Indonesia port projects set to outshine the other ASEAN partners | Invest Islands

Indonesia port projects set to outshine the other ASEAN partners

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It may not look like much right now, but an 1,800-hectare tract of land on the eastern edge of Java symbolizes Indonesia’s future.

The site, at the entrance to the busy Madura Strait, is to host the largest industrial park in East Java — the Java Integrated Industrial and Ports Estate. It is still mostly deserted, but construction is gaining steam. And it is just one of dozens of port projects sprouting up around the country, as President Joko Widodo pushes to turn the archipelago into a fulcrum of maritime trade.

“Why do I like this area? Because it is an integrated area — it has a port and an industrial zone,” Widodo said at the opening ceremony for the first phase of the Java estate in March. “By being integrated with a deep-sea port, this park will have direct access to domestic and international markets.”

indonesia port projects

Widodo has repeatedly said his maritime vision can complement the Belt and Road. Beijing has expressed some interest in port investment: Ningbo Zhoushan Port and China Communications Construction Engineering Indonesia have signed memorandums of understanding with Indonesian port operators to jointly develop New Priok and Kendal International Port, respectively.

Yet no actual investments are known to have been made. Indonesia’s Chief Maritime Minister Luhut Panjaitan was dispatched to Beijing in April to reiterate calls to invest in the Kuala Tanjung and Bitung international hub ports. He said he brought home $23.3 billion worth of deals — but none for the Indonesia port projects.

Some analysts think Indonesia is not a priority on the Belt and Road. “China has more immediate incentives to strengthen its trade routes in its neighboring countries first that are not separated by seas,” brokerage Reliance Sekuritas Indonesia said in a note.

Nevertheless, Massimiliano Cali, senior economist for macro trade and investment at the World Bank, said financing may not be the key issue for major projects like Kuala Tanjung and Patimban.

“While it is true that these are big projects, their financing should not be a key constraint to the extent that they are commercially viable,” Cali told the Nikkei Asian Review. “And both Indonesia port projects appear to have the potential to receive substantial traffic, which can eventually allow the repayment of the development costs.”

Financing issues aside, Teuku Rezasyah, an international relations lecturer at Indonesia’s Padjadjaran University, said the country must be cautious about allowing access to its ports. He specifically pointed to projects offered to China for Belt and Road investment that are located in areas with direct access to the disputed South China Sea.

read also: China, India, Indonesia: Greatest Magnets for Foreign Investment in Asia

The Belt and Road “can’t be merely about infrastructure development; it has more strategic goals related directly to the South China Sea,” Rezasyah said. “The Indonesian government is now being too hungry for investment … but it must be extra careful.”

Experts also stress Indonesia port projects has a long way to go before it can expect to snatch significant chunks of the transshipment market from Singapore. And given the number of ongoing and planned port projects, there is concern about counterproductive competition.

“Ports in the region need to [take] a collaborative view and not a competitive one to gain collective advantages,” said Gopal R, global vice president for transportation and logistics practice at Frost & Sullivan. “If the ports pitch one against another in the region, the advantage will only be incremental growth and not sustainable growth.”

Despite the various worries, Widodo has another reason to push on Indonesia port projects: the presidential election in April 2019.

The government is eager to show tangible progress before voters go to the polls. Despite delays in starting construction, a portion of the $3 billion Patimban project, which lies 120km east of Jakarta, is supposed to open next March.

Haste is the name of the game. Other infrastructure projects on densely populated Java have been rushed to meet deadlines and show voters that Widodo delivers results.

A new international airport in West Java, Indonesia’s most populous province, and much of a new Trans-Java toll road are expected to be ready for the Islamic holiday of Idul Fitri later this week, when millions of people will travel to their hometowns.

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