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STUDY ON PRIVATE-INITIATIVE INFRASTRUCTURE PROJECTS IN

DEVELOPING COUNTRIES IN FY2011

STUDY ON SOEKARNO HATTA INTERNATIONAL AIRPORT


EXPANSION AND UPGRADING PROJECT IN JAKARTA
IN THE REPUBLIC OF INDONESIA

FINAL REPORT

February 2012

Prepared for:

The Ministry of Economy, Trade and Industry

Prepared by:

ITOCHU Corporation

SHIMIZU CORPORATION

Japan Airport Terminal Co., Ltd.

Nikken Sekkei Ltd

Nikken Sekkei Research Institute

Japan Economic Research Institute Inc.


Reproduction Prohibited
Preface

This report is a summary of the results of a Study on Private Sector Initiative Infrastructure Projects

commissioned as a project in fiscal year 2011 by the Ministry of Economy, Trade and Industry to

ITOCHU Corporation, SHIMIZU Corporation, Japan Airport Terminal Co., Ltd., Nikken Sekkei Ltd.,

Nikken Sekkei Research Institute, and Japan Economic Research Institute Inc.

This Study on Soekarno Hatta International Airport Expansion and Upgrading Project in Jakarta in

the Republic of Indonesia was an investigative study of the feasibility of a project for expanding and

upgrading the airports airside facilities, upgrading utility facilities, constructing new terminal

building, renovating and upgrading existing terminal buildings and constructing new commercial

buildings at a budget of approximately 104.5 billion yen. In recent years the number of passengers

using Soekarno Hatta Airport in the Jakarta Metropolitan Area of the Republic of Indonesia has been

increasing dramatically. Realization of a project to expand and upgrade the airport will contribute to

resolving problems resulting from aviation demand surpassing anticipated capacity.

We sincerely hope that this report will be of assistance in the realization of the above project and will

also serve as a useful reference for interested parties in Japan.


February 2012

ITOCHU Corporation

SHIMIZU CORPORATION

Japan Airport Terminal Co., Ltd.

Nikken Sekkei Ltd

Nikken Sekkei Research Institute

Japan Economic Research Institute Inc.


Map of the Project Site

Map of Indonesia

Source: Prepared by the Study Team from Google Earth photos

Location of Soekarno Hatta Airport

Source: Prepared by the Study Team from Google Earth photos


List of Abbreviations
Abbreviations Long Forms
ACI Airport Council International
APM Automated People Mover
AP-I PT. Perum Angkasa Pura 1
AP-II PT. Perum Angkasa Pura 2
ASEAN Association of SouthEast Asian Nations
Badan Perencanaan Pembanguan Nasional
BAPPENAS
(National Development Planning Agency)
BCP Business Continuity Plan
BHS Baggage Handling System
CH/IN Check-in
CPI Consumer Price Index
DGCA Directorate General Civil Aviation
EIRR Economic Internal Rate of Return
EV Elevator
FIRR Financial Internal Rate of Return
IDR Indonesia Rupiah
IIGF Indonesian Infrastructure Guarantee Fund
JABODETABEK Jakarta, Bogor, Depok, Tangerang and Bekasi
JCR Japan Credit Rating Agency Ltd.
JETRO Japan External Trade Organization
JICA Japan International Cooperation Agency
JIS JapanTerminalBuilding, Itochu, Shimizu
JPY Japanese Yen
LCC Low Cost Carrier
METI Ministry of Economy, Trade and Industry (Japan)
MOSOE Ministry of State-Owned Entrprises (Indonesia)
MOT Ministry of Transportation (Indonesia)
Master Plan for Establishing Metropolitan Priority Area for Investment and
MPA
Industry in Jabodetabek Area
PMC Project Management Consultant
PTB Passenger Terminal Building
PPP Public Private Partnership
R&I Rating & Information Investment Inc.
ROE Return On Equity
SBI Central Bank of the Republic of Indonesia
Table of Contents

Executive Summary

(1) Background and necessity of the project S-1


(2) Basic policy concerning decisions on project content S-3
(3) Project overview S-7
(4) Implementation schedule S-14
(5) Feasibility of implementation S-15
(6) Superior Technology of Japanese companies S-17
(7) Concrete schedule for realizing the project and risks inhibiting its realization
S-19
(8) Maps indicating the project implementation site S-23

Chapter 1: Overview of the Host Country and Sector

(1) Economy of the Country & Financial Conditions of the Government 1-1
(2) Description of the Targeted Sector 1-8
(3) Description of Project Area 1-13

Chapter 2: Study Methodology

(1) Contents of the Study 2-1


(2) Method and Organization of the Study 2-3
(3) Schedule of the Study 2-4

Chapter 3: Justification, Objectives and Technical Feasibility of the Project

(1) Project Background and Necessity, etc. 3-1


(2) Necessary considerations for determining project details, etc. 3-17
(3) Project Plan Overview 3-42
Chapter 4: Evaluation of Environmental and Social Impacts

(1) Analysis of current environmental and social conditions 4-2


(2) Improvement effect of the environment accompanying the implementation of the
project 4-4
(3) Environmental and social impacts accompanying the implementation of the project
4-4
(4) Summary of laws and regulations relating to environmental and social considerations
of the partner country 4-14
(5) Procedures the implementing country (implementing or other relevant organization)
must follow for realizing a project 4-20

Chapter 5: Financial and Economic Evaluation

(1) Project Cost Estimate 5-1


(2) Overview of the Results of Preliminary Financial/Economic Analysis 5-4

Chapter 6: Planned Project Schedule

(1) Planned Project Schedule 6-1


(2) Issues Pertaining to the Project Schedule 6-2

Chapter 7: Implementing Organization 7-1

Chapter 8: Technical Advantages of Japanese Companies

(1) Expected Form of Japanese Involvement (Investment, engineering, procurement &


management, and operation & management) 8-1
(2) The Competitive Advantage that Japanese Companies have in the Implementation of
this Project (Technology , Economic Aspects) 8-19
(3) Measures Necessary to Promote the Issuance of Orders with Japanese Companies
8-22
Chapter 9: Outlook for Fund Procurement

(1) Review of Sources of Funds and Financing Plans 9-1


(2) Possibility of Funding 9-2
(3) Cash Flow Analysis 9-13

Chapter 10: Action Plan and Issues

(1) Status of Activities for the Implementation of the Project 10-1


(2) Status of Activities of Relevant Government Agencies and Implementers in Indonesia
for the Implementation of the Project 10-2
(3) Legal and Financial Restrictions of Indonesia 10-3
(4) Necessity of Additional Detailed Analysis 10-18
Executive Summary
(1) Background and necessity of the project
1) Background of the project

Aviation demand in Indonesia is growing at a remarkable pace and the Soekarno Hatta International

Airport (hereafter referred to as Soekarno Hatta Airport) plays a central role in aviation transport for

the Jakarta Metropolitan Area (Jabodetabek). In addition to being the major gateway of Jabodetabek,

the airport also serves as a domestic air transport hub. Since it commenced operation in 1985, the

number of users of Soekarno Hatta Airport has grown steadily and in 2010 the number of passengers

reached a record 44 million, surpassing the airports capacity.

In December 2010 a memorandum of cooperation was signed between the governments of Japan and

Indonesia for the concept of Metropolitan Priority Area for Investment and Industry (MPA) in

Jabodetabek Area for the development of infrastructure in Jabodetabek, and JICA commenced a

master plan study for this purpose in May 2011. JICAs master plan focuses on the development of

infrastructure essential for promoting further growth in Jabodetabek, which plays a key role in

Indonesias rapidly growing economy, and targets nine priority sectors. One of the priority sectors is

airport facilities and the master plan proposes a plan for the expansion of Soekarno Hatta Airport.

The Project for the Master Plan Study on Multi-Airport Development for Greater Jakarta

Metropolitan Area in the Republic Indonesia (hereafter, JICA Master Plan), which JICA is currently

in the process of preparing, also presents plans for the development of new airport in the future. The

plan presented here also aims at accommodating Indonesias increasing airport demand through the

expansion and upgrading of Soekarno Hatta Airport in the interim period before any new airports are

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ready to commence operation.

At the same time, Angkasa Pura II (hereafter, AP-II), the state-owned enterprise currently operating

Soekarno Hatta Airport, has already prepared its own plan for the expansion of the airport, which it

announced in 2011. However, progress in the implementation of this project has fallen behind the

schedule of the initial plan.

2) Issues in Soekarno Hatta Airport and the need for expansion and upgrading

In 2010 passenger numbers at Soekarno Hatta Airport increased about four-fold in comparison with

passenger numbers recorded in 2000. Reaching 44 million in 2010, passenger numbers far exceed

the terminals capacity of 22 million. As a consequence, the airport must contend with the following

issues:

Congestion in the terminal building

Congestion on the apron

Congestion in airport parking lots

During the Study Teams site survey, the following problems also came to light:

Loss of business opportunities

Inadequate security measures

Aging of facilities

In view of the current state of the airports overextended capacity and congestion both landside and

airside, it can be said that the expansion and upgrading of Soekarno Hatta Airport is an issue that

needs to be addressed urgently. In addition to responding to the need for tighter airport security

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reflecting the 9.11 terrorist attacks, environmental considerations in facilities used, and the

introduction of energy-saving equipment, this airport must fulfill its role as the gateway to Indonesia

by providing a range of services for airport users and endeavoring to enhance their level of

satisfaction.

In the context of various requirements mentioned above, a Japanese private sector group to

participate in an expansion and upgrade project for this airport first needs to determine the feasibility

of the project by engaging in consultation with AP-II and relevant government organizations. The

purpose of this study is to investigate and examine the feasibility of the expansion and upgrading of

Soekarno Hatta Airport by drafting a plan from the viewpoint of the airport management and from

the viewpoint of private sector companies intending to participate in the project.

(2) Basic policy concerning decisions on project content


1) Basic policy of the study

As mentioned above, the expansion and upgrade of this airport is a pressing issue. However,

respective master plans drawn up by AP-II and the Directorate General Civil Aviation (hereafter,

DGCA) have not been coordinated; rather, the two master plans stand as independent, parallel

documents.

After having assessed the respective master plans for the expansion of Soekarno Hatta Airport,

conducted the Study Teams own airport site surveys and interviews with AP-II and other related

organizations and consulted with JICA Master Plan Team, the Study Team will examine in this study

a project menu of options for the airport expansion, methods of financing, and a project schedule.

Then, the Study Team will present proposals to AP-II to further explore the feasibility of the project

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through dialogues.

2) Forecast for demand and airport capacity

We established 60 million passengers in 2017 (domestic passengers: 47 million, international

passengers: 13 million) as a forecast figure for demand of air travel to and from Jakarta area, and this

figure was agreed on in consultation with the DGCA, AP-II and the JICA Master Plan Team.

Plans for a new airport are being considered for 2017 onwards when the demand for air travel can be

expected to exceed 60 million passengers annually but at this stage the plans are still in a state of

flux. Therefore, this study will remain within the parameters of annual passenger numbers to a

maximum of 60 million with the use of two runways (excluding preliminary investigations described

in Chapter 4).

The current capacity of the terminals including Terminals 1 through 3 is 22 million, which falls far

short of the actual number of passengers at 44 million. On the other hand, the annual takeoff and

landing capacity for the current two runways is 370,000, and therefore it is estimated that there is

available capacity until about 2015. It is believed that the airport can accommodate 60 million

passengers annually with current capacity for take offs and landings.

3) Analysis of revenue structure and identification of management issues

A look at the revenue structure of Soekarno Hatta Airport shows that a little less than 80 % of the

airports revenues are related to aviation business while a little over 20% are derived from

non-aviation business and just under 2% of revenues are related to cargo business. The ratio of

revenues related to non-aviation business is low compared to international standards (2010 Airport

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Council International Study: 46.5 %) as well as standards for major Asian airports (a little over 40 %

for Narita, Hong Kong, Thailand and Malaysia, and about 50% for Singapore). Therefore, it is

believed that there is significant room for improvement. In specific terms, there is a need for increase

in space available for leasing following the expansion of the terminal buildings, improvement in the

quality of shops and inclusion, as customers, of those visitors to the airport who at present are unable

to enter the terminal buildings when they send off or meet passengers. To increase unit sales per

customer, the establishment of attractive commercial facilities is also necessary. The airport will

have to continue its management efforts by replacing and upgrading shops on the premises to meet

the ever-changing preferences of customers, as well as promoting the development of shops to meet

the various needs of departing customers, customers in transit, and customers sending off

passengers.

4) Goal setting and basic policy for the expansion project

a) Goal setting for the expansion project

Taking into account the current status of the airport facilities and management issues regarding

revenue, the Study Team set the following goals for the Soekarno Hatta Airport expansion project.

(i) To resolve the problem of insufficient capacity by appropriately providing facilities on the

airside (taxiways and aprons) and on the landside (terminals etc.), so that Soekarno Hatta

Airport can contribute to the further development of Indonesias economy

(ii) To promote improvement in customer satisfaction level and airport security by adjusting the

airport to the present world-wide needs through expansion and modification for solution of

existing issues, so that Soekarno Hatta Airport can be transformed into a world-class airport

(iii) To promote infrastructure development with a view to making Soekarno Hatta Airport an urban

hub in the long term

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b) Basic policy for the expansion project

Based on the targets we set for the expansion project, we established the following basic policy for

the development of facilities.

(i) To promptly resolve the lack of capacity on both the airside and the landside; to consecutively

make a series of expansion, replacement and modification of facilities so as to ensure the

development with the airport in operation

(ii) To enhance satisfaction of customers and focus investment in higher profitable project areas, by

specifying customer-based grades, such as international, domestic or LCC passengers

(iii) To improve security by upgrading the system to the present needs, so as to secure safety of

passengers and concerned persons and inaugurate unserviced air routes, such as ones for North

America.

(iv) To deepen the attractiveness of the current airport terminal by positively taking advantage of the

local cultural climate, so as to provide an airport terminal appropriate to the gateway to

Indonesia.

(v) To provide a new moving system so as to improve the inconvenient movement between

terminals

c) Basic policy for commercialization of the project

The project will not be a new development project but a project whose objective is to expand the

existing facilities of Soekarno Hatta Airport, currently owned and operated by AP-II. Therefore,

giving careful consideration to the coordination of the roles of the Study Team and AP-II is essential.

The project is currently being examined on the basis of the following approaches but these may

change in the future upon consultation with AP-II.

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(i) Implement a joint project with AP-II, taking into consideration the attendant characteristics and

risk

(ii) Implement a project with AP-II as the main organization in key areas of the management of

operations at Soekarno Hatta Airport, and Japanese companies having intention to provide

know-how and some administration

(iii) Allow the private sector (mainly Japanese companies) as risk takers to participate in numerous

project areas where there are many uncertain elements, such as the concession and cargo

business, etc.

(3) Project overview


1) Overview of the project

After undertaking a review based on the AP-IIs Grand Design, the JICA Master Plan, interviews and

site surveys, the Study Team drew up an overview of the project and determined its scale as shown

in the table below. Although future airport expansion policies for the surrounding area of Jakarta can

be expected to affect the position of Soekarno Hatta Airport and fluctuations in user numbers, the

Study Team based its estimate of the scale of the facility on figures forecast for demand adopted for

this study, that is, annual passenger numbers of 60 million in 2017 (47 million for domestic and 13

million for international passengers).

The Grand Design, which is AP-IIs airport expansion plan, assumes the construction of Runway 3

and Terminal 4 at the northern perimeter outside the current airport area to accommodate demand

exceeding 60 million passengers. As mentioned earlier, however, this study narrowed the scope of

the project to two runways and 60 million passengers per annum.

This study also did not include a railway station due to uncertainty regarding the commencement of

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the operation of the railway itself and because of the long-term concept for the eastern commercial

area within the airport grounds.

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Table S-1: Project Elements in the Grand Design and Scope of the Project Anticipated for This
Project

Assumed Scale of
Assumed Scope of Facility
Project elements in the AP-II Grand Design Facilities in the
Development in the Project
Project

New development +
Apron Partial upgrade of existing
aprons
Airside New construction of
runway on the eastern side Development area
Taxiway
Partial upgrade of existing 360,000
runway
Addition to existing 30,000 (extended
facilities area)
Terminal 1
upgrade of existing upgrade of existing
facilities area
Addition to existing 30,000 (extended
Terminal facilities area)
Terminal 2
upgrade of existing upgrade of existing
facilities area
Addition to existing 200,000
Terminal 3
facilities (extended area)
Cargo New construction 150,000
Integrated buildings
Connecting buildings
Commercial Area New construction 185,000
Interchange terminals
Parking building
New construction of
connecting terminals (or Total length: 3.5km
Terminal People mover
development of dedicated (4 stations)
ancillary
bus roads)
construction
Upgrade of utilities and
Utilities, etc.
roads
Railway Station Railway station Not included
Runway 3 Not included

Future Expansion Terminal 4 Not included


Commercial area, East
Not included
side
Source: Prepared by the Study Team

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Figure S-1: Difference between project elements in AP-IIs Grand Design and those in our plan

Source: Prepared by the Study Team based on JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

From the viewpoint of the main implementing organizations and assumed sources of funding for the

scope of the project plans, we divided the project into five package options as shown below. While

there are differences in views between AP-II and the Study Team regarding the main project areas

and funding sources, as shown in the table below, financial and economic analyses from hereon will

be implemented on the basis of our plan, which established a joint venture project with a wider scope

and we will conduct analyses of two scenarios, one based on package (3) with the inclusion of

package (2) and another without the inclusion of package (2).

Project costs for packages (1), (2) and (3) were calculated as shown in Table S-3..

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Table S- 2: Five Package Options

Capital sources AP-II is assumed Capital sources the Study Team


Project item
to utilize is assumed to utilize
Package (1) Implemented as public works
Airside (new construction of utilizing government funds Implemented as public works
taxiway, and upgrade of After implementation, assets utilizing yen loans
taxiway and apron) are transferred to AP-II as equity
or grants?
Implemented as public works
Package (2) as in Package (1), utilizing yen
Terminal ancillary work loans. However, if not treated
(people mover, utilities, etc.) as public works, develop on the
basis of a JV as in Package (3)
AP-II internal reserve or funds
procured from the domestic
Separate Soekarno Hatta
market with AP-II as the main
Airport operating company
borrower.
Package (3) from AP-II, and undertake
Upgrade and expansion of development of the terminal
terminal buildings building after receiving third
party participation, and operate
the business for a certain
period of time
Package (4)
New construction of cargo
village Construction based on the
Joint venture including third
Package (5) concession system with third
party participation
Commercial area party participation
(commercial, hotel, office,
parking facilities)
Source: Prepared by the Study Team

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Table S-3 : Calculation of Project Costs

Unit: Million
IDR Equivalent
Yen USD
Equivalent Equivalent Local Foreign
Total
Portion Portion
Basic Facility
(1) 6,000 78 705,900 564,720 141,180
Development
(2) Terminal Ancillary Work 19,000 246 2,235,350 1,788,280 447,070
Construction
Extension for Terminal 3 50,000 647 5,882,500 4,411,875 1,470,625
Costs
(3) Upgrade for Terminal 2 10,000 129 1,176,500 882,375 294,125
Upgrade for Terminal 1 10,000 129 1,176,500 882,375 294,125
Subtotal of Construction Costs 95,000 1,229 11,176,750 8,529,625 2,647,125
Design Expenses (5% of Construction Costs) 4,750 61 558,838 426,481 132,356
Reserved Fund (5% of Construction Costs) 4,750 61 558,838 426,481 132,356
Total Project Costs 104,500 1,352 12,294,425 9,382,588 2,911,838

Source: Prepared by the Study Team

2) Summary of results of preliminary financial and economic analyses

In AP-IIs financial results for fiscal 2010, Soekarno Hatta Airport earned 134% of AP-IIs overall

operating profit, and is therefore a profitable airport that supplements the AP-IIs head office

expenses and offsets the deficits of other local airports that AP-II owns. According to the demand

forecast adopted for this study, the total number of both domestic and international passengers using

this airport will continue to grow and can be expected to reach 60 million by 2017, which is the

upper capacity limit for the airport upon completion of this project. According to the outlook for

income and expenditure resulting from this project scheme calculated on the basis of total passenger

numbers of 60 million and other assumptions (see Chapter 5 of this report), by 2020, or the fifth year

after commencement of the new airport services, the increase in revenue will overtake the increase in

costs from the expansion of the terminal, and operating profit exceeding that of 2010 by 52% can be

expected. On the premise that Indonesia continues effective economic growth of around 6% in the

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future, an increase in the number of passengers using Soekarno Hatta Airport and an increase in the

airports revenue can be expected to continuously grow in the future. Based on passenger growth

forecasted by AP-II and increase in consumption per passenger assumed by the study team, financial

internal rate of return, FIRR, for Package (3) was 19% and economic internal rate of return, EIRR,

was 17%.

3) Environmental and social impacts

The consideration of environmental and social aspects of the schemes or plans proposed by this

study is basically cited from the study results of the JICA Master Plan, an antecedent study related to

this study.

The improvement of the terminal functions and connection functions between terminals examined in

this study will improve the usability of facilities for both passenger and cargo flights, and provide

high-quality space for the use of both passengers and the general public. The introduction of service

facilities including commercial areas will also create employment opportunities and will enable the

revitalization of retail and distribution businesses. In addition, underutilized land, such as the golf

course that at present is partially located between the two runways, will be converted to land for

airport purposes, making possible the integrated and orderly use of land.

A preliminary investigation of environmental and social impacts following the development of

Runway 3 and Terminal 4 in the future was conducted in the JICA Master Plan. As a result,

involuntary relocations on a scale of 2,000 households will be unavoidable due to the expansion of

Soekarno Hatta Airport, and formulation of a relocation plan is necessary. Furthermore, the

conversion of agricultural land into land for airport use will require the rerouting of irrigation

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channels and the shifting of roads used by residents in their everyday activities. The conversion of

agricultural land to land for other purposes will also necessitate a review of industrial policies in

regional planning.

Due to the scale and content of the airport, an environmental impact assessment (EIA) including a

Strategic Environmental Assessment (SEA) must be undertaken prior to the expansion of the airport.

The JICA Master Plan study project is proceeding with preparations for a joint study in cooperation

with the DGCA, the agency in charge of the plan, and the University of Indonesia to enable the

required environmental assessments to proceed.

The expansion of the terminal facilities will increase the floor areas of buildings and, therefore,

unavoidably increase the impact on the environment. However, This problem can be mitigated to

some extent by adopting building designs that conform to building standards in the guidelines of the

the Ministry of Environment Decree No.8/2010 that provides the standards for environmentally

friendly buildings.

(4) Implementation schedule


The schedule for the implementation of this project that can be assumed at this stage is shown below.

It has already been confirmed that the assignment of the respective terminal functions in the project

have not yet been finalized even within AP-II. If Terminal 3 is to be developed as a terminal for the

dedicated use of domestic flights, the plan for upgrading Terminals 1 and 2 will differ significantly

from the plan this study has anticipated. Therefore, it must be noted that this factor will have a

significant impact on the implementation schedule of the project.

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Table S-4 : Implementation Schedule

Year 2011 2012 2013 2014 2015 2016 2017


Quorter
Overall plan Pre F/S
Selection of consultant
Basic plan
Bid for project rights

Terminal 3 Detailed design


Bid for construction works
Construction works
Project management

Terminal 2 Detailed design


Bid for construction works
Construction works
Project management

Terminal 1 Detailed design


Bid for construction works
Construction works
Project management

Taxiways, etc. Detailed design


Bid for construction works
Construction works
Project management

Cargo terminal Detailed design


Bid for construction works
Construction works
Project management

Connected Building Detailed design


Bid for construction works
Construction works
Project management

Source: Prepared by the Study Team

(5) Feasibility of implementation


1) Status of the implementation organization of the partner country

AP-II, the implementing organization on the Indonesian side, is a state-owned enterprise wholly

owned by the Indonesian government and has an established track record in managing a total of 12

airports including Soekarno Hatta Airport, the subject of this study, as well as other airports in

western Indonesia. The scope of AP-IIs operations encompasses all airport facilities including basic

airport facilities as well as terminal facilities. AP-II also engages in air traffic control operations in

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western Indonesia.

In 2011 AP-II formulated the Grand Design, a comprehensive plan for Soekarno Hatta Airport, and

received the approval of the government to proceed with this plan in July.

As the implementing organization of this project, AP-II possesses sufficient capabilities in terms of

management, organizational structure, financial base, experience and know-how.

2) Results of financial analyses of the project

The feasibility of the project was confirmed through cash flow analysis on the soundness of the

balance of investment and earnings if the upgrade and expansion project proceed following the

acquisition of business rights to operate Soekarno Hatta Airport for 20 years at the cost of 600 billion

rupiah (about 5.1 billion yen 1 ) per annum. This assumption differs from AP-IIs policy to

singlehandedly undertake the development and management of the terminals. This review was

undertaken solely as one option for the implementation of the project.

