Transportation Minister Budi Karya Sumadi Tested Kepala Gading - Velodrome LRT - Photo by Transportation Ministry

JAKARTA (TheInsiderStories)–The Indonesian Government is evaluating several future infrastructure projects, including Patimban Port and Jakarta-Surabaya medium-speed train, in view of reducing the needs for imports thus keeping the rupiah stable, Transportation Minister Budi Karya Sumadi said on Tuesday (31/07).

The evaluation came after an instruction by President Joko Widodo who views that less imports of raw materials and capital goods from big infrastructure projects would help to stabilize the rupiah.

Sumadi will evaluate some infrastructure projects such as Patimban port and medium-speed train Jakarta-Surabaya. The government, however, will not review existing infrastructure projects that are underway, he added.

In the case of Jakarta-Surabaya medium-speed train, which is estimated to cost Rp80 trillion most of which will be financed by Japanese lenders, at least of 20 percent of capital goods will be imported, the minister said. The government wants the imports of capital goods to be reduced to as much as 10 percent.

Construction of the Jakarta-Surabaya medium-speed train is expected to start this year. The first phase will reportedly be a Jakarta-Semarang section, which will be completed within two years. The second, Semarang-Surabaya phase, will start construction in 2019.

Furthermore, the government wants to increase the portion of local components in Patimban Port project to 65-75 percent from currently 60-70 percent, the minister said.

The Patimban Port project is located in Subang, West Java and is expected to be completed in 220. The government has secured financing commitment worth ¥118 billion (US$1.09 billion) mostly from the Japan International Cooperation Agency (JICA) with a 40-years tenor and interest rate of 0.1 per cent for the first phase of Patimban Port project.

Indonesia imported materials worth US$4.1 billion for infrastructure projects in the first five months this year, according to the Central Statistics Agency data. Indonesia recorded US$1.02 billion in trade deficit from January to June 2018. Export in January to June 2018 reached US$88.02 billion, an increase by 10.03 percent (year to year), while imports reached US$89.04 million or increased 23.10 percent (year to year).

The trade balance deficit adds more pressure on the country’s this year current account deficit. The current account deficit was US$5.5 billion or 2.15 percent of gross domestic product (GDP) in the first quarter this year, triggered by the deficit in primary income and services that reached US$7.9 billion and US$1.4billion, respectively. As a result, the country’s balance of payment recorded a deficit of US$3.9 billion.

Bank Indonesia earlier said the current account deficit is seen around 2.5 per cent to 3 per cent of GDP, possibly putting more pressure on the rupiah. Indonesia always records a current account deficit in the past six years.

This condition sends rupiah lower against US dollar. Rupiah weakened 0.03 percent at Rp14.410 per US$1 at 14.00 WIB today (31/07). In addition, the exchange rate reference of Jakarta Interbank Spot Dollar Rate (Jisdor) weakened 0.02 percent at Rp14.413 per US$1 today.

Email: fauzulmuna@theinsiderstories.com