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ITE Transport and Logistics

Indonesia’s massive infrastructure spending spree

“We aren’t just serious about building infrastructure – we’re very, very serious,” said Indonesian President Joko Widodo at the start of 2017. A big statement of intent, but Indonesia has deep pockets – so infrastructure is enjoying billions of dollars of investment.

Infrastructure upgrades means cheaper transport & logistics in Indonesia

As much as $450 billion is being poured into essential infrastructure upgrades until at least 2020. Why? Well, the archipelago nation consists of over 17,000 islands and 5 million square kilometres. It’s almost half the size of Continental Europe. Many of its provinces are isolated or underdeveloped.

Connectivity and the nation’s economy go hand in hand. As much as 17% of an Indonesian company’s total expenditures are absorbed by logistics. Transportation costs account for 24% of Indonesia’s $861 billion economy, hence the government’s colossal infrastructure spending programme.

Roads, ports & airports on Indonesia’s infrastructure agenda

The Asia Times reports 2017 is set to be a blisteringly active year for Indonesian infrastructure construction. A wide range of projects are slated to begin or be completed this year including 55 seaports and 13 airports. Jakarta is planning on allocating an extra $30 billion to its country-wide projects across the next 12 months.

Highway and toll road construction is essential for transport and logistics in Indonesia – potentially more so than any other area. Road transport and trucking accounts for 72.21% of the Indonesian logistics sector, yet the majority of solid, serviceable roads are really only found on Java (the large island on which Jakarta, the nation’s capital, sits).

In excess of 3,000 kilometres of fresh roads are set to be built by the turn of the decade, including 1,000km of new toll roads. Such construction plans do not come cheap. Take a glance at the price tag for the under-construction Trans-Sumatra Freeway. This 2,600km route, which will become the main road on Indonesia’s second biggest landmass, is estimated to cost $11.25 billion once construction concludes.

Maritime transport is also a focus for the Widodo administration. The nation’s cabotage rules mean it is actually cheaper to import products from overseas than have it domestically ferried across Indonesia. To help combat this, the government is investing in new deep sea port facilities, such as Kuala Tanjung Seaport.

Kuiala Tanjung is Indonesia’s attempt to replicate the success of the Port of Rotterdam in The Netherlands. Planned annual cargo capacity at the port is expected to reach 2 million TEUs a year. It will also be linked to other transport routes via a highway, rail route and boast its own dedicated logistics centre.  The port’s first construction phase, estimated to cost authorities $2.5 billion, is predicted to be finished by 2019. At the time of writing construction is 40% complete at the site.

Airports are also another key area for expansion. Leading the charge is Kertajati Aiport, a greenfield site in Majalengka, West Java. So far, the airport, which will cost an estimated $750 million, is 65% complete. The site is expected to go operational in 2018, providing West Java with another international airport and freight handling facility.

Indonesia’s transport & logistics sector benefits from infrastructure spending

The nation-wide effort to upgrade or build updated infrastructure networks is likely to pay dividends for international transport firms. Indonesia is actively enhancing its travel networks, ports and airports, ensuring a stronger environment for logistics service providers to operate in in the very near future.

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