As a result of the Teams analysis assuming that the project be financed by 40% equity and 60% debt

with 12% interest and 23-year tenor, we were able to confirm that the return on equity, ROE, at over

15% was satisfactory if the project did not assume investment costs for ancillary facilities such as

taxiways or people mover, etc. and that the feasibility of the project remained high even after taking

into account Indonesias recent economic conditions and interest rate level.

However, the two points noted below will have significant impact on financial analyses and

1
As of November 30th, 1 rupiah was worth 0.0085 yen (Bloomberg.com)

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therefore further investigation is necessary for implementing the project.

a) Application of yen loans or other low interest financing provided by Japanese Government

A financial analysis of the scenario where the project assumed investment costs for ancillary

facilities yielded ROE of 11%, a result that make investment decision difficult under the current

Indonesias recent economic conditions and interest rate levels.

b) Continuous contact with AP-II

One factor that will significantly affect the return on investment is the payment of concession costs

to AP-II. Whether or not the project becomes an attractive proposition for the Japanese companies

involved depends on negotiations with AP-II.

Three Japanese companies wish to participate in this project as joint partners and all of these have

proven track records in promoting a wide range of projects to date. Undertaking additional detailed

analyses of a passenger terminal project in particular and presenting proposals to AP-II from the

viewpoint of business operators will be effective in proceeding with this project.

(6) Superior Technology of Japanese companies


1) Consideration of technology

Japanese companies are known to excel in technology in the following areas.

a) Environmental technology

At every stage including development, construction, and operation, an airport has significant impacts

on the environment. At airports in Japan, consideration of the surrounding environment and the

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fastidious introduction of environmentally friendly technologies for buildings during development

are already quite advanced. Utilizing the know-how in design and construction of Japanese

companies, this project too will be able to realize the construction of a highly environmentally

friendly model that incorporates a wide range of environmental technologies.

b) Construction technology

Japanese construction companies are also considered to have superior technical know-how in

construction technology for reducing environmental impacts. When it comes to countermeasures for

the surrounding environment during construction, these companies have a reputation for

implementing various mitigation measures as well as ongoing monitoring.

c) Disaster response measures and business continuity plan (BCP)

Earthquake resistance performance of Japanese buildings is unsurpassed at the top international level,

and the design of buildings utilizing Japanese earthquake resistance technology can be considered

very effective in protecting human life and establishing emergency bases during disasters in a

country like Indonesia, which in recent years has experienced a number of large-scale earthquakes.

From the perspective of other types of casualties as well, Japanese companies also have a

competitive edge in their ability to draft plans for facilities that incorporate technical know-how and

BCP response capabilities developed in Japan over many years.

d) Operation management systems

Japanese security systems, baggage handling systems, and energy control systems in buildings,

among others, are known for their high reliability.

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2) Economic considerations

The yen has been trending at historically high values, raising some concern regarding the cost

competitiveness of Japanese companies. However, Japanese companies can be considered to be in an

advantageous position compared to other countries due to the provision of capital through ODA and

export credit agencies.

(7) Concrete schedule for realizing the project and risks

inhibiting its realization


1) Concrete schedule for realizing the project

ITOCHU Corporation, Japan Airport Terminal, and SHIMIZU Corporation are the three Japanese

companies that wish to participate in this project. In this study, the three companies based their

participation in the passenger terminal project on a joint venture with AP-II, the operator of the

present Soekarno Hatta Airport. The three companies also make the assumption that they will pursue

other profitable, independent projects such as hotels in cooperation with business groups led by these

three Japanese firms.

On the other hand, AP-II has already announced at a press conference its intentions at present to

undertake the terminal project as a single entity but will approve investment of foreign capital in

concession businesses such as hotels. Therefore, AP-IIs intentions differ somewhat from the project

the three Japanese companies envision.

Therefore, promoting consultation with AP-II at an early stage for the implementation of the project

will continue to be important. As part of this process, the Japan Airport Terminal in tandem with this

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study has been putting forward proposals for business cooperation in airport management business

with AP-II. Japan Airport Terminal has managed the terminal building at Haneda Airport for about

50 years. Soekarno Hatta Airport shares many similarities with Haneda Airport in terms of its

location in a metropolitan area and the characteristics of passengers who use the airport. Therefore, it

is believed that cooperation in this project will be extremely effective in the future management of

Soekarno Hatta Airport.

2) Risks inhibiting the realization of the project

The following risks exist as legal restrictions in the realization of this project.

a) Restrictions on foreign capital participation

The only restriction on foreign capital participation in this project is as a provider of air traffic

control operations; therefore, there are no business restrictions applicable to the project.

On the other hand, an upper limit of 49% has been set for foreign capital investment in business

areas indicated in the table below. Therefore, careful attention must be paid to the fact that

investment by Japanese companies in the project will be restricted to no more than 49%.

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Table S-5: Restrictions on Foreign Investment in Indonesia (relevant to Airports)

Business Field Condition

10. Transportation Sector (Airport-Related)


Terminal supporting business Max 49% foreign investment
Airport service Max 49% foreign investment
Air transportation supporting service (reservation system via
computer, ground handling for passenger and cargo, and aircraft Max 49% foreign investment
leasing)
Air transportation non-commercial Max 49% foreign investment
Services related to airport Max 49% foreign investment
Freight forwarder service Max 49% foreign investment
Airplane cargo service Max 49% foreign investment
General Selling Agent (GSA) of foreign air transport company Max 49% foreign investment

Source: Presidential Decree No. 36, 2010, Attachments I and II (May 25th, 2010)

b) Risks relating to various procedures

This study proposes a method of establishing a joint venture company. To establish a joint venture

company in Indonesia and to commence construction and business operations, however, are required

the registration of investment plans, registration of the establishment of the new company,

acquisition of ownership rights and licenses (including construction rights, etc.), and the acquisition

of business and construction permits, and there is a likelihood that finalizing these will have an

impact on the project schedule.

In recent years, however, procedures have been simplified, and integrated one-stop services where

most applications can be lodged at the Investment Coordinating Board are now provided. In the

future it will be necessary to take advantage of these services.

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c) Funding risk

The recent European financial crisis does not allow for optimism at present and if its impact extends

to ASEAN countries including Indonesia, it can be assumed that it will have a significant impact on

funding of this project. In that case, however, the Study Team, which expects Indonesia to utilize

low-interest, long-term public loans from the Japanese government, may be able to demonstrate its

strengths to even greater advantage.

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(8) Maps indicating the project implementation site

Figure S-2: Map of Indonesia

Source: Prepared by the Study Team from Google Earth photos

Figure S-3: Location of Soekarno Hatta Airport

Source: Prepared by the Study Team from Google Earth photos

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Chapter 1 Overview of the Host Country and
Sector
(1) Economy of the Country & Financial Conditions of the

Government
The Indonesian economy has maintained favorable growth for a little over the past ten years led by

domestic demand, while the impact on the country from the global recession that followed in the

wake of the collapse of Lehman Brothers was mild compared to that in its neighboring countries (it

maintained a 4-5% positive growth rate over the period from the second quarter of 2008 to the

second quarter of 2009; see Table 1-1).

As a result of the decline in external demand and monetary tightening policies designed to curb

domestic inflation, the other countries in ASEAN-4 (Thailand, Malaysia, and the Philippines) are

forecasted to see a deceleration of economic growth due to a contraction of production from

domestic industry and declining exports. On the other hand, since prices are stable in Indonesia, the

expectation is that companies will expand capital investments backed by robust domestic demand,

and that rapid growth (6.2-6.4%) exceeding the 2010 level will continue.2 The rate of increase in the

Consumer Price Index (CPI) has been kept within the governments target range for inflation of 5.0

+/-1.0% and is on a downward trend. (See Table 1-2)

2
The Indonesian government predicts that its 2011 GDP growth rate will be 6.4% (October), the IMF predicts it will
be 6.2% (April), and the Asia Economic Monitor predicts it will be 6.4% in 2011 (and 6.7% in 2012; Asia Economic
Monitor: Economic Outlook, Risks and Policy Issues (July 2011)).

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Table 1-1: Trends for Growth Rates of Real GDP by Component of Expenditures (Unit: %)
GDP Growth Rate
Composition
GDP Growth Rate (Year-on-Year)*1 (Corresponding Period of the
Ratio*2
Previous Year)
2006 2007 2008 2009 2010 2011Q1 2011Q2 2011Q3 2010
Real GDP 5.5 6.3 6.0 4.6 6.1 6.5 6.5 6.5 100.0
Private
3.2 5.0 5.3 4.9 4.6 4.5 4.6 4.8 56.7
consumption
Government
9.6 3.9 10.4 15.7 0.3 3.0 4.5 2.5 9.1
consumption
Gross fixed
2.6 9.3 11.9 3.3 8.5 7.3 9.2 7.1 32.2
capital formation
Exports 9.4 8.5 9.5 -9.7 14.9 12.3 17.4 18.5 24.6
Imports 8.6 9.1 10.0 -15.0 17.3 15.6 16.0 14.2 -23.0
*1: Real values (based on the year 2000) *2: Target values

Source: Statistics Indonesia (BPS), Monthly Report on Socio-economic Data from July through November. Mainly
Table 2.9, Laju Pertumbuhan dan Distribusi PDB Menurut Penggunaan Tahun 2006-2010 (persen) in the November

edition.

Table 1-2: Trends in the Rate of Rise of the Consumer Price Index (CPI; Corresponding Period of
the Previous Year; Unit: %)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 9.2 8.6 7.9 7.3 6.0 3.7 2.7 2.8 2.8 2.6 2.4 2.8
2010 3.7 3.8 3.4 3.9 4.2 5.0 6.2 6.4 5.8 5.7 6.3 7.0
2011 7.0 6.8 6.7 6.2 6.0 5.5 4.6 4.8 4.6 4.4
Source: Statistics Indonesia (BPS), Monthly Report on Socio-economic Data (November 2011; and Monthly

Reports on Socio-economic Data from July through November) Table 1.5, Inflasi Nasional Year-on-Year

Next, looking at the central governments debt situation reveals that its public debt outstanding as of

the end of 2010 was at the low level of 27.43% as a share of GDP (IMF Statistics). In addition, the

deficits from its fiscal balance viewed from its initial budget from FY2011 is 1.7% as a share of GDP,

which has been kept within the 3.0% as a share of GDP stipulated in the State Finance Act. Thus,

there are no major concerns with its fiscal balance for the immediate future. The government is

aiming to achieve equilibrium in its fiscal balance through the year 2014, and plans to reduce public

debt as a proportion of GDP down to at least 22% (with 20% being ideal).

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Table 1-3: The Central Governments FY2011 Initial Budget and Revised Budget, and its Draft
Budget for FY2012
FY2011 FY2011 FY2012
(Unit: Trillion rupiah) initial revised draft
budget budget budget
Annual revenue 1,104.90 1,169.90 1,311.40
Tax revenue 850.3 878.7 1,032.60
Other revenue 250.9 286.6 278
Subsidies 3.7 4.7 0.8
Annual expenditures 1,229.60 1,320.80 1,435.40
Central government expenditures 836.6 908.2 965
Local government expenditures 393 412.5 470.4
Fiscal balance -124.7 -150.9 -124.0
Share of GDP -1.7% -2.1% -1.5%
Fundraising 124.7 150.8 124
Raised domestically 125.3 153.6 125.9
Raised overseas -0.6 -2.8 -1.9

FY2011 FY2011 FY2012


Macroeconomic conditions
initial revised draft
(Unit: Rupiah)
budget budget budget
GDP (trillion rupiah) 7,226.90 7,019.90 8,119.80
GDP growth rate (%) 6.5 6.4 6.7
Rate of inflation (%) 5.65 5.3 5.3
Exchange rate ($/rupiah) 8,700 9,250 8,800
Policy interest rate (SBI rate) (%) 5.6 6.5 6.0
Crude oil price (US$/brl) 95 80 90
Source: Ministry of Finance of the Republic of Indonesia (http://www.depkeu.go.id/)

Fiscal Policy Office (BKF) (www.fiskal.depkeu.go.id)

Future grounds for concern include: (1) the impact from sudden oil price rises in terms of worsening

domestic inflation and the fiscal balance, and (2) the impact on external demand and international

financial flows from the aftermath of the debt crisis in European countries and a protracted economic

slump in the United States, which is Indonesias major export partner.

Of these, sudden rises in crude oil prices are grounds for concern. The Indonesian government has a

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policy in place of providing subsidies for gasoline and other fuels in order to mitigate the impact of

sudden oil price rises on domestic prices. But due to the recent oil price hikes (the Indonesia Crude

Price (ICP) forecasted in the initial budget of US$40 per barrel had risen to US$80 per barrel as of

the time of the revised budget), the outlays for oil subsidies exceeded the initial budget from FY2011

(expanding from the 95.9 trillion rupiah estimated in the initial budget to 120.8 trillion rupiah

(US$14.1 billion)3). The fiscal balance deficit from the revised budget grew to 2.1% as a share of

GDP (whereas it was 1.7% in the initial budget). Though this has been kept within the 3.0% as a

share of GDP stipulated by the State Finance Act, attention must be paid to trends in the international

oil prices in the future.

Attention must also be paid to trends in international financial flows. Financing for Indonesias

budget deficit is raised mainly through the sale of government bonds in the market. As a result of the

ongoing monetary easing that has been taking place primarily in developed countries in recent years,

the proportion of government debt held by overseas investors has rapidly ballooned from 19% (108

trillion rupiah) at the end of 2009 to 31% (196 trillion rupiah) at the end of 2010, and on to 36% (249

trillion rupiah) at the end of July 2011.4 However, since August, the proportion of such debt retained

by overseas investors has been on a downward trend, as it appears that funds from overseas investors

have started to flow out of bond markets due to uncertainties over the future course of the Western

economies. This has been accompanied by a weakening of the rupiah from US$1 = 8,533 rupiah at

the end of August to US$1 = 8,852 rupiah at the end of October, and proceeding on apace to US$1 =

9,025 rupiah as of November 21st. However, preventative monetary easing steps have been taken by

the Central Bank of the Republic of Indonesia (SBI) (it lowered its policy interest rate from 6.75% to

3
Reuters News Agency (JAKARTA, July 4, 2011)
4
MOF: Ownership of IDR Tradable Government Securities (SBN) as of 31 October 2011

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6.50% in October), domestic prices are stable, and there exists robust domestic demand. When these

and other factors are taken into consideration, Indonesias economic growth is forecast to continue

through 2012 and beyond.

In addition, the Indonesian government is planning to improve and expand infrastructure in its draft

budget for FY2012 (167 trillion rupiah, a 19.4% increase from the revised budget from the previous

fiscal year), with it expected to achieve a GDP growth rate of 6.7% in 2012 (see Table 1-3). In order

to achieve equilibrium in its fiscal balance through the year 2014, the government plans to use a PPP

in order to perform infrastructure improvements without placing a burden on public finances.

According to the Five-Year Development Plan from 2010-2014, of the net total for infrastructure

improvements of 1,429 trillion rupiah that will be needed over this five year period, 511 trillion

rupiah (36% of the total) will be covered by national taxes, with the plan being to raise 407 trillion of

the remaining 918 trillion rupiah (28% of the total) through the PPP method.5

Given the abovementioned circumstances, major ratings agencies have raised their long-term

sovereign ratings for Indonesia across the board. S&P raised it from BB to BB+ in August 2011,

Moodys raised it from Ba2 to Ba1 in January 2011, the Japan Credit Rating Agency (JCR) raised it

from BB+ to BBB- in August 2010 (giving it the same rating again in August 2011), and the outlook

by the Rating & Information Investment Inc. (R&I) remained at the BB+ level in October 2010 but

was upgraded from Stable to Strengthening, with each of these raising Indonesias long-term

foreign currency sovereign credit ratings. JCR pointed to a number of factors when it came to its

reasons for raising its rating. These include the fact that Indonesias economy has achieved robust

growth led by domestic demand for more than the past ten years, as well as the expectation of

5
Ministry of Industry, Facts & Figures (2011)

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continued economic growth backed by brisk domestic demand coming mainly from private

consumption (since purchasing power is expected to rise in the future), and that the state of its

national finances is in good condition. It is conjectured that Indonesia will be able to further improve

its rating by boosting its tolerance against external fluctuations in the future and accelerating its

economic growth by promoting investments in infrastructure.

Table 1-4: Indonesias Long-term Foreign Currency Sovereign Credit Ratings (October 2011)

Rating agency Rating Outlook


Moody's Ba1 Stable
S&P BB+ Strengthening
Fitch Ratings BB+ Strengthening
JCR BBB- Stable
R&I BB+ Strengthening

Source: SBI Historical Indonesia Sovereign Rating November 2011

Despite the various problems the country still has to contend with, Indonesia can be considered

politically and socially stable overall. The 32-year autocratic regime of President Suharto finally

collapsed in May 1998 in the wake of growing social unrest exacerbated by the Asian financial crisis,

and efforts in the ensuing six years to promote democracy6 by three successive presidents Habibie,

Wahid, and Megawati culminated in the first direct presidential election in the countrys history in

October 2004. The incumbent President Yudhoyono has maintained a high public approval rating

since his election in the direct election in 2004 and is currently serving his second term after being

6
Measures to democratize the country included amendment of the 1945 constitution four times (October 1999,
August 2000, November 2001, and August 2002), the abolition of the Peoples Consultative Assemblys right to
appoint the president, introduction of direct elections, limiting the terms of both president and vice president,
strengthening of the power of the legislative branch of government, and the creation of the Regional Representative
Council.

1-6
sworn into office in October 2009 following his re-election in the general election in July. The

Democratic Party, the support base of President Yudhoyono, holds only 27% of the parliaments 150

seats and to secure a majority in parliament, his government formed a coalition of six political

parties. Although the centripetal force of the Democratic Party as the leading ruling party has

dwindled since the beginning of the second term of government, due largely to the uncovering of

corruption within the Democratic Party, the major parties within the coalition seem to have a tacit

agreement not demand Yudhoyonos resignation despite leveling open criticism at the president and

his party. Therefore, there is a strong likelihood that President Yudhoyono will see out his second

term, which continues until October 20147. While some political parties still insist that activities of

foreign companies and organizations should be more regulated, analysts and authorities on Indonesia

consider this insistence as a tradition of the countrys orientation toward autonomy since the country

won its independence and that there is no need for concern8.

There are over 300 tribes in Indonesia with ethnic Malays (native Indonesians, known as Pribumi)

comprising 97% of the total population and Chinese who immigrated to Indonesia during the Dutch

colonial period comprising the remaining 3%. Although about 90% of Indonesias population is

Islam, it is not the sole religion of Indonesia but one of six religions including Christianity and

Hinduism officially recognized by the government. Islam extremists in Indonesia remain a minority.

The majority of Islam belongs to the Sunni sect, which is a moderate sect and has only a mild view

regarding world control, and therefore have little inclination to restrict a free market economy.

Although terrorist activities by Islamic extremists occur from time to time and make the future

situation unpredictable, the Yudhoyono governments policy to eradicate terrorism is already having

7
Heads of four major political parties cut a deal October 22 & 25, 2011, The Daily Jakarta Shimbun
8
Domestic politics and Indonesias international position, Rizal Sukma, October 18, 2011 (www.eastasiaforum.org).

1-7
an impact and it is believed that there is little likelihood of terrorist activities having a devastating

effect on the countrys economic activities. In regional areas riots do occur sporadically, such as in

the case of independence movements in Aceh or Papua, but efforts are being made to resolve these

problems including the signing of a peace treaty with Aceh and the designation of Papua and West

Papua as special autonomous regions. Because of efforts like these, local problems have not reached

the stage where they have had an impact on the country as a whole.

According to the Political Instability Index9 compiled by the Economist, Indonesia ranked 52nd out

of 165 countries in order of political instability for the 2009/2010 period, and was included in the

group of high-risk countries. Nevertheless, it is considered to be of lower risk than Thailand,

which ranked 39th in the same index. In addition, results of a 2011 survey10 of executive directors

of U.S. companies belonging to the U.S. Chamber of Commerce in ASEAN countries indicated that

although approximately 90% of respondents considered corruption in Indonesia to be a problem,

about 30% of respondents replied that they would choose Indonesia as a destination for expanding

their business.

(2) Description of the Targeted Sector


Essentially, airplanes have been the most efficient means of travelling long distances for Indonesia,

as it is an island country. Its national territory comprises roughly 18,000 islands of varying sizes that

are dotted throughout a vast area that runs 5,110km east to west and 1,800km north to south. At

present, no transportation infrastructure of any kind connecting these islands together has been set in

9
Economist Intelligence Unit, The Economist.
10
AmCham Singapore, The ASEAN Business Outlook Survey 2011, a questionnaire survey targeting 327
executive officers of U.S. companies active in ASEAN countries (Cambodia, Indonesia, Malaysia, Singapore, the
Philippines, Thailand, and Vietnam).

1-8
place, and so aviation infrastructure is a useful means of getting around within the country. What is

more, as a result of the remarkable economic development of recent years, per-capita income has

increased and the use of airplanes as a means of transportation has been rising year by year. By now

189 airports have already been installed within the country, 29 of which provide flights along

international routes, with the demand for airplanes rising on the whole.

Regulations on entering the market for domestic air transport were relaxed in Indonesia from the

latter half of the 1990s until about 2001, and so low cost carriers (LCCs) began to appear on the

scene in Indonesia.11 The appearance of these LCCs contributed to making airplanes a more

accessible means of transportation for people across a broad spectrum of incomes, with demand for

domestic routes showing particular growth since 2000. Airplane passengers in Indonesia are

characterized by their overwhelmingly strong demand for domestic routes, which account for 80% of

the total.

11
Shinya Hanaoka, Aviation in ASEAN: Liberalization and Low Cost Carriers, Tokyo Institute of Technology
homepage: http://www.ide.titech.ac.jp/~hanaoka/take-off.pdf (November 10, 2011)

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Figure 1-1: Number of Airplane Passengers in Indonesia

Source: JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the

Republic of Indonesia, Progress Report (March 2011)

This growth in the demand for air travel has brought about a remarkable rise in the number of

passengers using Soekarno Hatta Airport, which serves the Jakarta metropolitan region, which is the

capital of Indonesia, with this already exceeding the airports capacity. Soekarno Hatta Airport was

opened in 1985, and functions both as a major gateway for Jakarta and as a hub within the country. It

is found in the Chengkareng area, which is located about 20km to the west of Jakarta, and can be

accessed from central Jakarta by car in about thirty minutes by using toll road, assuming the road is

not congested. At present, the only form of public transportation connecting the city of Jakarta with

the airport are buses, and so users of the airport are forced to travel there by vehicle. The actual

results from 2010 showed that the number of passengers at Soekarno Hatta Airport exceeded roughly

44 million people, making it the 16th most congested airport in the world.12

12
Airports Council International (ACI) homepage, Passenger Traffic 2010 Final, www.airports.org (November 10,
2011)

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Soekarno Hatta Airport mainly consists of Terminal 1, which is exclusively used for domestic routes,

Terminal 2, which is used for international routes and the state-run carrier Garuda Indonesia Airlines,

and two open parallel runways. In 2009 Terminal 3 was newly opened as a terminal exclusively for

LCCs.

But it is forecasted that Soekarno Hatta Airport will reach its saturation point when it reaches 60

million passengers per year in 2017, with the facilities undergoing marked deterioration and growing

obsolete. For this reason, in terms of national policies there are calls for the formulation of an airport

policy for the Jakarta metropolitan region that places emphasis on enlarging Soekarno Hatta Airport

and building a new airport within the metropolitan region.

In light of this background, the Japanese government has decided to implement the Master Plan

Study on Multiple Airport Development for Greater Jakarta Metropolitan in the Republic of

Indonesia based upon a request from Indonesia. Presently, it has been decided that the study

operations under JICAs supervision will be completed by March 2012. JICA is coordinating with

the Directorate General of Civil Aviation (DGCA) of Indonesia to formulate a master plan for

expanding Soekarno Hatta Airport and to select planned sites for new airports.

In addition, in December 2010 the governments of Japan and Indonesia signed a memorandum of

cooperation for the concept of Metropolitan Priority Area for Investment and Industry (MPA) in

Jabodtabek Area. For about one year starting from May 2011, 11 private companies (Nippon Koei

Co., Ltd., Oriental Consultants, Co., Ltd., Mitsubishi Research Institute, Inc., Mitsubishi Corporation,

Chiyoda Corporation, JGC Corporation, Taisei Corporation, Tokyo Metro Co., Ltd., Hitachi, Ltd.,

Metropolitan Intercity Railway Company, and NYK Line) led by JICA have formed a study team

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and been working out this concept. This master plan emphasizes the infrastructural improvements

that are crucial for encouraging greater growth in the Jakarta metropolitan region, which is the

engine driving the remarkable growth in Indonesias economy, and lists nine priority sectors for this.

