Indonesia to Upgrade Ports, Airports in Wake of Trade Deals

Jakarta Globe, Yessar Rosendar & Janeman Latul, February 10, 2010

The government said on Wednesday it was planning to triple its budget for capital expenditure on state-owned seaports and airports this year to prepare for an expected increase in the flow of goods resulting from free-trade deals with China and India.

It said it would spend Rp 10.3 trillion ($1.1 billion) to upgrade 66 seaports and 25 airports this year, compared to Rp 3.27 billion in 2009. The government owns the trade gateways through four seaport operators and two airport operators.

“We will use the money to increase capacity and revitalize infrastructure at the airports and seaports,” said Harry Susetyo, a deputy at the State-Owned Enterprises Ministry, during a meeting on Wednesday with the House of Representatives Commission VI, which oversees state enterprises.

“We hope it will increase the efficiency of the ports as well as increasing revenue, as the China and India free-trade agreements boost the outflow and inflow of goods.”

About Rp 6.17 trillion would be spent at the state-owned seaports, up from Rp 1.67 in 2009, while Rp 4.14 trillion will be spent at the airports, up from Rp 1.6 trillion last year.

The government is also targeting an increase in revenue and profit at both the seaports and airports.

It aims to lift combined revenue at the seaports to Rp 7.53 trillion this year, from a projected Rp 6.5 trillion in 2009, and increase net profit to Rp 1.98 trillion, from a projected profit of Rp 1.63 trillion in 2009.

It has projected revenue at the airports of Rp 5.15 trillion this year, from a projected Rp 4.56 trillion in 2009. Net profit is targeted to rise to Rp 1.54 trillion, from a projected Rp 1.28 trillion in 2009.

A wide-ranging free-trade agreement between China and Asean came into force on Jan.1, scrapping import tariffs on about 90 percent of goods.

A more limited free-trade deal between Asean and India was signed in August 2009. It also took effect on Jan. 1.

Together, China and India buy most of Indonesia’s commodity exports, such as crude palm oil and coal.

The Central Statistics Agency (BPS) said this month that shipments of crude palm oil increased by $1.1 billion in December from November.

State-owned port operator PT Pelindo I, which oversees seaports in Sumatra, said on Wednesday that it would focus this year on developing the Dumai Port, with the goal of transforming it into the country’s main port for palm oil exports.

Many of Indonesia’s state-owned airports struggled in 2009, with only five out of 12 ending the year in the black.

The largest, Jakarta’s Soekarno-Hatta International Airport, was the most profitable. It posted an unaudited net profit of Rp 1.46 trillion in 2009.

But the seven loss-making airports recorded a combined loss of Rp 114.39 billion, resulting in a net profit for all state-owned airports of just Rp 1.18 trillion.

Tulus Pranowo, director of operations at state-owned airport operator PT Angkasa Pura II, blamed insufficient traffic for the poor performance.