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Breakthrough of MP3EI Master Plan Acceleration and Expansion of Indonesia Economic Development MP3EI is intended to accelerate and foster economic development across the nation through 6

INDONESIA TRANSPORTATION SECTOR OVERVIEW

Infrastructure Forum 4 December 2012

Den Haag

Bambang Susantono, Ph.D

Snapshots of the country

2

Indonesia Today and in 2030

16 th largest economy in the world 9 th largest economy in the world

opportunity in consumer services,

agriculture and fisheries, resources

and education

$ 1.8 trillion market opportunity

in consumer services, agriculture and fisheries, resources and education

GDP and urbanization pattern in the future

86 % GDP comes from Urban Areas and 63% from midsize cities

4

Indonesia GDP growth 2010 - 2030

More than just population size

6

The World Embrace Indonesia Performance

Indonesia to be the 4 th largest economy in 2050

8

World’s 10 largest economies, 2010 (USD Tn, PPP) World’s 10 largest economies, 2050 (USD Tn, PPP)

2012 – World’s 15th (USD 1,12 Tn, PPP)

Breakthrough of MP3EI

Master Plan Acceleration and Expansion of Indonesia Economic Development (MP3EI) is

intended to accelerate and foster economic development across the nation through 6 (six)

economic development corridors This master plan implements the spirit of “not business as usual”

MP3EI Vision

MAIN STRATEGY

ECONOMIC CORRIDORS DEVELOPMENT

STRENGTHENING THE NATIONAL CONNECTIVITY

STRENGTHENING HR CAPABILITY AND SCI - TECH

THE ECONOMIC MASTERPLAN

10

Currently, indicated MP3EI investments are ~ Rp 4,930 T (USD 500 billion)

including ~ Rp 2,373 T (USD 250 billion) for infrastructure development

Indicated MP3EI investment (Rp T)* Indicated Infrastructure investment (Rp T)*

78 156

Sulawesi Bali - NT Sumatera

16 projects

27 projects

9 projects

Indonesia offers huge investment opportunity:

Palm Oil Industry

Sei Mangke (Medan, North Sumatera)

Sei Mangkei Special Economic Zone (SEZ) provide various

opportunities for investment

 Regulated under the Government Law No 29/2012

 There are three phase of development in Sei

Mangkei SEZ:

1 Develop 104 Ha Area

2 Expand to 640 Ha; (principal permit already issued,

currently waiting for the Right to Build permit)

3 Developing its area to total 2002,77 Ha

 There are three investor already commited:

1 PT Sinergi Oleo Nusantara (USD 415 Million on

biodiesel – bCarotene integrated – industry)

2 PT Cipta Buana Utama Mandiri (Rp 0,4 T on fertilizer

industry)

3 PT Unilever Indonesia (Rp 1,2 T on oleochemicals

industry)

Several advantage of Sei Mangkei SEZ

1 40 km to the Kuala Tanjung Port Under the

MP3EI program, this port will be developed to a global hub port

2 Nearby the “Gunung Bayu – Petlanaan Station”

railway track

3 Already produced 30 Ton / hour of Fresh Fruit

Bunches (FFB) since 1997

4 Abundance in water supply Water are supplied

from the Bah Bolon Rover( water debit 37,3 m3/second)

5 Nearby to several Large Palm Oil Plantations

Sei Mangkei SEZ will be supported by infrastructure

development

There 18 infrastructure projects related with MP3EI

91 5,644

10 projects

1 project

1 project 18

projects

 Road Plan

Transport Infrastructure Investment Needs in

Economic Corridors

16

Sumatera EC (USD 9,279 Million):

• Railway: USD 7,826 Million

• Port: USD 1,006 Million

• Airport: USD 447 Million

Kalimantan EC (USD 5,366 Million):

• Railway: USD 3,913 Million

• Port: USD 1,118 Million

• Airport: USD 335 Million

Sulawesi EC (USD 671 Million):

• Port: USD 671 Million

Bali - Nusa Tenggara EC (USD 1,677 Million):

• Railway: USD 1,342 Million

• Airport: USD 335 Million

Java EC (USD 18,558 Million):

• Railway: USD.11,738 Million

• Port: USD 5,031 Million

• Airport: USD 1,789 Million

Papua-Kep Maluku EC (USD 6,618 Million) :