Aviation was taken up as one of these priority sectors, and serves as an element that constitutes one

of the pillars of this concept.

Conversely, Angkasa Pura II (hereafter written as AP-II), which is the state-owned company that is

running Soekarno Hatta Airport, has also prepared its own airport expansion plan, which it unveiled

in July 2011. This expansion plan, which was named the Grand Design, was prepared with

Indonesias Institute of Technology Bandung hired to serve as a consultant. This plan is primarily

characterized by the new installation of a third runway, the construction of Terminal 4, the new

installation of an automated people mover (APM), the expansion of the apron, and the construction

of a commercial building called a connecting building. The target date for the improvements was

initially announced for around 2014. But according to information obtained from the meetings

between the higher-ups at AP-II, such as the president, and the Study Team, as of September 2011,

Basic Design is currently being prepared on the basis of consulting by the Institute of Technology

Bandung. Its completion has been delayed since the beginning, and so as things stand it seems to be

difficult to achieve the target for the improvements of 2014.

What is more, according to information from AP-II from the time of the interviews, offers other than

those from this team to take part in the airport expansion project have been coming in from other

countries as well. According to AP-II, other companies from Japan have been in contact, and they

have also been approached from overseas entities in France (Aeroports de Paris (ADP)), South

Korea (Incheon International Airport Corporation), Airport Authority of Hong Kong, Airport

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Authority of India, the Netherlands (Schipol Airport Authority), and others.

(3) Description of Project Area


1) Description of Soekarno Hatta Airport

Jakarta initially had two airports: Kemayoran Airport, which was an airport exclusively for domestic

routes in the northern part of the city, and Halim Airport, which was an airport for international

routes. By the 1970s the number of passengers of these two airports exceeded their capacity, and so

the Indonesian government conducted a study on constructing a new airport that would be shared by

international and domestic routes. Initially the Ralph M. Parsons Company, the engineering

company from the United States, was consigned to carry out a primary study in 1969. Out of several

candidate sites, the Tangerang region was selected as the most suitable candidate site. In 1974, a

Canadian consulting consortium formulated a preliminary master plan. Afterwards, Aeroports de

Paris (ADP) from France formulated a master plan for a new airport based upon these previous

studies, which it submitted to the Indonesian government in 1979. The Indonesian government

purchased about 1,800ha of land in the paddy field zone of Chengkareng, which is situated to the

west of Jakarta. It then built the new airport on the basis of the master plan by ADP and opened

Soekarno Hatta Airport in June 1985. At first, it was outfitted with Terminal 1 and two open parallel

runways. Terminal 2 was completed in 1992, after which Terminal 1 was used for domestic routes

and Terminal 2 was mainly used as the international route terminal (and for some domestic routes).

This airport was constructed through a loan from France, with a rough estimate for the construction

costs coming to about 30 billion yen for Phase I and 70 billion yen for Phase II.13 The construction

was carried out under the direct control of the national government (DGCA), after which the

facilities were handed over to AP-II, a state-owned airport management company, which was tasked

13
Yoshiyuki Hoshiyama, Jakartas Soekarno Hatta International Airport, Airport Review (1997) p.306

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with managing and operating them.

The design of Terminals 1 and 2 was overseen by Paul Andreu of ADP in France. Using red as the

keynote color, he went with a type of architecture that brims with local color by incorporating the

traditional architectural style of the island of Java, Indonesia. In 1995 the Landscaping of Soekarno

Hatta Airport was awarded the Aga Khan Award for Architecture, which recognizes exceptional

architecture throughout the Islamic world.

Terminal 1 consists of an architectural style that makes use of natural draughts. For the construction

of Terminal 2, per a request from the Indonesian side it was required to have a double curbside in

order to shorten the curbside distance and walking distance, as well as being fully outfitted with air

conditioning, including both its airside and landside areas.14 For this reason its basic design is the

same as that for Terminal 1, but it differed in aspects such as its arrangement and building size.

Since the addition of Terminal 2, no major capital investments have been carried out within the

airport for a while. But given its insufficient capacity, Terminal 3 was built on the east side of the

premises as a terminal exclusively for LCCs in 2009.

The initial demand forecasts for Soekarno Hatta Airport envisioned that there would be 9.2 million

passengers by the year 1995 and 31 million by the year 2000, but it had already surpassed the 13

million mark by 1995.15

14
Aga Khan Award for Architecture homepage: http://www.akdn.org/architecture/pdf/1560_Ind.pdf (November 14,
2010)
15
Yoshiyuki Hoshiyama, Jakartas Soekarno Hatta International Airport, Airport Review (1997) p.306-309

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2) About AP-II

AP-II, which manages and runs Soekarno Hatta Airport, is a 100% state-owned company. It manages

and operates 12 airports located on the west side of the country, as Indonesia was subdivided

geographically into an east and west side (AP-I is in charge of the east side). From information

during the interviews between the Study Team and AP-II, it was found that Soekarno Hatta Airport is

the only airport out of the 12 that it manages and runs that has managed to turn a profit. According to

claims by the higher-ups at AP-II who took part in the interviews, as things currently stand the

profits from Soekarno Hatta Airport are used to cover the deficits run by its other airports.

3) Soekarno Hatta Airports Existing Facilities

a) Airside Facilities

An overview of the airside and landside facilities was listed within this report by reflecting the

content from the on-site study by the Study Team, principally the Master Plan Study on Multiple

Airport Development for Greater Jakarta Metropolitan in the Republic of Indonesia: Progress

Report (March 2011) prepared by JICA.

The airside facilities include the north-south runway; Aprons A, B, and C at Terminal 1; and the

cargo area that were built in 1984, as well as Aprons D, E, and F at Terminal 2 that were built in

1990. The particulars for the airside facilities are listed in the following table.

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Table 1-5: History of the Construction of the Civil Engineering Facilities at Soekarno Hatta Airport

Facility Construction Year Remarks


North Runway(07R-25L) 1984 3,600m60m
Parallel Taxiway A 1984 3,760mx23m
Parallel Taxiway B 1984 3,760mx23m
Apron A(Terminal 1984 84,071 m2
Apron B(Terminal 1984 84,071 m2
Apron C(Terminal 1984 88,275 m2
Apron Cargo 1984 33,278 m2
Remote Apron B/C 1984 9,309 m2
South Runway (07R-25L) 1984 3,660mx60m
Parallel Taxiway C 1984 1,306mx 23m
Parallel Taxiway D 1984 3,505mx 24m
Apron D(Terminal 2 1990 12,564 m2
Apron E(Terminal 2 1990 95,271 m2
Apron F(Terminal 2 1990 131,353 m2
Remote Apron D 1990 54,315 m2
Remote Apron F 1990 59,850 m2
Connection Taxiway E 1984 1,800mx 23m
Connection Taxiway F 1984 1,800mx 23m
Apron G (Terminal 3) 1996 62,505 m2
Source: Table 6.1.1 Construction History of SH Airport Civil Facilities in JICA, Master Plan Study on

Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report

(March 2011), translated into English by the Study Team

1-16
Figure 1-2: Image of the Current Arrangement of Soekarno Hatta Airport

Golf course

Terminal 3
Cargo area

Terminal
Terminal 2

Utility area

Source: Prepared by the Study Team based upon the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-17
b) Terminal Facilities

(i) Terminal 1

Terminal 1 was completed in 1985, and is currently used as a terminal exclusively for domestic

routes. It is frequently used by LCCs such as Citilink, which is a subsidiary of Garuda Indonesia

Airlines, Lion Air, and Batavia Air in particular. The building is a two-story structure constructed of

steel reinforced concrete, with a total floor space of approximately 143,000m2. Its envisioned

capacity from when it was initially built was 9 million people per annum. The terminal forms a

semicircular shape, and has three units (Terminals A, B, and C) that are each independent. There are

seven boarding areas in the front of each unit, which are connected by a corridor. There is a surface

parking lot in front of the curbside area at Terminal 1 that is constantly packed.

The concept for Terminal 1 is for one and a half stories, with check-in and arrival handled on the

first floor, and passenger boarding of the airplanes carried out on the floor above this. The facilities

comprising Terminal 1 are listed below.

<Curbside Area / Departure and Arrival Lobby> (First floor)

The curbside area at Terminal 1 is a semi-enclosed space that is covered with a roof, and which has a

semicircular corridor that continues from Terminals A through C. This area is constantly packed with

passengers prior to check-in and the people there to see them off. There is a small amount of seating

there, but the sight of people who could not get a seat sitting on the ground can be seen. The curbside

area also contains an LCC sales window for LCC tickets, with people in this area purchasing plane

tickets.

There are restaurants and eating establishments for the general public facing the curbside area.

1-18
Additionally, as one of its recent initiatives AP-II has installed a shopping mall that can also be used

by general customers in the second floor area, but customers using this mall are rarely seen.

Photo 1-1: The packed curbside area Photo 1-2: Restaurants in the curbside area

Source: Taken by the Study Team (September 2011)

<Viewing Platform> (Second floor)

Visitors can get to the viewing platform which looks out over the runways and aprons from the

external staircases on either end of the curbside area. However, a fine-mesh fence has been spread

around the viewing platform, and so the view from there is not all that good. There are few people

actually watching the airplanes arrive and depart, and no chairs or other furniture have been installed

there. Scenes of passengers who seemed to be waiting for delayed flights sitting or laying down in

the passageway are conspicuous.

1-19
Photo 1-3: Viewing platform Photo 1-4: View of the airside area
from the viewing platform

Source: Taken by the Study Team (September 2011)

<Entrances> (First floor)

There are three entrances facing the curbside area. But according to those in charge at AP-II, in order

to alleviate the congestion these are operated so that only people with a ticket can enter the check-in

lobby. Security checks have been set up at these entrances, with passengers undergoing inspection

via a metal detector, and their baggage subject to an X-ray scan.

<Check-in Lobby> (First floor)

In Terminal A 25 check-in counters have been set up in a linear arrangement, with 27 such counters

in Terminal B and 24 in Terminal C arranged in a similar fashion.16 In general, there are two lines

lined up at each counter dealing with passengers.

<Airport Service Fee Counter> (First floor)

At the end of the check-in lobby there is a counter where customers who have completed check-in

16
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-9

1-20
pay the airport service fee.

Photo 1-5: Check-in counters Photo 1-6: Airport service fee payment counter

Source: Taken by the Study Team (September 2011)

<Departure Lounge> (Second floor)

After paying their airport service fee at the counter, passengers take the escalator up to the second

floor. In the departure lounge, restaurants and souvenir shops are lined up on either side of the

passageway. This area is called the Shopping Arcade. It was recently installed by AP-II, which

also enlarged the concession area. This area can also be used by the general public by passing into it

from the stairs and deck on the side of the curbside area.

<Security Check> (Second floor)

A ticket and security checkpoint has been installed right in the middle of the main passageway which

general visitors are restricted from passing through. Four sets of metal detectors and X-ray scanners

have been installed at the security checkpoint.

1-21
Photo 1-7: Shopping Arcade Photo 1-8: Security checkpoint

Source: Taken by the Study Team (September 2011)

<Departure Gate Lounges> (Second floor)

There are seven independent departure lounges in each terminal, with each lounge connected to the

main departure lounge via a corridor. Each lounge has about 100 seats.17 The departure gate lounges

are generally equipped with air conditioning, but part of the corridor linking the main departure

lounges for Terminals A and B are open-air space despite having a roof. Conversely, air conditioning

is controlled throughout all of Terminal C.

The area surrounding the departure lounges has been festooned with various species of tropical

plants that are a delight for the passengers to look at.

Passengers move from the departure gate lounges to a passenger boarding bridge (PBB) by passing

through the corridor, while in some cases, they travel from the first floor to the apron by bus.

Arriving passengers descend to the first floor via the stairs within the gate lounges and pass through

17
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-9

1-22
the corridor to arrive at the baggage claim area.

Photo 1-9: Passageway to the departure gate lounges Photo 1-10: A departure gate lounge

Source: Taken by the Study Team (September 2011)

<Baggage Claim Area> (First floor)

Five rotating conveyor belts have been installed here. Three of these are used for mid-sized aircraft

such as B737s, with the remaining two used for small-sized aircraft.18

<VIP Terminal>

There is a two-story terminal exclusively for VIP passengers located between Terminals A and B.

Since it lacks a PBB, the passengers are transported to their airplanes by bus.

18
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-9

1-23
Photo 1-11: Baggage claim area Photo 1-12: Exterior view of the VIP terminal

Source: Taken by the Study Team (September 2011)

1-24
Figure 1-3: First Floor Layout, Terminal 1

Source: Prepared by the Study Team based on the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-25
Figure 1-4: Second Floor Layout, Terminal 1

Source: Prepared by the Study Team based on the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-26
(ii) Terminal 2

Terminal 2 was completed in 1992, and is currently used as a terminal for international routes and

some domestic routes by Garuda Indonesia Airlines and others. The Terminal 2 building is a

three-storey structure constructed of steel reinforced concrete, with a total floor space of

approximately 135,500m2. Terminal 2 is located to the north of Terminal 1, with the plan for the

terminal essentially emulating the plan for Terminal 1, but inverting it. Like Terminal 1, Terminal 2

has three units (Terminals D, E, and F) that are each independent. Terminal 2 has a surface level

parking lot facing its curbside area, which is similar to that for Terminal 1 in that it gets congested.

It differs from Terminal 1 in that it adopts a two-storey concept. It separates out the arrival and

departure functions to different floors, with the first floor serving as the arrival lobby and the second

floor as the departure lobby. The second-floor departure lobby is connected to the curbside area via

an elevated roadway, which makes it possible to access it by car.

What is more, the concept of a garden airport was set forth for the Terminal 2 architecture, and so

a garden-like space was created for the curbside area and it has been festooned with planted tropical

plants.

<Curbside Area> (First and second floor)

The curbside area on the second floor of Terminal 2 has the same design as that of Terminal 1. It

consists of an semi-open air space that is covered by a consecutive gabled roof that emulates the

traditional style in Indonesia, which is connected to the elevated access road. On the other side, the

floor of the second floor area forms the ceiling for the first floor curbside area, which gives one a

somewhat gloomy impression.

1-27
There are cafeterias, retail stores, and so on facing both the first and second floor curbside areas.

Photo 1-13: Curbside area (second floor) Photo 1-14: Curbside area (first floor)

Source: Taken by the Study Team (September 2011)

<Departure Lobby> (Second floor)

Terminal 2 differs from Terminal 1 in that there is a departure lobby found between the check-in

lobby and the curbside area that the general public can enter. The departure lobby is an indoor space

outfitted with an air conditioner. There is a small amount of seating there, but it is not enough to

accommodate most of the waiting passengers and lot of them are found sitting on the floor.

On either side of the passageway there are concessions such as cafeterias, retail stores, and exchange

counters.

<Entrances> (Second floor)

Six entrances leading into the check-in lobby have been set up,19 with only passengers that have a

ticket permitted to enter. Metal detectors and X-ray scanners have been installed at each entrance,

19
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-15

1-28
where inspections of the boarding passengers and their luggage are carried out.

Photo 1-15: Departure lobby Photo 1-16: Entrance

Source: Taken by the Study Team (September 2011)

<Check-in Lobby> (Second floor)

Check-in counters have been set up in a row side by side along the lobby wall. There are 106

check-in counters for Terminals D, E, and F all together, with counter numbers 1 through 72

allocated to Terminal D and numbers 99 through 106 allocated to Terminal E, with these being used

for check-in for international routes.20 Counter numbers 73 through 98 have been allocated to

Terminal F, and these are used for domestic routes.

<Embarkation Inspection Area> (Second floor)

There are two embarkation inspection areas connected to the check-in counters. Each inspection area

consists of seven units, with each unit made up of two booths.

20
ibid.

1-29
Photo 1-17: Check-in lobby Photo 1-18: Embarkation inspection area

Source: Taken by the Study Team (September 2011)

<Departure Lounge> (Second floor)

Upon passing through the embarkation inspection areas there is a shared departure lounge joining

Terminals D, E, and F. This departure lounge primarily consists of a passageway and the concessions

and business lounges lined up on either side of this passageway. It lacks brand shops when compared

against the new international airports in Asian countries like Japan and neighboring Singapore,

Malaysia, and South Korea, as it consists mainly of shops selling Indonesian handicrafts and

souvenirs, as well as restaurants.

A moving sidewalk has been installed right in the center of the central passageway.

<Security Checkpoints> (Second floor)

Security checkpoints have been set up before the number 1 and number 7 gate lounges in each

terminal. Passengers and hand luggage are inspected via two metal detectors and X-ray scanners.

1-30
Photo 1-19: Departure lounge Photo 1-20: Security checkpoint

Source: Taken by the Study Team (September 2011)

<Departure Gate Lounges> (Second floor)

There are seven independent gate lounges in each terminal, each of which is connected to the central

passageway via their own passageways. They essentially have the same design as the gate lounges in

Terminal 1.

Photo 1-21: Exterior view of the gate lounges Photo 1-22: Passageway to the gate lounges

Source: Taken by the Study Team (September 2011)

1-31
<Passport Control Areas> (First floor)

Passengers arriving in Soekarno Hatta Airport take the stairs in each gate lounge down to the first

floor and pass through the passageway to reach the central passageway. Passport control areas have

been set up beyond the central passageways for Terminals D and E. There are eight units in the

inspection areas, with two booths in each unit.

<Baggage Claim Area> (First floor)

Five conveyor belts for long-distance flights have been installed between Terminals D and E, and

three long conveyor belts for international flights have been installed between Terminals E and F.21

A baggage claim area has been separated out between Terminals E and F via a glass partition, and

two long conveyor belts have been installed in Terminal F for the passengers from domestic routes.

<Security Checkpoints and Customs> (First floor)

There is a single metal detector and X-ray inspection machine in front of the exit where the final

security checks are carried out.

<Arrival Lobby> (First floor)

The arrival lobby contains restaurants, cafes, exchange counters, and other concessions. The area for

the people who will pick up passengers is separated by the fences, where a great many people can be

seen waiting while seated on the floor, as there is virtually no seating.

21
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-16

1-32
Photo 1-23: Baggage claim area Photo 1-24: Arrival lobby

Source: Taken by the Study Team (September 2011)

<Transit Hotel> (Third floor)

There is a transit hotel on the third floor of Terminal 2. The entrance is on the second floor of

Terminal E, with guests passing through a metal detector and X-ray scanner in order to enter the

hotel. Common spaces such as the front desk, lounge, and restaurant have been arranged in the

center of the hotel, with the guest rooms set up on one side of a semicircular corridor. The guest

rooms are arrayed along the airside, and there are 82 rooms in total.

Photo 1-25: Entrance to the transit hotel Photo 1-26: Corridor within the hotel
(the right-hand airside contains the guestrooms)

Source: Taken by the Study Team (September 2011)

1-33
Figure 1-5: First Floor Layout, Terminal 2

Source: Prepared by the Study Team based on JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-34
Figure 1-6: Second Floor Layout, Terminal 2

Source: Prepared by the Study Team based on the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-35
(iii) Terminal 3

Terminal 3 was completed in 2009 in the area on the east side of Terminal 1. Transport between the

terminals is provided via a free shuttle bus service. The design for Terminal 3 was designed by the

Schiphol Airport Authority from the Netherlands. Terminal 3 is a two-storey structure of steel

reinforced concrete, with a total floor space of approximately 29,000m2. The terminal was built for

LCCs, and is currently served by domestic and international LCC routes. A 1.5 storey concept was

adopted for Terminal 3. No PBB was constructed in the interest of cutting costs, and so passengers

are transported to the apron by bus. There is an exclusive parking lot in front of Terminal 3, which is

not that crowded compared to Terminals 1 and 2.

Whereas Terminals 1 and 2 emulate a traditional Indonesian architectural style, Terminal 3 adopts a

contemporary architectural design.

<Curbside Area> (First floor)

The curbside area is a semi-enclosed space that is covered by a large roof. Stores such as fast food

restaurants and airline offices have been set up facing this curbside area. In addition, meeting spaces

have been established for general customers in the vicinity of the entrances and exits.

1-36
Photo 1-27: Exterior view of Terminal 3 Photo 1-28: Curbside area

Source: Taken by the Study Team (September 2011)

<Entrances> (First floor)

There are entrances to Terminal 3 in two locations. One is for passengers checking in, and the other

is an entrance for general public. Metal detectors and X-ray scanners have been set up at both

entrances.

<Check-in Lobby> (First floor)

There are 30 check-in counters lined up side by side along the wall in the check-in lobby.22

22
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-21

1-37
Photo 1-29: Entrance for general passengers Photo 1-30 Check-in lobby

Source: Taken by the Study Team (September 2011)

<Departure and Arrival Lobbies> (First floor)

The departure lobby and arrival lobby share the same space. The departure and arrival lobbies have

facilities like cafes, kiosks, exchange counters, and information desks. This area can also be accessed

by the general customers as well.

<Shopping Arcade> (Second floor)

Upon passing through the departure and arrival lobbies and taking the escalator up to the second

floor visitors come to the shopping arcade. There are eight shops, such as souvenir shops, restaurants.

Since natural light enters in from the arch-shaped roof, no lighting is needed during the daytime.

<Security Checkpoint> (Second floor)

There is a security checkpoint between the shopping arcade and the departure lounges, in which two

metal detectors and X-ray scanners have been installed.23

<Departure Lounge> (Second floor)

23
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-21

1-38
The departure lounge is essentially a shared space in which about 1,100 chairs have been provided.24

Boarding passengers descend from here to the first floor, where they are guided to the apron via

buses.

<Baggage Claim Area> (First floor)

Passengers getting off the buses immediately enter the baggage claim area, where there are six

conveyor belts.

Photo 1-31: Shopping arcade Photo 1-32: Departure lounge

Source: Taken by the Study Team (September 2011)

24
Ibid.

1-39
Figure 1-7: First Floor Layout, Terminal 3

Source: Prepared by the Study Team based on the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-40
Figure 1-8: Second Floor Layout, Terminal 3

Source: Prepared by the Study Team based on the JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report (March 2011)

1-41
(iv) Transport between the Terminals

At present, transport between the terminals is provided by running free buses between them.

c) Cargo Terminals

(i) Terminal 1

There is a cargo terminal on the east side of Terminal 1. This cargo terminal is composed of a cargo

terminal for domestic routes, an international route cargo terminal for imported cargo, and an

international cargo terminal for exported cargo. The cargo terminal for international routes is more

spacious than that for domestic routes, with the one for international routes being about 36,000m2

and that for domestic routes being about 12,000m2. This cargo terminal handles the cargo for

Terminals 1 and 2.

Figure 1-9: Cargo terminal

Source: JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the

Republic of Indonesia: Progress Report (March 2011)

(ii) Terminal 3

Six cargo buildings were constructed on the east side of Terminal 3, half of which have already been

demolished as the expansion work for the apron is carried out.

1-42
4) Other Facilities

A control tower, utility-related facilities and the AP-II head office building are located in the area

between Terminals 1 and 2.

AP-II head office building

Control tower

Extra high voltage substation

Water receiving and purification facility

Mosque

Photo 1-33: Interior of the extra high voltage substation Photo 1-34: Water purification facility

Source: Taken by the Study Team (September 2011)

In addition, the grounds on the southeast side within the airport are used as a business park (offices

and warehouses of the logistics companies), golf course, and a hotel (Sheraton).

5) Planned Site for the Construction of the Runway 3 and Terminal 4

The planned site for the third runway that is currently being planned as part of the Grand Design by

AP-II will be situated on the northern side of the airport grounds, but progress has yet to be made on

purchasing the land. According to the onsite study by the Study Team, residences are lined up along

1-43
the planned site, and so the expectation is that land acquisitions for the construction of the third

runway will be difficult.

Photo 1-35: Planned site for the construction of Photo 1-36: Planned site for the construction of
the Runway3 and Terminal 4 (distant view) the Runway 3 and Terminal 4 (foreground view)

Source: Taken by the Study Team (September 2011)

Proposed sites for construction of the Runway 3

and Terminal 4

Photo 1-37: Planned sites for the construction of theRunway 3 and Terminal 4 (aerial photograph)

Source: Created by the Study Team based on a Google Earth image

1-44
6) In-service Flights

The in-service international routes mainly run to Japan, Australia, China, Singapore, and other

countries in the Asian region, as well as some flights to Europe (France, the Netherlands, Germany,

etc.). However, there are no routes running to North America, where the security requirements are

stringent.

7) Development Plans of the Transportation Network around Soekarno Hatta Airport

a) Current State of the Road between Downtown Jakarta and Soekarno Hatta Airport

The current state of the transportation infrastructure running from the center of downtown Jakarta to

Soekarno Hatta Airport could not be described as being adequate. Since there is no access by railway

at present, users of the airport are forced to access it either by car or by bus. However, as the road

tends to be congested, this diminishes the convenience for airport users. This road is called the

Airport Toll Road and it forks off from the beltway running around the area of central Jakarta and

heads towards the airport. Depending on the parts of the road, it has six or eight traffic lanes.

