Jakarta caps foreign stake in air, sea ports at 49%

Tanjung Priok port in Jakarta, Indonesia's largest sea port, currently handles about 6.5 million containers a year.
Tanjung Priok port in Jakarta, Indonesia's largest sea port, currently handles about 6.5 million containers a year.PHOTO: REUTERS

Foreigners welcome in transport sector but ownership limit is a sovereignty issue

Indonesia is open to more foreign investors in its transport services sector but it will limit foreign ownership of its air and sea ports to just under 50 per cent, said Transportation Minister Ignatius Jonan.

"This is a sovereignty issue because the port would not only control the land, it will also be in charge of the airspace above it," the minister told Jakarta Globe news on Monday. "We cannot just give that away to foreigners."

For similar reasons, foreign ownership of Indonesia's sea ports will also be limited to 49 per cent, he said.

This latest development comes as the Indonesian government is in midst of revising what it refers to as its "negative investment list", which sets limits on foreign players in various industry sectors of South-east Asia's largest economy.

The first phase of the revision is set to be announced in the coming days, said Coordinating Minister for Economic Affairs Darmin Nasution.

If the liberalisation of the transport and logistics sectors is pushed through, it will allow foreigners to invest in and own firms providing, among other things, port management services, cargo handling as well as air traffic control.

In some of these businesses, foreign investors can own a stake of up to 67 per cent, but foreign ownership of air and sea ports will be capped at 49 per cent.

Restrictions on foreign ownership and regulatory and transparency issues have stifled the growth of Indonesia's transport and logistics sectors for decades, though the latter accounts for more than a quarter of the country's economic growth.

Analysts have long said that the two sectors could do with an infusion of foreign funds and expertise to boost growth and enhance the country's status as a regional hub.

Government-linked airport operator Angkasa Pura currently runs the Soekarno-Hatta International Airport in Jakarta, among the other 236 airports across the country - 27 of which serve international flights.

Indonesia's sea ports are also operated by state-owned enterprises such as Pelindo, which runs the Tanjung Priok port in Jakarta. Indonesia's largest sea port, it currently handles about 6.5 million containers a year.

But a bugbear is that ships often face lengthy delays.

Still, the country's transport and logistics sectors have much to offer investors, particularly in a new network of sea ports President Joko Widodo has been pushing for in a bid to improve Indonesia's dilapidated maritime infrastructure.

New Priok is one of 24 ports in Indonesia's plan to overhaul the maritime connections across the country, which has more than 17,000 islands. Once completed, it will be Indonesia's biggest port and is expected to handle about 12.5 million containers a year.

Work on ports in Sumatra and Central Sulawesi has also begun. The target date to complete all the ports is 2019.

There are also potential investments in its air transport sector.

Mr Indroyono Soesilo, a special envoy of the Transportation Ministry to the International Civil Aviation Organisation (ICAO), told Tempo news that in about five years, Indonesia would need around 400 new aircraft in addition to the 1,142 registered in the country last year.

"Based on a global study, (Soekarno-Hatta International Airport) is No. 12 in the world with a flow of 57 million passengers," he said.

A positive development for Indonesia's air transport sector is that the country is on track to meet higher aviation safety standards by the first quarter of this year.

The need for tougher safety regulations had gained urgency following a report into the crash of Air- Asia Flight QZ8501 out last year. Indonesia's air safety record has since come under international scrutiny, prompting regulators to step up improvements.

A version of this article appeared in the print edition of The Straits Times on February 03, 2016, with the headline 'Jakarta caps foreign stake in air, sea ports at 49%'. Print Edition | Subscribe