• Port: USD 6,596 Million

• Airport: USD 22 Million

Sumatera Economic Corridor

Kalimantan Economic Corridor

Sulawesi Economic Corridor

Source : MP3EI, 2011

Acceleration of Transport Infrastructure Development

MP3EI

Transport Infrastructure

No Infrastructure Investment

Need (USD Million)

Est # of Projects

1 Ports and Inland

Non -Cost Recovery Project

Cost Recovery Project

PPP

SOE Special Asssignment

•State Budget

•Local Budget

Tender / Right To Match

•Special Airports

•Special Ports, Special Terminals

•Special Railways

Licencing

Private Sector Involvement Is Made Possible through Regulatory Reform in Transport Sector

18

• Overlapping roles of regulator,

operator and contracting

agency

• Monopolistic / Single Provider

• Limited access for Private

Sector

• Centralized

• More on supply approach

• Minimum access for the

Government Support

• Clear separation of role between regulator, operator & contracting agency

Three Ways of Private Sectors Involvement in

Transport Infrastructure Development

Investments in Transport Sector

Special Purpose Transport

Infrastructure SEZ/FTZ Transport Infrastructure Transport Infrastructure Public / Commercial

• Infrastructure specially developed for the

purpose of a business entity and may

operate exclusively for the business

entity

• Usually unsolicited, i.e initially proposed

by the business entity (private sector)

• Ministry of Transportation reviews the

feasibility study and other technical

matters, including safety issues

• The investment procedure for the special

• Infrastructure to be used by public and commercially oriented (tariff applied)

• May be solicited (proposed

by the GoI) or unsolicited

• Ministry of Transport prepares the project documents and tender documents, including feasibility study

• The business entity is chosen

• Infrastructure is located in the Special Economic Zones (SEZ)

or in Free Trade Zones (FTZ)

• Several incentives such as reduced tax rates

• More relaxed restrictions (compared to the Negative Investment List)

• More incentives and exceptions for the projects in the Bounded Zones (Kawasan Berikat)

• The investment procedure is

Government had provided many endorsements and incentives in

order to attract private invesments

Several government supports and incentives are in

place to attract more investors

Government supports and incentives

Tax Holiday Facility

Viability Gap Fund

Geothermal Fund

 Geothermal Fund: reducing the investor risks

during exploration activities

 Presidential Regulation no 71/2012:

providing clear mechanism and duration of every stages in land acquisition process

 Viability Gap Fund: government support to

increase the financial feasibility for infrastructure projects Some infrastructure sector may have this facility such as toll road, water sector, etc

 Land Capping: government support to reduce

the risk due to the unpredicted and unavoidable increasing land price

20 20

Recent amendment on Presidential Decree No 67/2005

(Presidential Decrees No 56/2011), had eased PPP from

straining regulations

There are several changes that have been

made through PD No 56 / 2011

 Permits unsolicited proposal

 Easier tender process

 Allows Ministry of Finance to give

guarantees through appointed

 Project Development Facility: to fund

feasibility studies given as revolving fund to be repaid by winning bidder

 Land Capping: To cover the risk of

increasing cost of land acquisition above certain level

 Land Revolving Fund: Provide

bridging finance for land acquisition

 Guarantee Fund: provides guarantee

for risks better covered by government

 Viability Gap Fund: provides financial

support in the form of grants, one tie or deferred, to make them commercially

Government have been vigorously providing support in every

step of PPP process

Project Development Facility (PDF) will be used

by CAs to fund feasibility studies, and is essential to ensure initiation and implementation of projects

– PDF given as revolving fund to be repaid by winning bidder

Two types of Land Fund:

• Land Revolving Fund:

Provide bridging finance for land acquisition

• Land Capping: Cover risk

of increasing cost of land

Guarantee fund provides guarantee for risks better covered by government

• e.g political, price, land acquisition delay

• Based on Perpres 78 /

2010 and Permenkeu 260/PMK.011/2010

• Takes part in financing a

commercially viable project

–Can be as debt, equity

or credit enhancement guarantees

PT SMI (PT Sarana Multistruktur Indonesia)

Managed by Government Investment Unit (under Min

Finance) and forwarded through Toll Road Regulatory Agency (under Min Public Works)