Due to the fact that the embankment for this toll road is on a site with poor soil it gets flooded during

the rainy season, which poses obstacles for vehicle passage.

Moreover, because the development of the vicinity surrounding the Tangerang district in which

Soekarno Hatta Airport is located is making progress and the demand for commuting into downtown

Jakarta has increased, this is also worsening the congestion.25

25
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-40

1-45
b) Development Plan of the Road Network around Soekarno Hatta Airport

A plan exists to construct infrastructure such as a second beltway and another toll road in order to

relieve the chronic traffic congestion in the Jakarta metropolitan region. However, even if these

roads were to be built the current road to the airport would still be the shortest route to Soekarno

Hatta Airport from downtown Jakarta. For this reason, it is assumed that no dramatic changes will

occur unless a railroad or other such means of public transportation is developed.

8) Status of Access Railway Development

Presently there is no railroad linking downtown Jakarta with the airport, but there is a plan to

construct the Airport Access Link which was approved by the Directorate General of Railways of the

Ministry of Transportation in 2004. It is expected to commence its service in 2014. An

environmental assessment was carried out by Raillink (joint venture between AP-II and PT.KAI),

and approval was given by the Ministry of Environment in March 2009.26 There are two routes from

the direction of Jakarta envisioned; a northern route and a southern route. Since the southern route is

the existing railroad route going to Tangerang station near the airport, it is viewed as being more

highly feasible. From a hearing with AP-II it was learned that progress has not been made in

purchasing the land that will be needed for the construction of the railroad along the northern route,

and so it is believed that it will be difficult to implement construction quickly.

26
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
of Indonesia: Progress Report, (March 2011), p.6-41

1-46
Figure 1-10: Planned Route Map of the Airport Access Link

Source: JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the

Republic of Indonesia: Progress Report, (March 2011)

1-47
Chapter 2 Study Methodology
(1) Contents of the Study
As stated in Chapter 1, the expansion of Soekarno Hatta Airport requires urgent measures. AP-II has

made its own expansion plan called Grand Design, while DGCA which oversees all the airports in

Indonesia has commissioned JICA to make the master plan to deal with the same matter. However,

as there has not been enough coordination between AP-II and DGCA, the content of these two

master plans has some differences. Therefore, two master plans stand as independent, parallel

documents.

This study will evaluate these existing master plans for the expansion of Soekarno Hatta Airport.

Based on this assessment, the Study Team will conduct its own study of the airport, hearings of

AP-II, and hearings of relevant organizations, including the JICA Master Plan (M/P) Team. The

Study Team will draw on this information to design and propose to AP-II a project outline, financing

method, and project schedule for the expansion of Soekarno Hatta Airport, and the feasibility will be

explored through consultation. In principle, the study was carried out in coordination with the JICA

MP Team as much as possible through exchanges of views and other relevant information.

The relationship between the Study Team and relevant organizations is shown in the following

figure.

2-1
Figure 2-1 Relevant Indonesian and Japanese Organizations and their Relationship

Government of Indonesia Government of Japan


EKUIN
Office of Ministry of Finance JETRO / JKT METI
President
BAPPENAS Embassy of Japan
President
MOFA
in Indonesia
JICA / JKT MLIT
MOT DGLT

DGST JICA Airport


Itochu Corp. M/P Team
DGCA Group Study
Team JICA
MPA Team
MOSOE AP-II

AP-I

Source: Prepared by the Study Team

A more detailed list of the study contents is as follows:

Review existing studies

Analyze current airport demand and capacity, and review future demand projection

Recommend realistic investment plan in line with demand projection

Review profit structure of airport business and modality of public-private partnership

(role-sharing with AP-II)

Make recommendations for increasing/diversifying profits of private initiative PTB

development project

Recommend airport specifications/evaluate environmental impact

Forecast financing demand

Review Indonesias legal system and regulations on foreign capital participation regarding

PPP and restrictions on granting of business rights

2-2
Review Indonesias investment and loan environment/country risk

Identify anticipated risks of private initiative PTB development project and explore risk

mitigation measures

Identify envisioned PPP project scheme and requirements for its implementation

(2) Method and Organization of the Study


1) Method of the study

Carry out preliminary survey by reviewing relevant materials and conducting hearings of

stakeholders in Japan, etc.

Collect information through meetings and hearings from relevant organizations in Indonesia

Site survey

Analyze information collected and prepare proposal

Present proposal to relevant organizations and exchange views

2) Organization of the study


Bu ilding Technology
Nikken Sekk ei Ltd
Kazutaka Horii

Economic and Financial Analysi s


ITOCHU Corporati on
Masatake Tashi ro, Hirokazu Naka, Norihi sa Takahashi

Legal Scheme
Japan Economic Research Ins titute Inc.
Managing Company
Hiromasa Kon do
Project Devel opment & Trade
Project M anagement
Coordination Group
ITOCHU Corporation Airport Demand and Operation Anal ys is
Plant Project & Machi ne Division
ICT & Machin ery Company Hi rokazu Naka Japan Ai rport Termi nal Co., Ltd.
ITOCHU Corporat ion Yasuhid e Yonem ot o and Naohiro Kusu

Cost Estimate
SHIMIZU Corporation
Sadayasu Asano and Yoshihi ro Sato

En vironment and Social Analysis


Nikken Sekkei Research Insti tute
Shigehisa Mat sumura

Source: Prepared by the Study Team

2-3
3) Counterpart in Indonesia

AP-II, the company responsible for the operation of Soekarno Hatta Airport, is anticipated to be the

implementation unit in Indonesia. As of November 2011, no definite agreements have been made in

particular regarding activities conducted in partnership by AP-II and the Study Team.

(3) Schedule of the Study


1) Overview of the schedule

The study period is from August 31st, 2011 to February 16th, 2012. During this period, the Study

Team will carry out one site survey, three series of meetings, and a briefing session in Indonesia. The

schedule of the study is as shown in Table 2-1.

Table 2-1: Schedule of the Study


2011 2012
July August September October November December January February March

Indonesia Field study and meetings 1st meeting 2nd meeting 3rd meeting Briefing session
1Week 1 Week 1 Week 1 Week 1Week

Japan
Interim report Submission of draft report Submission of report

Info gathering Analysis Analysis


Compilation of draft report Final reporting Compilation of report

Source: Prepared by the Study Team

2) Contents of the site survey and meetings in Indonesia

The site survey and meetings were carried out on the following dates and contents.

2-4
a) Site survey (September 12th-17th, 2011)

September 12th, 2011 Travel (JapanJakarta, Indonesia)

September 13th, 2011

Meeting with a concerned party

Tour of Soekarno Hatta Airport

September 14th, 2011

Site survey of the airport (by Study Team)

September 15th, 2011

Meeting with the concerned party

Tour of Terminal

September 16th, 2011

Meeting with JICA Master Plan Team

Mr. Uehara (Team Leader)

3 others

Visit to JICA Indonesia Office

Mr. Matsunaga (Senior Representative)

Mr. Higuchi

Visit to Japanese Embassy

Mr. Maeda and 2 others

2-5
b) 1st series of meetings (October 30th-November 4th, 2011)

November 1st, 2011

Meeting with DGCA

Director of Airports

Meeting with the concerned party

Hearing of JAL Jakarta OfficeHH

November 2nd, 2011

Meeting with DGCA

Secretary General

2 Others

Exchange of views with the concerned party

November 3rd, 2011

Meeting with JICA Master Plan Team

Mr. Uehara (Team Leader)

Visit to Japanese Embassy

First Secretary Kamite

Visit to JICA Indonesia Office

Senior Representative Matsunaga

Mr. Higuchi

ANA Jakarta Office

Meeting with the concerned party

2-6
c) 2nd series of meetings (November 21st-23rd, 2011)

November 21st, 2011

Meeting with the concerned party

November 24th, 2011

Visit to Japanese Embassy

Minister Ushio

Counsellor Yoshizawa

November 25th, 2011

Meeting with JICA Jakarta Office

Senior Representative Matsunaga

d) 3rd series of meetings (December 18th-20th, 2011)

December 19th, 2011

Visit to Japanese Embassy

Counselor Yoshizawa

Meeting with JICA Jakarta Office

Mr. Higuchi

December 20th, 2011 Meeting with the concerned party

e) Debriefing Session in Jakarta (January 25th-28th, 2012)

January 26th, 2012

Meeting with the concerned party

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January 27th, 2012

Visit to Japanese Embassy

Minister Ushio

Meeting with JICA Jakarta Office

Mr. Higuchi

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Chapter 3 Justification, Objectives and Technical
Feasibility of the Project
(1) Project Background and Necessity, etc.
1) Positioning of Soekarno Hatta Airport in upper-level plans and related plans

A Memorandum of Cooperation was signed between the Governments of Japan and Indonesia for

the concept of Metropolitan Priority Area for Investment and Industry (MPA) in Jakarta in December

2010. A steering committee composed of cabinet members and others of both countries has been

established along with a technical committee composed of working-level staff. And, close exchanges

of opinion have been taking place concerning the development of the area with the aim of resolving

Jakartas infrastructure problems. At the first MPA Steering Committee meeting held in March 2011,

the Governments of Japan and Indonesia agreed on the content of the master plan study and the Fast

Track Projects, the construction phases of which are to start by the end of 2013. Accordingly, the

Master Plan for Establishing Metropolitan Priority Area for Investment and Industry in Jabodetabek

Area (MPA) in the Republic of Indonesia was launched by JICA in May 2011.

The MPA Study is scheduled to last approximately one year, beginning May 2011 in order to carry

out the following: 1) formulation of a city vision for greater Jakarta for the year 2020 by taking into

account predictions of the socioeconomic conditions of Indonesia in 2030; 2) based on this vision,

formulation of a comprehensive infrastructure plan to be achieved in Jakarta by 2020 and

identification of priority projects; and 3) acceleration of realizing the Fast Track Projects for which

construction is scheduled to start by the end of 2013 at the latest. This MPA Study is being carried

out on nine areas: public transportation networks, roads, railways, airports and related infrastructure,

ports, electric power, water and sewage, waste, and flood countermeasures.

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Of these, with regard to airports and related infrastructure, the construction of an access railway to

Soekarno Hatta Airport, expansion of Soekarno Hatta Airport, and the construction of a new airport

have been raised as issues of particular pressing importance.

Table 3-1: List of priority MPA projects

Source: MPA Master Plan Study Team, Master Plan For Establishing Metropolitan Priority Area For Investment And

Industry In JABODETABEK Area: PPT Slide (June 2011)

The process of drafting an airport development policy within Jakarta was even reported in the JICA

Master Plan. The Indonesian Government drafted a mid-term development plan (RPJM 2010-2014)

focusing on national and local economic development until the middle of the 21st century, and based

on this plan the Indonesian Ministry of Transportation (MOT) and DGCA drafted a mid-term

strategic plan (RENSTRA 2010-2014).

The greater Jakarta metropolitan area is currently undergoing rapid urbanization, and it is expected

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that the capacity of runways at Soekarno Hatta Airport will not be able to handle a long-term rise in

air flight demand. It is believed that this will seriously restrict private sector air travel in the future.

In light of these circumstances, acknowledging the importance and urgency of formulating policy for

an airport in the greater Jakarta area, the DGCA has applied for a subsidy using foreign technical aid

in order to draft a master plan for constructing an airport in Jakarta. At present, however, the Badan

Perencanaan Pembanguan Nasional (National Development Planning Agency; BAPPENAS) has not

approved this application list (Blue Book).

Meanwhile, however, AP-II, which oversees the operations of Soekarno Hatta Airport, supports the

expansion of the airport and has released a Grand Design as a concept document for the airports

expansion.

Figure 3-1: Grand Design by AP-II

Source: AP-II Grand Design pamphlet

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According to the Grand Design, Runway 3 and Terminal 4 will be newly constructed on the northern

side of the premises. An expansion is planned for the existing facilities of Terminals 1, 2, and 3,

where Terminals 1 and 2 would be linked using an integrated building which would contain boarding

gates, immigration, and other areas, as well as commercial facilities.

2) Trends of increase in number of passengers at Soekarno Hatta Airport

Soekarno Hatta Airport opened its south runway and Terminal 1 in 1985, and in 1993 constructed its

north runway and Terminal 2. The airport has experienced extremely high growth in passenger

numbers, surpassing 20% on average between 2001 and 2006. The graph below shows that the

number of passengers grew from 10 million in 2000 to 42 million by 2010. This is an increase of

approximately four-fold over the 10-year period. The current terminal capacity amounts to a total of

22 million people when combining the nine million for Terminals 1 and 2, respectively, with the four

million for Terminal 3. However, the number of passengers currently amounts to two-times this

capacity, making it safe to say that the number of passengers has already reached a point of

saturation compared to terminal capacity.

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Figure 3-2: Changes in passenger numbers at Soekarno Hatta Airport

Source: JICA, Master Plan Study On MultipleAirport Development For Greater Jakarta Metropolitan Area In The

Republic Of Indonesia: Progress Report (March 2011)

Meanwhile, as can be seen in the graph below, the number of arrivals and departures possible per

annum is 370,000, and it is forecasted that this will suffice until around 2015. It is believed that this

number of arrivals and departures can accommodate up to 60 million passengers.

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Figure 3-3: Forecasted number of arrivals/departures at Soekarno Hatta Airport (2000-2040)

Source: MPA Master Plan Study Team, Master Plan For Establishing Metropolitan Priority Area For Investment And

Industry In JABODETABEK Area: PPT Slide (June 2011)

3) Extracting the issues from the site survey

a) Extracting issues from discussion with AP-II

The main issues that should be resolved at Soekarno Hatta Airport that AP-II identifies as being

problematic, which were made clear in the first round of discussions with AP-II, are: 1) terminal

congestion; 2) parking lot congestion; and 3) aircraft parking apron congestion.

(i) Terminal congestion

As mentioned earlier, the airport currently receives 44 million passengers despite its terminal

capacity of 22 million. This creates congestion in various areas, including inside the terminal,

departure lobby, arrival lobby, and departure lounge. There is also a marked accumulation of

passengers in the visa application and immigration areas of the international arrival lobby.

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Photo 3-1: Congested arrival lobby Photo 3-2: People resting at the observatory tower

Source: Taken by the Study Team (September 2011)

(ii) Parking lot congestion

The existing parking lots at Terminals 1, 2, and 3 are able to accommodate 5,400 vehicles, but

considering that actual passenger numbers reach 44 million (120,000 per day), it is clear that the

number of passengers have already exceed parking lot capacity. Throughout the parking lots there

are cars parking on the shoulder of the road and cars that disrupt the order of the lot. For reference,

Haneda Airport offers a domestic airline parking lot for approximately 9,500 cars (57 million

passengers annually) and an international terminal parking lot that accommodates approximately

2,250 cars (6 million passengers annually).

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Photo 3-3: Congested curbside Photo 3-4: Congested parking lot

Source: Taken by the Study Team (September 2011)

(iii) Aircraft parking apron congestion

As passenger numbers continue to rise, there is a lack of fixed spots and there is an increase in the

number of airplanes using open spots to wait, which is a response to the increasing number of LCCs

in service. The aircraft parking apron as a whole appears to be congested. Furthermore, while the

number of passengers is increasing, many of the aircraft are smaller in size, making for a larger

number of aircraft that use the parking apron and further boosting the necessity for an expansion of

the parking apron.

Photo 3-5: An aircraft parked in an open spot Photo 3-6: LCC equipment

Source: Taken by the Study Team (September 2011)

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b) Issues extracted via the Study Teams site survey

On the first visit to Soekarno Hatta Airport, the Study Team conducted a site survey of their airport

over a three-day period. The Study Team discovered the following three issues with the airport: 1)

loss of business opportunity; 2) inadequate security structure; and 3) aging and obsolete systems.

(i) Loss of business opportunity

Currently, while the terminal buildings are overflowing with passengers and well-wishers, as far as

can be observed, there is not very much use of concessions at the curbsides and other places. Most of

the stores in the departure lobby are either souvenir shops or cafeteria-style restaurants catering

chiefly to local residents, making it difficult to say that the existing facilities respond to the

widespread customer needs of foreign businesspersons and resort tourists. Furthermore, the product

lineups at duty free shops within the security area lack visual appeal, and compared to other airports

there is a lack of brand name shops and other stores that handle luxury goods. There is also a lack of

restaurants and lounges within the security area where passengers can rest and relax.

By properly providing the necessary services from the viewpoint of airport users it will be possible

to expand business significantly. In actuality, at famous airports throughout the world there are

facilities to provide users with the services that they need, including concessions inside and outside

of the security gates, a rich food and beverage selection, diverse services for waiting passengers such

as lounges, play spaces for children, smoking areas, Internet services, and more. In this way, airports

are boosting their non-aeronautical revenues. However, as mentioned earlier, despite the large

number of airport users at Soekarno Hatta Airport, few services are provided for improving the

convenience and comfort of users, thus sacrificing great business opportunity.

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Photo 3-7: Unattractive concessions Photo 3-8: Passengers waiting with nothing to do

Source: Taken by the Study Team (September 2011)

(ii) Inadequate security structure

In general, the attitude towards security at Soekarno Hatta Airport can hardly be considered as strict.

The airport utilizes outdated security systems and there are apparent flaws in security operations and

facilities.

The X-ray scanners used to check the checked luggage and carry-on baggage of customers are

outdated. Moreover, the baggage handling system that was installed when the airport first opened is

still being used, where a single employee visually confirms the X-ray scanned images of baggage.

Compared to the baggage handling system at Haneda Airport, which makes use of the latest

computer control technology, it is hard to say that a thorough system of safety control is being

implemented.

Moreover, the results of an interview survey conducted on Japanese airlines that use Soekarno Hatta

Airport indicated that it was possible to move from the arrival area inside the security area to the

departure area via elevator. Even the teams survey revealed that there was no glass or other barrier

along the arrival passage within the security area, allowing people to freely pass over to the airside.

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As one example of an operational problem, a person was confirmed to be smoking in a location after

the final security check on the other side of the departure gates, meaning that people are permitted to

bring in lighters.

Photo 3-9: Security system Photo 3-10: Passageway near the airside

Source: Taken by the Study Team (September 2011)

(iii) Aging facilities

Terminals 1 and 2, which opened in 1985, have never undergone major upgrading and renovation

since opening, and after more than 25 years the facilities clearly show signs of aging and

obsolescence. Consideration must be paid to restoring the buildings structure (waterproofing and

sealing), machinery (air conditioning and sanitation), electrical facilities (lighting, etc.), EV facilities,

BHS facilities, CH/IN facilities, etc. It is anticipated that upgrading to the latest energy-saving

facilities will allow for reducing the overall burden.

Furthermore, with regard to the power supply facilities, there is not a proper effort of BCP. As there

are no preparations in place to respond to power outages, which occur frequently in Indonesia, a

country with a shortage of power, the stable operation of flight control systems, which ensures the

smooth and safe flight of aircraft, cannot be guaranteed.

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Photo 3-11: Outdated baggage handling Photo 3-12: Later installed air conditioning system
system

Source: Taken by the Study Team (September 2011)

4) Necessity for expansion and upgrading of Soekarno Hatta Airport

As can be seen, there is a clear necessity for rapidly carrying out expansion and upgrading of

facilities at Soekarno Hatta Airport. In order to make this airport a suitable gateway to Indonesia, a

country undergoing marked economic growth, it will be necessary to introduce and manage

advanced security systems, install and upgrade to facilities that take into consideration the

environment, and provide various new customer services.

In addition, it is expected that the expansion and upgrading of the facilities will bring forth

prevention of the loss of opportunities for outside economic activities due to insufficient capacities,

enhancement of favorable impression on Indonesia through appropriate spatial arrangement of the

gateway, extension of air routes through increase in security, improvement of profitability through

introduction of passenger-oriented functions leading to satisfaction of customers, and so on.

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5) Scope of project

a) Project elements

The envisioned scope of this project is outlined in the table below. The difference from the Grand

Design of AP-II is that our team does not incorporate the construction of Runway 3 and Terminal 4.

Moreover, as the period for the launch of operations for the railway is uncertain, the railway station

has also been left out from our project scope. Even the MP produced by the JICA MP Team, which

conducted a survey ahead of others, does not incorporate plans to construct Runway 3 due to

difficulties in appropriating the land where the runway was planned for construction, amongst other

reasons. Furthermore, with regard to Terminal 4, which AP-II envisions to construct in the north area

of the airport site, the JICA team drafted the MP under the premise that Terminal 4 would be

constructed in the area which is currently occupied by the golf course in the airport site; however,

the Study Team believes that the capacity of the airport depends more on the runway capacity, not on

the terminal capacity. In addition,, considering the recent tendency of increase in LCCs which prefer

open spot operation, the Study Team has decided not to include the Terminal 4 in our scope.

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Table 3-2: Project elements in the Grand Design and project scope envisioned in this project

Envisioned scope of Envisioned scale of


AP-II Grand Design project elements
construction in this project facilities in this project

New construction + repair of


Apron
existing areas

Airside New construction of taxiway


on eastern side; Area developed:
Taxiway
partial repair of existing 360,000
runway
Extension to existing facilities 30,000 (extension) +
Terminal 1
+ repair of existing areas repair of existing facilities
Extension to existing facilities 30,000 (extension) +
Terminal 2
Terminals + repair of existing areas repair of existing facilities
Terminal 3 Extension to existing facilities 200,000 (extension)

Cargo New construction 150,000


Integrated Building
(Connecting building,
Commercial area New construction 185,000
inter change terminal)
(Parking building)
New construction for
Additional terminal Total length: 3.5 km
People mover connecting to new terminal
construction (4 stations)
(or construction of bus route)
Utilities, etc. Utilities, road improvement
Railway station Railway station Not applicable
Runway 3 Not applicable

Future expansion Terminal 4 Not applicable

Commercial Area, East Side Not applicable

Source: Prepared by the Study Team

6) Consideration and comparison of alternative plans

According to the Interim Report drafted by the JICA MP Team, the new airport in the greater Jakarta

area is proposed for construction on the southern side of Karawang as an airport that provides both

domestic and international services. Moreover, there are plans to develop two runways, a terminal,

access road, and related facilities in order to be able to accommodate the yearly amount of 34 million

passengers by the year 2019. The new airport will tentatively include four runways in order to

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ultimately accommodate for an annual amount of 100 million passengers. In other words, it was

believed necessary to accommodate the growing demand for air transportation by expanding

Soekarno Hatta Airport until the new airport is constructed in 2019.

As an alternative option until the new airport is constructed, the airports currently located in the

great Jakarta metropolitan area can be utilized. As of present, this area hosts three operating airports:

Halim Airport, Pondoc Cabe Airport, and Curug Airport. Furthermore, there are plans to construct

Majalengka Airport and Panimbang Airport. The following is an evaluation of these airports as a

substitute airport for Soekarno Hatta Airport.

Figure 3-4: Location of major airports in greater Jakarta

Soekarno Hatta Airport

Karawang Airport

Curug Airport

Pondoc Cabe Airport

Halim Airport

Bandung Airport

Majalengka Airport

Source: JICA, Master Plan Study On MultipleAirport Development For Greater Jakarta Metropolitan Area in the

Republic of Indonesia: Interim Report (June 2011)

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Halim Airport

Halim Airport is about 11 km from the center of Jakarta, offering easy access, at about 30 minutes by

car. Currently, the airport is often used for noncommercial flights, such as military persons and VIPs ,

and there are restrictions on the number of regular flights. It will be difficult to greatly increase the

number of departures and arrivals.

Pondoc Cabe Airport

Pondoc Cabe Airport is 25 km southwest of Soekarno Hatta Airport and is about 20 km from the

center of Jakarta. It takes about 30 minutes by car to get to the airport from the center of Jakarta. The

airports runway is not long enough to accommodate a Boeing 737 and is not suited for regular

flights. Moreover, the access road to the airport passes through a residential area, making it an

unfavorable option considering access time.

Curug Airport

Curug Airport is located 30 km from the center of Jakarta, and it takes about 60 minutes by car to

reach. This airports runway is also not long enough to accommodate a Boeing 737 and is not suited

for regular flights. The access road to the airport passes through a residential area, and as it is

somewhat far from inner Jakarta, access is a problem.

Bandung Airport

Bandung Airport is the airport that provides services for Indonesias second largest city, Bandung,

and is located about 180 km southwest of Jakarta. Currently, the airport provides six domestic and 5

international flights everyday, but the terminal building is believed incapable of accommodating a

further increase in passengers. Moreover, since the airport is 130 km away from Jakartas main

3-16
shopping district, it is a problem with access to use this airport as a substitute for Soekarno Hatta

Airport.

Majalengka Airport

Majalengka Airport is a new airport planned for constructed in West Java. It will be located 200 km

from central Jakarta, making access a problem in using this airport as a substitute for Soekarno Hatta

Airport.

