17 November 2019 (closed)
USD/IDR (14,091) +16.00 +0.11%
EUR/IDR (15,600) +34.61 +0.22%
Jakarta Composite Index (6,128.35) +29.40 +0.48%
The Sunda Strait bridge, a planned road and railway connection between the two western Indonesian islands of Sumatra and Java, has been a dream of Indonesia's political elite since the 1960s. From both a political and an economic point of view, the connection between these two islands through physical infrastructure is a grand ideal. However, as with many other infrastructure projects in Indonesia, its realization tests people's patience.
Also under the current Susilo Bambang Yudhoyono administration, the establishment of the 29- kilometer-long Sunda Strait Bridge (in Indonesian Jembatan Selat Sunda, abbreviated JSS) has been mentioned as a top priority to support the Indonesian economy.
Economic activity in Indonesia is heavily centered towards the western-located islands of Java and Sumatra. Both these islands together, account for approximately 80 percent of Indonesia's gross domestic product (GDP). The Greater Jakarta area (known as Jabotabek which is an urban region linking four big cities around Jakarta) by itself accounts for around 20 percent of Indonesia's GDP. As such, the Sunda Strait is positioned in an economically-highly-active area and thus needs to absorb a large flow of goods and human capital; a situation that requires good infrastructure in order to foster efficient use of time and money. As there has never been a bridge linking these two islands, Indonesians have relied on ferries to cross the strait (a much more costly alternative is air travel). Annually, an average of about 20 million people cross the Sunda Strait. By 2020, this number is estimated to double.
Currently, however, traffic congestion around the Merak harbor in Banten (on Java's side of the strait) - caused by a kilometers-long queue of trucks waiting to cross over to Sumatra by ferry - is a common sight. Obviously, it significantly increases logistics costs. In fact, recently Indonesia's Chamber of Commerce (Kadin) estimated that logistics costs take up around 24 percent of the country's GDP per year.
To overcome this situation, the government aims for the establishment of the Sunda Strait Bridge. This bridge (which is actually a series of bridges) will carry a three lane highway (in both directions), a double track railway, a footpath, an emergency lane for vehicles, pipelines (for oil, gas and water supply) and cabling works (fiber optic, telephone and electricity).
Already in 2007, president Yudhoyono gave the initial go-ahead for the project. However, there is still much uncertainty about when the project will start. Last Saturday, Yudhoyono said it can start before 2014 but this seems to be a too ambitious statement. The two largest problems surrounding the establishment of the project - which is placed in the government's Masterplan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) - are the regulatory framework and the high costs involved. Yudhoyono does not allow this project to be financed through Indonesia's state budget (APBN), and instead relies on private parties for its funding. However, as the feasibility study has not yet been done, the total amount of investments needed remains unknown. Estimates vary from USD $10 to over USD $20 billion, a large sum of money for private investors. Moreover, as the bridge will not be ready before 2025 and as returns will not be profitable on the short term, it is not the most attractive project for private investors.
In 2009, a pre-feasibility study was conducted by the consortium PT Graha Banten Lampung Sejahtera (GBLS), which consisted of the local governments of Banten and Lampung, and Artha Graha, a private company owned by Indonesian business tycoon Tommy Winata. Results of this pre-feasibility study were presented to the government that reacted in 2011 by issuing a presidential regulation stating that GBLS would arrange and finance the preparations of the project (which included a feasibility study as well as basic design). However, internal disagreement within the government about this presidential issue has put the preparations on hold. Finance Minister Agus Martowardojo wanted the regulation to be revised. According to him, the feasibility study needs to be funded by the state budget to maintain more control over the project. There is also disagreement concerning the extent to which the government should provide guarantees to the private sector for the project.
It is starting to become doubtful whether this project will come off the ground while Yudhoyono is still the county's head of state, and what the vision of Indonesia's new president and new government will be regarding this project from 2014 onward.