Japan, Indonesia Sign Deal US$1 Billion for Patimban Port

President Joko Widodo meets with Japanese PM Abe. (Photo source : Cabinet Secretary)

JAKARTA (TheInsiderStories) – Japanese and Indonesian Government signed Rp15 trillion (US$1.11 billion) loan to construct Patimban sea port in West Java, Foreign Ministry reported. The new sea port its expecting to start operating in early 2019.

Kozo Honsei Deputy Chief of Mission Embassy of Japan Indonesia sadi the project will be funded mostly by the Japan International Cooperation Agency (JICA) for a reported a 40 years tenor loan worth US$1,04 billion or ¥118 billion with interest rate 0.1 per cent for the first phase and will be disbursed as soon as the project start constructing on 2018.

“The Japan Ambassador already signed the loan agreement together with Indonesian Foreign Affair Ministry on November 13th,” said Honsei on Monday (13/11) during the signing of Loan Memorandum Exchange companied by Desra Percaya, Director General of Asia Pacific and Africa, Ministry of Foreign Affairs,

The Port of Patimban is set to commence operation in March 2019. The first stage is the construction of the port and the first stage access road connecting Patimban and Pantura national road along 8.1 kilometres. The project will require 570 hectares of land, the acquisition of which will be funded using the State Budget and cost Rp 500 billion ($37 million).

The port will be located about 70 kilometers from the Karawang Industrial Estate and Bekasi in West Java, where many Japanese industrial firms, particularly automotive and electronics manufacturers, operate.

Senior Representative of JICA Kawabata Tomoyuki said the project will be developed in three stages. The first stage works will include terminal, sea wall, channel dredging and connecting bridge. Indonesian government will hold project auction to find the operator who will lead the port. Land procurement is also expected to finish in February next year.

“Japanese company will join the auction and will open the chance to cooperate with Indonesian company. We hope the soft opening will be held in 2019,” said Tomoyuki.

Meanwhile, the second stage access road to the Port of Patimban, which connects Subang with the national road and Cipali toll road, is still being discussed with JICA. The second stage access road along 40 kilometres will cost around Rp5.35 trillion. The constructon plan is set to begin in 2020.

Indonesia hopes the port will help it jack up its automotive exports by 30 per cent once it becomes operational. It will have the capacity to handle 1.5 million 20-foot equivalent units (TEUs) of containers once it is partly complete in 2019 and 7.5 million TEUs by 2027.

The Patimban Port project is one of several flagship projects between Indonesia and Japan, a long-time investor that now intensively seeks a tighter grip on infrastructure in Southeast Asia’s largest economy.

Other projects include the development of the MRT system and the revitalization of the Jakarta-Surabaya railway, which will reduce travel time between Java’s main cities by nearly half to only five hours.

Indonesia offered the railway project to Japan after the former disappointed the latter by granting another high-speed railway project, which links Jakarta and West Java’s capital Bandung and is estimated to cost more than $5.5 billion, to China.

JICA and the Agency for the Assessment and Application of Technology are carrying out two separate studies on the design of the Jakarta-Surabaya railway.

Previously, Minister of Transportation, Budi Karya Sumadi stated, the operator will be 51 percent-owned by a national entity and 49 percent by Japan. The national entity will be a combination between a state-owned enterprise and a private company. He added, there are at least three companies interested in becoming a Patimban operator, such as state-owned port operator PT Pelabuhan Indonesia (Pelindo) II, conglomeration firm PT Astra Internasional Tbk (IDX: ASII), Japan’s Toyota Motor Corp. and Mitsubishi Corp.

Indonesia and Japan have agreed to increase their cooperation as the two countries celebrate a 60-year anniversary of diplomatic relations next year. In the meeting with Prime Minister of Japan Sinzo Abe in Manila, Philippines, President Joko Widodo said that next year Indonesia and Japan will celebrate their anniversary with the theme of ‘Modern Technology’.

‘With this improvement, I hope Japan’s investment in 2017 will surpass last year’s realization,’ said Widodo in the sidelines of ASEAN Summit meeting on Sunday (12/11)

During a bilateral meeting, Foreign Minister Retno Marsudi told journalists that the two leaders have also launched a 60-year logo of diplomatic relations between Indonesia and Japan.

Indonesia called on Japan to open access for Indonesia’s agriculture and fisheries products, to finish the review of Double Tax Avoidance Agreement, improve access and capacity for Indonesian nurses to meet Japan’s standards, to start a general review of the Indonesian-Japanese Economic Partnership Agreement this year.

Indonesia also asked Japan to consider a plan to increase air connectivity by opening PT Garuda Indonesia Tbk (IDX: GIAA) flight service to Los Angeles in U.S via Tokyo in Japan.

The two countries also agreed to enhance cooperation on the economy, including a plan to develop Patimban Seaport and Masela Block, to conduct initial discussions on the construction of a Jakarta-Surabaya high-speed train, and to further cooperation on integrated marine and fisheries center development in frontier islands of Indonesia.

Indonesia has become a ‘golden place’ for overseas Japanese investors. In recent years, the economic partnership between Indonesia and Japan has strengthened and grown rapidly.

Japan has more investments in Indonesia than any other Southeast Asian country, and according to data from Indonesia’s Investment Coordinating Board, investment from Japan to Indonesia has increased considerably, totaling $5.4 billion in 2016 and with an average growth rate of 30 percent.

In 2015, President Widodo set an ambitious goal of developing 35,000 MW of power capacity over the next five years, to resolve Indonesia’s endemic electric power shortages and propel economic growth.  Japanese investors have and are expected to continue to play a significant role in this development.

One example is PT Bhumi Jati Power, established by Sumitomo Corp., as lead developer, building a coal-fired plant in Central Java with a total investment of $4 billion. Other projects include Itochu Corp. and J-Power’s 2×1000 MW power plant development in Batang, Central Java, with a total investment of US$2 billion.  

Written by Elisa Valenta, email: elisa.valenta@theinsiderstories.com