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20 September 2017 (closed)
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Today's Headlines Infrastructure
One of the biggest problems in relation to infrastructure development or construction projects in Indonesia is the land acquisition process. Many projects have been delayed - or cancelled altogether - because local land owners refuse to sell their land to the developers of the project, or, they only agree to sell land at very costly prices.
Construction of the Warnasari terminal in Cilegon (Banten province) commenced. Indonesian Minister of Transportation Budi Karya Sumadi laid the first stone at the groundbreaking ceremony on Wednesday (30/08). Zamhari Hamid, President Director of port operator Pelabuhan Cilegon Mandiri (PCM), said the Warnasari terminal is designed to have a loading capacity of 12 million tons in the first phase, which estimated to be completed in October 2019, established on a land area of 45 hectares.
Traditionally, the Indonesian President reveals the government's proposal for next year's state budget one day ahead of the Independence Day celebrations. This time, President Joko Widodo announced a rather ambitious target in terms of economic growth. The central government proposes the GDP growth target figure for 2018 at 5.4 percent year-on-year (y/y). The budget proposal requires approval from the House of Representatives (DPR).
The Batam Indonesia Free Zone Authority (in Indonesian: Badan Pengusahaan Batam) is currently preparing the Batam-Bintan Bridge project. This could become the area's first public-private partnership (PPP) project. Batam and Bintan are two islands that are located in Indonesia's Riau Islands province, just south of Singapore. While Batam is a major industry hub, Bintan is being promoted as the new Bali.
During the Susilo Bambang Yudhoyono administration (2004-2014) the Indonesian government presented public-private partnerships (PPPs) as solution to infrastructure development in Indonesia. However, there was limited enthusiasm as investors remained hesitant due to the nation's complex investment climate (including the difficult land acquisition process, regulatory uncertainty and doubts about the economic feasibility of certain projects).
The Indonesian government plans to show results of the prefeasibility study for the revitalization of the north coast railroad - that connects Jakarta and Surabaya on the island of Java - to Japan immediately after the study has been completed. Luhut Binsar Pandjaitan, Indonesia's Coordinating Minister for Maritime Affairs, said the government is expecting to start discussing the project in early August 2017.
Indonesian police informed that there were less traffic accidents during this year's Idul Fitri exodus compared to preceding years. Idul Fitri, a national week-long holiday, marks the end of the Islamic fasting month (Ramadan) and is a big happening in Indonesia. Ahead of Idul Fitri millions of workers who live in the cities travel to their places of origin to spend some days with their families. Locally, this tradition is known as "mudik" ("going home").
Perry Warjiyo, Deputy Governor of Indonesia's central bank (Bank Indonesia), believes Indonesia's gross domestic product (GDP) growth in the second quarter of 2017 will not be as high as earlier predicted because there has been a correction in Indonesia's export performance.
A large chunk of the costs for the development of Indonesia's first high-speed railway - between the capital city of Jakarta and Bandung - is covered now a consortium of Indonesian and Chinese companies signed a USD $4.5 billion loan with the China Development Bank. This loan should cover about 75 percent of the total (estimated) costs to develop this railway. In 2015 the Indonesian government, rather unexpectedly, awarded the contract for this project to China, sidestepping Japan that thought it would be appointed to establish this railway.
Tidal Bridge BV, a joint venture of Strukton International and DEC, has been awarded the contract to construct the Palmerah Tidal Bridge in Indonesia. The Dutch company will build a floating bridge in the Larantuka Strait, located in East Flores in the eastern part of Indonesia. This floating bridge will be linked to (what is set to become) the world's largest tidal power plant. The total duration of the project is estimated at four years with a final contract value of more than USD $550 million. This project is the first Dutch-Indonesian cooperation in the field of waterworks.
Latest Columns Infrastructure
Indonesian Minister of Home Affairs, Tjahjo Kumolo, made a statement in support of the Lippo Group's controversial Meikarta integrated township project. At the Indonesia Future City & REI Mega Expo 2017 on Thursday (14/09) Kumolo said Indonesia's regional governments should not unnecessarily obstruct private projects that help to develop the regional economy. He cited Meikarta as an example.
