News / Economy

Foreign Investors Eye Airports as Indonesia Rolls Out Welcome Mat

Wreckage of a Chinese-made Xian MA60 twin turboprop aircraft operated by state-run Merpati Nusantara Airlines lies on the runway after it landed hard at El Tari airport in Kupang, East Nusa Tenggara, Indonesia,  June 10, 2013.
Wreckage of a Chinese-made Xian MA60 twin turboprop aircraft operated by state-run Merpati Nusantara Airlines lies on the runway after it landed hard at El Tari airport in Kupang, East Nusa Tenggara, Indonesia, June 10, 2013.
Reuters
Indonesia's need for more and better airports is drawing strong interest from foreign transport and construction companies, hungry for a slice of the action in one of world's the fastest growing markets for air travel.
 
Next month, Indonesia is expected to ease regulations to allow foreign companies, like India's GVK Power & Infrastructure and South Korea's Incheon International Airport Corp , to manage and operate airports in what is already the world's fifth largest domestic air travel market.
 
“After this [change in the] law in Indonesia, all airport operators will be showing an interest,” said Turkish airports operator TAV Havalimanlari Holding in an e-mailed statement.
 
Indonesia's airports, many of which are operating at two to three times above their designed capacity, are crying out for investment after years of scant government funding, inefficient bureaucracy, and unending disputes over land rights.
 
Its nearly 200 public airports are barely coping with a travel boom and could lose market share to Singapore, Malaysia and other regional hubs if it doesn't quickly expand, industry officials warned.
 
Years of robust economic growth in the world's fourth most populous country has led to a surge in air traffic, as many Indonesians pick planes for traveling between the archipelago's myriad islands instead of ferries.
 
The country's main airport, Soekarno-Hatta International Airport in Jakarta, is expected to handle 64.4 million passengers this year, nearly triple its designed capacity of 22 million, according to its owner, Angkasa Pura II.
 
The country's newest international airport, located in northern Sumatra's provincial capital of Medan, is already operating at capacity after opening just four months ago.
 
Budget carrier Lion Air, which has ordered more than 500 planes for delivery in the next decade, warned its new aircraft could be diverted to its affilates in Thailand or Malaysia if Indonesia can't accommodate its plans to expand into the international market, said Edward Sirait, the firm's director of general affairs.
 
Indonesia's flag carrier Garuda Airlines, which last week announced plans to double its fleet to 350-400 aircraft by 2025, is also being forced to move many of its new planes to Batam and Medan airports due to the lack of capacity in Jakarta.
 
“Garuda's fleet is quite flexible so we can park our aircraft in airports around Indonesia,” the company's chief executive, Emirsyah Satar, told Reuters. “It's a pity if we can't fulfill the needs for transportation due to a lack of infrastructure.”
 
In August, Garuda was forced to announce a delay in the  launch of its first Jakarta-London service by six months to May 2014 due to the capital's aging airport.
 
Satar said the company's expansion plan was based on the government's development program to start building 24 new airports and significantly expand current ones by 2017. Another 21 airports are to be built within a decade.
 
Soaring demand
 
Overseas interest in Indonsia has been rising for years.
 
France's Vinci, Germany's Fraport AG, South Korea's Incheon, Japan's Mitsubishi Corp and Sojitz Corp have recently approached Indonesian companies about possible investment opportunities, said two senior officials with state-owned air operator Angkasa Pura I.
 
But no foreign firm has been able to grab a major stake in any of Indonesia's major airports due to restrictive government regulations and land acquisition issues. The country's airports are currently operated by either the government or state-owned companies.
 
“Many foreign companies have come to us. They are asking and waiting for their opportunity,” Tommy Soemoto, president director of Angkasa Pura I, told Reuters earlier this month. “It is up to the government now.”
 
Indonesia's airports are on a “negative investment list”, which limits foreign involvement in areas deemed sensitive. Under the regulations, foreign companies are limited to owning no more than 49 percent of domestic airports.
 
Indonesian officials have proposed removing airports, ports and airport services from this list to help revive a slowing economy. The measures need the approval of President Susilo Bambang Yudhoyono.
 
Indonesia's investment chief Mahendra Siregar told Reuters minor details of the proposal were still being finalized, and should be approved in early December.
 
India's GVK Power & Infrastructure said Indonesia's plan to allow 100 percent foreign direct investment in airport development would “facilitate not only capital infusion but also the much needed management, technical and operation expertise.”
 
India's largest private airport operator is expected to become the first foreign company to hold a major stake in an Indonesian airport when it teams up with Angkasa Pura I next year to build a second airport in the central Java city of Yogyakarta.
 
