Indonesia – Infrastructure & Transportation

Indonesia Seeks Private Investors to Improve Infrastructure

Published: 08 April 2019

US$ 13 billion for new toll roads

At present, around 1,200 km of toll roads are being built in Indonesia – most of them on Java. The market researcher Data Consult estimates the total investment sum at almost US$ 15 billion. In addition, 660 km of toll roads with an investment value of US$ 13 billion are being tendered or prepared for tender by the toll road regulatory authority BPJT.

The deficits are considerable, as the archipelago has only 1,500 km of highways. About one-third of these have been built in the past four years, mainly as toll roads.

The longest toll roads are on the island of Java, where two-thirds of Indonesians live. The Trans-Java Toll Road, which has recently been completed, cut the traveling time from the western tip of Java to the eastern city of Surabaya from 14 to 9 hours. The Trans-Sumatra Toll Road is a mega-project that has been around for decades. With a total length of 2,800 km, it has 17 sections, most of which are still in the planning stages.

 

Indonesia: Planned toll road projects

Route Length (km) Investment (US$ billion*) Status
Gedebage-Tasikmalaya-Cilacap (West Java-Central Java) 184.1 3.8 Tender in preparation
Kamal-Tekulnaga-Rajeg (Banten/Java) 38.6 1.6 Tender in preparation
Solo-Airport Yogyakarta-Kulonprogo (Central Java) 91.9 1.6 Tender in preparation
Probolinggo-Banyuwanggi (East Java) 172.9 1.5 Tender
Jakarta Cikampek 2 Selatan (Jakarta-West Java) 64.0 1.3 Tender
Bridge Panajam-Passer Utara (Eastern Kalimantan) 7.6 1.2 Tender in preparation
Balaraja-Semanan (Banten/Java-Jakarta) 31.9 1.1 Tender in preparation
Access to Port Patimban (West Java) 37.7 0.45 Tender in preparation
Serang-Panimbang (Banten/Java) 33.7 0.37 Tender
Total 662.4 12.8

*Conversion according to February 2019 exchange rate: 1 US$ = 14,100 Rupiah

Source: Toll Road Regulator BPJT

 

Public companies have had to provide most financing so far

The expansion of the highway network puts pressure on the Indonesian public budget. In the past, financing was provided primarily by state-owned companies. The government wants to increase involvement by the private sector, but interest so far has been meager.

In recent years, when private companies participated in tenders and were awarded with projects, they often withdrew before signing the contract. The companies are mainly deterred by the long financing periods. Unresolved land issues also are an obstacle. And toll refinancing can take several decades, as concessions for the operation of toll roads are awarded over periods of 35 to 50 years.

Additionally, the government reserves the right to intervene in calculating the road toll, which can make long-term calculations obsolete. In 2018, for example, the toll was to be reduced by 23%, from US$ 0.92 to US$ 0.71 per kilometer. The plan was rejected for the time being.

Private companies financing the construction of highways are concentrating primarily on the Jakarta metropolitan area, where projects are implemented more quickly and yields generated more reliably.

 

Indonesia: Toll road projects under construction (selection)

Route Length (km) Investment (US$ million*) Investor Status
Pekanbaru-Kandis-Dumai (Riau/Sumatra) 135 1,200 Hutama Karya Land clearance/ construction
Cileunyi-Sumedang-Dawuan (West Java) 58.5 875 Central government Land clearance/ construction
Cimanggis-Cibitung (West Java) 26.3 500 Waskita Toll Road Under construction
Serpong-Balaraja (Banten/Java) 30.0 370 Consortium Start of construction
Depok-Antasari (West Java) 21.5 340 Citra Wassphutowa Land clearance/ construction
Cibitung-Cilincing (West Java-Jakarta) 34.0 300 MTD CTP-Expressway Land clearance/ construction
Cengkareng-Batuceper-Kunciran (Jakarta-Banten) 14.2 250 Marga Kunciran-Cengkareng Land clearance/ construction

*Conversion according to February 2019 exchange rate: 1 US$ = 14,100 Rupiah

Sources: Data Consult, Toll Road Regulator BPJT

 

Indonesia builds first high-speed train

Indonesia’s current rail projects include prestige projects, such as the construction of the first metro in Jakarta (which opened for trials in March 2019, with construction and financing by Japan), the first high-speed train between Jakarta and Bandung (scheduled for completion in 2021, with construction and financing by China) and the airport transfer link in Jakarta, the initial portion of which is currently operating. There are also plans to build a 1,700 km railway connection in Sulawesi.

The total length of the rail network in the huge archipelago is just 8,000 km, including intra-city and industrial lines. Some of them date back to Dutch colonial times and must be shut down due to age. 6,400 km of track is on the main island of Java, but only half of this is currently operating.

Cautious private investors make financing difficult

The construction of railway lines is expensive and tedious. Due to the uneven terrain, bridges and tunnels are often necessary. The Ministry of Transport promotes public-private partnerships (PPP), and the government is assisting with the often complicated acquisition of land. There is also the option of 100% private ownership. Nevertheless, involvement by the private sector remains low. Therefore, meager state enterprises must continue to provide financing, resulting in slow expansion of the rail network.

 

Indonesia: Railway projects

Project Company Investment (US$ million*)
High-speed train Jakarta-Bandung Kereta Cepat Indonesia Cina (KCIC) 5,100
LRT Jakarta-Bogor-Depok-Bekasi Adhi Karya 1,600
MRT Phase II between Bundaraan HI and Kampung Bandan MRT Jakarta 1,600
LRT Jakarta Corridor I, Phase I: Velodrome, Rawamangun-Kelapa Gading Jakarta Propertindo 480
Train to Airport Adi Sumarmo Kereta Api Indonesia,Angkasa Pura I, Pembangunan Perumahan 65
Makassar-Parepare Kereta Api Indonesia 60
Bireun-Lhokseumawe, segment Krueng Geukue-Paloh Batee (8.3 km) Kereta Api Indonesia Not specified
Besitang-Langsa, segment Besitang-Sei Liput (35 km) Kereta Api Indonesia Not specified
Rantauprapat-Kota Pinang, segment Rantauprapat-Pondok S2 (33 km) Kereta Api Indonesia Not specified
Dual track: Purwokerto-Kutoarjo-Solo-Kedung Banteng-Jombang-Wonokromo Kereta Api Indonesia Not specified

*Conversion according to February 2019 exchange rate: 1 US$ = 14,100 Rupiah

Source: Data Consult

 

Signal technology must be revamped

Indonesia is heavily reliant on technology imports for its rail infrastructure. Although trains are manufactured within the country, they are not built to run at faster speeds.

Signal technology has the greatest need for modernization. The signaling systems in the country are 20 to 30 years old and can no longer be modernized, but require complete overhaul. The market analyst Data Consult estimates the investment requirements for signal technology in Java and Sumatra at US$ 350 million and in the Jakarta area at US$ 150 million.

Indonesia’s imports in the railway sector amounted to almost US$ 160 million in 2017. Signal technology accounted for 80% of that. The most important suppliers are China, the USA, Japan and Germany, although large individual projects lead to statistical fluctuations.

Second subway line in Jakarta

The largest and most expensive upcoming rail project (after the high-speed line between Jakarta and Bandung) will be the second section of the subway in Jakarta. It will run from the city center via seven stations over a distance of 8 km to the north of the city. It will run deeper into the ground than the first section, which is twice as long, and could therefore become more expensive.