The Indonesian government has outlined a plan for infrastructure development costing the equivalent of over half a trillion US dollars.
In an interview with local media, Mr Bambang Brodjonegoro, Indonesia’s planning minister, said that the government intended to spend 5,957 trillion rupiah – approximately US$565m – between 2020 and 2024 on a mix of projects, 60% of which will be transport related. Details of the report were not made public but have been leaked to the news agency Bloomberg.
Reports suggest that the plan pays particular attention to air transport, with the improvement or building of 165 airports. Other than that, there is little mention of the need for the expansion of seaports or of roads although this must be in the plan somewhere.
Indonesia’s economy has been growing at a round 5% a year, which is regarded as an under-performance for a government which says that it aspires to become the fifth largest economy in the world by 2040. Fundamental to sustaining such growth is logistics, infrastructure and services, however these remain inadequate despite previous large scale initiatives.
There have been important developments, such as the opening of a new, large container terminal at the port of Tanjung Pirok. However, many of the smaller terminals across the archipelago have not kept pace. Indonesia has seen the launch of a nationwide toll-highways which have been fairly successful, however their construction has been slowed by arguments over land sales whilst much of the rest of land transport across what is huge country with a breadth of nearly 2,000 miles, remains problematic. Major areas of the logistics sector remain under-invested, from cold storage to road freight.
A core obstacle is institutional, with corruption and vested interests frequently crippling both minor and major projects. Arguments over land sales are also a continuing problem. This in turn deters foreign investors despite the Indonesian government and parts of business now appearing to realise that foreign capital and expertise is needed to fulfil the economy’s potential. Realising the latest plan’s colossal ambitions may continue to be hindered by the inability to attract foreign funding.
With a population of 264m people, Indonesia has vast potential. At some stage it will offer very significant opportunities for both investors in logistics infrastructure and logistics service providers. This will require institutional improvement within Indonesia. The country’s political class seems to be still grappling with this and Indonesia is still some distance from making it a reality.
Source: Transport Intelligence, May 21, 2019
Author: Thomas Cullen
