Indonesia Pins Hopes on Private Sector for Airport Development

 - October 22, 2018, 12:00 PM

In an urgent bid to address overcapacity and modernize existing infrastructure, the Indonesian government has turned to the private sector to fund a series of airport projects across the sprawling archipelago. In recent days, the government has revived talks of a new $10 billion international airport to serve as an alternative to Jakarta’s Soekarno-Hatta Airport, which has operated beyond design capacity for more than 10 years. Authorities have earmarked reclaimed land some nine miles north of Soekarno-Hatta for the project, plans for which call for financing from a private-public partnership scheme between investors and state-owned PT Angkasa Pura II. 

Separately, the airport operator has earmarked three facilities in North Sumatra to receive a combined $796 million in upgrades, including Sibolga Airport, Silangit Airport, and Kualanamu Airport. PT Angkasa Pura II has started accepting letters of intent to expand airside and landside facilities at Kualanamu, including the terminal, apron, runway, and hangar.

On the island of Flores in East Nusa Tenggara province, Komodo Airport will start accepting tenders later this month for the operation and expansion of facilities. The $200 million airport project, which falls under the purview of the Ministry of Transportation, would increase the airport’s current capacity from one million to four million passengers per year by 2044.

Meanwhile, at least five airports and four proposed airports have made the government’s list of strategic projects as part of President Joko Widodo’s ambitious infrastructure initiative to bolster economic activity and increase air connectivity between the country’s some 17,000 islands.

Yet, despite ongoing talks to address infrastructure bottlenecks and upgrade navigational equipment and facilities, very few investors have come forward to bring the projects to fruition. Notable exceptions include the Salim group, which signed a memorandum of understanding with PT Angkasa Pura II in 2017 to build a new $150 million airport at Bintan Island in the Riau Archipelago, and Indian conglomerate GVK, which manages the landside facilities at Bali’s Ngurah Rai International Airport

Rather, the majority of infrastructure projects have received their financing through loans and public money, which is creating an enormous burden on Indonesia’s state-owned airport operators.

Indonesia’s infrastructure faces further strain from the constant threat of natural disasters such as flash flooding, volcanic eruptions, and earthquakes, which frequently disrupts airport operations across the nation. In late September, a 7.7 magnitude earthquake caused extensive damage to Mutiara Sis Al Jufri airport in Palu, Central Sulawesi. The airport has since resumed limited commercial operations while it undergoes repairs and facility upgrades.

Uncertainty also looms about whether Indonesia possesses the technical capabilities to oversee the safe construction of its proposed airport activities. Earlier this year, the government suspended all major infrastructure projects, including the expansion of airports in Java, after a spate of accidents and ahead of a report that deemed 80 percent of Jakarta’s construction activities unsafe. According to the Ministry of Manpower, only some 60 percent of the 128 million workforce has gained as much as an elementary or junior high school education, raising concerns over competency.