Last year, Indonesia announced it would offer regional airport management contracts to the private sector under a public-private partnership (PPP) scheme, beginning with 10 existing airports. Taking the next step in realizing this new policy, the Indonesian Ministry of Transportation recently announced that tenders for the management of three airports – located in Lampung, Komodo and Palu, Sulawesi - will commence in August/September 2014.
This announcement hints at the potential for big changes in the Indonesian airport sector. The sector has long been dominated by the state through public ownership and management by the Ministry of Transportation and state-owned operators Angkasa Pura I and Angkasa Pura II. Indonesia is now looking to airport management by the private sector to address the twin challenges of rising demand on airports, many operating beyond design capacity, and anticipated growth fueled by open access mandated from 2015 by the ASEAN Open Skies Policy.
It is hoped, private airport management will also deliver budget savings, freeing funds to develop other airports. “Pioneer” airports in remote areas have been cited as the intended beneficiaries of increased state investment out of reallocated funds.
Local news sources report 38 investors (13 local and 25 foreign) have already expressed interest in the 10 airport management PPPs. The local investors are said to include Garuda Indonesia, Lion Air and the Bakrie Group. The foreign investors' names have not been formally disclosed, but appear to reflect broad global interest. They are rumored to include 13 investors from Japan, three from Singapore, two from Spain, two from Australia and one from each of New Zealand, Malaysia, United Arab Emirates and South Korea. One multilateral lending institution may also throw its hat in the ring.
Foreigners may soon be in the hunt for local partners, as regulations limit airport management to Indonesian companies with no more than 49% foreign ownership.
In addition to airport management opportunities, the private sector may soon be offered a role in airport ownership and development. The Ministry of Transportation is planning to offer several new airport PPP projects. These new airports may include Karawang International Airport near Jakarta, Kulonprogo Airport in Yogyakarta, Kertajati Airport in West Java and Buleleng Airport in North Bali. As of May 2014 these projects are still in the preparation stage. Clyde & Co will soon publish analysis of the Karawang International Airport and Kertajati Airport projects.
We set out a summary of the ten airports proposed for the PPP management scheme, as follows:
To view the table, click here.