Indonesia courts Hong Kong investors to build toll roads on Java as part of Widodo’s ambitious infrastructure plans
- Widodo is aiming to build motorways worth US$70 billion and stretching across 5,400km, triple the length of the current road network
- The road projects will be part of a US$400 billion plan to modernise Indonesia and boost economic growth
PT Waskita Toll Road, a unit of PT Waskita Karya that has been tasked with boosting connectivity across the archipelago, said the investors had expressed interest in buying its 40 per cent stake in two toll road segments in Java.
Herwidiakto, chief executive officer of PT Waskita Toll Road, said the value of the stake had yet to be determined.
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“[The investors] are in the process of due diligence now [to assess and value the project]. We expect this to be completed by the end of July,” he said, declining to name the parties.
Previous bids by local and foreign investors for four other toll road segments did not work out, Herwidiakto said, but the company hoped it would be different for the 90km Solo-Ngawi toll road, and the 87km Ngawi-Kersatono toll road.
PT Waskita Toll owns 40 per cent in each of the projects, with the remainder held by other Indonesian companies.
Although the identity of the investors remain unclear, Brian Chan, a director at Indonesia’s Chambers of Commerce and Industry in Hong Kong said that the investors might come from mainland China.
“My best guess is that probably they are construction companies from mainland China and they set up a company in Hong Kong with a purpose to buy stakes in Indonesia like this one,” Chan said.
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Indonesia needs foreign funding for toll roads – also known as tollways – given that Widodo is aiming to build motorways worth US$70 billion and stretching across 5,400km, triple the length of the current road network, according to Bloomberg. The road projects will be part of a US$400 billion plan to modernise Indonesia and boost economic growth, that has been hampered in part by poor connectivity across the archipelago of 17,000 islands.
But analysts have questioned who will foot the bill, concerned it will strain government finances and banking system.
Andry Asmoro, an economist at PT Bank Mandiri, was among the analysts who welcomed foreign funding, saying investors would benefit from the growth that would result if some logistics challenges were eased.
“[Investors] see potential growth in the infrastructure sectors in Indonesia especially from tollways … especially since Jokowi has made infrastructure one of his main priorities in the next five years,” Andry said, referring to Widodo by his nickname.
Investors have traditionally chosen to invest in toll roads as profit from traffic is stable but previous bids by local and foreign firms for the two toll road segments did not work out, Herwidiakto said.
My best guess is that probably they are construction companies from mainland China and they set up a company in Hong Kong
He added proceeds from the sale would be used to help repay Waskita’s loans to domestic banks and fund the construction of other infrastructure related projects in Indonesia, such as a toll bridge in Balikpapan in East Kalimantan. The 7.6km-long toll bridge project in the city nicknamed Indonesia’s coal capital for the presence of global and local mining firms is estimated to cost 16.5 trillion rupiah (US$1.2 billion), according to a local media report.
Analysts also see interest from Hong Kong as a hopeful sign that more Chinese investors will pump money in Indonesia, whether in infrastructure of manufacturing.
David Sumual, an economist at PT Bank Central Asia in Jakarta, said: “Investing in tollways is something new for them but should be in line with their intentions to reallocate some manufacturing output due to the US-China trade war. Having better infrastructure means better access to the Indonesian market.”
