Jokowi plans to spend $95b on toll roads to boost connectivity

JAKARTA • Indonesian President Joko Widodo is planning to splurge an unprecedented US$70 billion (S$95 billion) on toll roads to help connect the most strung-out country on the planet.

It is almost the equivalent of laying bitumen from New York to San Francisco.

By 2024, Indonesia's fee-charging highways will stretch for 5,400km, almost triple the length of the current network, Dr Danang Parikesit, head of the country's toll-road regulator, said in an interview with Bloomberg.

The government wants to make it easier to haul food and fuel across the world's largest archipelago. But there is already concern about how the highways will be funded.

Analysts fret that the funding burden will strain Indonesia's banking system and the balance sheets of local construction companies.

The government cannot foot the whole bill itself and is seeking other sources of capital such as bank loans and private funding, Dr Parikesit said.

"Infrastructure will grow rapidly and faster than before," he said.

The roads roll-out is central to the Joko administration's ambitious plans for more than US$400 billion worth of building projects - from constructing 25 airports to new power plants - to modernise Indonesia.

Mr Joko, also known as Jokowi, begins his second term in October.

 
 
 
 

The extensive sprawl of Indonesia, a nation dispersed across 17,000 islands, is a logistical nightmare and can send the cost of everyday items soaring and hamper development in tough-to-access locations.

So the only way to generate faster economic growth is through connectivity, Planning Minister Bambang Brodjonegoro said last month.

"We are planning to establish the equivalent of a highway for the skies by building airstrips or smaller airports for connectivity" in remote areas such as the Papua region, he told Bloomberg.

More than half of the new toll roads will be rolled out on Sumatra to connect the two ends of the enormous island.

Dr Parikesit, who is also a professor in civil engineering, said advanced construction techniques will be required in some locations - to hold up a road bridge 100m above the ground or to build several kilometres of tunnels.

In addition to the highways, the regulator is also studying the possibility of building a bridge from Peninsular Malaysia to Sumatra, and a bridge connecting Singapore to Bintan island, Dr Parikesit said.

The work could boost revenue for state-owned construction companies such as PT Waskita Karya, PT Adhi Karya and PT Wijaya Karya.

Lenders such as PT Bank Mandiri, PT Bank Rakyat Indonesia and PT Bank Negara Indonesia may also be asked to help fund the projects.

"Such ambitious projects could boost businesses for construction companies and related stocks, particularly the state-owned ones," said Mr Jeffrosenberg Tan, head of investment strategy at PT Sinarmas Sekuritas.

"However, that might put more pressure on the liquidity of the banking sector."

A version of this article appeared in the print edition of The Straits Times on June 21, 2019, with the headline 'Jokowi plans to spend $95b on toll roads to boost connectivity'. Print Edition | Subscribe