The Indonesian government plans to offer 10 toll road projects - with a total length of 520.83 kilometers - to investors before the end of the year. The projects are estimated to have a total value of IDR 109.58 trillion (approx. USD $8.3 billion). The offering of these projects are in line with the government's efforts to boost infrastructure development across the country. Such development will enhance inter and intra island connectivity, thus curbing the nation's high logistics costs and offer a more attractive investment climate to (potential) investors.
In recent years the Indonesian government has been eager to cut energy subsidies and redirect these funds to the government's infrastructure budget. In the 2016 State Budget a record high IDR 313 trillion (approx. USD $24 billion) was allocated to infrastructure development. The world's 12-year low crude oil prices in January 2016 made it relatively easy for the government to scrap gasoline subsidies at the start of 2016.
However, although encouraging, the IDR 313 trillion is not enough to cover all infrastructure needs and therefore the government needs to rely on the private sector as well as on (partially) state-owned enterprises to finance infrastructure development. It was previously estimated that the total costs for Indonesia's infrastructure needs up to 2019 is 5,519.4 trillion (approx. USD $418 billion).
Infrastructure development is estimated to cause a multiplier effect in the Indonesian economy, triggering growth in other industries - such as the cement and property sectors - while job availability grows accordingly.
Toll Roads Offered by the Indonesian Government:
|Jakarta-Cikampek 2 (South)||64||17.77|
|Jakarta-Cikampek 2 (Elevated)||36.4||14.13|
Source: Investor Daily
In the National Medium‐Term Development Plan (RPJMN) 2015-2019, the Indonesian government targets to add 1,000 kilometers to the nation's toll road network. This includes the ambitious Trans-Java and Trans-Sumatra toll roads. Currently, the length of Indonesia's existing toll road network is small compared to the length in other nations. Between the years 1978 and 2014 only 820.2 kilometers of toll road was constructed in Indonesia. Most of the additional toll roads that are currently being developed - or are set to see groundbreaking soon - are part of the Trans-Sumatra and Trans-Java projects on Indonesia's two most populous islands.
One of the key challenges for toll road projects (as well as other infrastructure projects) in Indonesia is land acquisition. Problems related to land acquisition have caused many infrastructure projects in Indonesia to be delayed - or cancelled altogether - as local land owners tend to demand very high prices for their land. Another issue that makes the private sector hesitant to commit itself to long-term toll road development is the costly investment in combination with the low internal rate of return
Toll Road Development per Country (1978-2014):
Source: Investor Daily