As Indonesia’s economy has grown so too have the challenges in providing a well-organised public transport system. Rising incomes and the flow of people into densely populated cities have already led to total gridlock in the capital, costing the country a fortune in lost productivity, wasted fuel and missed business opportunities.
To address this issue, the country has set about prioritizing several projects that ease the burden on overcapacity roads and lessen the public’s dependence on private vehicles. In addition to providing Indonesians with an alternative to private cars and the chaotic mess of buses, motorbikes and mini-vans that currently make up the public transport network; these projects also bring about business opportunities for companies looking to set up shop in new stations, ports and other transport hubs.
Among the government’s most recent plans to improve public transport facilities are the following landmark projects:
The Jakarta Mass Rapid Transport (MRT) System for the longest time epitomized the Indonesian story when it comes to public transport development. First tabled in the 1980s as a solution to traffic jams caused by the swell of commuters coming in and out of the city on a daily basis, the project has been put forward in many different forms only for each incarnation to be postponed or deemed unfeasible. Following the appointment of a more proactive local government in 2012, however, this initiative to develop a public transport system spanning Jakarta picked up steam and has now begun formal construction after a ground-breaking ceremony in late 2013.
At its core, the Jakarta MRT project seeks to first develop 15.7 km of rail based transport from South Jakarta to the business district surrounding local landmark Bunderan HI. With development led by the Jakarta Provincial Government and funded by the Japan International Cooperation Agency, this line is expected to carry 212,000 passengers per day and will take less than 30 minutes to complete – a significant improvement on the more than one hour needed to travel this route by car during rush hour. To be operated by PT MRT Jakarta, the 13 stop North-South line is but half of the project’s entire scope which also includes an East-West line traversing Bekasi to Tangerang. Once complete, the MRT system together with the Trans Jakarta bus network (See Interview with Mr Muhammad Akbar, former chief of Trans Jakarta and current Head of the Jakarta Transportation Agency) will serve 60% of total trips made by Jakartans.
The positive impact of this rail transport system is clear to see; Jakarta currently loses approximately $2 billion dollars a year in wasted fuel and lost productivity due to traffic (Reuters). The provision of a viable alternative to private transport, coupled with tax hikes on the purchase of cars (that become steeper for every car after a household’s first) should serve to take cars off the road. On the ground this translates into less time needed to go to and from meetings for Indonesia’s professionals and a better rested workforce able to achieve optimum performance. Beyond increasing the efficiency of businesses already located in Jakarta, the MRT will alleviate concerns of companies looking to set up in the city and should create pockets of commercial activity in areas surrounding new stations.
Phase I (North-South Line) of the Jakarta MRT System is currently scheduled for completion between 2017 and 2018, though an announcement is expected in September 2014 detailing a delay on this initial target due to issues such as obtaining land to be cleared for construction.
The Trans Java railway project seeks to connect Jakarta with Surabaya in East Java via a double track railway covering over 700km of Java’s north coast. Scheduled for completion earlier in the year (2014) but subject to delays due to problems with land acquisition, the double track directly addresses the lengthy traveling times between Indonesia’s largest cities which was previously constrained by a single track line between Cirebon and Surabaya. Trains crossing paths on this old system would need to wait at the nearest station for the other to pass before proceeding, resulting in a trip that took 13 hours even by express train. The new double track railway will see this time cut down to 8.5 hours, as reported by the Jakarta Post.
Upon completion, this project is expected to substantially improve upon the movement of goods across Java in that railway container traffic is set to increase from 200,000 twenty-foot equivalent units (TEUs) to 1 million TEUs every year (Ministry of Transportation, Jakarta Post). Responsible for this gain in logistics capabilities is the system’s rise in railway capacity from 84 trains to 200 trains per day, thereby facilitating a more cost competitive and efficient transport of goods for companies located in Java. This should also curb industries’ current overreliance on trucks that take upwards of 3 days to complete the Trans Java trip, in turn mitigating one of the most prominent sources of traffic in Indonesia.
As of April 2014, the Ministry of Transportation had already put into operation 333km out of the 436km of the Trans Java Double Track railway between Cirebon in West Java and Surabaya. This adds to the Jakarta to Cirebon section in operation since 2009, but fails to meet the government’s goal of 100% operation by March 2014. Latest reports indicate that the project is still in the process of acquiring land in isolated locations between Kandangan and Surabaya, both in East Java.
Passenger growth in what is now one of the world’s ten busiest airports has necessitated the development of a railway system between Soekarno-Hatta International Airport and Jakarta. The Soekarno-Hatta International Airport Railway will comprise 33.86 km of elevated track and provide direct access to the Halim Perdanakusuma Airport in Jakarta, as well as a further four stations in Manggarai, Dukuh Atas, Tanah Abang and Pluit. Facilitating an easy trip to and from the airport is projected to have considerable benefits for a tourism industry in Jakarta currently held back by the capital’s reputation for bumper to bumper traffic.
