Indonesia is the world’s 16th-largest economy and as a large archipelago country, the infrastructure in Indonesia continues to play a key part in the growth of the Indonesian economy and its ability to compete on the global stage.
Inadequacies in the country’s infrastructure have for many years hindered its industrial growth but times are changing, and changing quickly.
Author: Danang Projosujadi, Operations Manager, Driver Trett, Indonesia
Since President Joko Widodo was elected in 2014, Indonesia has witnessed significant growth in major infrastructure projects, and in particular the transport sector with the current transport systems failing to keep pace with Indonesia’s growing economy. Development of the national railway network is the country’s top priority, which will provide much needed and affordable public transport, as well as the ability to move goods and raw materials quickly around the country, and importantly, to and from the major ports.
The Indonesian construction industry registered an annual growth rate of 5.8% in real terms in 2019.
The construction industry is expected to continue to grow substantially over the next 5-years notwithstanding any short-term disruption caused by Covid-19. President Joko Widodo, who was re-elected in the April 2019 elections, is expected to continue to drive forward with large-scale investment and development.
At the start of his second term in office, President Joko Widodo announced a new policy in the government development plan that is solely dedicated to infrastructure with plans to launch a $412billion programme to boost investment. To achieve the country’s aggressive infrastructure targets, 2019 alone saw the Government complete 91 nr strategic national projects from a total of 223. One of the major projects to be completed in 2019 was the Palapa Ring (http://investvine.com/indonesiabrings-high-speed-internetto-remote-eastern-provinces/indonesian-national-palapa-ringproject-development-iskandar/nggallery/slideshow) that connects 34 provinces through optical fibre with a broadband network.
Adding to the list, the government is also developing clean and potable water projects and water network systems, including: dams, flood control projects, smelters, fisheries, and marine projects.
Another major project on the horizon is the construction of a new capital city. In April 2019, the President approved plans to relocate the country’s capital city to East Kalimantan, a province on the island of Borneo, due to overpopulation and traffic gridlock in Jakarta. The current Indonesian capital is sinking by 25cm annually, making it one of the fastest-sinking cities among the world’s coastal cities. It is estimated that 95% of North Jakarta will be submerged by 2050. The cost of the project is officially estimated at US$33 billion, and it is expected to take a decade to complete, jointly funded by the state and private sector.
Julian Smith, global transport and logistics leader at PwC, based in Indonesia, told The Oxford Business Group (OBG), “The new capital city is an opportunity to show that Indonesia can design, build and operate a modern urban transport system, which includes maximum opportunities for walking.”
Notable projects which are currently underway include the following:
- New Priok Port, Jakarta.
The project is to construct a new extension of the existing Tanjung Priok harbour in the northern part of Jakarta. The development was started in 2012 and is targeted to be completed by 2023.
- Mass Rapid Transit (MRT), Jakarta.
This US$ 1.7 billion project will provide a public transport solution to ease the traffic congestion in Jakarta. Currently the first phase of the South-North corridor is already complete and in operation, while the construction of the second phase is underway with a target completion date of 2022.
- Trans Java Island Toll Road.
This US$ 5.5 billion project will provide a 619 km toll road network on Java Island to connect main cities along the northern part of the Island from Merak Port in the West to Banyuwangi port in the East.
- Trans Sumatra Toll Road.
This US$ 36 billion project is to connect all the major cities in Sumatra from Banda Aceh in the North to Bandar Lampung in the South, covering a distance of approximately 2,000 km.
The Government also added that several toll road projects would commence in 2021, including a 14 km section of the Banda Aceh – Sigli toll road in Sumatra, a 33 km section of Balikpapan – Samarinda toll road in East Kalimantan, and a 131 km Pekanbaru – Dumai toll road in Sumatra.
So, what else does the future hold for Indonesia?
Under Presidential Decree number 109 of 2020, which is the third revision of the Presidential Decree number 3 of 2016, the Government announced, that 201 projects are to be included as part of the Strategic National Projects between 2020 – 2024, with 55 of them being new projects. The total value of the Strategic National Projects is an estimated $340 billion.
The 55 new Strategic National Projects include 9 new major road and bridge projects, 9 dams, 6 energy projects, 6 new and expansions of airports, 5 clean water projects, 4 major seaports, 4 new railway projects, 4 new industrial zones, 4 irrigation projects and a major defence project.
Inadequate infrastructure has long been a challenge for this archipelagic state, which is possibly the most complicated country in the world in terms of its logistical challenges. However, after many years of infrastructure neglect and struggles with funding, the country’s economic growth plans over the next five years are one to watch, and will certainly close the infrastructure gap.
“Where we see challenges. I see opportunities. Indonesia’s challenges are your opportunities”, President Joko Widodo.
This article was written for issue 21 of the Driver Trett Digest.
To view the issue, please visit: www.driver-group.com/digest-issue-21