Jokowi seeks investors for Indonesia's airports

[JAKARTA] Indonesia, under pressure to rein in its budget deficit, plans to sell minority stakes in some of the nation's airports and ports to private investors as President Joko Widodo seeks investment to fund his ambitious infrastructure agenda.

The government intends to sell as much as 45 per cent in 10 airports and 20 ports but will retain state control of the facilities, Transport Minister Budi Karya Sumadi said in an interview Wednesday in Jakarta. The sale will start in 2017 with Kualanamu airport in North Sumatra and Sepinggan airport in East Kalimantan. It will invite companies including Incheon International Airport Corp, GVK Power & Infrastructure Ltd and Vinci SA to bid, he said.

"Airports and ports that generate profits will be given to the private sectors to be managed professionally," said the 59-year-old Sumadi, who was appointed by Mr Widodo in July to replace Ignasius Jonan. Amid dwindling state revenue, the government wants spending on major airports and ports to be reallocated to those in remote areas, he said.

Mr Widodo is turning to private investors for funds as a shortfall in tax revenue and sputtering economic growth caused by a slump in commodity prices stymie his plans to ramp up spending on new roads, ports, railways and airports. He wants to boost economic growth to 7 per cent, while the central bank last month forecast expansion for this year at the lower end of its 4.9 per cent to 5.3 per cent range.

As part of his infrastructure push, Widodo, also known as Jokowi, wants to improve connectivity between the 13,466 islands in the archipelago as rising incomes and lower fares offered by budget airlines boost demand for air travel.

The number of passengers in Indonesian skies reached an estimated 88.7 million in 2015, tripling over a five-year period, according to the World Bank. The International Air Transport Association sees that number reaching 219 million in 2034, placing the country fourth in terms of fastest projected growth, after China, U.S. and India.

State-owned operators PT Angkasa Pura I and PT Angkasa Pura II oversee the nation's 26 airports across the archipelago.

BLOOMBERG