Indonesia, Russia secure $4b business agreements

On the back of President Vladimir Putin's visit, Indonesian and Russian companies signed four major business deals worth US$4 billion Thursday. The deals came on top of a $1 billion arms deal in which Russia will, among other things, provide credit lines for the purchase of helicopters, tanks and submarines. "I hope that this historic visit by President Putin and the interaction between business sectors in this forum will serve as a milestone for our improving collaborative relations," President Susilo Bambang Yudhoyono said during the Indonesia-Russia business forum, which was organized by the Investment Coordinating Board (BKPM). Putin said that cooperation between the two countries was far from being sufficient, and that the four deals between the private companies should serve as impetus for stronger cooperation in the future. "This is the second time this business forum has been held. So we are now witnessing a new tradition, which will allow deeper cooperation in energy, high technology, and trade and investment," said Putin. Witnessed by the two presidents, D. Aditya Sumanegara, president director of state mining firm PT Aneka Tambang (Antam), signed an agreement to jointly develop bauxite deposits worth $1.5 billion in Ketapang, West Kalimantan, with Alexander Livshits, director for international and special projects of Russia's UC Rusal enterprise. This was followed by the signing of a deal for a joint deep-sea oil exploration study between PT Pertamina and Lukoil Ltd., a banking services deal between Bank Mandiri and Russia's biggest private bank, Alfa Bank, and a deal on heavy equipment purchases between PT Minang Jordanindo and Chelyabinsk Tractor Plant-Uraltrac Ltd. Didie W. Soewondho, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin)'s Russia Committee, said the main problems hampering trade relations between two countries were language and cultural differences, the lack of business support information, and unclear dispute settlement mechanisms. "Kadin signed a memorandum of understanding last year with the Russian chamber so as to help provide the information needed by businesses," Didie said. Total trade between the two countries amounted to US$689.2 million in 2006, an increase of 1.2 percent from 2005, with Indonesia importing $416.1 million worth of goods from Russia, and exporting $273.2 million. Raising the curtain on the forum, Kadin chairman Mohammad S. Hidayat said that cooperation in trade and investment was still far from optimal. Hidayat said that potential exports to Russia included agricultural products, textile and garments, crude palm oil and furniture. As for Russian firms, Hidayat said they were interested in investing in the Indonesian oil and gas sector, telecommunications, financial services, banking and mining. Russian investment in Indonesia to date has been very low, with realized investment between 1990 and June 2007 only amounting to $110,000. Investment Coordinating Board (BKPM) chairman M. Lutfi expressed optimism about trade and investment relations with Russia as the investment climate in Indonesia had been improving due to the ongoing reform programs.