Indonesian development to offer more chances for Chinese investment

Fifty-six years on, a mature ASEAN, now with 10 member states, including Vietnam, Cambodia, Laos, Myanmar and Brunei, focuses on the free movement of goods within the bloc. Tariffs are set at zero and non-tariff barriers are being steadily lifted. That member states have enjoyed the peace dividend is evident from the political stability and economic growth in the region.

The 43rd ASEAN Summit, to be held in Jakarta on Sept 5-7, will see the association putting emphasis on positioning itself as a major regional player with huge economic growth and investment potential. It could become the new engine for global growth as China rises up the industrial ladder thanks to its pursuit of sustainable, technology-driven development.

Whereas previous ASEAN summits dealt mainly with intrabloc matters, the 43rd summit is likely to focus on external relationships, such as its relations with Asia-Pacific countries like Canada, Australia, New Zealand, India and China, for security, investment and market access purposes.

ASEAN member states have a combined population of 670 million and GDP of $3.7 trillion. As an economic bloc, its economic growth rate is expected to be higher than that of Japan and the Republic of Korea, not to mention the United States and the European Union, for the next decade.

As a matter of fact, due to its centrality in the Asia-Pacific economy, ASEAN is carving its space on the global stage. For instance, in November 2020, China, Japan, the ROK, Australia and New Zealand joined the 10 ASEAN members to form the Regional Comprehensive Economic Partnership, the world's largest free trade agreement. The RCEP covers one-third of the world's population and accounts for 30 percent of global GDP, and it is the first FTA Japan has signed which also includes China and the ROK.

Thanks to the RCEP, about 65 percent of the goods traded among the 15 members are tariff-free, and in about 20 years 90 percent of them will carry zero tariff. This has facilitated the unhindered flow of raw materials and finished goods in the region, which will prompt China and Western economies to increase their investments in ASEAN economies.

What about road, rail and sea transport infrastructure within and across ASEAN member states which is needed to transform the policies into tangible benefits? Intra-ASEAN trade remains low at only 21 percent, perhaps because cross-border freight has become costlier due to logistical inefficiency and non-standardized regulations.

Amid all this, Indonesian President Joko Widodo has announced a plan to shift the country's capital from Jakarta to Kalimantan in Borneo, which requires the construction and development of roads, railways, buildings and a 5G network in the pristine rainforest province. It will be a greenfield site complete with smart city technology and sustainability. Nusantara (as the new capital has been named) would cost $32.5 billion to build.

In addition, Widodo plans to build 100"smart cities" across Indonesia by 2045. The latest digital technology, artificial intelligence, the internet of things, big data, waste recycling facilities, renewable energy generation and quality of life planning will develop Indonesia into a natural leader of ASEAN.

This is where the China-proposed Belt and Road Initiative comes in. Comprising the Silk Road Economic Belt and the 21st Century Maritime Silk Road, the initiative is aimed at improving connectivity by developing ports, container terminals, bridges, railways, roads and telecom networks. In fact, under the Belt and Road framework, Chinese enterprises have already been helping realize Widodo's plans.

The Power Construction Corporation of China, for example, has been involved since 2019 in building a hydroelectric dam on the Kayan River in North Kalimantan.

The Gezhouba Group International Engineering Co has worked on 12 development projects in Indonesia since 2006, including hydropower in North and West Kalimantan.

While the China Road and Bridge Corporation, the China Communications Construction Indonesia, and the China Construction Eighth Engineering Division Corporation are bidding for parts of the toll highway to link the Balikpapan oil storage port with Penajam Paser Utara, where the new capital will be built, China provided a $59 million loan in 2019 for the construction of a portion of the toll highway linking Balikpapan with Samarinda.

While the China Railways Construction Corporation is pitching to develop Nusantara's transportation system, the Hongshi Holdings Group plans to build in East Kalimantan a cement plant with a production capacity of 8 million tons a year that would employ 13,000 workers.

Moreover, with China's help, Widodo eventually launched the construction of the Indonesian Industrial Park in the Bulungan Regency on 30,000 hectares in December 2021.

Incidentally, China and the United Arab Emirates are the primary funders for the Indonesian Industrial Park, which is expected to become the world's largest green industrial park and attract $132 billion in investment, with Chinese companies, too, investing in it.

But all these development plans and activities have left local people and NGOs worried about the environmental damage to Kalimantan, whose rainforest is rich in biodiversity, full of wildlife, and home to many endemic flora and fauna.

The government and enterprises have, however, assured the local people that environmental impact assessments will be commissioned, and the recommendations to mitigate the negative effects implemented.

The author is a Malaysian senior media executive based in Hong Kong.

The views don't necessarily represent those of China Daily.