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.
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

Multimedia Brussels Schools, Metro Reopen Under Heavy Guard

City remains under the highest threat alert level due to what authorities have described as a 'serious and imminent' threat of attack

Video Debt-ridden Refugees Await Onslaught of Lebanese Winter

Aid agencies are attempting to reduce potentially devastating consequences of freezing conditions and snowstorms that killed eight last year, including three Syrian refugees

Americans Think About Strange Stuff at Thanksgiving

Millions of Americans are celebrating Thanksgiving, but they’re not necessarily thinking about turkey and stuffing

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Paris Attacks, France Steps Up Fight Against ISi
November 24, 2015 3:04 AM
The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs

World Currencies


Rates may not be current.