Indonesia lures Middle East investment as US turns inward

Bloomberg

As one of Asia’s fastest-growing economies and the most populous Muslim nation in the world, Indonesia is billing itself as a natural home for Middle Eastern investment at a time when the US is turning inward.
With a landmark visit by Saudi Arabia’s King Salman bin Abdulaziz to Southeast Asia winding down this week, Indonesia has won pledges of $1 billion in development finance and signed agreements to cut trade barriers. That’s on top of a $6 billion oil refinery deal between Saudi Aramco and Indonesia’s PT Pertamina signed in December.
As the largest supplier of crude to Indonesia and with muted oil demand in developed markets, Saudi Arabia has plenty of economic reasons to build stronger ties with the Southeast Asian nation. With the US hardening its attitude toward some Muslim-majority nations, Indonesia also sees the potential for tighter links with the Middle East on the basis of religious bonds.
“Politically, it probably also makes sense for the Middle Eastern petro-states to diversify their investments geographically into Asia,’’ said Thomas Lembong, head of the Indonesian Investment Coordinating Board. “In Muslim-majority countries like Indonesia, Middle Eastern investors would enjoy added comforts such as the inherent respect and feelings of sanctity towards investment from the very cradle of Islam.”
The visit by the Saudi king was planned well before US President Donald Trump issued an executive order for a travel ban that targeted several Muslim-majority countries, and which was renewed this week after initially being set aside by the courts. Indonesia criticized Trump’s move at the time the order was issued, saying closing borders to the rest of the world won’t address the problem of terrorism. “We are on a slippery slope when we start linking the issue of radicalism and terrorism around any particular religion,” Foreign Ministry spokesman Arrmantha Nasir said last month.
With a 1,500-strong entourage in tow, the Saudi king’s 12-day visit to Indonesia was preceded by a visit to Malaysia, another Muslim-majority nation, to seal a separate $7 billion deal with the state-owned Petroliam Nasional Bhd to develop an oil refinery and provide up to 70 percent of its crude requirements. Malaysian and Saudi Arabian companies signed agreements worth about $2.2 billion in areas including construction, aerospace, halal, and hajj-related industries. Naser Al-Tamimi, a researcher based in the UK and author of a book on China-Saudi Arabia relations, said he expects ties between the Arab world and Muslim-majority countries like Indonesia and Malaysia to be strengthened.
“The efforts to develop relations with countries such as Indonesia, Malaysia enjoys considerable support from most Saudis,” he said by email. “I expect that relations with countries such as Indonesia and Malaysia will expand in the future in all areas, including security and defense, as a result of Saudi Arabia’s strategy to diversify its foreign policy and its investments in the world.”
Indonesia’s youthful and growing population of 260 million, economic growth of about 5 percent and a relatively stable political environment are luring investors. President Joko Widodo, who took office in 2014 on pledges to reform and boost the economy, sees foreign investment as key to his growth plans.