CDPQ Makes Big Infrastructure Investments in Indonesia and Brazil
DP World alongside its partner Caisse de dépôt et placement du Québec (CDPQ), a global investment group, today signed a long-term agreement with Indonesia’s leading conglomerate Maspion Group to start the construction of an international container port and industrial logistics park in Gresik.
Work on the projects is expected to begin in the third quarter of 2021, with a total investment of up to USD 1.2 billion, enhancing East Java’s position as a key trade gateway for Indonesia.
The signing ceremony was held in the presence of the Coordinating Minister for Maritime and Investment Affairs of the Republic of Indonesia, Mr. Luhut Binsar Pandjaitan, and the United Arab Emirates’ Minister of Energy and Infrastructure, H.E. Suhail Al Mazrouei, in Jakarta at the Indonesia-Emirates Amazing Week 2021 Building Path Towards Economic Recovery business forum. The signatories of the formal agreements are Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, and Dr. Alim Markus, Chairman and CEO of Maspion Group.
Under the agreement, a joint venture company will be established between DP World and CDPQ’s global investment platform and Maspion Group, the first of its kind in the Indonesian transportation sector involving a foreign direct investor (FDI) partner and a private sector Indonesian company. DP World Maspion East Java will become the sole operator of a modern international container port with design capacity of up to three million twenty-foot equivalent units (TEU). DP World and CDPQ will also work with Maspion Group to develop an integrated industrial and logistics park, adjacent to the Container Terminal, with an initial land area of 110 hectares with scope for future expansion. The Park will provide world-class trade environment for domestic and international businesses to help drive economic growth and create jobs.
Since its launch four years ago, the US$8.2 billion DP World-CDPQ platform has invested in 10 port terminals globally and across various stages of the asset life cycle. This investment will allow the partnership to pursue its objectives to further diversify its reach in terms of geography and trade lanes.
Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, said: “The partnership with Maspion Group is an important development in our global ports and logistics network. Indonesia is rapidly developing as one of the world’s most important economies. This project will create modern, efficient infrastructure, as well as an industrial zone that provides quality logistics. DP World’s business model and vision are aligned with President Jokowi’s vision to spur faster economic growth through trade infrastructure development, more investment opportunities, and job creation.”
Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure at CDPQ, said: “Through this partnership with Maspion, CDPQ is delighted to make its first infrastructure investment in Indonesia, a strong growth market which benefits from favourable structural trends. It also represents an important milestone for our joint platform with DP World with the addition of a first greenfield port to our portfolio of high-quality assets that have demonstrated their resilience over the past year despite important shifts in the global supply chain landscape.”
Dr. Alim Markus, Chairman and CEO of Maspion Group, said: “Maspion Group is committed to support Indonesia’s sustainable economic development to be aligned with President Jokowi’s grand plan to make Indonesia the fifth largest economy in the world. Surabaya is an important gateway in Indonesia and the existence of this Container Port will further enhance economic development and investment opportunities in Indonesia.”
Groundbreaking on the Container Terminal is expected to take place in 2021, with commercial operations expected to begin in 2023. The project will develop East Java’s infrastructure as part of President Joko Widodo’s vision to accelerate economic growth through his Indonesia Golden Generation 2045 strategy.
CDPQ put out a press release on this deal here and it's basically the same as what you read above.
Indonesia is an interesting country. It has a population of more than 270 million people and it is home to 12.7% of the world's Muslims, followed by Pakistan (11.0%), and India (10.9%).
Indonesia is the world's largest island country and the 14th-largest country by land area, at 1,904,569 square kilometres (735,358 square miles).
Located in Southeast
Asia, lying between the Indian Ocean and the Pacific Ocean, it is
located in a strategic location astride or along major sea lanes
connecting East Asia, South Asia and Oceania.
The country is on the rise as an Indo-Pacific actor and the country has strategic relationships with Australia, Japan, China, India, and the United States.
This is why CDPQ's Head of Infrastructure, Emmanuel Jaclot calls it "a strong growth market which benefits from favorable structural trends.”
You have a huge population, a growing middle class, and the location is perfect to build an international container port and industrial logistics park.
Of course, DP World is CDPQ's trusted partner to expand its global port investments and locally, the Maspion Group will be in charge of building this project.
