Wednesday, June 3, 2009

Building A Road To Link 3 Giants

Madhu Koneru is building a road to the future that will bring together the financial heft of the Middle East, the technological know-how of a rising India and the vast natural resources of emerging Indonesia.

The $800 million infrastructure project his company, RAK Minerals & Metals Investments, is undertaking in Kalimantan will provide better access to the rich coal deposits there and create new opportunities and thousands of jobs. The project includes a 135-kilometer rail line, a road and a coal terminal.

The next stage of the project will include a $3 billion smelter and 1,400-megawatt power plant, which Koneru said would create 3,000 new jobs in the future.

“This is not rocket science,” he said. “We are developing traditional infrastructure that creates employment and industrial growth using Indonesian coal as the base.”

RMMI, a joint venture between India’s Trimex Group and the United Arab Emirates, has been working on the railway project for the past two years and expects to complete it in the third quarter of 2010. It hopes to have the smelter and power plant completed in the next five years.

RMMI was founded in 2007 with an investment of $200 million, and has grown into a global conglomerate with an asset base of more than $4 billion. The company has expanded into Africa, Europe, India and the Middle East.

Last year, it established Middle East Coal to manage the group’s coal investments in Indonesia . Koneru said the global credit crunch had not affected the appetite among Middle Eastern investors for opportunities in this region, and in Indonesia in particular.

RMMI aims to be at the forefront of the coming wave of investment to link the Middle East, India and Indonesia. “The combination of India, UAE and Indonesia is the right mix and is a proven formula,” he said. “It’s an example of how things can move forward between three countries that are so close to each other.”

India, he said, is a big market for Indonesian coal and thus has a natural interest in being part of the growth story in this country. India imports 100 million tons of coal each year to feed its growing energy needs and Indonesia is one of its biggest suppliers. Doing business in Indonesia, he said, had its own unique challenges, but was no different from other countries RMMI has investments in, such as Congo and Armenia. It took the company four months to get the necessary paperwork done for its railway line and coal terminal. But not all of its investments in Indonesia have proceeded so smoothly.

RMMI’s $1.5 billion investment in the Tanjung Api-Api integrated port project in South Sumatra hit some snags over land acquisition for the development. “In South Sumatra, we have had some problems with the land for the port, but when that issue is cleared we will go back,” Koneru said.

Infrastructure specialist Scott Younger, chief commissioner of Glendale Partners, said the project would open up access through the heart of East Kalimantan, where the development of smaller and mid-sized coal mines has proceeded slowly due to a lack of supporting infrastructure.

The RMMI railway is expected to connect six coal mines in the region, but it is unclear how many of these mines have signed up so far. “This project has been on the cards for a long time and [RMMI] are the right people to develop it,” Younger said.

Given the mountainous terrain and thick rainforest in Kalimantan, the region is largely uninhabited, except for local tribes.

It is hoped that with the road and railway track, the region may attract migrants as new industries open up, fuelling development and urban growth.
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