The $700 million project is expected to be finalized next year with operations starting as early as 2017.
 
Angkasa Pura I also hopes next year to spin-off five of its most profitable airports, including the Ngurah Rai International Airport in Bali, to enable foreign investment for its expansion plans, Yudhaprana Sugarda, head of corporate planning, told Reuters earlier this month.
 
“Up to 900 new planes will be delivered into Indonesia in the next decade,” Sugarda said. “We must seek cooperation to improve our infrastructure to be ready.”

You May Like

Hezbollah Chief Says Does Not Want War But Ready for One

VOA's Jerusalem correspondent reports that with an Israeli election looming and Hezbollah's involvement in Syria, neither side appears interested in a wider conflict More

Multimedia VOA SPECIAL REPORT: Despite Danger, Best US Minds Battle Deadly Virus

Scientists at America's premier biological research center race in military confinement to find effective drugs, speedier tests and a safe vaccine amid the deadliest outbreak of Ebola in history More

Kurdish Poet Battles to Defend Language, Culture

Kawa Nemir's work is an example of what he sees as an irreversible cultural and political assertiveness among Kurds in Turkey More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Egypt's Suez Canal Dreams Tempered by Continued Unresti
X
Heather Murdock
January 30, 2015 8:00 PM
Egypt plans to expand the Suez Canal, raising hopes that the end of its economic crisis may be in sight. But some analysts say they expect the project may cost too much and take too long to make life better for everyday Egyptians. VOA's Heather Murdock reports.
Video

Video Egypt's Suez Canal Dreams Tempered by Continued Unrest

Egypt plans to expand the Suez Canal, raising hopes that the end of its economic crisis may be in sight. But some analysts say they expect the project may cost too much and take too long to make life better for everyday Egyptians. VOA's Heather Murdock reports.
Video

Video Threat of Creeping Lava Has Hawaiians on Edge

Residents of the small town of Pahoa on the Big Island of Hawaii face an advancing threat from the Kilauea volcano. Local residents are keeping a watchful eye on creeping lava. Mike O’Sullivan reports.
Video

Video Pro-Kremlin Youth Group Creatively Promotes 'Patriotic' Propaganda

As Russia's President Vladimir Putin faces international pressure over Ukraine and a failing economy, unofficial domestic groups are rallying to his support. One such youth organization, CET, or Network, uses creative multimedia to appeal to Russia's urban youth with patriotic propaganda. VOA's Daniel Schearf reports.
Video

Video Mobile Infrared Scanners May Help Homeowners Save Energy

Mobile photo scanners have been successfully employed for navigational purposes, such as Google Maps. Now, a group of scientists from the Massachusetts Institute of Technology says the same technology could help homeowners better insulate their houses and save some money. VOA’s George Putic has more.
Video

Video Filmmakers Produce Hand-Painted Documentary on Van Gogh

The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Issues or Ethnicity? Question Divides Nigeria

As Nigeria goes to the polls next month, many expect the two top presidential contenders to gain much of their support from constituencies organized along ethnic or religious lines. But are faith and regional blocs really what political power in Nigeria is about? Chris Stein reports.
Video

Video Rock-Consuming Organisms Alter Views of Life Processes

Scientists thought they knew much about how life works, until a discovery more than two decades ago challenged conventional beliefs. Scientists found that there are organisms that breathe rocks. And it is only recently that the scientific community is accepting that there are organisms that could get energy out of rocks. Correspondent Elizabeth Lee reports.
Video

Video Paris Attacks Highlight Global Weapons Black Market

As law enforcement officials piece together how the Paris and Belgian terror cells carried out their recent attacks, questions are being asked about how they obtained military grade assault weapons - which are illegal in the European Union. As VOA's Jeff Swicord reports, experts say there is a very active worldwide black market for these weapons, and criminals and terrorists are buying.
Video

Video Activists Accuse China of Targeting Religious Freedom

The U.S.-based Chinese religious rights group ChinaAid says 2014 was the worst year for religious freedom in China since the end of the Cultural Revolution. As Ye Fan reports, activists say Beijing has been tightening religious controls ever since Chinese leader Xi Jinping came to office. Hu Wei narrates.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

In the mid-1980’s, thousands of Sudanese boys escaped the country's civil war by walking for weeks, then months and finally for more than a year, up to 1,500 kilometers across three countries. The so-called Lost Boys of the Sudan had little time for games. But one of them later mastered the game of chess, and now teaches it to children in the New York area. VOA’s Bernard Shusman in New York has his story.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8845
JPY
USD
117.71
GBP
USD
0.6643
CAD
USD
1.2669
INR
USD
62.019

Rates may not be current.