I read a good interview with Dr. Alim Markus, Chairman and CEO of Maspion Group published in Indonesia's Global Business Guide. It's dated (2012) but still worth reading:
Maspion Group is a highly diversified group which is involved in consumer products, construction materials, property and financial services. What can you tell us about the current strategies being followed to further expand the group and its subsidiaries?
Maspion was established in 1962 in the field of kitchenware and we have expanded significantly since then. Now we have around 10,000 products that we manufacture and are involved in many other areas such as property and transport. Building materials is another industry that we are engaged in as well as the durable consumer products industry such as home appliances. We also have a bank to enable our products to be purchased on credit as well as hotels.
Consumer products are one of the most interesting areas for the future as the middle class is growing rapidly in Indonesia so we will continue to focus on this.
Maspion Group currently exports to international markets but the global economic slow down means that we are focusing on the Indonesian market as it offers a lot of potential for further growth.
In your opinion, what are the key areas that Indonesia needs to address to improve the business climate?
Indonesia lacks good infrastructure and if we want to enlarge the business potential then it comes down to having more toll roads, airport and seaports. Today, all the country’s ports are completely congested and this is slowing down businesses in every sector.
Labour regulations are also an area where Indonesia has insufficient laws and legal certainty. Labour strikes in West Java are becoming more common. I believe that it is better to leave labour regulations up to the labour unions and the business owners rather than the government as it should be dealt with at a local level.
I also hold the role of chairman of APINDO for the East Java region.
The China – ASEAN Free Trade Agreement has been seen in both a positive and negative light by Indonesian businesses. What is your opinion on the impact of the FTA on Indonesia?
China has many entrepreneurs who have created their own brands.
In Indonesia, if we do not develop value added brands then we will face a lot of competition from China as a result of the China – ASEAN Free Trade Agreement. It means that Indonesian companies must increase their efficiency, introduce better quality control measures and to invest in their marketing and branding.
Within the field of marketing, what do you think needs to be done to promote Indonesian made products internationally?
Any business will eventually face cost competition. If you offer good quality and good aftersales service as well as pay close attention to areas such as packaging then Indonesian products can move up the value chain. I think this has been an area that has been lacking in the past.
For Maspion, we have created excellent brand awareness and good quality products.
The company is also engaged in other areas such as banking and property. What are the next projects that you have planned within the various companies of the group?
I think in the next five years we will be interested in going into mass housing projects.
Maspion Bank is performing very well, our non performing loans are only 0.2% so we will continue to develop our financial services in Indonesia.
In all types of business, if there is an opportunity then we are open to it. Hotels and malls are really our focus and area of interest for now.
How is the group positioned towards working with international partners and investors looking to come into the Indonesian market?
For the future we are open to working with international partners who wish to set up their operations in Indonesia. We are open in all sectors as we already enjoy a significant market share in many segments in Indonesia.
Nowadays, Maspion Group is a huge conglomerate and it will start the construction of an international container port and industrial logistics park in Gresik.
Again, in order to make these big investments in a foreign country like Indonesia, you need a good strategic partner like DP World and a good local partner like the Maspion Group.
Once commercial operations of this international container port and industrial logistics park in Gresik commence in 2023, it will offer CDPQ and DP World solid long-term revenue streams.
In other related news, Frederic Tomesco of Post Media News reports the Caisse bets up to $408 million on Brazilian optical-fibre venture:
Another day, another major investment for the Caisse de dépôt et placement du Québec.
Fresh from committing $475 million to help CAE Inc. make its biggest-ever acquisition, CDPQ said Tuesday it agreed to invest up to $408 million in a joint venture with Spanish telecom company Telefonica Group to build, develop and operate an independent optical fibre wholesale network in Brazil.
Telefonica and CDPQ will each hold 50 per cent under a co-control governance model, according to a statement issued Tuesday. Closing is expected to take place in the second quarter of 2021.
Called FiBrasil Infraestrutura e Fibra Ótica SA, the venture will deploy and run fibre-optic networks in mid-sized cities outside the state of Sao Paulo. FiBrasil will also offer fibre-to-the-home wholesale access to all telecommunications service providers in Latin America’s most populous country.
