Authorities in Indonesia have signed agreements with South Korea and the Asia Development Bank, or AdB, designed to bring multibillion-dollar investment to transport infrastructure projects throughout the country and drive breakbulk activity.
Progress was made this month on two fronts, with Indonesia’s Ministry of Transportation signing a memorandum of understanding with the Asia Development Bank, or AdB, as well as five MoUs with the South Korean Ministry of Land, Infrastructure & Transport. The new agreements with South Korea alone are worth an estimated US$1.9 billion.
Among the deals reached, the Korea Rail Network Authority will be in charge of the second phase of Indonesia’s light rail transit project, a significant driver for breakbulk activity.
AdB to facilitate PPP growth
Alongside closer links to South Korea, Indonesia will also seek to open its market to global investors as AdB and the Indonesia’s Ministry of Transportation agreed to collaborate to develop and promote public-private partnerships in the transport sector.
“PPP is an important instrument to deliver infrastructure in Indonesia, and ADB is looking forward to assisting the government in developing priority transport projects that could be structured on a PPP basis to mobilize private capital flows,” said Winfried Wicklein, AdB country director for Indonesia.
AdB will provide strategic advisory services to support the MOT in screening and preparing transport projects and in tailoring PPP capacity building programs.
Based in the Manila, Philippines, the AdB, provides finance for projects throughout Asia and the Pacific. It is owned by 67-member organizations and Indonesia is a founding member of AdB. Last year, assistance from the bank totaled US$27.2 billion.
Jokowi seeks domestic transport cost cuts
Indonesia has traditionally suffered from high logistics costs due to its poor roads and transport links and inefficient maritime transportation system. The Indonesian Chamber of Commerce and Industry estimates that about 17 percent of companies’ total expenditure in Indonesia is absorbed by logistics costs.
As a result, President Joko Widodo has repeatedly stressed his commitment to growing investment in transport and has made infrastructure across the transport and power sectors his key priorities.
“We aren’t just serious about building infrastructure, we’re very, very serious … This is something we absolutely must do to build the foundation of our economy, even if the work is bitter at the beginning,” Widodo said earlier this year.