Indonesia to Allow More Foreign Investment in Airports?
The Indonesian government may soon revise its negative investment list (in Indonesian: dafter negatif investasi) to attract more foreign investment into Indonesia. The government is specifically seeking to allow bigger foreign stakes in the management of airports across the Archipelago.
Currently, foreigners cannot own a majority stake in a joint venture (with an Indonesian party) to operate an airport in Indonesia. However, Indonesian President Joko Widodo seems eager to encourage more foreign direct investment (FDI) in order to boost Indonesia's overall economic growth. Infrastructure and connectivity remain key bottlenecks that need to be overcome in Indonesia in order to boost competitiveness of local businesses. Hence, the establishment of new airports or the expansion of the nation's existing airports is vital.
However, government-owned companies and the government (either central or regional) have limited financial resources for airport (expansion) development projects and therefore private investors are needed. Bayu Sutanto, Head of the Scheduled Flights Division at the Indonesian National Air Carriers Association (INACA), would support the government's plan to allow more foreign investment in Indonesian airports. He says there are many foreign investors interested to invest in the operation of airports. However, they want to be able to obtain a majority stake in the project. Currently, the maximum foreign ownership is set at 49 percent for airport operation services.
Sutanto added that airport operations in Indonesia are currently done by either the government or state-owned enterprises. Therefore, this sector lacks a healthy level of competition that would result in better services and operations at local airports.
It remains unknown whether the government plans to allow a bigger stake to foreign investors in the land-side area (such as check-in, parking lots, public transport railway stations), the air-side area (such as runways, taxiways and apron/rams), or both. The plan is still being studied by the government.