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Indonesia scraps plan for foreigners to manage airports

Publication Date : 17-12-2013

 

The Indonesian government has bowed to pressure from nationalistic quarters by scrapping its plan to allow foreigners to become majority or controlling shareholders in airport management, in the much-anticipated revised negative investments’ list (DNI).

“In the airport industry, the discussion now is to have [a maximum ownership of] 51 per cent for local investors and 49 per cent for foreign investors,” Investment Coordinating Board (BKPM) chairman Mahendra Siregar told reporters in his Jakarta office on Monday.

“We’ve discussed this issue with firms in the airport management industry, both locally and internationally, and I think such an ownership threshold is already [sufficient] to make our airport management industry more conducive and appealing,” he explained.

Foreign investors may still own majority ownership in seaport management, though, maximum ownership there could be relaxed to 95 percent, Mahendra said, without explaining the reasons.

The final say would be decided in a meeting with Coordinating Economic Minister Hatta Rajasa and other government officials later this month, the BKPM chief added.

The government announced its plan last month to relax the foreign ownership cap in infrastructure management industries, such as airport and seaport management, with Hatta previously stating that foreigners would soon be able to own up to 99 per cent in the sectors, from a previous level of zero percent.

But the plan was shelved after it triggered controversy in the local media, with critics describing such a plan as “un-nationalistic” as it prioritised foreign interests at the expense of local firms.

On the other side of the argument however, economists said the plan would give a much-needed boost to connectivity in the archipelago as it could lure more foreign investment to the infrastructure sector.

Mahendra acknowledged many foreigners were still reluctant to provide funding for building airports and seaports as they were not allowed to have a stake in their management.

Currently, state-run firms such as PT Angkasa Pura and PT Pelindo have the exclusive rights to manage airports and seaports in the country, but their “monopoly” in the sectors and the lack of competition there have been blamed for poor service quality within the industries.

“Yes, we should give support to domestic firms, but it should be taken to a degree that there isn’t a monopoly there,” Deputy Finance Minister Bambang Brodjonegoro once said.

Bambang noted that the underdevelopment and poor service quality of Indonesia’s airports had been a “mistake” of airport operators.

“If there’s a monopoly in the industry, then Angkasa Pura can just ask why should it pay attention to service quality at [Soekarno-Hatta International Airport in] Cengkareng?” he said.

In interviews with The Jakarta Post, representatives from Pelindo and Angkasa Pura have thrown weight behind the proposal to open the infrastructure management industries to foreign investment, saying the move could give much-needed capital to boost efficiency in Indonesia’s airports and seaports.

“We’ve been expecting the industry to be opened to foreign investors or strategic partners from overseas for a long time,” said Farid Indra Nugraha, corporate secretary of Angkasa Pura I, which manages airports in Indonesia’s central and eastern regions.

“In fact, it was us that first invited foreigners as partners [in airport management],” he said.

“We asked South Korea to cooperate in our airport in Surabaya [in East Java], as well as India in our airport in Bali,” he said, arguing the entry of foreign investors would boost the service quality of airports in the country.

 

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