PT PII (PT Penjaminan Infrastruktur Indonesia)

PT IIF (Indonesia Infrastructure Fund), a subsidiary under PT SMI

PDF (Project Development

Facility)

Providing

Party

Objective

Fiscal support given along PPP process

PT IIF

22 22

TRANSPORTATION SECTOR INVESTMENT CLIMATE

Opportunities in Air Transport Sector

24

• With a population of more than 240

million, and with major airports

handling more than 68 million

passengers in 2011, Indonesia

presents itself as an immense

aviation opportunity as one of the

fastest growing domestic air traffic

markets in the world

• Domestic air passengers grew on

average 12.1% per year from 2006 to

2011, while international air

passengers grew 22.4% annually

within the same period

• ASEAN Open Skies in 2015 will

further increase the demand of air

Emerging economies drive strong travel growth

• Worlds air transport double every 15 years and will double again in the next

Forecast for the Indonesian air transport sector

26 Source: Airbus, 2012

Over-capacity Problem at Indonesia Major Airports

Airport Existing pax

Airports Supporting MP3EI

28

• International airports to serve passengers and cargoes to other countries

• Domestic airports to become feeders for those international airports

Year 2020 International

Domestic

Year 2030 International

Domestic

Investment Schemes in The Airport Infrastructure Development

Greenfield

Airports

Non-Commercial Airports (small airports, airstrips,

Existing Commercial Airports Terminal Development

30

Source: AP I & II, 2011

Airport

Existing pax

Existing Capa Pax./Capa

Additional Capacity

Total capacity

Capacity expansion (percent)

million/year million/year (percent) million/year million/year

Soekarno Hatta - Jakarta 51.5 22 234% 40 62 282%

Depati Amir - Bangka 0.95 0.35 271% 1.3 1.65 471%

Sultan Thaha - Jambi 0.8 0.25 320% 1.5 1.75 700%

Husein Sastranegara - Bandung 0.86 0.35 246% 4 4.35 1243%

St Mahmud Badarudin II - Palembang 2.1 1 210% 2.5 3.5 350%

Angkasa Pura 1

Sepinggan - Balikpapan 5.1 1.4 364% 10 11.4 814%

Syamsuddin Noor - Banjarmasin 2.6 1.3 200%

Several Planned Greenfield Airports

Jakarta Multiple Airport

New Non-Commercial Airport Development Plan

32

Muara Bungo

Bone

Morowali Tojo Una2

Namniwel

Saumlaki Baru

Sinak Baru Waghete Baru

Pekon Serai

Bawean

Werur

Miangas Muara Teweh

Opportunities in Railway Transport Development

Freight Access Rail to Port Development Plan

34

Network Development and Freight Access Rail to Port Services:

Coal, Petrochemical Industrial Area

Metropolitan Jakarta

Petrochemical Industrial Area

Metropolitan Surabaya

Food Manufacturing Complex

Dockyard (biggest in Indonesia)

Freight Access Rail to Port Development Plan

2 Belawan (North Sumatra) 2011-2012

3 Tanjung Api-api (South Sumatra) 2018-2023

Muara Wahau – Bengalon Railway Development,

East Kalimantan

36

Opportunities in Sea Transport Sector

Indonesia whose coastline extends to 54,716 km has waters in two-thirds of its

territory Its sea transport is vital in supporting the economy and asserts a great need

