Jokowi's projects derailed by bureaucrats

Infighting delaying major infrastructure projects

JAKARTA • Investors hoping for President Joko Widodo to speed up work on Indonesia's infrastructure projects have been disappointed, with a plan for a US$2 billion (S$2.7 billion) airport railway line in the capital spotlighting the delays and bureaucratic infighting involved.

Nearly half the 10 projects to which Mr Joko gave priority when he took office last year are languishing for lack of cooperation among ministries he has been unable to whip into line. "Somebody has to coordinate the orchestra of stakeholders," said Ms Emma Sri Martini, head of government-owned infrastructure finance company Sarana Multi Infrastruktur.

President Joko is racing against time to create sufficient jobs for the two million Indonesians who enter the workforce annually, as he struggles to revive economic growth that has fallen to the weakest pace in around six years. His promised splurge on roads, ports and power plants is critical as Indonesia's traditional engines of growth - consumption and commodity exports - are faltering, while businesses are shedding jobs fast.

When he was governor of Jakarta, Mr Joko had managed to break an almost decade-long impasse over construction of a ring road around the Indonesian capital, and investors had hoped to see him, as president, repeat the feat on the national level.

Nine months into his tenure, the signs are not encouraging.

THE BOTTOM LINE

There's potentially a lot of appetite for the airport train project, but the main question for investors and lenders is, how do you make money out of it?

MR MARK GIBLETT, group head of Asia project finance for Sumitomo Mitsui Banking Corp

The airport railway line, designed to cut the travel time to one of the world's busiest airports to 30 minutes from as long as three hours, has suffered a delay of at least two years in construction. Officials have locked horns over its route and how to fund it, but in the absence of significant government support, it hardly offers private investors a worthwhile return.

Just last month, for example, newspaper Bisnis Indonesia reported that Transport Minister Ignasius Jonan had sought a route change to take advantage of existing tracks.

Another issue is funding, whether one-off or deferred payments for the project. The government expects private bidders to get returns chiefly from future traffic volumes and fares.

"There's potentially a lot of appetite for the airport train project, but the main question for investors and lenders is, how do you make money out of it?" said Mr Mark Giblett, group head of Asia project finance for Sumitomo Mitsui Banking Corp.

Mr Joko must act fast, as Indonesia risks falling behind its neighbours, who are aggressively building infrastructure. Indonesia's cost of moving goods was as much as 27 per cent of gross domestic product in 2013, outstripping Malaysia, Thailand and Vietnam, a study backed by the World Bank showed.

Investors are eager for the President to speed things up.

"The biggest thing that Jokowi thought he could do, and that he realised he cannot do, is coordinate all his ministries," said OCBC Bank economist Wellian Wiranto.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 20, 2015, with the headline 'Jokowi's projects derailed by bureaucrats'. Print Edition | Subscribe