Mega-Bridge Tests Yudhoyono With Legacy in Focus: Southeast Asia

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Rows of trucks wait at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia. Close

Rows of trucks wait at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia.

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Photographer: Dimas Ardian/Bloomberg

Rows of trucks wait at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia.

For Aat Djunaidi, a 12-hour wait to catch a ferry linking Indonesia’s most-populous islands isn’t so bad. On some trips the 41-year-old waits for two days before his truck can cross the Sunda Strait from Java into Sumatra.

“If they build a bridge, it would take just 20 minutes to cross,” Djunaidi, who makes the journey three times a week to transport Suzuki motorcycles, said while waiting at the back of a four-kilometer (2.4-mile) queue. “I’d be happy if I get to use the bridge in my lifetime.”

Indonesia will soon decide whether to proceed with what would be the world’s largest suspension bridge, according to Luky Eko Wuryanto, a deputy minister overseeing infrastructure projects. First conceived half a century ago, the planned 29-kilometer link that would cost an estimated $15 billion has spawned a debate over the best way to reduce logistics costs in a country with more than 17,000 islands and 250 million people.

While advocates say the bridge will bring new investment to Southeast Asia’s biggest economy, detractors see it as a liability that could jeopardize economic gains President Susilo Bambang Yudhoyono has made since taking office in 2004. With a year left in his final term and his party’s popularity sagging, any decision to push ahead with the bridge may have more to do with securing votes and less to do with economic benefits.

Photographer: Dimas Ardian/Bloomberg

A driver takes a nap between two parked trucks while waiting at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia. Close

A driver takes a nap between two parked trucks while waiting at a port to catch the... Read More

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A driver takes a nap between two parked trucks while waiting at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia.

“He wants to leave these tangible, physical legacies, and the bridge is clearly one of them,” said Hal Hill, a professor of Southeast Asia economies at Australian National University in Canberra who advises the World Bank and Asian Development Bank. “The real worry, and in fact the likelihood I think, is that this bridge would become a white elephant. It would not just be costly, but it would actually blow up Indonesia’s well deserved achievement of macroeconomic stability.”

Investment Grade

Yudhoyono has seen Indonesia raised to investment grade since 2011 as economic growth rates exceeded 4 percent during the global financial crisis. Last month he raised fuel prices to cut an annual subsidy bill of more than $20 billion that is sapping funds needed for roads and bridges that could propel the economy toward his goal of 9 percent annual growth.

The fuel subsidy cut will lead to more spending next year on public works, energy and infrastructure projects, Aldian Taloputra, an economist at PT Mandiri Sekuritas, said today in a note citing Bambang Brodjonegoro, head of the finance ministry’s fiscal policy office.

Photographer: Dimas Ardian/Bloomberg

A driver sits in his parked truck while waiting at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia. Close

A driver sits in his parked truck while waiting at a port to catch the ferry linking... Read More

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Photographer: Dimas Ardian/Bloomberg

A driver sits in his parked truck while waiting at a port to catch the ferry linking Java and Sumatra in Merak, Indonesia.

Even so, corruption scandals and price rises have damped support for his Democrat party, which has yet to announce its nominee for next year’s presidential election. An Indonesia Research Center survey conducted in May found that 57 percent of respondents said they were not satisfied with Yudhoyono’s presidency, the Jakarta Globe reported. The poll had a 2.3 percent margin of error.

Bridging History

The plan for a bridge linking Java and Sumatra dates back to 1960, when Indonesia’s first president, Soekarno, put it in a national development plan. After decades with little progress, the project was revived in 2004 in part by the Artha Graha Network, a conglomerate owned by Tomy Winata, who also plans to build Jakarta’s biggest building. Winata has listed holdings of $59 million, according to data compiled by Bloomberg.

Yudhoyono threw his support behind the Sunda Strait Bridge during his first term in office. While campaigning for re-election in 2009, he told residents on the Sumatra side of the strait that work on the bridge would start within five years. As recently as March, he said the bridge must proceed given its strategic importance in the longer term, the Jakarta Globe reported.

Feasibility Study

Wrangling over how best to conduct a feasibility study has stalled things since 2011, when Yudhoyono listed the bridge as the most expensive among 400 infrastructure projects to jumpstart the economy. Of those, work has started on 603 trillion rupiah ($61 billion) worth of projects, or 12 percent of the total value, according to Wuryanto, deputy coordinating minister for the economy.

A ministerial team will soon decide how to proceed, Wuryanto said by phone on June 24. The finance ministry has opposed Winata’s group conducting the feasibility study on its own due to concerns over the independence of the results, he said, adding that state-run companies may now get involved.

“They will be asked to do a feasibility study and that’s not cheap,” Wuryanto said of the state-run companies. “Such an expenditure will have to go through a consultation with legislators, and the question is whether they would allow this.”

Bridge Backers

Even so, the bridge has backers within the administration. Coordinating Minister for Economic Affairs Hatta Rajasa told reporters last week the bridge will begin construction soon, the Jakarta Post reported on July 4.

Hermanto Dardak, vice minister for public works, said the government wants to start the project next year.

“The bridge is important for not just the economy but also to bring Sumatra and Java in one because there’s a significant inter-dependence,” Dardak said in an interview, adding that Sumatra has natural resources that can be processed in Java.

Artha Graha’s design shows the Sunda Strait bridge soaring about 85 meters (279 feet) above the water, featuring two three-lane roads with a double rail track down the middle. It would take about a decade to build, Winata said in a June 13 interview. Most of the expense would come from building the foundation, including six artificial islands made of concrete.

Winata, who said his company has spent $50 million studying the bridge since 2004, said he’s ready to work with any government appointees to the project, including state-owned companies. He said he could line up investors, potentially from China, Japan, South Korea and the U.S., within six months if the government signed a cooperation agreement with him.

Winata Funding

Winata said he wants funds to come from the private sector, with the government guaranteeing that contracts are honored and regulations overseeing the project aren’t changed. Winata and other investors would seek to get their money back via bridge tolls and profit generated from developing proposed strategic economic zones on either side.

“At the end it will make the financing burden of the bridge come down,” said Winata.

Finance Minister Chatib Basri said his biggest concern over the project is governance and assessing the cost to taxpayers if anything goes wrong. The bridge would sit in an earthquake-prone area about 60 miles from the active Anak Krakatau volcano.

“We have to look at the contingent liabilities, what will be the impact on our budget,” Basri said in a June 19 interview.

Corruption Perception

Indonesia’s political parties, parliament, judiciary and police are perceived as among the most corrupt institutions in the world, according to Transparency International’s Global Corruption Barometer 2013. Muhammad Nazaruddin, the former treasurer of Yudhoyono’s party, was sentenced in April 2012 to four years and 10 months in prison in a bribery case involving building projects for the Southeast Asian Games.

Even if the bridge moves towards a feasibility study, drivers like Djunaidi don’t have much faith in final approval coming anytime soon. Tuki, who has been driving trucks across Indonesia since the 1970s and like many Indonesians uses one name, said life would stay the same.

“Presidents come and go, but nothing really changes,” the 61-year-old said as he prepared to roll his truck onto the ferry after queuing for seven hours. “We’ll still be waiting.”

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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