The Governor of Jakarta Basuki “Ahok” Tjahaja Purnama is set to visit the city-state Singapore next week on October 20, 2015. The Governor will spend the night, before returning to Jakarta the following day. While in Singapore, Ahok will give a business pitch in front of several hundred investors—over two hundred have reportedly confirmed their attendance—in a business forum meeting. His target is to bring home firm commitment to invest in Jakarta’s infrastructure project.
In a meeting with the representatives of the Indonesian Embassy in Singapore, Governor Ahok clearly stated his objective: He’d like to attract investor into his Port of Jakarta vision. The Port of Jakarta will be an expanded sea port area that will include not only the current Priok Port, and the New Priok Port, but also a new sea port to be built in the O, P, and Q artificial island the Government of Jakarta would like to reclaim in the near future.
The planned, artifical O island is positioned next to the N island, which is now being developed as the extension of the Tanjung Priok Port, otherwise known as the New Priok. The P island is position next to the O island; and the Q island next to the P island. This row of N, O, P, Q island, and the coastline beneath them will make for the so-called Port of Jakarta area.
The Priok Port and the New Priok Port are under the management of state-owned Pelindo II. The O island is within the area of the Marunda Special Economic Zone (KEK Marunda). The P and Q islands is within the area of the Cakung Bonded Zone (KBN Cakung). As such, the Port of Jakarta authority is currently projected to be an authority wherein Pelindo II, KEK Marunda, and KBN Cakung, each has their share. Governor Ahok would also like to have Jakarta’s holding company PT Jakarta Propertindo (Jakpro) to have a share in this envisioned port authority.
The mission to Singapore would be to attract strategic investors into the development of the Port of Jakarta, not as contractors, but as potential future shareholders of Port of Jakarta. The Dutch is reportedly keen, which would explain why Ahok went to the Netherlands last month; the Governor visited the Port of Rotterdam authority with his key staff members to develop the concept for the Port of Jakarta plan. Right now, the Governor would like to bring in Singapore’s port authority as investor.
Ahok is also keen to meet with Temasek. He told his staff that the meeting with the latter will be an informal one; there were repeated mentions about Temasek’s supposedly cautious approach to dealing with Indonesian businesses. The Governor seems aware of this, but he’s nonetheless eager to meet with Temasek to talk about his vision. What was particularly interesting to hear was Ahok’s statement that many, who otherwise believe in his commitment, inquired about the security of their investment in the absence of the Governor. “What if you (Ahok) are not there (leading Jakarta) anymore?” Jakarta’s prospective investors asked the Governor. Ahok, unfortunately, do not have a firm answer.
What Ahok has in mind now is to keep strategic projects under the wing of Jakpro. He would then push for Jakpro to become a publicly listed entity, but this IPO plan remains a plan. Ahok is still on the fence on which entity he’d rather push towards IPO. Ahok thinks it would also make sense to keep Jakpro as a Jakarta-owned entity, and instead push Jakpro’s subsidiaries towards IPO.
Right now, the Governor may have developed a preference on having Jakpro to establish an investment holding company, by way of a joint-venture, with the Jakarta-owned financial institution Bank DKI. This investment holding company will be the Temasek of Jakarta; not Jakpro, as initially planned. The reason for this being Jakpro will always be under the control of the Government of Jakarta, and to some extent porous to the influence of Jakarta’s Legislative Council (DPRD DKI) for Jakpro will always have to be under the supervision of DPRD DKI. But there’s presumably a different story for Jakpro’s subsidiary. Being a step down, the company’s subsidiaries would supposedly have an increased degree of independence. The details of this degree of separation, however, remains unclear.
What is clear today is that Ahok is trying to find a way to make sure that Jakarta will not change drastically without him steering the development. This is indeed a difficult challenge. Even if Ahok were to find a clever way to secure strategic infrastructure development project from the interference of fickle politics, there’d still be that unpredictability that is characteristically Indonesia today. Recall the decision of the Constitutional Court with regards to the privatization of the management of the water sector. The Court’s decision drastically changed the business arrangement in the water sector and directly undermined business commitments made to last for years. This is something that could happen in Indonesia. Who is there to guarantee that something of the sort would not happen with regards to the management of other strategic sectors, such as the logistic sector? This is the problem with investing in Indonesia. Beyond politics, there are other concerns that ultimately put a massive question mark on this country as an investment destination. And to be frank, no one in the Government seems to be aware of this elephant in the room.