Panimbang Airport

According to the master plan for Panimbang Airport, the new airport will be located 130 km west of

Jakarta. Construction is planned to commence in 2012 and the airport is scheduled to begin operating

in 2014. However, it is located 130 km from the center of Jakarta, making access a problem in using

this airport as a substitute for Soekarno Hatta Airport.

As can be seen from the explanation above, expanding Soekarno Hatta Airport is the only viable

option for covering the increase in flight demand in greater Jakarta.

(2) Necessary considerations for determining project details, etc.


1) Demand forecasts

a) Demand forecasts in AP-IIs Grand Design

Demand forecasts in the AP-II Grand Design indicate that passenger numbers are to reach 54 million

by 2015. In order to respond to this increase, there are plans to boost the airports capacity to 62

million by 2013. In terms of capacity by terminal, it is envisioned that Terminal 1 will be increased

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from 9 million to 18 million, Terminal 2 from 9 million to 19 million, and Terminal 3 from 4 million

to 25 million.

Figure 3-5: Passenger number statistics and demand forecasts

Source: AP-II Grand Design pamphlet.

Figure 3-6: Expansion plan for terminal capacity

Source: AP-II Grand Design pamphlet.

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b) Demand predictions used in this plan

Table 3-3: Demand predictions in this plan

Intermediate Target (2014) Target Demand (2017)


Airport capacity 53 map Airport capacity 60 map
Domestic 42 map Domestic 47 map
International 11 map International 13 map

Source: Prepared by the Study Team

In a meeting in October 2011 between the DGCA, AP-II, and the JICA Master Plan team, the

decision was made to set the demand forecasts in their master plan study at 60 million people (47

million for domestic and 13 million for international travel). The Study Team has also adopted this

forecast for the feasibility study.

2) Responding to airport capacity and demand

The JICA Master Plan team presented a response to airport capacity and demand illustrated in the

graph below in a meeting held in October 2011 with the DGCA and AP-II.

The response specifies the intermediate target of responding to passenger demand by raising

passenger capacity to 53 million by 2014. Furthermore, it also indicates the final target of raising

passenger capacity to 60 million by 2017.

The following is the envisioned demand targets for both the intermediate target and final target.

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Figure 3-7: Phased terminal development

Source: JICA Study Team, Development Plan of Soekarno - Hatta Airport: PPT Slide (October 2011)

The following development situation is envisioned for the intermediate target phase.

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Figure 3-8: Phased Area Development Plan (2014)

Source: JICA Study Team, Study On Development Plan of Soekarno - Hatta Airport: PPT Slide (October 2011)

The following development situation is envisioned for 2017.

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Figure 3-9: Phased Area Development Plan (2017)

Source: JICA Study Team, Study On Development Plan of Soekarno - Hatta Airport: PPT Slide (October 2011)

a) Profit structure analysis and extracting administrative issues

AP-IIs profit structure and that of Soekarno Hatta Airport are similar; a little less than 80% of all

profits come from aeronautical business, while non-aeronautical business accounts for just over 20%,

and cargo services for less than 2%.

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Table 3-4: AP-II revenue breakdown

(Unit: Million IDR)

2008 2009 2010


Aeronautical Revenues 1,714,367 2,109,615 2,375,757
Non-Aeronautical Revenues 524,907 596,771 682,247
Cargo Services 37,250 39,093 48,365
Total 2,276,524 2,745,479 3,106,369

Source: AP-II Annual Report (2009, 2010).

Table 3-5: Soekarno Hatta Airport revenue breakdown

(Unit: Million IDR)

2008 2009 2010


Aeronautical Revenues 1,373,262 1,709,374 1,918,467
Non-Aeronautical Revenues 433,582 496,413 560,619
Cargo Services 22,853 24,850 30,657
Total 1,829,697 2,230,638 2,509,743

Source: AP-II Annual Report (2009, 2010)

Figure 3-10: AP-II profit structure Figure 3-11: Soekarno Hatta Airport profit structure

Source: AP-II Annual Report (2009, 2010).

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According to the 2010 Airport Economics Survey released by the Airports Council International,27

non-aeronautical revenue accounted for 46.5% of all business earnings by the 646 airports that

responded to the questionnaire (2009, 2010).

In terms of non-aeronautical earnings by Asias major airport management companies, at Narita,

Hong Kong, Thailand (Airports of Thailand, AOT), and Malaysia (Malaysia Airports Holding

Berhad) non- aeronautical earnings account for more than 40%, while in Singapore (Changi Airport

Group, CAG) they account for approximately 50%.

Table 3-6: Revenue breakdown of Narita Airport

FY2008 FY2009 FY2010

Aeronautical revenue 56% 56% 57%

Non- aeronautical revenue 44% 44% 43%

Other 0% 0% 1%

Total (million yen) 196,897 187,359 195,483

Source: Narita International Airport Corporation Financial Report (FY2009, FY2010)

Table 3-7: Revenue breakdown of Hong Kong International Airport

FY2008 FY2009 FY2010


Aeronautical revenue 60% 56% 56%
Non- aeronautical revenue 39% 44% 43%
Other 1% 1% 1%
Total (M, HKD) 8,886 9,015 10,583

Source: Hong Kong International Airport Annual Report (2010, 2011)

27
http://www.airports.org/aci/aci/file/Annual%20Report/ACI_Annual_Report_2010_online.pdf

3-24
Table 3-8: Revenue breakdown of Airports Of Thailand

FY2008 FY2009 FY2010


Aeronautical revenue 56% 57% 58%
Non- aeronautical revenue 44% 43% 42%
Total (M, THB) 26,740 21,502 24,033

Source: Airports of Thailand Annual Report (2009, 2010)

Table 3-9: Revenue breakdown of Malaysia Airports Holding Berhad

FY2008 FY2009 FY2010


Aeronautical revenue 51% 52% 52%
Non-aeronautical revenue 49% 48% 48%
Total (M, MYR) 1,279 1,469 1,675

Source: Malaysia Airports Holding Berhad Annual Report (2009, 2010)

Table 3-10: Revenue breakdown of Changi Airport Group

2009/2010
Aeronautical revenue 36%
Non-aeronautical revenue 51%
Other 13%
Total (M, SGD) 961
Note: The Changi Airport Group (CAG) was founded in June 2009 and the fiscal year begins in April. As such,
financial information is only available for the founding year of June 15, 2009 to March 2010 (business period of
about eight months).

Source: Changi Airport Group Annual Report (2009/2010)

From the above revenue structure analysis, it is believed important from an administrative

perspective for Soekarno Hatta Airport to implement measures for boosting non-aeronautical

revenues, as the airports ratio of non-aeronautical revenues on overall revenues is much lower

compared to the rest of Asia and the world.

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b) Analysis of detailed revenue breakdown

With regard to a detailed breakdown of revenues (breakdown of aeronautical revenue and

non-aeronautical revenues), due to data restrictions it was only possible to assess figures for AP-II

(there was no breakdown of revenues for aeronautical /non-aeronautical by airport in the annual

reports).

Aeronautical revenues

The largest factor of AP-IIs aeronautical revenues was passenger service. This was followed

by flight services and then landing services (the air traffic control services operated by AP-I

and AP-II in Indonesia are now state-owned, and while the decision has been made to separate

the services from the airport management company, there have been no specific developments

as of yet).

Table 3-11: AP-II airport revenue breakdown

Aeronautical Revenues 2008 2009 2010


Landing Services 17.9% 15.8% 14.8%
Flight Services 26.3% 20.6% 17.8%
Passenger Service 49.6% 58.1% 62.2%
Aviobridge usage 2.9% 2.6% 2.3%
Counter usage 3.2% 2.9% 2.9%
Total 100.0% 100.0% 100.0%

Source: AP-II Annual Report (2009, 2010)

Passenger service fees (formerly known as airport taxes) at Soekarno Hatta Airport are set at

150,000 rupiah for international flights and 40,000 rupiah for domestic flights. According to

JICAs Master Plan survey, there were a total of approximately 42 million passengers in 2010

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(of which 32 million were domestic travelers and 9.5 million were international travelers).

Estimating that half of the airport users are travelers that pay airport usage fees, airport usage

fees at Soekarno Hatta Airport in 2010 can be assumed to be around 1.3715 trillion rupiah.

This is 71.5% of the airports aeronautical revenues (1.9185 trillion rupiah), or 54.6% of

overall revenues.

Table 3-12: Airport usage fees at Soekarno Hatta Airport (estimate)

Passenger Departing Passenger Fee Revenue


(JICA MP) Estimated per passenger (Estimated)
(people) (people) (IDR) (M, IDR)
Domestic 32,396,066 16,198,033 40,000 647,921
International 9,647,576 4,823,788 150,000 723,568
Total 42,043,642 21,021,821 1,371,490

Source: AP-II Annual Report (2009, 2010), JICA Master Plan

Compared to the international flight fees of surrounding airports in Asia, airport service fees at

Soekarno Hatta Airport are not very high. On the other hand, however, domestic flight fees are

rather high compared to other airports in Asia.

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Table 3-13: Airport service fees (international flights)

Yen Dollar
Local currency
equivalent equivalent
Indonesia Soekarno Hatta Airport 150,000 IDR 1,266 16.5
Narita Airport 2,540 JPY 2,540 33.1
Haneda Airport 2,000 JPY 2,000 26.1
Hong Kong International Airport 120 HKD 1,183 15.4
Suvarnabhumi International Airport (Thailand) 700 THB 1,729 22.6
Kuala Lumpur International Airport (Malaysia) 51 MYR 1,233 16.1
Kuala Lumpur International Airport (Malaysia; LCC) 25 MYR 604 7.9
Changi Airport (Singapore) 28 SGD 1,654 21.5
Changi Airport (Singapore; LCC) 18 SGD 1,063 13.9
Note: Narita, Haneda, and Hong Kong also have separate fees for children.

Source: Websites for each respective airport. Currency equivalents were taken at the time the report was drafted

(November 21, 2011).

Table 3-14: Airport service fees (domestic flights)

Yen Dollar
Local currency
equivalent equivalent
Indonesia Soekarno Hatta Airport 40,000 IDR 338 4.4
Narita Airport 0 JPY 0 0.0
Haneda Airport 170 JPY 170 2.2
Hong Kong International Airport N/A N/A N/A
Suvarnabhumi International Airport (Thailand) 100 THB 247 3.2
Kuala Lumpur International Airport (Malaysia) 9 MYR 218 2.8
Kuala Lumpur International Airport (Malaysia; LCC) 6 MYR 145 1.9
Changi Airport (Singapore) N/A N/A N/A
Changi Airport (Singapore; LCC) N/A N/A N/A
Note: Narita, Haneda, and Hong Kong also have separate fees for children. Figures for Narita Airport are for
domestic flights that originate at Narita Airport. The transit charge for international flights is 1,520 yen per adult.

Source: Websites for each respective airport. Currency equivalents were taken at the time the report was drafted

(November 21, 2011).

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Non-aeronautical revenues

Non-aeronautical revenues account for a little more than 20% of all AP-II revenues.

Of those revenues, the main non-aeronautical revenues are concessions and space rentals.

Table 3-15: AP-II non-aeronautical revenue breakdown

Non-Aeronautical Services 2008 2009 2010


Space Rental 25.9% 24.2% 24.5%
Concession 32.9% 30.4% 31.8%
Airport Pass 2.4% 1.3% 1.1%
Parking Services 10.3% 10.0% 10.0%
Land Rental 5.1% 5.3% 4.9%
Utilities 12.1% 10.6% 9.9%
Advertising 8.8% 9.2% 9.9%
AMACS 0.2% 0.2% 0.1%
Others 2.3% 8.8% 7.8%
Subtotal 100.0% 100.0% 100.0%

Source: AP-II Annual Report (2009, 2010)

At Singapores Changi Airport, non-aeronautical revenues accounted for 51% of all business

revenues in fiscal 2010.28 Moreover, the total floor area of the four terminals that makes up

the airport amounts to 1,046,220 m2. Of that floor area, more than 70,000 m2 is used for

commercial space (6.7% of total floor area), with 290 retail shops and 130 restaurants and

eating establishments.29

Currently, total floor area of terminals at Soekarno Hatta Airport amounts to 307,147 m2,

making the rentable area of the airport likely around 8,000 m2 (of which, 2,000 m2 is for

28
Source: Changi Airport Group Annual Report 2009/2010
(http://www.changiairportgroup.com/export/sites/caas/assets/changi_connection/Changi_Airport_Group_AR_0910_F
ull.pdf).
29
Source: Changi Airport website (http://www.changiairport.com/our-business/about-changi-airport/facts-statistics).

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Terminal 1, 4,000 m2 for Terminal 2, and 2,000 m2 for Terminal 3). Thus, rentable area

accounts for approximately 2.6% of the airports total floor space.

The following is an overview of the administrative issues as taken from the above detailed revenue

analysis.

Possible methods for increasing non-aeronautical revenues are boosting the amount of

commercial space or raising the average spending per customer. In order to do this, in addition

to the new construction of Terminal 3, it is important to work to expand the amount of rentable

space in accordance with the upgrading of Terminals 1 and 2, while also making efforts to

increase sales by targeting well-wishers by constructing Terminal 3 and a connecting building

(place where only passengers with tickets can currently go).

In order to raise the average spending per customer it is necessary to establish attractive

commercial facilities. In order to promote more spending by departing passengers, passengers

in transit, and well-wishers, it will likely be necessary to upgrade the quality of commercial

facility management and make administrative efforts such as opening stores that meet the

customers needs.

3) Target setting and the basic policy for expansion

a) Target setting for the expansion project

In light of current issues with the facilities and administrative issues related to revenues, the

following targets have been set for the expansion project of Soekarno Hatta Airport.

(i) Resolve the capacity problem and contribute to the further development of the Indonesian

economy

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Indonesia is currently experiencing an ongoing trend of healthy economic growth, and the number of

air travel passengers is dramatically increasing in response. Indonesia is a nation comprising a large

number of islands, making air travel a very significant mode of medium to long-distance domestic

travel. The lack of air travel capacity should be resolved quickly and a foundation for further

economic growth, constructed.

(ii) Improve customer satisfaction and security to make the airport a world-class airport

As described earlier, the current airport terminal lacks convenience and appeal as a gateway to the

growing market of Indonesia, including holdups at immigration for international flights and an

unattractive concessions area for departing passengers.

Moreover, the airport has a large number of security problems, including with baggage handling, and

these issues are the reason that flights have yet to be established with North America.

One target of the expansion project will be to increase customer satisfaction and security, working to

make the airport a world-class airport.

In increasing customer satisfaction it is important to assess the situation of customers, establish

customer segments, and consider a finely-tuned response.

First, an overview of flight passengers will be provided from the JICA MP Teams Progress Report.

As can be seen in the figure below, the purpose of travel differs between domestic and international

passengers. For domestic flights, the majority, approximately 30%, is accounted for by passengers

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returning home or visiting family, while nearly 25% are traveling for sightseeing purposes.

Meanwhile, the majority of international air travelers, at approximately 40%, travel for business,

while nearly 30% travel for sightseeing.

Figure 3-12: Travel purpose of airport users taken from a questionnaire

Source: JICA, Master Plan Study On Multiple Airport Development For Greater Jakarta Metropolitan Area In The

Republic Of Indonesia: Progress Report (March 2011)

Let us use the survey above to look at the situation of airport users that are well-wishers. For

domestic flights, these users account for 16.5%, where the average reflected on air travel passengers

is 0.298 people.

Meanwhile, for international flights, the percentage of airport users that are well-wishers is 24.4%,

where the average reflected on air travel passengers is 0.431 people.

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Figure 3-13: Ratio of well-wishers

Source: JICA, Master Plan Study On Multiple Airport Development For Greater Jakarta Metropolitan Area In The

Republic Of Indonesia: Progress Report (March 2011)

Moreover, in addition to the flight passenger-related businesses described above, the following

groups can be assumed as customers for other airport businesses.

Carriers are the customers that should be emphasized the most, by maintaining airways and bringing

in their customers. Tenants of restaurants, shops, and lounge operators are also important customers

that provide rent money and influence the satisfaction level of airport customers. Furthermore, while

this may not apply at present, it will be necessary sooner or later to pay a certain degree of

consideration to passengers traveling to visit the airport itself.

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Figure 3-14: Customer segmentation of Soekarno Hatta Airport

Source: Prepared by the Study Team

(iii) Infrastructure development advanced in view of forming a city core with Soekarno Hatta

Airport at its center in the long term

As described in the Grand Design of AP-II, the Soekarno Hatta Airport expansion project aims not

only to expand the airports terminals, but in the long term to introduce business, lodging, and

convention functions, and to form a city core that is centered on Soekarno Hatta Airport.

While promoting the early introduction of railway transport, people movers and other shuttle

facilities will be developed on the airport grounds in order to construct the infrastructure necessary

for forming a new city core.

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4) Basic policy for facility development

The following is the basic policy for facility development in light of the current challenges faced and

the targets laid out for the expansion project above.

a) Prompt rectification of the lack of capacity

As mentioned above, rectifying the lack of capacity is an urgent issue, and developments will be

made at the earliest timing possible. The following categories have been set in order to overcome

this issue.

Terminals

Apron, aircraft parking spots

Parking lots

(i) Setting grades in accordance with the customer

As airport service fee of an international passenger is 3.75 times that of domestic passenger, it is

plausible to assume that the revenue increase per person contributed by an international passenger

who spends money at commercial facilities will be larger than that by a domestic passenger, as

discussed in Chapter 5 Overview of the Results of Preliminary Financial/ Economic Analysis.

While maintaining the necessary comfort for domestic passengers, further investments will be

focused on the international terminal in efforts to achieve the status of a world-class airport and

increase customer satisfaction.

(ii) Improving security

The airports security gates and baggage handling systems are aging and growing obsolete, meaning

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that sufficient security is not being ensured. In addition, security flaws were observed at transport

areas to the terminals, and these factors have prevented the airport from commencing flights with

North America. The number of flights will be increased while enhancing security and providing a

safe and secure environment.

(iii) Boosting the appeal of the current airport terminal by exploiting regional character

Terminals 1 and 2 of Soekarno Hatta Airport are rich with an original design that makes use of the

regional architectural features. That appeal will be expanded upon in aim of constructing a new

world-class airport that exploits the local characteristics.

(iv) Increasing the convenience of inter-terminal travel

Currently, most travel between terminals is conducted on shuttle buses; however, these buses are not

easily accessible, thus keeping usage levels low.

The convenience of traveling between terminals will be improved, including for the purpose of

forming a city core in a long run. Specifically, the people mover will be constructed between

terminals.

b) Basic business policy

This project is not a development project, starting from a scratch, but rather a project to expand and

upgrade existing Soekarno Hatta Airport, which is currently owned and operated by AP-II. As such,

when considering business aspects it is necessary to pay heed to the division of roles with AP-II.

This section will pay consideration to a basic direction for such aspects.

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The table below is a comparison of the expertise and administrative resources needed for the

expansion project between AP-II and our team.

Table 3-16: The expertise and administrative resources needed by AP-II and the Study Team for the
expansion project
AP-II Study Team
Fund procurement
Including public fund
procurement
Security operations (including baggage
handling)
Concession area Tenant composition
operations MD
Tenant leasing
Tenant management
Promotions
Cargo terminal operations
Facility maintenance and management
Energy conservation in
particular
Air traffic control

Source: Prepared by the Study Team

With regard to the business aspects, as clarified in the table above, utilizing the Study Teams

expertise in the operations of concessions areas and cargo terminals would particularly contribute to

overall business. Moreover, by utilizing the Study Teams expertise on security and other issues,

while also taking into account the importance of the Soekarno Hatta Airport within AP-IIs overall

business, consideration should be paid to areas where further added value can be created. Thus,

business should be considered under the following policy.

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(i) Implement joint businesses under this project with AP-II in consideration of the respective

attributes and risk

As clarified in Table 3-16, the expansion project of Soekarno Hatta Airport includes the introduction

of new functions. This means that, instead of implementing the overall project using AP-II alone, the

conventional business and operating entity, implementing a joint project with private sector

businesses with airport administration expertise would be an effective way to utilize a wider range of

know-how, divide the risk, and add diversity to funding procurement. The Study team includes Japan

Airport Terminal Co., Ltd., a private sector company that has for many years handled the

management and operations of Haneda Airport, and it is assumed that we will be able to utilize

business expertise that will lead to efficient airport administration and boosting non-aeronautical

revenues to the maximum extent possible.

(ii) Core airport operations at Soekarno Hatta Airport are administered by AP-II while Japanese

corporations provide expertise and implement partial operations

As mentioned above, projects related to Soekarno Hatta Airport play a major role in overall AP-II

businesses, and it is safe to say that this project greatly supports AP-II operations, particularly in

terms of employment and profits. Full consideration should be given to this point, and AP-II should

continue to be mainly in charge of the operation of Soekarno Hatta Airport.

In addition, cooperation will be carried out to promote the mutual utilization of expertise and

administrative assistance via operational partnerships with Japanese companies, working to improve

services and enrich businesses at the Soekarno Hatta Airport..

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(iii) The private sector takes risk for businesses with many uncertain elements, such as concessions

and cargo business

AP-II has not yet pursued the business opportunities on a large scale that generally contribute to the

creation of a city core such as shopping malls, cargo terminal, offices, lodging, and convention

functions. Therefore, AP-II has not accumulated administrative expertise and business risk

management in these business lines. Hence, the Study Team which comprises private sector

businesses and have knowledge and experience in the these businesses, will bear the risk and

implement these functions.

5) Assumed risk in privately-owned airport management business and ways to mitigate them

a) Decrease in passenger numbers

An increase in air passenger demand will be conditional on political stability and stable economic

growth in Indonesia, and demand could decrease due to various short-term and long-term factors.

Short-term factors include 1) the spread of contagious diseases such as avian flu both in Indonesia

and overseas and 2) the avoidance of travel by the public due to incidents such as large-scale terrorist

attacks. However, there are no effective countermeasures for dealing with such factors.

Previous declines in passenger demand due to short-term factors such as those described above

ended in six months to one year, and passenger numbers subsequently returned to normal conditions.

The kind of political and economic chaos that occurred in Indonesia in the latter half of the 1990s as

a result of the Asian crisis could reduce passenger demand over the long term. However, there are no

effective measures to reduce risk of this nature either.

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b) Reduction in passenger numbers due to the construction of a new airport in metropolitan

Jakarta

Soekarno Hatta Airport currently has a monopolistic position on air transport and travel in the

Jakarta metropolitan area. In future, however, it could expect to lose some of its passengers due to

the completion of a new airport facility. In this case, if highly profitable international passengers,

who account for the majority of the revenue from the airport passenger service charges and

commercial sales, migrate in large numbers to the new airport, this will result in a significant

reduction in revenue and become a factor for a decline in profits. Therefore, attention must be paid to

policy developments in the construction of new airports.

c) Contraction of sales in commercial areas

Sales of goods and services within the airport facilities are areas that are significantly affected by the

management of business operators even when the number of passengers remains at a consistent level.

Therefore, accurately identifying customer needs and implementing ongoing improvements in

commercial areas are essential.

d) Increase in operating expenses including personnel and utilities, etc.

In Indonesia, where economic growth is set to continue in the future, increases in all operating

expenses including personnel expenses can be expected. Paying attention to efficient, energy-saving

management in the use of utilities such as electricity and water, etc. will also become necessary.

Likewise, it will be important to approach the Indonesian government about raising airport taxes as

required.

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e) Terrorism

Airports are often the target of terrorist attacks, and when damages caused by terrorist bomb attacks

occur, it can be assumed that both human and physical damages will be caused. Therefore, it is

necessary to cooperate with security authorities in formulating adequate countermeasures against

terrorist risk.

f) Natural disasters

Indonesia is a country formed from volcanoes, and the possibility of natural disaster events such as

earthquakes or tsunamis cannot be overlooked. Floods also regularly occur in the capital of Jakarta

and, therefore, measures to cope with typhoons and heavy rains are essential. In addition to taking

appropriate countermeasures against these various events within budget constraints, consideration of

insurance coverage as required is vital.

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(3) Project Plan Overview
1) Issues with the existing terminals

a) Terminal 1

Table 3-17: Area list of domestic passenger terminal (Terminal 1)

Source: JICA, Master Plan Study on MultipleAirport Development For Greater Jakarta Metropolitan Area in

the Republic of Indonesia: Progress Report (March 2011)

Terminal 1 is a semi-circular building reserved for domestic airlines. As mentioned earlier, this

terminal hosts most passengers in the airport. Nevertheless, there is only one curbside pickup, and

the check-in lobby and arrival lobby are positioned together, making it difficult to handle the

over-capacity of passengers and well-wishers. Furthermore, as each unit (A, B, and C) is

independent of each other, passengers making a domestic transit are forced to undergo an

inconvenient processes of picking up their baggage upon arrival, leaving the arrival unit, moving

along the curbside pickup, and traveling to another unit.

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Moreover, when the airport initially started operations each unit was allotted for one carrier, but

currently over 50 low-cost carriers are operating in a single small space. This format is very difficult

for passengers to understand.

