Oct 6, 2012

Indonesia - Russian firms struggle to find local partners

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Lured by Indonesia’s remarkable economic growth over recent years, many Russian companies have been looking into expanding their businesses into the largest economy in Southeast Asia. Realization, however, remains minimal, a business envoy says.

Victor I Tarusin, the executive director of the Russia-ASEAN Business Council, told The Jakarta Post in an interview on Tuesday that finding business partners, especially with firm financial commitments, was still a problem for Russian firms looking to invest in Indonesia.

“We need serious, solid partners that will co-invest in the project, to be implemented here in Indonesia. Not only [in terms of providing land assets], but also by making solid financial commitments,” he said.

Tarusin added that better administrative support from the government could greatly improve the situation. He did not elaborate further.

Russia’s major alumina producer, Russky Aluminiy, announced a plan last month to cooperate with state-owned diversified mining company PT Aneka Tambang to construct a bauxite refinery in West Kalimantan with an estimated investment of US$1 billion.

The partnership plan, however, did not work out, according to Industry Minister MS Hidayat recently. Hidayat said Russky was looking into partnerships with other local companies.

Russia’s Norilsk Nickel is also assessing possibilities to build a copper smelter and a non-ferrous metal smelter in Indonesia, with investment of up to $2 billion. There have been no updates on its plan so far.

Tarusin said that the problem of finding a partner was very unfortunate, considering Indonesia and Russia could complement each other in terms of their economic characteristics.

He held up the example of the oil and gas industry, in which Russia had plenty of experience.

“So far, there is only one Russian oil and gas company that has managed to operate in Indonesia — the Syntes Group,” he said.

The field of aircraft and satellite manufacturing was another example of undeveloped potential that could benefit Indonesia-Russia economic ties, he said.

“Russia has a number of technologies that could be well-transferred here to complement industrial development in Indonesia,” he said.

Regardless of the failures to find business partners in the past, interest to invest in Indonesia remained strong, Tarusin said. He added that several representatives of a number of Russian firms were currently looking for partners in Jakarta, with the construction sector becoming the new point of focus.

Also speaking to the Post on Wednesday, Andrey Karev, the vice president of Russia’s giant construction company Morton said he had met with several local players to discuss possible partnerships.

“Indonesia is interesting for Morton because it’s the biggest country in ASEAN with the largest population,” he said at the Russian Embassy in Jakarta.

Morton is known in Russia for its expertise in building towns with supporting infrastructure, including power plants, roads and hospitals. This year, the firm expects to generate $2 billion in revenues from a variety of private construction projects.

Linda Yulisman and Novan Iman Santosa

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