OREANDA-NEWS. March 15, 2012. An Indonesian minister said that China's largest cement maker, Anhui Conch Cement, plans to begin construction of a cement plant in South Kalimantan later this year with an anticipated investment of 400 million US dollars, a local media reported on Thursday.

"The planned plant in South Kalimantan will be able to produce 2.5 tons of cement annually," Industry Minister M.S. Hidayat said after his meeting a business delegation from China's Anhui province at the ministry's office recently. The output will be used for domestic purposes.

Indonesia's per capita cement consumption of 171 kilograms remains far lower than its peers, including Thailand and Vietnam' s respective 394 and 564 kilograms per capita consumption. There are growth opportunities; therefore, for cement makers, especially given the fact that cement is one of the key indicators of gross domestic product (GDP) growth in a domestic consumption-reliant economy.

Anhui Conch Cement is currently awaiting the completion of its land acquisition process and a license to be issued by the South Kalimantan administration so that the plant can be built in Tanjung, Tabalong, according to Hidayat.

The plant would be equipped with a cement-grinding plant, a seaport, a 60 megawatts (MW) power plant and other supporting infrastructure, the minister had previously said.

Anhui Conch Cement was also preparing to acquire land in Manokwari, West Papua, next year for another cement plant that would require another 400 million US dollars, Hidayat added. It is expected to meet cement demands in the surrounding areas.

Anhui province Deputy Governor Huang Haisong, who led the Chinese business delegation, said the construction of the plant was part of China's commitment to boost its investments, as conveyed by Chinese Premier Wen Jiabao during his visit to Indonesia last year, the Jakarta Post reported.

"Given its abundant natural resources, Indonesia has myriad opportunities for investment. Anhui Conch Cement is the first firm [from Anhui province] to enter Indonesia. If it succeeds, we will invest a lot more in the country," he said.

A number of investors from Anhui province are exploring the possibility of building an industrial park in Indonesia to serve Chinese manufacturing, according to Haisong.

The park would be occupied by Chinese firms working in a wide array of manufacturing industries, from textile machinery production to the mineral ore processing sector, he added.

"We have completed our survey and we will invest [in Indonesia] ," Haisong said without providing further details.

Haisong expected the Indonesian government to provide fiscal incentives, particularly tax holidays, to Chinese firms keen to invest in Indonesia.

The tax-holiday incentive offers 10-year tax breaks on investments of at least 1 trillion rupiah (about 109.1 million US dollars) in five selected sectors: base metal, oil refining, petrochemicals, renewable energy and telecommunications equipment.