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258 km of toll roads built in Indonesia in 2020, short of target

Jakarta Post - January 12, 2021

Norman Harsono, Jakarta – Indonesia added 258 kilometers of toll roads in 2020, short of the government's target, as the country strove to continue infrastructure development in the middle of the COVID-19 outbreak, Indonesia Toll Road Authority (BPJT) announced.

BPJT data published on Friday show that, with the latest addition, the country's toll roads at the end of 2020 stretched a combined 2,346 km, which compares to 2,088 km in December 2019.

The longest toll road operating in 2020 was the 131.69-km-long Pekanbaru – Dumai road in Riau. Most of the new roads are in Java and Sumatra, the country's two most populated islands, except for the 26.35-km-long Manado-Danowudu section of the Manado-Bitung toll road in Sulawesi.

"The tendency abroad is that toll roads support freight vehicles. These enable better, faster services than non-toll roads," said BPJT head Danang Parikesit, explaining the target market for the roads, at a virtual press conference on Friday evening.

The realized expansion is, however, lower than government expectations for 2020. The target for new toll roads to enter service last year was 314 km, as announced by the Public Works and Housing (PUPR) Ministry's roadworks director general, Hedy Rahadian, in October last year.

The government has long made efforts to push down the stubbornly high logistics costs in the country and reduce price disparities among the country's many islands through infrastructure development. The country's logistic costs stand at 23.5 percent of the country's GDP, Finance Minister Sri Mulyani Indrawati said in September.

The BPJT explained in its presentation on Friday that it aims to expand Indonesia's toll road network to 4,761 km by 2024.

BPJT data also shows that accumulated toll road investment as of 2020 has grown by a modest 5.5 percent year-on-year (yoy) to Rp 729.54 trillion (US$51.38 billion) from the 2019 figure of Rp 691.43 trillion. Domestic banks, both private and state-owned ones, led the new investments, while there was no foreign direct investment (FDI) in toll road development last year.

"Because of the uncertainty with COVID-19, very little FDI entered Indonesia," said Danang.

This is amid the government's increasing reliance on the private sector to take part in developing, financing and managing the country's infrastructure projects under the National Medium-Term Development Plan (RPJMN) to ease the strain on the state budget. The state budget is expected to only cover some Rp 623 trillion, or around 30 percent of the needed funds to realize all the infrastructure projects, the ministry estimates.

In December, the ministry stated that it would offer eight toll road segments and one bridge worth a total of Rp 117.3 trillion to investors in this year's first quarter through the public-private partnership (PPP) scheme.

The toll roads and bridge add up to 380.8 km in length. One of those projects is the 32.4 km Semanan-Balaraja toll road connecting Jakarta and Tangerang, as well as a 37 km access road connecting the Cikopo-Palimanan toll road in West Java with the Japan-backed Patimban Port in Subang.

The BPJT expects to increase the accumulated toll road investments to Rp 887.41 trillion this year from the 2020 figure, including an additional Rp 10.1 trillion in FDI, to finance the development.

Center of Reform on Economics (Core) economist Muhammad Faisal said the saving grace for toll road investments in 2020 and in 2021 was government spending that, unlike the private sector, was expanded as Indonesia pours money into recovery programs.

The government and House of Representatives have agreed to lift Indonesia's budget deficit cap – normally 3 percent of GDP – until 2023 to help finance such programs.

"The pressure on private investment was bigger because both domestic and foreign businesses were affected by a contracting business climate and restrictions amid the pandemic," he said.

Government spending nevertheless faced restrictions in early 2020 as the Finance Ministry shifted ministerial budgets to COVID-19 relief schemes, he noted.

The government has earmarked Rp 149.81 trillion for the PUPR in the 2021 state budget, a significant increase from around Rp 87.61 trillion last year.

Faisal said that, this year, highway investment had "positive room to move" thanks to the higher deficit cap and the expectations of positive economic growth in 2021.

The government has predicted that Southeast Asia's largest economy will grow between 4.4 and 6.1 percent this year, largely driven by an expected recovery in consumer spending after vaccines become widely available, rising commodity prices and monetary and fiscal stimulus packages.

Source: https://www.thejakartapost.com/news/2021/01/12/258-km-of-toll-roads-built-in-indonesia-in-2020-short-of-target.htm