As can be seen in Table 3-15 on area, each unit is approximately 48,000 m2 in size, while the overall

size of Terminal 1 is 143,000 m2. Moreover, as can be seen from Figure 3-18 below on the

relationship between terminal building area and annual passenger numbers, it is clear that the

facilities are insufficient in size to accommodate the approximately 34.5 million domestic air

passengers.

b) Terminal 2

Table 3-18: Area list of domestic/international passenger terminal (Terminal 2)

Source: JICA, Master Plan Study on MultipleAirport Development for Greater Jakarta Metropolitan Area in

the Republic of Indonesia: Progress Report (March 2011)

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Terminal 2 is also shaped in a semicircle form like Terminal 1, and is mainly used as the

international flight terminal (one portion is used for domestic flights for Garuda Indonesia, etc.).

Also, just as with Terminal 1, Terminal 2 is divided into three independent units: D, E, and F. The

biggest difference with Terminal 1 is clearly that it adopts a two-floor terminal plan, with separate

departure and arrival levels. Also, as each unit is connected to one another, moving between units is

extremely more convenient compared to Terminal 1.

Furthermore, when Terminal 2 was being constructed its concept was a garden airport, and various

tropical plants are placed in and around the terminal, on the curbside pick-up, and other locations,

making for an appealing entrance to the international terminal.

The airlines used at each unit have remained the same since services first started, where unit D is all

international carriers other than Garuda Indonesia, unit E is Garuda Indonesias international line,

and unit F if Garuda Indonesias domestic line. Therefore, transiting is easy for customers using

Garuda Indonesia (from international to domestic, or vice-versa). However, as the domestic lines are

concentrated in Terminals 1 and 3, for the passengers of other airlines it is inconvenient to transfer

between terminals. Transfer between terminals is handled using a free shuttle bus, but it appears as if

the bus does not make frequent rounds.

In terms of size, each unit is allotted about 45,000 m2, and the total area of Terminal 2 is 135,000 m2.

The terminals size is appropriate to accommodate the annual number of international passengers,

9.7 million, even when looking at Figure 3-15, which looks at the relationship between annual

passenger numbers and passenger terminal size.

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c) Terminal 3

Table 3-19: Area list of domestic passenger terminal (Terminal 3)

Source: JICA, Master Plan Study on MultipleAirport Development For Greater Jakarta Metropolitan Area in

the Republic of Indonesia: Progress Report (March 2011)

Terminal 3 is a terminal specially constructed for low-cost carriers that was an urgent measure to

respond to the increase in low-cost carriers. It is economically constructed and contains no PBB.

The curbside pick-up is on the first floor and the departure and arrival lobby are conjoined.

Moreover, compared with Terminals 1 and 2, which offer a strong sense of local architectural

features, Terminal 3 has a modern design, showing no association between the old and new. The path

of travel for passengers is complicated, where passengers that have completed checking in are

guided to a second floor departure lobby, but as there is no PBB, passengers are forced to again

travel to the bus departure gate on the first floor. In terms of size, it is a small terminal of less than

30,000 m2 that accommodates a nominal annual passenger scale of 4 million passengers.

d) Cargo terminals

Currently, each regular terminal is equipped with a cargo terminal, and as they are decentralized,

efficiency is poor. Moreover, it is envisioned difficult to respond to the future increase in cargo

demand using the current cargo terminal size.

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Table 3-20: Size of existing cargo terminals

Facility Area Cargo handled


(10,000t)
2
T1 cargo facility 36,417m
(international)
T1 cargo facility 12,421 m2
(domestic)
T3 cargo facility 19,800 m2
Total 68,638 m2 50
Source: JICA, Master Plan Study on MultipleAirport Development For Greater Jakarta Metropolitan Area in

the Republic of Indonesia: Progress Report (March 2011)

2) Basic policy for terminal construction

In light of the aforementioned profit structure analysis, business scheme considerations, and issues

with existing terminals, the following policy has been set for terminal construction.

Terminal 1

Construction of an integrated check-in lobby

Develop an integrated check-in lobby located at the center of the curbside zone in order to

consolidate the check-in areas.

Expand the gate lounges and seating space

The gate lounge of each unit will be expanded and connected to create a unified gate lounge.

This will simplify changing gates and searching for passengers. In accordance with this,

current boarding check operations conducted in front of gates will be revised.

Upgrade to a two-floor curbside pick-up

The current single-floor curbside pick-up will be revamped into a two-floor curbside zone in

efforts to ameliorate the issue of congestion. The check-in space will be relocated to the

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second floor and the space expanded.

Placement of bus lounge and maximum use of open spots

A bus lounge of a maximum size possible will be placed under the newly added gate lounge

area in aim to enrich response to LCCs using open spots, which is expanding for domestic

lines. Furthermore, efforts will be made to ensure effective use of the terminal by operating

these separately from the upper PBB usage spot.

Terminal 2

Construction of an integrated check-in lobby

Develop an integrated check-in lobby located at the center of the curbside zone in order to

consolidate the check-in areas.

Expand the gate lounges and seating space

The gate lounge of each unit will be expanded and connected to create a unified gate lounge.

This will simplify changing gates and searching for passengers. In accordance with this,

current boarding check operations conducted in front of gates will be revised.

Expanding the departure and arrival lobbies and enhancing the variety of concessions

The outdoor space located between the curbside zone and the departure and arrival lobbies

will be utilized to expand each lobby. Furthermore, floor space will be added on the airside of

the second floor only between units in order to expand concessions. Also, in terms of

operational aspects, tenant leasing will be implemented with a focus on store diversity in order

to respond to a broad range of customers.

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Terminal 3

Expansion into a world-class terminal with focus on international airlines

As Terminals 1 and 2 has some special and technical difficulties in enriching security system

or installing advanced baggage system, Terminal 3 will be expanded with a focus on

international flights so as to make it into a world-class terminal. The design of the terminal

will utilize the regional character used in the design of Terminals 1 and 2, giving Terminal 3 a

look that is befitting to Indonesia.

Moreover, as the passenger volume of Terminal 3 is too large for international passengers

alone, the terminal will be developed to host both international and domestic flights.

The two functions described above will be constructed into a unified terminal while taking

into account security aspects in order to flexibly respond to future changes in the ratio of

international and domestic flights.

Establishment of a PBB in the existing terminal

The existing Terminal 3 is only host to LCCs and thus does not have a PBB. However, a PBB

will be constructed, as the terminal is to be expanded to host a wide range of international and

domestic carrier flights.

Cargo terminals

Form a consolidated cargo zone using the latest equipment

The existing cargo terminals are aging and growing obsolete. A cargo terminal and exclusive

space will be constructed on the west side of the airport grounds in order to respond to cargo

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demand, which is forecasted to grow in the future.

3) Aspects of terminal development

The details of terminal development for this plan were decided in light of the basic policy for

terminal construction. These details are presented in Table 3-21.

Table 3-21: Details of terminal development under this plan


Project Details Notes
Terminal 1 Two-story curbside zone Domestic lines (mainly LCCs)
Integrated check-in construction
Guest lounge expansion
Bus lounge expansion
Concessions expansion
Update systems
Terminal 2 Integrated check-in construction Domestic line terminal
Guest lounge expansion
Concessions expansion
Update systems
Terminal 3 Development of world-class terminal Joint international/domestic lines
Establishment of PBB at existing terminal
facilities
Cargo terminals Construction of integrated cargo zone Domestic and international air
in west part of site logistics
Concentrated facilities that realize a
compact logistics line
Source: Prepared by the Study Team

4) Size of planned new terminals

a) Analyzing cases of terminal plan units

When determining a size for the terminals, a correlation analysis between annual passenger numbers

and terminal size conducted by the Service Center of Port Engineering was referenced. According to

this analysis, terminal sizes are dispersed within the average range of approximately 15% of about

10,000 m2 per million annual passengers.

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Figure 3-15: Relationship between annual passenger numbers and passenger terminal building size

Tota
l
floo
r
area
(m2)

Annual number of passengers (10,000s)


Source: 2007 directory of all airport terminal buildings, etc.

*The grey area in the graph indicates the 15% range.

Source: Figure 13.1.5 Relationship between annual passenger numbers and passenger terminal size taken from

Service Center of Port Engineering, Kuko Kogaku, p.241 (2010; Nikkan Kensetsu Kogyo Shimbun) and partially

altered by the Study Team.

b) Setting the terminal plan unit

The basic policy of this plan is to develop facilities and provide services in accordance with the

passenger demographics. The following plan units have been set by user grouping for the scope

described above.

Table 3-22: The terminal plan unit


2
Classification Area (m ) per million passengers
per annum
International 11,500
Domestic 9,000
LCC 8,500

Source: Prepared by the Study Team

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c) Setting a size for the terminal plan

The following list of terminal plan sizes has been established in light of the above plan units.

Table 3-23: A size for the terminal plan


Approximate number
Main target Current Size Annual number of
Terminal Expansion (m2) Total (m2) of passengers per
passengers (m2) passengers
annum (millions)
T1 LCC 142,730 30,000 172,730 20,321,176 20
T2 Domestic 135,459 30,000 165,459 18,384,333 18
T3 Domestic 28,958 50,500 79,458 8,828,667 9
International 0 149,500 149,500 13,000,000 13
Subtotal 28,958 200,000 228,958 21,828,667 22
Total 307,147 260,000 567,147 60,534,176 60

Source: Prepared by the Study Team

Each of the terminals is taken to be composed as follows:

Table 3-24: Area list of expanded terminal

Item Area Remarks


T1 (Expanded) Integrated check-in 10,000 m2
Concessions 15,000 m2 5,000 m2 added after check-in relocated
Gate lounge / bus lounge 5,000 m2
Subtotal 30,000 m2
T2 (Expanded) Integrated check-in 10,000 m2
Concessions 15,000 m2 5,000 m2 added after check-in relocated
Gate lounge 5,000 m2
Subtotal 30,000 m2
T3 (Expanded) Terminal 145,000 m2
Concessions 40,000 m2
Offices 15,000 m2
Subtotal 200,000 m2

Source: Prepared by the Study Team

5) Setting an area size for this plan

In determining area for this plan, project elements have been classified into the following five

packages in view of business activities.

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Table 3-25: Five Project Packages

Source of funds anticipated Source of funds anticipated


Packaged project elements
by AP-II by the Study Team
Package (1) Implemented as public works using Implemented as public works using
Airside (New construction or government fund (Assets after yen loans.
modification of taxiways and completion may be transferred as
aprons) equity or grant to AP-II.)
Package (2) Use of internal reserve of AP-IIand Like Package (1), implemented as
Ancillary works for terminals AP-IIs collection of funds from public works using yen loans.
(People mover, utilities, etc.) domestic market However, in the event that it is not
carried out as a public work,
development will be carried out
through JV as per Package (3).
Package (3) The managing company for Soekarno
Renovation and extension of Hatta Airport will be separated from
terminal buildings AP-II, carry out development of the
terminal buildings using third party
funds, and operate for a fixed period
of time.
Package (4) Joint venture including third party Construction is carried out in a
New construction of cargo fund concession style using third party
village funds.
Package (5)
Commercial area
(Commercial space, hotels,
offices, car parks)

Source: Prepared by the Study Team

The set size of facilities is summarized as follows by project package.

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Table 3-26: Size of facilities by project package

Project elements Anticipated scope of facilities Anticipated Size


Package (1) Airside Apron New construction + modification of
existing areas
Taxiway New construction of taxiway on Area developed:
eastern side; partial modification of 360,000 m2
existing areas
Package (2) Ancillary People mover New construction for connecting to Total length: 3.5 km (4
woks for new terminal (or construction of bus stations)
terminals route)
Utilities etc. Utilities, road improvement
Package (3) Terminal Terminal 2 Extension of existing facilities + 30,000 (extension)
modification of existing areas + modification of
existing facilities
Terminal 3 Extension of existing facilities 200,000 (extension)
Package (4) Cargo village Cargo New construction 150,000
Package (5) Commercial Integrated New construction 185,000
area building,
Connecting
building,
Interchange
terminal,
Parking
building

Source: Prepared by the Study Team

6) Model plan for this plan

A model plan has been created as follows based on the above considerations.

A specific plan for the location of the commercial, connecting building, and parking space will

be crafted once detailed planning is conducted.

Exact route of APM will be determined once detailed location of Airport Link Railway station

within the airport premise is provided.

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Figure 3-16: Model plan (tentative)

Source: Prepared by the Study Team

Alternative proposals have been provided below as a reference.

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Alternative Plan 1

In this plan, a design of Terminal 3 that exploits the regional character achieved in Terminals 1 and 2

is developed even further. As the additional part of the Terminal 3 looks totally different from the

existing part, it will be difficult to consider two different buildings together as one terminal building,

leaving the problem of having to remove the existing.

Figure 3-17: Alternative Plan 1

Source: Prepared by the Study Team

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Alternative Plan 2

In this alternative plan, Terminal 3 is designed to accommodate more open spots. This design will

allow for developing a certain degree of open area at the north and east sides of Terminal 3. At the

same time, however, this will reduce the number of fixed spots. Thus, in the event that a terminal is

constructed that emphasizes fixed spots, it will be difficult to accommodate those spots.

Figure 3-18: Alternative Plan 2

Source: Prepared by the Study Team

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7) Issues and solutions for realization of the project

Technical issues and solutions for realizing the plans stated above are enumerated as follows:

(i) Detailed investigation of existing terminals

Existing conditions including utility line routes and building structures will have to be

investigated in detail in planning extension and modification of the present terminals.

(ii) Elaborate study on staged development plan

Since this project for extension and improvement must be implemented while maintaining the

airport operation, it is necessary to draw up a detailed development plan with due

consideration for staged relocation. Therefore, it is preferable to start meetings with airline

companies, tenants, etc. at the earliest stage.

(iii) Coordination about connection with railway station

In preparing cross-sections of modified or ameliorated terminal buildings, plans of connecting

buildings and plans of people mover, it is necessary to ensure coordination with the planned

railway station in view of horizontal and vertical development. Therefore, it is preferable to

continuously hold meetings with the railway unit and, where it takes much time to complete a

railway, impose the railway unit planning conditions reviewing the master project schedule.

(iv) Relocation of existing facilities

Essentially, the proposed plan has been prepared so as to minimize relocation of existing

facilities accompanying extension of terminal buildings and construction of connecting

buildings; however, part of the facilities has to be relocated or demolished. Therefore, it is

necessary to confirm intention of present building users at the early stage and know who

would be moved to where (including new connecting buildings).

In constructing taxiways, part of the golf course has to be demolished and flattened. It is

3-57
necessary to start a meeting with the concerned persons at the early stage to commence site

preparation as scheduled.

(v) Rearrangement of business area related to Cargo Terminal

The business area which comprises offices of distribution companies etc. in relation to the

present cargo area is formed on the eastern side of Terminal 1. In providing the Cargo

Terminal, it is necessary to verify intention of these companies etc. concerning relocation to

the Cargo Terminal and its vicinity and reflect it in the plan of Cargo Terminal. Therefore, it is

needed to conduct inquiries to the concerned companies etc. at the early stage and ascertain to

what extent open spot area will be placed in the business area site.

3-58
Chapter 4 Evaluation of Environmental and Social
Impacts
The purpose of this study is to consider the feasibility of a facility project for the construction of a

new airport terminal, the upgrading of existing terminals, and the linking of terminals in an

expansion project for Soekarno Hatta Airport in Indonesias Jabodetabek Area. A separate

comparative study on the validity and content of extension projects in plans for new construction and

upgrading of several airports including Soekarno Hatta Airport in Indonesias Jabodetabek Area has

already been undertaken by JICA in the Project for the Master Plan Study on Multiple-Airport

Development for Greater Jakarta Metropolitan Area in the Republic of Indonesia (JICA Master Plan)

and is antecedent to this study.

The environmental and social impacts covered in this chapter have also been examined in detail by

the JICA Master Plan and this study, which is not at variance with the findings of the JICA Master

Plan in regard to environmental and social impacts, relates details of results of this study while

introducing the main points of the JICA Master Plan. Although the construction of Runway 3 and

Terminal 4 which requires additional land of precincts on the north of the present site is not within

the scope of this study, results of the preliminary study made in the JICA Master Plan are outlined in

this chapter.

As discussed later in (4) of this chapter, an environmental impact assessment (EIA) including a

strategic environmental assessment (SEA) established by the government of Indonesia must be

implemented in proceeding with the expansion plan for Soekarno Hatta Airport. As stated in the

JICA Master Plan, JICA will provide technical cooperation to Indonesia to enable the

4-1
implementation of the SEA for the realization of the Soekarno-Hatta Airport extension plan.30

(1) Analysis of current environmental and social conditions


1) Analysis of the current state

Soekarno Hatta Airport is located in the northeast corner of the city of Tangerang in the eastern

corner of Banten Province. The northern perimeter of the airport is on the border of the city of

Tangerang and the Tangerang District and the expansion plan (Runway 3 and Terminal 4) of the

airport will have an impact on six villages (Desa) in the area.

The land earmarked for expansion of the airport is flat terrain less than 5m above sea level. The area

is dotted with small ponds and marshy areas so it can be presumed that the land naturally formed

into an alluvial fan at the estuary of Chi-Sadane River.

The majority of the land for the planned project consists of rice fields and residential areas, with

dwellings occupying one-fourth of the total area. The total number of buildings is approximately less

than 2,000 and irrigation channels stretch for about 2km across the land planned for the project.

Because the plan for expansion has not yet reached the implementation stage, acquisition of the land

planned for the expansion has not started yet. The University of Indonesia is currently undertaking a

survey of the number of households, population for involuntary resettlement and the current use of

the target land.31

30
http://www.jica.go.jp/english/operations/social_environmental/archive/pro_asia/pdf/ind12_03.pdf
31
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
Indonesia (Progress Report), ( 2011) pp.10-1, 10-2

4-2
According to interviews with Indonesias Ministry of Environment, the ministry has not identified

conspicuous environmental problems such as noise, except chronic traffic congestion around the

airport.

2) Future outlook (if the project does not proceed)

The purpose of the Soekarno Hatta Airport expansion project is to expand and develop the existing

airport facility to accommodate the airports ever-increasing aviation passenger and cargo demand.

This study specifically focuses on the expansion and upgrading of terminal functions and the

improvement in connection functions between the terminals.

The issue as to whether to proceed with the expansion of Soekarno Hatta Airport or to accommodate

future demand through the upgrading and development of other airport infrastructure without

expanding the Soekarno Hatta Airport is already being studied in the JICA Master Plan. Therefore,

the future prognosis regarding environmental and social changes if the expansion of Soekarno Hatta

Airport does not proceed will be left to the findings of the JICA Master Plan.

Infrastructure development and redevelopment of the terminal functions proposed in this study will

inevitably be concomitant with the expansion of functions of Soekarno Hatta Airport. Therefore,

failure to proceed with expansion of the airport facilities is likely to lead to a decline in the user

services of the airport itself, making the regeneration of an attractive Soekarno-Hatta Airport

difficult. In such case, a decline in economic activities can also be expected.

4-3
(2) Improvement effect of the environment accompanying the

implementation of the project


The expansion of Soekarno Hatta Airport will make it possible not only to accommodate increased

aviation demand but also to stimulate latent aviation demand. Improved functions of the terminal

buildings will enhance the convenience of passenger and cargo flights and provide high-quality

spaces for the enjoyment and entertainment of passengers. The establishment of service and

commercial facilities within the terminal buildings will also create employment opportunities and

lead to the revitalization of the retail and distribution business. If the general population as well as

travelers visit the terminal and use it as a place for shopping and sightseeing, the terminal building

may come to be utilized as a high-quality urban space.

In terms of land use, the redevelopment of terminal functions will enable the use of underutilized

land, which at present includes a golf course situated in a pocket between Runway 1 and Runway 2,

purely for the purposes of the airport, making possible integrated and orderly use of the land.

(3) Environmental and social impacts accompanying the

implementation of the project


1) Impacts on environmental and social areas already indicated in existing studies

Analyses conducted by JICA in the JICA Master Plan, which is related to this study, indicate that the

following environmental constraints will occur as a result of the site expansion of Soekarno Hatta

Airport.32

32
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
Indonesia(Progress Report), ( 2011) p.10-2

4-4
a) Involuntary resettlement

There are about 2,000 residential buildings occupying the land proposed for the expansion, and

involuntary resettlement will be unavoidable. A resettlement plan for the residents will be formulated

by the project proponent (AP-II), the Tangerang District and the city of Tangerang. To sufficiently

grasp the views of the local residents and to provide them with adequate information, there are plans

to hold a stakeholders meeting during Phase 2 of the JICA Master Plan.

b) Conversion of agricultural land

Agriculture is the main industry throughout the surrounding area of the land planned for the project,

and the use of the existing land for rice fields will change from agricultural use to use as airport land.

The expansion of the airport will also require the reconstruction of trunk irrigation channels. To

accommodate the rerouting of irrigation channels, the involuntary resettlement outside the planned

land can also be expected.

c) Roads

A main road used by residents in the course of their daily lives run parallel to the irrigation channel,

and this road will also have to be diverted.

d) Impact on the Regional Spatial Plan

The change of the land use of existing rice fields is a factor that will have an impact on the Regional

Spatial Plan and will require coordination with the stakeholders. The JICA Master Plan with the

cooperation of the University of Indonesia and the Strategic Environment Assessment Department,

Ministry of Environment intends to engage in discussions with the District Coordinative Body of

Spatial Plan (BKPRD) regarding changes in the Regional Spatial Plan for Banten Province and

4-5
Tangerang District (RTRW), and with the Regional Body for Planning and Development (Bappeda)

regarding the Regional Medium Term Development Plans (RPJM).

In this connection, the Study Team was informed by the JICA Master Plan study team that no rare

species to be conserved are found in the expansion area.

2) Screening according to JICA guidelines

As a matter of course, work and procedures in the JICA study project introduced in the previous

section are performed according to the Environment and Social Consideration Guidelines established

by JICA in April 2010, and results of JICAs screening at the preliminary examination stage are

announced together with provisional scoping on the JICA Website (Table 4-1).33

There is some concern regarding environmental and social impacts as explained in the previous

section. In addition, information published on the JICA Master Plan website also states that an

agreement has been reached between JICA and the DGCA to undertake a review equivalent to a

Strategic Environmental Assessment (SEA) of the Jakarta Metropolitan Area according to laws and

regulations of Indonesia and a review equivalent to an Initial Environmental Examination (IEE) for

drafting an expansion plan for Soekarno Hatta Airport in the JICA Master Plan (see (4) 2) a) of this

chapter for details).

The provisional scoping in Table 4-1 targets several locations suitable for the construction of new

airport facilities including the expansion of Soekarno Hatta Airport in the Jakarta Metropolitan Area,

and all items noted including the social environment, natural environment, and pollution will also

apply to the Soekarno Hatta Airport expansion plan, which is the subject of this study.

33
http://www.jica.go.jp/english/operations/social_environmental/archive/pro_asia/indonesia_12.html

4-6
This study focuses mainly on the examination of support measures for the improvement of the

terminal building and connecting functions of the expansion plan of Soekarno Hatta Airport. Insofar

as the re-development of the terminal alone is concerned, the following may be considered as

anticipated environmental and social impacts.

Increase in parking demand and volume of traffic within the airport premises

Greater impact on the environment due to facility expansion (increase in energy and water

consumption and generation of waste water, waste heat and other waste matter)

Temporary environmental and psychological impact and general inconvenience accompanying

the partial removal of existing building structures

Settlement of arrangements with existing tenants in the terminal

Measures to address each will be examined closer to the implementation stage of the project when a

spatial plan is concretized.

To address the second point stated above, that is, greater impact on the environment due to facility

expansion, certain measures can be implemented such as the adoption of specific building designs

that conform to the Ministry of Environment Decree No. 8 of 2010, which provides for standards for

environmentally friendly buildings (see (4) 2) b) of this chapter for details of the standards).

3) Comparative study of environmental and social considerations of a plan different from the

proposed plan

In line with the JICA Master Plan, which aims to explore appropriate measures for the expansion or

new construction of an airport in the Jakarta Metropolitan Area, this study examines methods for the

4-7
smooth realization of infrastructure development and improvement in terminal functions and

terminal connection functions at Soekarno Hatta Airport. Therefore, a comparative study of airport

development plans with lower environmental and social impacts will be undertaken in the same

JICA Master Plan including examination of means of access to the airport.34

Furthermore, a quantitative comparative study of environmental and social impacts will be

conducted in a more specific spatial plan in the future in regard to plans for the terminal and terminal

connection facilities proposed in this study.

34
Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
Indonesia(Progress Report), JICA, 2011, pp. 12-1 to 12-9, 9-11 to 9-13.