Already overseeing the construction of a double track commuter line between Tangerang and the airport via state owned companies PT Angkasa Pura II and Railink, the government has made this particular project open to the private sector via a PPP model (See Indonesia Infrastructure: Tremendous PPP Opportunities). As detailed by the Ministry of National Development Planning’s (Bappenas) 2013 list of PPP projects, the private partner’s role in this endeavour is to focus on undertaking the engineering design, constructing the civil works for rail infrastructure, procuring the rolling stock, providing financing for initial costs and operating the facility during a lengthy concenssion period.
The bidding process, led by state owned enterprise Sarana Multi Infrastruktur, is scheduled to take place in August 2014 and construction has been slated for 2015. Crucially, the majority of the land required for this project is already in public ownership and barring any delays, the railway will begin operations in 2019.
Indonesia’s move to improve upon inadequacies in public transport facilities is not limited to Jakarta. Through state owned enterprise ASDP Indonesia Ferry, the country has also set about developing new port projects across the archipelago to provide the public with a means to easily travel between islands. Among the most notable of these projects is ASDP Indonesia Ferry’s plan to develop new tourist friendly amenities within their self-operated ferry ports, including entertainment centres and restaurants. Prioritising routes between Bali and other tourism hotspots, this initiative will make great strides in improving upon the passenger experience and encourage more people to visit parts of Indonesia that are inaccessible apart from by ferry. In this regard, developing public transport is projected to have a considerable impact on the realisation of tourism business opportunities in high potential but as of yet untapped islands.
ASDP Indonesia Ferry in the near future will also launch its routes to other ASEAN countries, in keeping with the region’s upcoming economic integration in 2015. Such a move will have a direct impact on the flow of ASEAN visitors into Indonesia and provide the Indonesian public with a new avenue to access regional markets without going through already over capacity airports.
The development of new public transport facilities creates opportunities for foreign entities to reach out to a captive market by setting up storefronts and franchise outlets in new train and MRT stations as well as revamped ports (See Franchise Laws & Opportunities in Indonesia). The market is particularly suited to the entry of mini-marts and convenience store retail outlets that now stand at the forefront of Indonesia’s ongoing retail boom (See Indonesia’s Retail Boom is Far From Over).
With future MRT stations likely to be commercialized as part of a scheme to ensure lower ticket fares for commuters, strategic retail space is to be made available in a host of key locations with guaranteed foot traffic. CEO of PT MRT Jakarta, Mr Dono Boestami has already intimated that the development of property into office space, hotels and car parks will take place in and around the Lebak Bulus, Dukuh Atas and Blok M stations.
Transport facilities currently in operation in Indonesia have to date suffered from a case of missed opportunities in failing to provide spaces for in-demand retail outlets that fulfil consumer needs. The lacklustre selection of stores and restaurants in Soekarno-Hatta International Airport’s older terminals are but one example of this, but the ongoing development of the new Terminal 3 suggests that steps will be taken to address the problem.
Investors interested in pursuing this type of business opportunity should contact the relevant state owned enterprise tasked with managing the facility, such as PT MRT Jakarta for the MRT system, PT Angkasa Pura II for Soekarno-Hatta International Airport and PT Indonesia Ferry for ferry ports. Moreover, the negative investment list currently requires that businesses taking up small retail spaces (i.e. those suited for stations, airports and ports) are backed by 100% local capital. Foreign companies thus must offer value beyond capital in partnering with local players, such as a globally recognised brand.
For all of its delays and bumps in the road, the collection of public transport projects underway suggests that Indonesia is getting its act together in providing this crucial service to the people. In addition to the aforementioned projects, the government has also successfully opened a new international airport in Medan, Sumatera accessible via a modern rail-link to the city. Other projects poised to go forward include a new airport in northern Bali and a high speed railway line between Bandung and Jakarta funded by a PPP scheme. While patience is a must for projects heavily reliant on a cumbersome land acquisition process; investors should keep in mind that these initiatives are sure to boost productivity and counter one of Indonesia’s most prominent shortcomings in regards to doing business.
Global Business Guide Indonesia - 12th August 2014
Contribution to GDP: 4.19% (Q3 2015)
Existing Road Network: Paved 287,926 km, Total 508,000 km (2013)
Existing Toll Road Network: 949 km (June 2015)
Active Railway Network: 4,069.4 km (September 2015)
Number of Airports: 295; 27 with runway length >2,000 metres (2015)
Active Commercial Sea Ports: 78 (2015)
Main Government Bodies: Ministry of Transportation, BAPPENAS, Ministry of Public Works and Housing, Indonesia Toll Road Authority (BPJT).