NTB

KENDARI

PONTIANAK

BITUNG TEMBILAHAN

SORONG

JAYAPURA

TARAKAN

BONTANG SAMARINDA

GORONTALO

TAYIN

TOLI TOLI SANGKULIRANG

TANJUNG SELOR

SENGATA BENGALON BALIKPAPAN DUMAI

MALAHAYATI

PALEMBANG

BIMA

BITUNG TEMBILAHAN

KOTA BARU

GORONTALO

TAYIN

TOLI TOLI SANGKULIRANG

TANJUNG SELOR

SENGATA BENGALON BALIKPAPAN DUMAI

MALAHAYATI

PALEMBANG

DARWIN

BAGANSIAPIAPI PEKANBARU

LEMBAR

BITUNG TEMBILAHAN

Parepare

JAYAPURA

TARAKAN

BONTANG SAMARINDA

GORONTALO

MUNTOK

PALU

TOLI TOLI SANGKULIRANG

TANJUNG SELOR

SENGATA BENGALON BALIKPAPAN DUMAI

MALAHAYATI

PALEMBANG

DARWIN

BAGANSIAPIAPI PEKANBARU

KUPANG

TUAL MAKASSAR

BITUNG

LAMPUNG

Tg Pandan/Belitung

BATAM TEMBILAHAN

TANJUNG SELOR

SENGATA BENGALON BALIKPAPAN

BELAWAN

LHOKSEUMAWE

DUMAI MALAHAYATI

PALEMBANG

DARWIN

BAGANSIAPIAPI SIAK

MERAUKE PANJANG

Ende BAWEAN

Singapokna Sinaki

Sikabaluan Srilagui M.Saibi Siberut Saumanuk Sioban Berilau

BENGKULU

Letung Tarempa Midai SINTETE Serasan

Sedanau Ranai

Tambelan

P Kerayan Marabatuan Maradapan Masalembo

PULANG PISAU Pegatan

Bahaur Maliku

Makalehi Lipang Kawaluso Matutuang Kawio Marore Miangas Karatung Kakorotan Geme Essang Rainis Beo Melonguane Lirung Mangarang

Pehe Biaro

Kolonedale Ampana Popolii PAGIMANA

Bonerate Jampea Kayuadi Selayar

Batu atas Papalia (P.Binongko) Usuku(P.Tomia) Burunga (P.Kaledupa) Banabungi

Raha Maligan Sikeli Boepinang

Kolaka Larearea/

Sinjai Watunoho

Naikliu Wini Attapupu Maritaim W

AMBON Leksula

P Toyando

SAUMLAKI Tutu Kembong Larat

P Molu Seira

Batu Goyang Kalar kalar Benjina Dobo

Pomako

Wanam Kimaam

Nabire Waren Babo

Bintuni MANOKWARI Sausapor

BIAK Serui Teba Sarmi

D Rombebai Trimuris Kasonaweja Koweda

Kaipuri Poom

P Mafia

Wapoga

Asiki Gententiri Ampera Tanah merah

R - 3 R - 6 R - 9 R - 16 R - 18 R - 19 R - 27 R - 30R - 31 R - 38 R – 41 R - 44

SORONG BIAK

TERNATE SAUMLAKI

AMBON KUPANG

Makassar BITUNG

Domestically, trade routes are vibrant and growing

38

Fast growing, vibrant domestic trade routes

= Selected major domestic goods routes (MT/yr)

Inter-island trade has increased ~5x from 638 Mn Ton

9 MT 18% CAGR

10 MT 36% CAGR

56 MT 35% CAGR

74 MT 40% CAGR

13 MT 85% CAGR

66 MT 6% CAGR

18 MT 27% CAGR

2 MT 70% CAGR

2 MT 96% CAGR

2 MT 52% CAGR

8 MT 73% CAGR

8 MT 2% CAGR

20 MT 50% CAGR

51 MT 66% CAGR

Note: Province to province origin-destination goods flow for all means of transportation (sea, air, land), CAGR 2006-2011

Source: OD Matrix - Ministry of Transportation 2006 and 2011

Container Traffic Projection in Major Ports in

Port Development within the Economic Corridors

47 Designated Ports for ASEAN Connectivity (14 in

Indonesia)

BIDDING PROCESS

• Development of Cruise Terminal in Tanah Ampo

• Surabaya West Access Channel

PRIORITY PROJECTS

• Cilamaya Port Development Project

• Pelaihari Port Development Project

• Maloy Port Development Project

POTENTIAL PROJECTS

• Garongkong Port Development Project

• Bau-bau Port Development Project

• Luwuk (Tangkiang) Port Development Project

• Probolinggo Port Development Project

• Makassar New Port Development Project

PPP Projects in Port Sector

42

Optimization Shipping Services

Indonesia has 70 major ports

functioning as commercial ports

However, restricted by the limited

access draft and lack of proper port

handling facilities, majority of these

ports in Indonesia only serve by

container vessels with carrying

capacity of 300 TEUs to 500 TEUs and

operate single loop shipping services

The development of an optimal East West Shipping corridor would reduce the transport cost, therefore unlock the economic growth for regions like

Sumatera, Kalimantan, Sulawesi, and Papua