Seeking to tap the growth prospects in emerging markets and reduce its overwhelming exposure to the Eurozone, Slovakia is to leverage its power engineering pedigree to invest an estimated $1.4bn in Indonesian power and manufacturing projects, the government announced on December 11.
"Indonesia is very ambitious in developing its economy," Slovak Economy Minister Tomas Malatinsky said, according to the Jakarta Globe. "I think Slovakia can participate in several programmes," he added after meeting with Indonesian counterpart Hatta Rajasa.
Slovak power plant contractor Istroenergo Group and the Export-Import Bank of the Slovak Republic have proposed investing in a 180-megawatt (MW) power plant project alongside Tria Talang Emas - a consortium of Malaysian, Chinese and Taiwanese investors. While not officially confirmed, the project has been reported at a cost of $185m by the local press.
"We expect the ground breaking of the project to take place in March next year," Hatta said, adding that the two states are also exploring possibilities to distribute electricity, as well as studying a proposal to jointly build a power plant in Singapore.
Overall, Slovak companies are expected to pump $1.4bn into infrastructure - mostly energy - in a bid to tap into rapid growth in the Southeast Asian nation. Outgunning expectations, the Central European economy has seen the highest growth in the Eurozone this year driven by the modern, efficient car plants based in the country. While the compact models the factories turn out are doing well in recession-hit Europe, they are also selling into developing markets.
However, with domestic demand weak and over 80% of exports heading into the EU, the economy remains largely a hostage to the fortunes of the crisis-hit bloc. The current troubles have only illustrated the need for CEE states to diversify their markets. And with a population of close to 250m, Indonesia is one of the largest potential emerging markets outside the Brics.
The projects will be carried out through a public-private partnership (PPP) scheme, as well as through purely private-sector arrangements, Hatta noted, with six preliminary deals signed at the conference. In addition to investment in the energy sector, a Slovak firm, which Hatta did not name, would also set up a cement plant in East Kalimantan in an unspecified time frame.
Hatta welcomed the cooperation, saying the projects are critical for national infrastructure development. He said they would not require any state funding because they would involve business-to-business cooperation. "This is a win-win cooperation," Hatta said. "Slovakia is better than us in manufacturing, technology and electricity." In turn, the Indonesian economy minister said his country will seek to increase palm oil exports to Slovakia.
Slovakia's ambassador to Indonesia, Stefan Rozkopal, said that in addition to investment in traditional sectors, such as machinery, electronics and agriculture, Slovak firms are eyeing other industries, such as information technology. Slovakia also aims to boost bilateral trade, he added, which expanded by 6% in 2011 to stand at $65.95m. Indonesias exports to Slovakia comprise palm oil, natural rubber, footwear and accessories for video recording, while imports consist of machinery, electronics, vehicles and explosive substances.
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