One of the toll roads that is high on the Indonesian government's priority list is the Balikpapan-Samarinda toll road in East Kalimantan. The project is part of the government's quest to boost infrastructure development, thus reduce the nation's high logistics costs and make local businesses more competitive. However, as with every big infrastructure project in Southeast Asia's largest economy, there are bottlenecks that have caused a significant delay.
From Hamburg (Germany) where he visited the G-20 summit, Indonesian President Joko Widodo instructed his cabinet to increase efforts to attract investment into Indonesia. Now Indonesia recently obtained the investment grade status from all important global credit rating agencies, it should make Indonesia a more attractive investment destination for foreigners, including institutional investors such as pension funds.
Angkasa Pura I, the state-owned firm that provides airport management services in the central and eastern region of Indonesia, offers foreign and domestic private investors the opportunity to operate and develop several airports (in cooperation with Angkasa Pura I) across Indonesia: the Sultan Aji Muhammad Sulaiman Airport in Sepinggan (Balikpapan, Kalimantan), Lombok Praya Airport on Lombok, and - in the pipeline - Kulon Progo Airport in Yogyakarta (Java).
Six new 'special economic zones' (in Indonesian: kawasan ekonomi khusus, or KEK) should become operational in Indonesia soon. These six KEKs are: (1) Bitung, (2) Palu, (3) Tanjung Api-Api, (4) Mandalika, (5) Morotai, and (6) Maloy Batuta Trans Kalimantan. Indonesia's special economic zones are designated areas that offer both foreign and local investors preferential regulatory and tax regimes, as well as - in theory - the availability of key physical infrastructure such as harbors and power plants that should attract foreign investment in these zones.
For Indonesian cement producers it is vital to maintain their market share amid ongoing difficult times. With Indonesia's total installed annual cement production capacity now being around 100 million tons, while domestic demand is only expected to reach 65 million in 2017, cement players are facing weak prices amid a big oversupply, while foreign demand for Indonesian cement is yet to grow. Meanwhile, due to the arrival of various new cement players in Indonesia in recent years, competition for market share has become increasingly fierce.
The controversial Batang power plant in Central Java is expected to be completed in 2020 now all land acquisition disputes have been resolved. This USD $4.2 billion power plant experienced a long delay as about a dozen of local farmers were reluctant to sell their land to the developers of the project. In February 2016 Indonesia's Supreme Court ruled in favor of the project developers. Indonesian President Joko Widodo is a supporter of this project.
Approaching the end of 2016 it is interesting to take a look whether the Indonesian government achieved its target in terms of infrastructure development. In this column we zoom in on toll road construction. Before 2016 started the central government - under the leadership of President Joko Widodo - targeted to see the construction of 136 kilometers of new toll roads this year. However, two weeks before the end of 2016 only 44 kilometers of new toll roads have been developed this year, achieving only 32 percent of the target.
Infrastructure is the artery of the economy. Blocked arteries are life threatening. Similarly, when there is a lack of adequate infrastructure within the economy (whether in terms of quality or quantity) the economy will run in a highly inefficient manner due to high logistics costs, uncompetitive businesses (as the costs of doing business rise significantly), as well as social injustice when, for example, it is difficult for part of the population to reach healthcare facilities, or, for children to reach a school.
Labuan Bajo, a small harbor town on the island of Flores in Indonesia's Nusa Tenggara region, is considered the "new Bali" due to its huge tourism potential. Blessed with beautiful and idyllic natural scenery (including beaches and offshore islands), foreign and domestic tourists will surely have a great experience. Although there are already about a dozen of high-class hotels (4 or 5 stars) and it is fairly well connected to other parts of Indonesia (through its Komodo Airport and port), the small fishing town remains underdeveloped for now.
Associated businesses Infrastructure