The Brazilian venture is a first step in the Quebec pension fund manager’s efforts to double the size of its global infrastructure portfolio to $60 billion over four years — a goal that chief executive Charles Emond disclosed last week. Infrastructure holdings returned 5.1 per cent last year, cutting CDPQ’s overall return to 7.7 per cent. Assets include stakes in airports, renewable energy producers and wireless towers.
FiBrasil’s creation “is an opportunity to further diversify our infrastructure portfolio,” Emmanuel Jaclot, head of infrastructure at CDPQ, said in the statement. It demonstrates “ongoing interest for Brazil and the wider Latin America region, where we see opportunities in a variety of sectors.”
Starting with an existing base of 1.6 million homes passed, which Telefonica is contributing, FiBrasil aims to more than triple its network to reach around 5.5 million homes within four years.
CDPQ’s projected capital contributions, coupled with the expected debt that FiBrasil plans to issue, will provide a “fully funded business plan,” according to Tuesday’s statement.
Brazil is Latin America's most populous country with over 211 million people.
It has long represented an important growth market for CDPQ, CPP Investments and all of Canada's large pensions.
I recently wrote a comment on how CPP Investments is joining a fund managed by Banco BTG Pactual SA to make a binding offer for the fiber unit of Brazilian telecom carrier Oi SA.
You can read this comment here to get an idea on how critical Brazil's telecom space is and how foreign investors want a piece of the action, partnering up with local banks and telecom companies.
Charles Emond has expressed that CDPQ wants to double the size of their infrastructure portfolio to $60 billion in four years and to do so, Emmanuel Jaclot and his team will need to put the peddle to the metal and partner up with great partners all over the world to invest in high quality infrastructure assets.
As I stated last week when I went over CDPQ's 2020 results, Emmanuel Jaclot and his team were named institutional investor of the year for a second year in a row and they are more than up for the challenge.
Lastly, today is International Women's Day, and while I often praise the men at this organization, there are a lot of great women working at CDPQ like Anita M. George, Helen Beck, Kim Thomassin, Rana Ghorayeb, Ani Castonguay, Nathalie Palladitcheff and many more:
From Montréal to Singapore to New York to Paris, today we salute the work of our colleagues, in Quebec and around the world, who strengthen our expertise and our abilities as investors through the quality and richness of their perspectives. pic.twitter.com/CC2Z8tQ4jQ— CDPQ (@LaCDPQ) March 8, 2021
What's that old saying, behind every great organization there are a bunch of great women doing all the hard work? Trust me, it's true (there are a lot of great guys too but today we celebrate women!).
Alright, I'm back from a week off (actually posted last Monday), if there's anything to add, feel free to email me at LKolivakis@gmail.com.
I want to thank all of you who take the time to financially support this blog by donating under my picture at the top left-hand side, it's greatly appreciated (not to mention I hate reminding people that this blog and the work that goes into it must be monetized, so please show your appreciation through your dollars).
Below, and older (2014) World Bank clip on how inefficiencies at the Indonesia's main port are multiplying logistics costs for the economy. Shortening long dwell times and introducing simpler payment systems can help make the port -- and hence businesses -- run more smoothly.
And Jakarta is the capital of Indonesia, a country with some of the friendliest people you will ever meet. That's why Jakarta (Java Island) generally surprises visitors despite being a huge capital. The highlights of this video include visits to Merdeka square, the National Monument (Monas), Ragusa ice cream, Istiqlal Mosque, Our Lady of Assumption Cathedral and Skye Bar and Restaurant.
Lastly, I embedded an interview with André Borges, Secretary of Telecommunications, Brazil at ITU TELECOM WORLD 2018, Durban, South Africa. Listen to his comments and you will understand why they need foreign investors to develop their telecom space.
Update: The Wall Street Journal's Preeti Sing reports on why CDPQ's Anita George continues to bet on India's promise:
Anita George is the executive vice president and deputy head of the $333 billion Caisse de dépôt et placement du Québec’s CDPQ Global, which manages assets for certain public pensions and insurance systems in the Canadian province of Quebec. She fills a key role in developing CDPQ’s investment activities across three priority international areas of Europe, the U.S. and Latin America, and the Asia-Pacific. Ms. George shared her views on the private-equity landscape in India, where CDPQ makes direct investments as well as commitments in local and global commingled funds.
You can read the rest of the article here, Ms. George is an integral part of CDPQ's global expansion.