In order to improve Indonesia's intra-island connectivity on Java (and thus reduce logistics costs that are due to fragile infrastructure), the government is planning to build a toll road above the sea from the capital city of Jakarta in the western part of Java to Surabaya in East Java. Both these cities are Indonesia's centers of industrial productivity and economic growth. The 775 kilometer-long toll road, which is expected to cost about IDR 150 trillion (USD $13.3 billion), will be build by a consortium of 19 Indonesian state-owned enterprises.
The toll road will connect the Tanjung Priok harbour in Jakarta to the Tanjung Perak harbour in Surabaya. It is also expected to be extended from Jakarta to Merak on the western tip of Java as Merak is an important trade route to Sumatra. Currently, a kilometers-long queue of trucks waiting to cross over to Sumatra by ferry is a daily routine around the Merak harbour in Banten (West Java) as there is no road connection yet. The government hopes to establish a road and railway connection between Merak and Sumatra through the Sunda Strait Bridge. However, before this grand project is able to materialize many bottlenecks need to be overcome.
The 19 state-owned enterprises signed a memorandum of understanding on Tuesday (03/10) in Jakarta. The feasibility study will be conducted soon and is expected to take about three to six months before the results can be presented to the government. The participating companies are the following:
|Participating State-Owned Companies
|Bank Rakyat Indonesia
|Bank Tabungan Negara
|Bank Negara Indonesia
The Jakarta-Surabaya toll road is positive news for the economy of Indonesia as the lack of adequate infrastructure causes Indonesia's logistics costs to rise steeply, thus reducing the country's competitiveness and attractiveness of the investment climate. According to data published by the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) around 17 percent of a company's total expenditure in Indonesia is absorbed by logistics costs. In peer regional economies this number lies below ten percent. In particular transport costs are high; for land as well as sea.
A toll road above the sea is not new to Indonesia. Last month, the Bali toll road was officially opened. This toll road, part of the Indonesian government's ambitious MP3EI program, cost about IDR 2.4 trillion (USD $210 million) and is expected to relieve busy traffic around Bali's Ngurah Rai airport, the most popular access point of foreigners that visit Indonesia.