4-8
Table 4-1: Results of Environmental and Social Considerations

4-9
4-10
4-11
Attached Table:

4-12
4-13
Source: Results of Preliminary Examination of the Master Plan Study on Multiple-Airport Development for Greater

Jakarta Metropolitan Area in the Republic Indonesia

http://www.jica.go.jp/english/operations/social_environmental/archive/pro_asia/pdf/ind12_01.pdf

(4) Summary of laws and regulations relating to environmental

and social considerations of the partner country


1) Summary of laws and regulations relating to environmental and social considerations

Following the establishment in 1978 of a government agency dedicated to dealing with

environmental issues, the Ministry of Environment and Development Supervision (PPLH, Pusat

Pendidikan Lingkungan Hidup), environmental issues rose to prominence as an area of priority in

initiatives of the Indonesian government.35 Since then the government has continued to frame and

implement legislation relating to the environment on an ongoing basis.

The Environmental Basic Law (Law No. 04 of 1982) is Indonesias first environmental law. This law

established the basis for all initiatives for controlling and managing the use of the environment in

35
PPLH was reorganized into the Ministry of Population and Environment (KLH, Kantor Menteri Negra
Lingkungan Hidup) in 1983 and further into the present Ministry of Environment (LH, Kementerian Lingkungan
Hidup) in 1993.
http://erb.umich.edu/News-and-Events/news-events-docs/11-12/eco-labels2011/JorgeGarciaLopez.pdf

4-14
order to protect and preserve environmental resources for future generations by preventing their

depletion and deterioration. On September 19th, 1997, this law was superseded by the Environmental

Management Act (Law No. 23 of 1997). Taking into consideration issues such as the discharge of

waste matter, environmental impact assessments, and the management of harmful and poisonous

substances, this law focused on the sustainability of the environment. The law provides that every

business and/or activity which gives rise to a large and important impact on the environment shall

possess an environmental impact analysis to obtain the license to conduct a business and/or activity.

On October 3rd, 2009, the Environmental Management Act was replaced by the Environmental

Protection and Management Act (Law No. 32 of 2009), which brought regulations concerning the

environment in line with world standards. This new legislation strengthened both regulations and the

jurisdiction of the government and at present forms the legal basis for the protection and

conservation of Indonesias environment. This law also stipulates that all Indonesians have an

obligation to make efforts to protect the environment and to control environmental pollution and

destruction.

The Ministry of the Environment is the head of environmental administration in Indonesia and

engages about 1,200 ministry staff in operations promoting environmental management, measures to

control pollution and other tasks. The organizational chart of the Ministry of Environment is shown

in Figure 4-1.

4-15
Figure 4-1: Organizational Chart of the Ministry of Environment

Minister

Secretary to the
Minister
Assistant Minister Assistant Minister Assistant Minister Assistant Minister Assistant Minister
for Global for Economy and for Cultural, for Law and for Sustainable Bureau for Bureau for
Environmental Poverty Social Partner Interrelation Development General Planning
Affairs between Technology Affairs International
Instructions Cooperation
Inspectorate

Deputy for Spatial Deputy for Deputy for Nature Deputy for Deputy for Deputy for Deputy for
Environment Pollution Control Conservation, Hazardous and Environmental Community Capacity Building
Management Enhancement & Toxic Waste Compliance Empowerment and Technical
Environmental Management and Infrastructure
Destruction Environmental
Communication

Assistant Deputy Assistant Deputy Assistant Deputy Assistant Deputy Assistant Deputy
for Manufacture for Gas, Oil, for Agro Industry for Enterprises and for Mobile Source
Pollution Control Energy, Pollution Pollution Control Domestic Pollution Emission Pollution
Control Control Control

Assistant Deputy Assistant Deputy Assistant Deputy Assistant Deputy


for Environment for Environmental for Environmental for Environmental
Impact Assessment Planning Evaluation and Institution
Monitoring

Regional Center Regional Center Regional Center Regional Center Regional Center
for Environmental for Environmental for Environmental for Environmental for Environmental
Management in Management in Management in Management in Management in
Kalimantan Java Bali, NTB, NTT Sulawesi, Maluku Sumatra
and Papua

Source: JICA, Master Plan Study on Multiple-Airport Development For Greater Jakarta Metropolitan Area in the

Republic Indonesia: Progress Report (March 2011)

In Indonesia, local governments and assemblies (regional lower houses) are allowed to engage in

autonomous legislative activities in matters that are not of national interest. All of the countrys 33

states are divided into provinces (Kabupaten) and cities (Kota). While the central government and

agencies like the Ministry of Environment are responsible for establishing national policies,

regulations and standards, local governments are responsible for enforcing and overseeing these.

4-16
In 2007 the Indonesian government established the Investment Act, No. 25 of 2007 regarding

investment projects and made all investors responsible for environmental protection. Under this law,

all investors must bear the burden of costs for the restoration of the natural environment at every

stage of development in areas utilized by their projects, particularly in investments resulting in the

destruction of nature such as, for example, the development of natural resources.

2) Summary of Indonesias EIA

a) Environmental assessments

Indonesias environmental assessment system (AMDAL) was first introduced in 1986 in accordance

with the Environmental Basic Law, No. 04 of 1982, and later became established in 1997 under the

Environmental Management Act, No. 23 of 1997. Then, in 2009, the Strategic Environmental

Assessment was introduced as an environmental assessment system under the Environmental

Protection and Management Act, No. 32 of 2009, which aims for environmental conservation from

the initial stage of a project and also from a wide range of environmental views. A strategic

environmental assessment (SEA) is required at the master plan stage of a project. The assessment

and approval of the environmental impact report (ANDAL) are the domain of the Ministry of

Environment for large scale or cross-sectoral projects that cover plural areas under local government

jurisdiction. Environmental assessments (AMDAL) for projects in Jakarta, the provinces or cities are

implemented by the local governments of respective areas. Jakarta has its own AMDAL system, but

cities such as Tangerang apply the national system. The respective local governments also appoint

committee members to serve on the Environmental Assessment Committee.

Government Regulation No. 27 of 1999 requires an environmental impact assessment (EIA) of any

activity that is likely to have an impact on the environment. According to this regulation, assessment

4-17
results are to be used in making decisions on whether or not to approve a project. Those activities

that require an EIA are stated in the Ministry of Environment Decree No. 11 of 2006. According to

this decree, an EIA is required for an airport with a runway of longer than 200m and a terminal more

than 2,000m2 (see Table 4-2).

Table 4-2: Related Activities that require an Environmental Impact Assessment (EIA)

Activities Area Scale Environmental Items


Runway > 200m Noise, emissions,
Airport Anywhere biology, social
Terminal > 2,000 m2
impacts

Source: Prepared by the Study Team based on JICA, Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic Indonesia (Progress Report) (2011), p.6-65

Procedures for an EIA begin when a project proponent submits a project plan to the relevant agency

and seeks its opinion as to whether an EIA is needed or not. After determining whether activities

listed in the appended table of the Ministry of Environment Decree No. 11 of 2006 apply to the

submitted plan or whether the plan will have a significant impact on the environment, the agency

decides whether or not the process of EIA is required.

b) Environmentally friendly building standards

To encourage the participation of building owners in initiatives for promoting a sustainable

environment, the Ministry of Environment Decree No. 8 of 2010 establishes building standards that

recognize environmentally friendly buildings. The standards of that decree are summarized below.

Use of environmentally friendly building materials bearing eco-labels or other proof of

guarantee of eco-friendliness, and use of locally produced building materials

Conservation of water resources, and the development of procedures, equipment, and

4-18
infrastructure for conserving water quality including systems for utilizing rainwater

Development of procedures, equipment, and infrastructure for conserving energy and

diversifying energy use including the use of renewable energy, low-energy consumption

lighting, and air recirculation systems

No use of ozone-depleting materials in equipment such as air-conditioning and fire

extinguishers

Development of procedures, equipment, and infrastructure for wastewater treatment and

recycling of treated water

Development of methods for separating types of water

Establishment of building management procedures in line with spatial plans, taking into

consideration microclimate and climate changes to secure dedicated areas for sustainable

growing of plants using purified water circulation equipment, utilization of natural light,

outdoor spaces with healthy plants, and rainwater collection equipment

Outfitted with disaster-response systems including early warning systems for natural disasters

and use of building materials with superior resistance to extreme weather conditions

(torrential rains or drought)

Buildings that satisfy all of the above conditions are certified as environmentally friendly buildings

and certification is valid for a period of two years. At present the construction of environmentally

friendly buildings is optional but it is possible that in the future obtaining environmentally friendly

certification for buildings will become a requirement.36

36
JETRO, Citizen Awareness of the Environment and Environmental Policies in Indonesia, (2011), p. 9 (Text in
Japanese)

4-19
(5) Procedures the implementing country (implementing or other

relevant organization) must follow for realizing a project


To realize construction of a new terminal, upgrading of the existing terminal, and improvement in

terminal connection facilities through the Soekarno Hatta Airport expansion and upgrading project,

which is the purpose of this study, the relevant Indonesian organizations must approve the actual

implementation of the expansion project itself. Therefore, after environmental assessments described

in (4) of this chapter are carried out, the government agency uses the results of assessments to decide

whether to approve a project plan. It must also determine whether the land ownership or the use of

the planned land is appropriate and decide whether to give its approval. Approval for land

development requires the following permits:

a. Principal permit (If it meets the Spatial Plan, the local government will grant approval),

b. Location permit (If the plan is appropriate for the land management purposes, the land

agency will grant approval),

c. Planning permit (Approval is required for drawing up a development plan),

d. Building permit (Approval is required prior to the start of construction).37

Moreover, while Article 5 of the Presidential Regulation No. 56 of 2006 establishes procedures for

land acquisition for public use including airports, a review is currently underway for more practical

38
procedures.

As indicated above in a. Principal permit and in (3) 1) of this chapter, the Soekarno Hatta Airport

37
JICA, Master Plan Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic
Indonesia(Progress Report) ( 2011), p.6-67
38
Ibid. p.6-67

4-20
expansion and upgrading project will require a change in land use for agricultural land, and the

relevant government agency is required to change the Regional Spatial Plan for the relevant district.

The local government is also obliged to cooperate in the examination of the resettlement of residents

by the project proponent.

Proceeding with the construction of a new terminal, upgrading the existing terminals, and improving

terminal connection facilities will require a detailed plan underpinned by the administrative

procedures.

4-21
Chapter 5 Financial and Economic Evaluation
(1) Project Cost Estimate
1) Project Costs for the Soekarno Hatta Airport Expansion and Upgrading Project

The following estimate was drawn up for the abovementioned project. Below (1) , (2) and (3) show

Package(1) , (2) and (3).

Table 5-1: Results of Project Cost Estimate


Unit; Million IDR
IDR Equivalent
Yen USD
Local Foreign
Equivalent Equivalent Total
Portion Portion
Basic Facility
(1) 6,000 78 705,900 564,720 141,180
Development
Terminal Ancillary
(2) 19,000 246 2,235,350 1,788,280 447,070
Work
Constructi Extension for
50,000 647 5,882,500 4,411,875 1,470,625
on Terminal 3
Costs Upgrade for
(3) 10,000 129 1,176,500 882,375 294,125
Terminal 2
Upgrade for
10,000 129 1,176,500 882,375 294,125
Terminal 1
Subtotal of Construction Costs 95,000 1,229 11,176,750 8,529,625 2,647,125
Design Expenses (5% of Construction Costs) 4,750 61 558,838 426,481 132,356
Reserved Fund (5% of Construction Costs) 4,750 61 558,838 426,481 132,356
Total Project Costs 104,500 1,352 12,294,425 9,382,588 2,911,838

Source: Prepared by the Study Team

2) Stance for Cost Estimate

For this study, as it had not been possible to proceed with a review of the detailed specifications for

each facility that would undergo maintenance work as a result of the expansion and upgrading

project, the cost estimate was drawn up based on the following stance, taking reference from AP-II

press releases and the results of prior reviews conducted.

5-1
Hence, in the event that specifications for each facility are revised based on the progress of future

reviews, there is a need to pay attention to the possibility of accompanying changes to the project

cost.

Table 5-2: Stance for Cost Estimate

Target facility Stance for cost estimate

Terminal 3 Estimated for a 200,000m2 extension, based on the plan laid out in
Chapter 3.
The per-unit construction cost, as set by the JICA study team, is
200,000 yen/m2.
With regard to passenger facilities such as baggage handling systems
and boarding bridges, an amount equivalent to 10 billon yen has been
allocated as a one-off estimate.

Terminal 1 Estimated for a 30,000m2 extension and renovation of the existing


terminal, based on the plan laid out in Chapter 3.
The per-unit construction cost is set as 150,000 yen/m2, equivalent to
75% of the cost for the extension for Terminal 3. The renovation cost
is set as 37,500 yen/m2, equivalent to 25% of the cost for the
extension.

Terminal 2 Estimated based on the same stance as for Terminal 1.

Basic facilities Estimated for a total of 400,000 m2 additional construction of


taxiways (360,000 m2) and the accompanying renovation of runways
(40,000 m2), as laid out in Chapter 3.
The per-unit construction cost is set as 15,000 yen/ m2 by the JICA
study team.
The apron in Terminal 3 is excluded from the plan as work had
already commenced when the study was launched

5-2
Target facility Stance for cost estimate

Ancillary works for Estimated based on the assumption of all maintenance costs for traffic
terminals improvements within the premises laid out in Chapter 3, including
people mover tracks (3.5 km), car parks, tracks, and piers.
The construction cost is set as 4 million yen/ km.
A total of 5 billon yen has been allocated for the renovation and
construction works of access roads at all passenger terminals, utility
supply facilities, and supply conduits.

Cargo terminal Although a review of the facility scale was carried out in Chapter 3, it
has been set as a project implemented under an independent
accounting system, and was excluded from the estimate.

Concession facilities With regard to concession facilities such as Integrated Building and
hotels, although a review of the facility scale was carried out in
Chapter 3, it has been set as a project implemented under an
independent accounting system, and was excluded from the estimate.

Reserve fund An amount equivalent to 5% of the direct construction costs has been
allocated.

Design expenses, An amount equivalent to 5% of the direct construction costs has been
etc. allocated.

Proportion of local Set by the JICA study team.


and foreign costs With regard to construction costs, 75% has been set as the local cost.
With regard to civil engineering works, 80% has been set as the local
cost.

Source: Prepared by the Study Team

5-3
(2) Overview of the Results of Preliminary Financial/Economic

Analysis
1) Financial condition of Soekarno Hatta Airport

According to AP-IIs Statement of Accounts for 2010, Soekarno Hatta Airport generated 134% of

AP-IIs overall operating profits, offsetting losses from regional airports and head office expenditure.

Table 5-3: 2010 Ordinary Income for Soekarno Hatta Airport and AP-II

Head office Subtotal for Total for


(Million IDR) Soekarno Hatta
expenditure other airports AP-II
Aeronautical
1,918,467 1,140 456,150 2,375,757
revenues
Non-aeronautical revenues 560,619 121,629 682,248
Cargo revenues 30,656 17,709 48,365
Total operating revenues 2,509,742 1,140 595,488 3,106,370
Employee expense 271,492 281,750 223,489 776,731
Maintenance and inventory 127,026 8,356 67,286 202,668
Rental expenses (electricity,
198,027 2,517 44,816 245,360
water, telecom)
General expenses 132,469 121,176 73,167 326,812
Bad debt losses 7,687 2,600 10,287
Depreciation and
110,878 9,634 185,662 306,174
amortization
Total operating expenses 847,579 423,433 597,018 1,868,030
Operating income (Loss) 1,662,163 (422,293) (1,530) 1,238,340
Other revenues (interest, etc.) 16,862 229,500 8,369 254,731
Other expenses (exchange
26,492 78,175 8,814 113,481
loss, etc.)
Ordinary income 1,652,533 (270,968) (1,975) 1,379,590
As of November 30th, 1 IDR = 0.0085 yen (Bloomberg.com).

Source: Prepared by the Study Team based on AP-IIs annual reports

5-4
2) Overview of the Results of the Preliminary Financial Analysis

As described in Chapter 1, based on the premise that Indonesia sustains real economic growth of

approximately 6%, the number of passengers using the airport facilities will then be expected to

continue increasing, resulting in forecasts for growth in revenue for Soekarno Hatta Airport.

Furthermore, it is also important to put in effort to increase non-aeronautical revenue, which can be

gained from the increasing passenger numbers, by strengthening the commercial sector.

The main premises for the review of the projected income for this project scheme are as follows.

Premises for income

Based on the estimates in the interim report drawn up by the JICA Master Plan Team, the total

number of passengers on domestic and international routes are expected to continue increasing

in the future, reaching the maximum permissible number of 60 million people by 2017, and

flattening out thereafter.

Air traffic control operations, which are under review to be transferred to the government, are

not included in the income forecast. (The air traffic control revenue for 2010 for this airport is

assumed to be 82% of AP-II.)

There are no changes to landing and aircraft parking fees, and the revenue from these fees is

predicted to increase at the same rate as that of passenger increase.

Airport tax is assumed to stay at current levels40,000 IDR for domestic routes and 150,000

IDR for international routes.

With the enhancement of commercial facilities, the unit sales for each passenger has been

raised to approximately 220,000 IDR (in line with other international airports) by the year

2020 for international route passengers, and to approximately half of that at 120,000 IDR for

5-5
domestic route passengers. The airport receives 15% of the amount as concession revenue.

Floor rent is taken to be same amount as it currently is, and vacancy rateincluding the

increased floor spaceremains at 80%.

Premises for expenses

No significant cost reductions are predicted. Operating expenses for Soekarno Hatta Airport

for 2010 are expected to increase at the same ratio as the terminal floor area. (Operating

expenses for 2010 for the airport is assumed to be 82% of AP-II.)

The establishment of the new company is taken to be the year 2012, and construction

investment takes place in the four-year period from 2013 to 2016. From 2016, it is predicted

that the total building floor area (307,147 m2 as of 2010) will double to 682, 147 m2, and the

floor area that can be leased will increase 6.25 times from the current 8,000 m2 to 50,000 m2.

Ancillary works, including airside projects and unmanned people mover, are assumed to come

under the national budget for public works and be transferred to Soekarno Hatta Airport at no

charge. However, a second scenario, in which ancillary works are self-funded, is also under

consideration.

The operating cost of the unmanned people mover is predicted to be 50 billion IDR/y

(approximately 425 million Yen39).

Based on the above premises, the projected income for 2020, the fifth year after its full opening to

the public, is as follows. As the growth in income exceeds the increase in expenses accompanying

the expansion of the terminals, operating income is projected to increase by 52% over operating

income for 2010.

39
As of November 30th, 1 IDR = 0.0085 yenBloomberg.com

5-6
Table 5-4 : Operating Income for Soekarno Hatta AirportActual Income for 2010 and Projected
Income for 2020, Five Years after Completion of the New Facilities
2010 2020
STATEMENT OF INCOME
Aeronautical Revenues 1,570,919 2,230,165
- Passenger Service (International 723,568 1,201,036
- Passenger Service (Domestic 647,921 879,724
Landing, locating, parking, counter,
- 199,430 284,604
Aviobridge
Non-Aeronautical
560,619 1,562,645
Revenues
- Advertisement Space 55,484 189,201
- Consession Retail 10% of retail sales) 129,228 440,666
Consession Others (golf course, fuel
- 48,635 69,407
charging, etc.)
- Rent Room 137,164 519,508
- Utilities 55,159 208,914
- Other Non-Aeronautical Revenues 134,949 134,949
TOTAL REVENUE 2,131,538 3,792,810
OPERATING EXPENSES
- Employee expense 271,492 501,310
- Maintenance & Inventory 127,026 234,554
- Rental expense (electricity, water, telecom) 198,027 365,657
- General expenses 132,469 244,604
- Other expenses 26,492 48,917
Depreciation & amortization (existing
- 110,878 110,878
facility)
- Depreciation & amortization (new facility) 301,968
- Bad debts expenses 7,687 21,426
- People Mover 50,000
TOTAL OPERATING EXPENSES 874,071 1,879,315
OPERATING INCOME 1,257,467 1,913,495
(Million IDR)

Source: Prepared by the Study Team

5-7
Based on the above premises, in the event that only the 70 billion yen for renovations for Terminals

1 and 2 as well as extension work for Terminal 3 are borne by AP-II, financial internal rate of return

(FIRR) for the 20 years after completion will be 19% (See Table 5-5 for the Base-Case FIRR

Forecast for Package (3) invested by AP-II). On the other hand, in the event that the 89 billion yen

for works related to the terminals and ancillary works including people mover, are borne by AP-II,

the financial internal rate of return (FIRR) will be 14%. (See Table 5-6 for the base-case FIRR

forecast for Packages (2) and (3) invested by AP-II).

5-8
Table 5-5: Base-Case FIRR Forecast for Package (3) invested by AP-II(in Million IDR )

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

5-9
Table 5-6: Base-case FIRR Forecast for Packages 2 & 3 invested by AP-II(in Million IDR)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

5-10
3) Overview of the Results of the Preliminary Economic Analysis

The followings are possible economic effects that may arise as a result of this project, other than

financial revenues for the operator.

a) Increase in revenues for retailers in the terminals

In tandem with the expansion of terminals, commercial space will expand to six times that of the

current size, thereby creating various business opportunities such as retail and Food&Beverage.

Based on the premises of the financial analysis laid out under the previous item, it is estimated that

the commercial sector will gain sales of 4.4 trillion IDR five years after the completion of the new

terminal, and 5.5 trillion IDR ten years after the completion of the said terminal, significantly

exceeding the 2010 projected sales of 1.3 trillion IDR.

b) Construction demand

Total construction-related spending of 104.5 billion yen is projected, and is expected to generate

benefits to the related companies, centered on Japanese and Indonesian companies.

c) Growth in employment in tandem with the expansion of terminals

As the terminals will occupy a floor space that is approximately twice the size of the current floor

space after the expansion, the number of employees is also expected to double. Employee expense

for Soekarno Hatta Airport was 271.5 billion IDR for 2010; against that, employee expense is

projected to be 501.3 billion IDR after the new terminal is put into operation.

Of these, as part of the attempt to quantify benefits other than those captured by business entities

directly involved as lenders or shareholders, with regard to a) above, we computed the revenue

5-11
increase to the tenants in the terminal facility, such as retailers and service providers, in the event

that this project is implemented (With condition) and in the event that it is not implemented

(Without condition), and assessed the economic internal rate of return (EIRR) based on the

assumption that 30% of the revenue increase becomes the economic profits of the tenants.

The reasons for adopting only a) are that for b) Construction demand it is difficult to make a

comparison with the benefits from other projects in the event that this project is not implemented, as

well as the difficulty in making a comparison with the benefits from the current work carried out by

newly-hired staff with regard to c) Growth in employment. On the other hand, with regard to a), as it

is difficult to conceive of alternative spending for the consumption made by passengers while they

wait for their flights in their terminals, it has been assessed to be a new economic activity generated

as a result of this project.

5-12
[Premises]

Through the enhancement of commercial facilities and services under the With condition, in

2016, when terminal expansion and renovation has been completed, it is assumed that the per

passenger consumption for domestic flights will increase 56% year-on-year and 81%

year-on-year for international flights. Thereafter, it is assumed to grow at an annual rate of 5%

for domestic flights and 2% for international flights.

Under the Without condition, it is assumed that per passenger consumption for domestic

flights will increase from the current level to 5% per annum, and 2% per annum for

international flights.

The benefits to passengers and airline operators using the terminal were replaced by the

business profits computed in the financial analysis laid out in Chapter 5, section (2) 2).

With regard to project costs, Package (1), implemented as a public project by the Indonesian

government, has been added to the figures for Packages (2) and (3) used in the financial

analysis.

[Results of computation]

The EIRR obtained based on the above assumptions is at a high level of 17% in the base case.

5-13
Table 5-7: Base-Case EIRR Forecast for Package (3) invested by AP-II(in Million IDR)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

5-14
Chapter 6 Planned Project Schedule
(1) Planned Project Schedule
The projected implementation schedule for this project, at this point in time, is set out as follows.

Figure 6-1: Projected Implementation Schedule for the Project

Year 2011 2012 2013 2014 2015 2016 2017


Quorter
Overall plan Pre F/S
Selection of consultant
Basic plan
Bid for project rights

Terminal 3 Detailed design


Bid for construction works
Construction works
Project management

Terminal 2 Detailed design


Bid for construction works
Construction works
Project management

Terminal 1 Detailed design


Bid for construction works
Construction works
Project management

Taxiways, etc. Detailed design


Bid for construction works
Construction works
Project management

Cargo terminal Detailed design


Bid for construction works
Construction works
Project management

Connected Building Detailed design


Bid for construction works
Construction works
Project management

Source: Prepared by the Study Team

6-1
(2) Issues Pertaining to the Project Schedule
1) Establishing the division of functions for the passenger terminals

This study took reference from the JICA Master Plan study that had been started earlier, and the

schedule was reviewed based on the assumption that Terminal 3 will be used as an international

terminal. However, in the hearing sessions conducted by the Study Team in the site survey, it was

verified that policies relating to the division of functions for each terminal under this project have

also not been established within AP-II.

