smelter and power plant in Indonesia's East Kalimantan province.
Bauxite is used to make alumina which is in turn used to make aluminium, a light-weight and flexible metal used in a vast array of industrial and consumer products, from packaging and aircraft manufacturing to electrical cables and insulation.
Indonesia is the world's top exporter of thermal coal, with about 99 percent of the identified coal resources located on the island of Sumatra and in the south and east Kalimantan provinces, on the Indonesian side of Borneo island.
The world's fourth most populous country drew in a record of $9.6 billion in foreign direct investment (FDI) in first-half 2011, lured by its relatively stable politics and economy since the 1998 financial crisis, plus abundant resources and huge consumer spending power.
Despite issues over infrastructure, corruption and labour disputes, that trend is expected to continue as global firms look to take advantage of cheap labour, and Indonesia's huge mineral wealth.
Growth prospects have been given another boost by the government's offer of a tax holiday to big manufacturers investing more than $100 million. ID:nL3E7JF0JZ]
Other planned investments include a $6 billion joint-venture steel plant by South Korea's POSCO , the world's third-biggest steelmaker, a $4.5 billion petrochemical complex by South Korea's Honam Petrochemical Corp and a new oil refinery for $8-$9 billion from Kuwait Petroleum Corp.
In an effort to support the domestic industry and add value to its coal exports, the Indonesian energy and minerals ministry is drafting a regulation that would by 2014 require coal producers to upgrade low-quality coal to a medium-quality coal before exporting.
Supriyadi also said that another unnamed UAE company would invest $100 million in a crude palm oil refinery, while a second UAE firm will invest $90 million in the tyre industry. (Additional reporting by Amran Abocar in DUBAI, Reporting by Yayat Supriatna, Michael Taylor; Editing by Ramthan Hussain)