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JAKARTA: Indonesia on Wednesday welcomed the UAE’s pledge to invest $ 10 billion in its recently launched sovereign wealth fund, which a senior official said made the Emirates the “largest major investor” in the initiative.

“With this investment, the UAE is the largest major investor to date for the Indonesian Investment Authority (INA),” Husin Bagis, Indonesia’s ambassador to the UAE, told Arab News on Wednesday.

“The UAE’s accession continues to demonstrate the high level of international confidence to invest in INA and would attract other world investors to join and invest,” he added.

The United Arab Emirates helped Indonesia build INA in February of this year through the Abu Dhabi Investment Authority (AIDA), with AIDA acting as one of its advisors.

The sovereign wealth fund introduced during the same period will be used for large infrastructure projects and improve connectivity in the world’s largest archipelago with almost 17,000 islands.

“We believe that more investors will be interested in a number of high potential opportunities in Indonesia, from stable brownfields to greenfield projects with potential future value,” said Jodi Mahardika, spokeswoman for the Ministry of Maritime Affairs and investment, said Arab News on Wednesday.

On Tuesday, the state news agency of the United Arab Emirates, WAM, reported that the Emirates’ commitment to invest in the Indonesian sovereign wealth fund was in line with the instructions of the Crown Prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al-Nahyan.

The investment is focused on strategic infrastructure projects – particularly in the areas of infrastructure, roads, ports, tourism, agriculture and other promising sectors – that “can contribute to growth and economic and social progress”.

According to Bagis, the investment promise is the “sweet result” of talks between Indonesian President Joko Widodo and Sheikh Mohammed on Friday last week, when the two heads of state and government discussed bilateral cooperation and touched the INA.

“The UAE’s investment in INA would strengthen bilateral relations between the two countries in various areas and reflects the close personal ties between the leaders of the two states,” said Bagis.

The investment promise came two weeks after a UAE delegation led by Energy and Infrastructure Minister Suhail Al-Mazrouei visited Indonesia earlier this month for the Indonesia-UAE Week.

During the week-long visit, the two sides signed several deals, including agreements to develop a $ 500 million tourist resort on an island in Aceh Province and a $ 1.2 billion project to develop ports and industrial areas in Gresik, in the United States East Java Province.

In addition, officials attended the laying of the foundation stone for a replica of the Sheikh Zayed Grand Mosque in Widodo’s hometown in Central Java Province.

At the time, Al-Mazrouei had said the UAE was looking at investment options for infrastructure development projects in Indonesia before providing more financial assistance.

INA was launched with up to $ 5.3 billion in initial capital in cash and assets that the government will allocate to various infrastructure and development projects by the end of the year. The goal is to build an initial funding pool of $ 20 billion.

Indonesian officials said other countries such as the US, Japan, Canada and the Netherlands have expressed an interest in investing a total of $ 9.5 billion in INA through their respective development, finance and pension fund agencies.

For their part, analysts said the funds secured by INA may provide some respite for leverage by state-owned construction companies, some of which have struggled to secure funding for infrastructure projects through global bond issues.

According to Fitch Ratings, these companies totaled over 170 trillion rupiah ($ 11.77 billion) in debt at the end of September 2020, while the debt of state-owned energy company Pertamina was nearly 300 trillion rupiah as of June 2020.

In a statement on Monday, the international rating agency said that INA is unlikely to reduce state-owned companies’ debts in the short term, “as their capital is modest in relation to debt”. Own companies operating in the construction, toll roads, oil and gas and other strategic sectors.

“INA’s ability to raise funds can be enhanced if it is able to channel foreign capital into Indonesian infrastructure investments. It is possible that the agency’s privileged legal and political positions will provide greater security for foreign partners looking to invest in infrastructure, ”said Olly Prayudi, corporate director at Fitch Ratings Indonesia.