Hypothetically, in the event that the policy is to prepare Terminal 3 as a dedicated terminal for

domestic routes, the renovation plans for Terminals 1 and 2 will differ greatly from the assumptions

set forth in this study. Furthermore, it is also expected to have a significant impact on the shape that

concession projects will take.

In driving this project forward in the future, it will be important to decide, at an early stage, the

policies pertaining to the division of functions for the passenger terminals.

2) Relationship with the development plan for transportation infrastructure

While it has not been included in the scope of our project, the Indonesian Government has plans to

develop a rail system connecting the heart of Jakarta to Soekarno Hatta Airport. AP-IIs Grand

Design also takes it into consideration to enhance the connection between terminals and planned

railway station.

As the location of the rail station greatly influences the division of functions for passenger terminals,

and the location of concession businesses, it is necessary to take prompt steps to consult with the

6-2
related authorities on the tentative location of the rail station, and to come to a decision at an early

stage.

6-3
Chapter 7 Implementing Organization
1) AP-II

AP-II, the implementing organization on the Indonesian side, is a state-owned enterprise that is

100% owned by the Indonesian Government. It manages and operates Soekarno Hatta Airport,

which is the subject of this project, as well as 12 airports in the western part of Indonesia.

AP-IIs business area covers the management of the entire airport facility, including basic facilities

and terminal facilities. In addition, air traffic control operations for the western part of Indonesia are

also implemented by AP-II.

The management structure of AP-II comprises a head office organization made up of four

directorates (Operation and Engineering, Commercial and Business Development, Finance, and

Personnel and General Affairs) that come under the charge of the President Director. A branch office

is also located in each airport. The organization has a total of 4,988 employees. The highest

decision-making authority for managerial decisions is the Board of Commissioners.

7-1
Figure 7-1: AP-II Organizational Structure

Source: Prepared by the Study Team based on JICA,Master Plan Study on Multiple-Airport Development for

Greater Jakarta Metropolitan Area in the Republic of Indonesia: Progress Report, (March 2011)

Business conditions for AP-II have remained steady with the increase in passenger numbers

accompanying economic growth in Indonesia in recent years. In 2011, the company recorded strong

revenue takings with sales of 33 billion yen and ordinary income of 12 billion yen. Soekarno Hatta

Airport is a core business for the company, generating 80% of its sales and 134% of its profits.

Under the project scheme that has been in place till now, development and improvement of the

airport have been carried out under the direct control of the state, then transferred to AP-II for

management and operation after development has been completed. However, with the privatization

7-2
of state-owned enterprises under the Yudhoyono regime, AP-II has been shifted to a scheme under

which the company carries out airport development works independently. Currently, with regard to

the Medan airport, which is undergoing airport development works, while the development of basic

facilities comes under the state, the development and improvement of terminal buildings are being

implemented by AP-II. Other than Soekarno Hatta Airport, which is the target for this project, future

renovation plans for other airports are underway. However, these are scheduled for implementation

as independent AP-II projects.

In this study, we are proposing the scheme to jointly implement the passenger terminal development

project. AP-II has had the experience of establishing a joint venture with the airport authority of

Schiphol Airport during the development of the existing Terminal 3, and of driving a project. In

addition, AP-I, which is managing and operating airports in the eastern part of Indonesia, concluded

a business partnership with the Incheon International Airport Corporation in 2011 on future airport

development.

To sum up the above, AP-II is assessed to have more than sufficient capacity, in terms of business

conditions, organizational structure, financial base, achievement, and knowhow, to take on the role

of the implementing organization for this project.

7-3
Chapter 8 Technical Advantages of Japanese
Companies
(1) Expected Form of Japanese Involvement (Investment,

engineering, procurement & management, and operation &

management)
The anticipated projects for the expansion of Soekarno Hatta Airport are divided into the five broad

categories shown below. The anticipated sources of funds based on information obtained from

dialogues with the Indonesian Government and AP-II conducted to date and reports from media are

laid out as follows.

Table 8-1: Outline of the Soekarno Hatta Airport Expansion and Upgrading Project, and Anticipated
Sources of Funds for AP-II
Project item Current anticipated source of funds
Implemented as public works with government
Package (1)
funding
Repair of runways, aprons and taxiways,
After implementation, assets shall be transferred
etc.
to AP-II as equity or a grant.
Package (2)
Utility plant buildings, people mover, etc. Retained earnings of AP-II, and procured from the
Package (3) domestic market with AP-II as the borrowing entity.
Passenger terminal buildings
Package (4)
Cargo terminals
Package (5) JV, including third-party funds.
Commercial buildings, hotels, offices, car
parks

Source: Prepared by the Study Team

Against the above, the Study Team proposes the following.

8-1
Table 8-2 : Anticipated Sources of Funds, Based on Assumptions by the Study Team

Project item Current anticipated source of funds


Package (1)
Implemented as public works using yen loans.
Repair of runways, aprons and taxiways, etc.
As for Package (1), implemented as public works
Package (2) using yen loans. However, in the event that it is not
Utility plant buildings, people mover, etc. carried out as a public work, development will be
carried out through JV as per Package (3).
The managing company for Soekarno Hatta
Airport will be separated from AP-II, carry out
Package (3)
development of the terminal buildings using third
Passenger terminal buildings
party equity participation, and operate for a fixed
period of time.
Package (4)
Cargo terminals
Construction is carried out in a concession style
Package (5)
using third party funds.
Commercial buildings, hotels, offices, car
parks

Source: Prepared by the Study Team

The expected form of involvement by Japanese investor group: Japan Air Terminal Co., Ltd., Itochu

Corporation and Shimizu Corporation, collectively called as JIS, can be summarized as follows.

8-2
Table 8-3: SHIA Expansion and Upgrading ProjectProject Scheme Proposal

Source: Prepared by the Study Team

The management entity for aeronautical operations in Soekarno Hatta Airport is AP-II. For Packages

(1) and (2) described above in the event that they are implemented as public works, Japanese

involvement will mainly take the form of contractor for civil engineering and construction projects.

In addition, for Package (2), Japan is also expected to take on the role of operator under a BTO

(Build Transfer Operate) contract for services agreement, centered on post-completion maintenance.

With regard to Package (3), Japanese involvement will take the form of investing in equity of the

management company of Soekarno Hatta Airport spun off from AP-II. Japan is also expected to

develop the terminals as part of a joint venture with AP-II, and after the completion of the project, to

operate them jointly with AP-II.

With regard to Packages (4) and (5), Japan is expected to shoulder the construction and management

8-3
of facilities as an independent project implementing body. With respect to each type of contracts,

reviews were conducted as follows.

Commission for Package (1) Civil engineering works for runway extensions as well as the repair and

new construction of taxiways, and Package (2) Construction and operation of shared facilities

As the construction works for this project are expected to be implemented by the Indonesian

Government as public works, Japan is considering participating in the project through Japanese

companies that will act as construction contractors and operation contractors, rather than as the

primary project implementing body.

For a long period of time since the postwar recovery period, Japan has contributed to the

development of infrastructure in Indonesia, including roads and ports. In the area of airports, Japan

also has a proven track record, with Shimizu Corporationa member of the recent

consortiumdeveloping the new Padang airport in 200240, and Hazama Corporation developing the

new Palembang airport41 in 2003. AP-II currently owns and manages both of these airports, and

these results are expected to have an appeal.

In recent years, several projects have been implemented in the transportation sector, making use of

Special Terms for Economic Partnership (STEP). If we were to assume that Package (1) is

implemented as a government project, there is also a possibility that for development to be

implemented under STEP, as per the above. The Indonesian Government also has policies aimed at

40
Shimizu Corporation press release, January 4th, 2002
41
Hamaza Corporation press release, September 28th, 2005

8-4
reducing its public debt (detailed in Chapter 9: Financial Outlook), and requests for yen loans for

this project have not been confirmed.

Table 8-4: Track Record for Yen Loans Under the Special Terms for Economic Partnership (STEP)
in Indonesias Transportation Sector
Contracted
Loan contract
Project amount Project implementing body
date
(Million yen)
Jakarta Metropolitan Area
March 31st, Government of the Jakarta
Highway Improvement 48,150
2009 Special Capital Region
Project (I)
Jakarta Metropolitan Area Directorate General of
November
Highway Improvement 1,869 Railways, Ministry of
28th, 2006
Project (E/S) Transportation
Tanjung Priok Port Access Directorate General of
March 29th,
Road Construction Project 26,620 Highways, Department of
2006
(II) Public Works
Directorate General of
North Java Corridor March 31st,
4,287 Regional Infrastructure,
Flyover Project 2005
Department of Public Works
Tanjun Priok Port Access Directorate General of
March 31st,
Road Construction Project 26,306 Regional Infrastructure,
2005
(I) Department of Public Works

Source: Prepared by the Study Team based on the information from JICA website

A point of concern is the possibility of a drop in price competitiveness, as the exchange rate for yen

against rupiah has risen more than 50% since 2002 and 2003, when Shimizu and Hamaza

Corporations were commissioned to take on airport projects in Indonesia. As shown in the following

figure, while the rupiah had maintained a rate of approximately 70 yen to 75 yen in 2002 and 2003,

the impact of the global financial crisis had caused it to rise beyond 130 yen by 2009. Thereafter,

although it rose to above 100 yen momentarily in April 2010, the yen continued to appreciate against

8-5
a weakening rupiah, and the rupiah depreciated to 116 yen as of November 2011.

Figure 8-1: Fluctuations in Yen and Rupiah Exchange Rates for the Past Ten Years (2002-2011)

Most recent value/Closing


value/Price/Revised value 116.8939
High value 01/30/09 131.3907
Simple average 89.2401
Low value 06/06/03 68.8377

Source: Bloomberg (accessed on November 29th, 2011)

With regard to the development of shared facilities (utility plant, people mover, etc.) under Package

(2), while there are originally a part of the terminal building and a part of Package (3), they were set

up as a separate package due to the possibility of yen loans, in consideration of the public nature of

shared facilities (means of passenger transportation, the electricity and water supplies that are vital to

aviation services, etc.). The people mover is also operated in Narita Airport and Kansai International

Airport. In addition, an appeal can be made for the results achieved under each local government, in

the form of the new transit systema short-distance unmanned transit system that can also operate

outside the airport.

8-6
Table 8-5: New Transportation Systems in Japan

Railway/ Operating Year of


Route (Known as) Remarks
Tracks distance establishment
Ina Line (New Shuttle) Railway 12.7km 1983 AGT (side guide rail
Nippori-Toneri Liner Tracks 9.8km 2008 AGT (side guide rail)
Tokyo Waterfront New Railway 6.8km AGT (side guide rail)
Transit Waterfront Line 1995
Tracks 7.9km
(Yurikamome)
Kanazawa Seaside Line Tracks 10.6km 1989 AGT (side guide rail)

Yamaguchi Line (Leo AGT (side guide rail)


Railway 2.8km 1985
Liner) VVVF inverter control

Yukarigaoka Line Railway 4.1km 1982 AGT (center guide rail)


Tobu Kyuryo Line
Railway 8.9km 2005 HSST (Maglev)
(Linimo)
Nanko Port Town Line Railway 3.3km AGT (side guide rail)
1981
(New Tram) Tracks 4.6km
Railway 3.0km AGT (guide rails on both
Port Island Line (Port
1981 sides): First application in
Liner) Tracks 7.8km
Japan
Rokko Island Line (Rokko Railway 1.5km AGT (side guide rail)
1990
Liner) Tracks 3.0km
Hiroshima Short Distance
Transit Seno Line Tracks 1.3km 1998 Skyrail
(Skyrail Midorizaka Line)
Hiroshima New Transit Railway 0.3km AGT (side guide rail)
1994
Line 1(Astram Line) Tracks 18.1km

Source: Prepared by the Study Team based on New Transportation System on Wikipedia

8-7
Package (3) New construction of terminal buildings

While both the Indonesian Government and AP-II appear to be in agreement toward undertaking

construction with AP-II shouldering responsibility for the terminal buildings, there is a possibility for

the incorporation of third party funds for the development and operation of the terminal buildings.

This is due to a lack of knowhow on the construction and management of large-scale facilities, or

issues pertaining to funds procurement due to adverse changes in economic situation in the future.

The Study Team will review opportunities to participate in Soekarno Hatta Airport operations as a

project partner.

Previously, Indonesia had operated in the following stylethe state would develop airport facilities,

and the completed facilities would be transferred to AP and AP-II . However, since several years ago,

it had shifted to a developmental policy aimed at suppressing government fundsexisting airports

would be developed by the airport operators AP or AP-II, while new airports would be developed

through PPP by private-sector companies, selected through an open tender.

The new terminal buildings constructed using AP-II funds under the new government policy

includes Soekarno Hatta Airport Terminal 3 (total construction cost of 200 billion rupiah 42 ,

approximately 1.7 billion yen43 ), which commenced operations in 2010, and the New Medan

International Airport that is currently a work-in-progress, and which is slated to be the second largest

in scale in Indonesia.

42
http://baltyra.com/2010/03/05/terminal-3-soekarno-hatta-airport/

43
As of November 30th, IDR = 0.0085 yen (Bloomberg.com)

8-8
The New Medan International Airport airside is owned by the Indonesian Government, while the

landside is owned by a joint venture established between AP-II and the state and operated under a

30-year contract. Thereafter, the ownership rights will be transferred to AP-II through the BOT

(Build Operate Transfer) system. AP-II is anticipated to inject a total of US$315 million

(approximately 24.2 billion yen44) into this project45, and has allocated a carrying value of 1,050.3

billion IDR (approximately 9.1 billion yen46) to the construction in progress and other assets on its

balance sheet as of the end of 2010. Based on reports released in July this year, although the new

terminal is approaching completion, the construction of roads connecting the city to the new airport

has been greatly delayed, and the original launch of the airport scheduled for July this year will be

postponed to after 2013.

Photo 8-1: Terminal building of the New Medan International Airport

Source: July 13th, 2011 by Medan Indonesia, Medanku.com

44
Calculated at the rate of US$1 = 77 yen
45
May 15th, 2009, Kuala Namu International Airport | Medan Indonesia Pride http://www.medanku.com/
46
Calculated at the rate of 1 yen = 115 IDR

8-9
Photo 8-2: Grand design of the Medan airport (including after future extensions)

Source: May 15th, 2009 by Medan Indonesia, MedanKu.com

While the investment in the New Medan International Airport is one of the largest to-date by AP-II,

it has not been confirmed that there has been a significant increase in the amount of loans taken out

in tandem with the progress of this project. The new terminal for Soekarno Hatta Airport is

believed to be the first project of a scale that requires the taking out of loans.

Expected Form of Involvement by Japanese Companies in the Management of Soekarno Hatta

Airport

As Soekarno Hatta Airport currently forms a part of AP-II, the following are the options that can be

taken into consideration as means of accepting third-party funds, including those from Japanese

companies.

8-10
a) Investing in AP-II

Figure 8-2: Conceptual image of investment in AP-II

AP II
Assets Liabilities

12 airports in
various parts
of Indonesia
Capital Japanese
Investors

Source: Prepared by the Study Team

AP-II is currently owned wholly by the Indonesian Government, and there are no plans for

privatization.

Hypothetically, even in the event that the Indonesian Government takes up the option of partial

privatization, investment analysis would be difficult due to the need to assess policy risks,

including the future of an unprofitable airport for investors.

b) Spinoff of Soekarno Hatta Airport into a separate company for a fixed period of time

Figure 8-3: Conceptual image of Soekarno Hatta Airport spin-off

AP II Soekarno Hatta Airport


T1, T2, Liabilities
T3, cargo,
land

Capital
Japanese
Soekarno Hatta
financing

Spin-off
Financing by
AP-II

Source: Prepared by the Study Team

8-11
Soekarno Hatta Airport is the most profitable airport, and this form would be the easiest way to

receive third party equity and the procurement of debt.

The spin-off and partial privatization of Soekarno Hatta Airport was reviewed after the Asian

economic crisis, at the request of the IMF. In reality, an international bidding took place (Paris

Airport Authority won the negotiation rights). However, as a result of opposition within

Indonesia and other factors, it was not implemented, and complete privatization is believed to

be fraught with difficulties.

As such, we believe that the review should proceed with a focus on proposing to keep the

ownership of the airport with AP-II, separate all Soekarno Hatta Airport operations for a fixed

period of time, accept third party funding, and develop the terminals and improve operations.

This would be similar to the concept of concessions applied to infrastructure PPP. The

assumption is that AP-II, which is the current owner of the facilities and concession rights, will

exchange the relevant assets and rights for a certain value, and lend these to a third party for a

fixed period of time.

However, there is a need to conduct detailed studies, including dialogues with the Indonesian

authorities, into the practicalities as well as legalities involved in bringing this to fruition.

8-12
c) Separation of passenger terminal operations for a fixed period of time

Figure 8-4: Conceptual image of passenger terminal spin-off

AP II
Extension

Existing
Existing Japanese
facility
facility financing

Financing by
AP-II

Source: Prepared by the Study Team

This scheme involves the separation of the operations of Soekarno Hatta Airport, which is

currently managed under a vertically integrated system (as for Narita Airport); airside

operations including runways and apron will be handled by AP-II, while the ownership and

management of the terminal buildings will be undertaken by the newly established JV (as for

Haneda Airport).

As for b), there is no need to the separation to be permanent; after a fixed period of operation,

the ownership rights will be transferred to AP-II under the concession system.

The division of roles for AP-II and JV after the vertical separation can be classified under two

broad categories.

8-13
(1) Annuity (receive certain fees from AP-II)

Figure 8-5: Conceptual image of annuity arrangement

Dividend Usage fees


User
AP II
Equity investments
Shared Passengers
services Airlines
Facility
among usage fees
buildings
Loans
JV Bank
(T1-3)
Repayment

Equity investment and


O&M Dividend

Japanese
Companies

Source: Prepared by the Study Team

This system is frequently used by Japanese PFI. On the one hand, JV will be able to

enjoy stable revenues in the form of facility usage fees from AP-II; on the other hand,

the scope for increase in benefits are limited.

8-14
(2) Concession (Investors take business risks)

Figure 8-6: Conceptual image of concession arrangement

Dividend Usage fees


User
Financing
AP II
Agreement
on
operations Usage fees

JV
(T1-3) Repayment

Financing Bank
O&M Dividend
Loans
Japanese
Companies

Source: Prepared by the Study Team

This system is used by the international terminal of Haneda Airport. However, as the

bulk of Soekarno Hatta Airports profits are made up of airport taxes, it would be an

issue to have AP-II and JV come to an agreement on profit sharing rules.

Comparison of Options and the Orientation of This Study Team

The merits and demerits of each option to investors have been organized as follows.

8-15
Table 8-6: Comparison of Options and the Orientation of This Study Team

Merits Demerits
(a) Investment in AP-II No costs accompanying the Need to maintain unprofitable
separation of operations, local airports, as well as to bear
such as negotiations, the costs of development
administration, taxes, etc.
(b) Investment in spinoff of Possibility of gaining Gives rise to obligation to pay a
Soekarno Hatta Airport increased profits from airline large concessionary fee to
companies as a result of the AP-II.
enhancement in the aviation
department, as well as the Citizens are expected to oppose
increased profits as a result the partial privatization of an
of sales expansion in the airport in the capital city.
commercial department.
(c) (1) Separation of Stable profits Limited room for expansion of
operations for the terminal profits
(Annuity)
(c) (2) Separation of Possibility of gaining Possibility of suffering losses
operations for the terminal increased profits as a result in the case that the commercial
(Concession) of sales expansion in the department does not fare well.
commercial department.

Source: Prepared by the Study Team based on AP-IIs annual reports

This study team is oriented toward (b) Spinoff of Soekarno Hatta Airport into a separate company

for a fixed period of time. This option allows us to aim for greater profits not only from the

enhancement of non-aviation sectors such as the commercial department, but also from the increase

in aviation income from landing fees and aircraft parking fees.

Summarizing the dialogues and media reports to date, the Directorate General of Civil Aviation

(DGCA) of Indonesia views the participation of foreign companies in this project as one of the

options under consideration. On the other hand, AP-II is headed toward the direction of conducting

8-16
the aviation and passenger terminal businesses by itself, while working in collaboration with foreign

companies on the new cargo terminal, the commercial sector, and hotels. This differs from the form

of involvement that our group is considering.

Even as the maximum investment (of 49%) remains a legal limitation to the fixed-period spinoff of

Soekarno Hatta Airport, which is what our study team prefers, AP-IIs policy is to keep up the

operation of the airportits core businessindependently. For that reason, the first step toward

bringing this project to fruition would be to gain AP-IIs understanding on the involvement of a third

party in the operation of Soekarno Hatta Airport. Going forward, it is important to keep up outreach

efforts in view of the potential merits to be gained in partnering with our group.

Packages (4) and (5)

With regard to Terminals 1 and 2 connecting buildings, the new cargo terminal, commercial facilities,

and hotels, AP-II has reviewed these and designated them as non-core businesses.Therefore, AP-II

appears to be considering undertaking the development of these facilities using third party funds

under the concession system.

Currently, at Soekarno Hatta Airport, part of the non-aeronautical operations such as commerce- and

cargo-related operations are managed using third party funds under the concession system, and

concession revenues make up the largest share among non-aeronautical revenues.

8-17
Table 8-7: Major Concession Contracts

Contracting party Project Contract Period Contents


type year (Year)

PT Wahana Dirgantara BTO 2005 Development of warehouse


2,292m2, offices 340 m2, space for
disposal of goods 2,664 m2, car
parks 2,584 m2, connecting roads
Sanggraha Daksa Mitra BOT 1999* 20 years Development and management of
golf course, parks, shopping
centers located on approximately
1,000,000 m2 of land
PT Birotika BOT 1999 20 years Construction and management of
Semesta/DHL warehouses and offices located on
approximately 1,411.20 m2 of land
*1 There are no records of contract date on AP-II annual reports. Date of commencement of operations for golf
course based on information from Wikipedia.com.
The period of 20 years after commencement of operations is set out in AP-IIs annual reports.
*2 Calculated based on the rate of 1 yen = 115 IDR.

Source: Prepared by the Study Team based on AP-IIs annual reports

In a concession contract, the participating company takes over, from AP-II, the rights to use the land

and carry out operations laid out in the contract for a fixed period of time (20 to 25 years), and

constructs facilities and carries out business operations at its own risks. The strengths of Japanese

companies with regard to air cargo handling facilities and the operation of commercial facilities are

as follows.

Japans air cargo handling volumes clearly surpasses that of Indonesias, and it also possesses

experience in working with ground logistics.

With respect to the operation of commercial facilities in airports, Japan has significantly

higher per passenger expenditure than Indonesia, and possesses a high level of knowhow in

the development and management of facilities in diverse areas, such as product retail, F&B,

8-18
hotels, and multistory car parks.

Packages (4) and (5) are not the main targets for review in this report, and consideration of

involvement in these packages is dependent upon future developments.

(2) The Competitive Advantage that Japanese Companies have in

the Implementation of this Project (Technology , Economic

Aspects)
1) Technology

a) Environmental technologies

Airports are made up of massive buildings and civil engineering structures, and leave a deep impact

on the environment throughout all stages of development, construction, and management. With

regard to Japanese airports, consideration is given to the environment during development, and

environmentally friendly technologies are actively incorporated into the buildings. Similarly, in this

project, through design and construction work carried out by Japanese companies, it is possible to

create environmentally friendly architectures that incorporate numerous environmental technologies.

For that reason, Japanese companies have a strong competitive advantage in this project. The

concrete measures are as follows.

[Use of natural energy]

Settingup of photovoltaic systems

Conservation of energy through the use of natural light in wide, open spaces

8-19
Figure 8-7: Example of the use of natural energy in the airport

Solar power generation panels Utilization of daylight

Source: Records of terminal facility construction at Central Japan International Airport

[High-efficiency facility systems]

Introduction of high-efficiency equipment aimed at energy conservation, such as inverter and LED

lighting.

Introduction of lighting controls that utilize daylight sensors and motion sensors.

Setting up of cogeneration systems.

[Effective use of resources]

Introduction of rainwater recycling systems

Introduction of water recycling systems

Use of recycled materials

b) Construction technologies

With regard to construction technologies with low environmental burden, Japanese construction

companies may also have superior technological prowess. For instance, in the construction of

Central Japan International Airport, iron and steel slag (by-products that arise in the manufacturing

of steel) were actively used in the roadbed of large-surface roads such as runways, as part of efforts

8-20
to use resources effectively. In addition, in concrete paving works such as for aprons, Japanese

companies have a track record for using slip form methods (approximately 60% of the paving

surface) as opposed to formwork47. The utilization of high quality management knowhow in the

management of construction materials and waste materials during the period of construction is also

anticipated. With regard to consideration for the surrounding environment during construction,

Japanese companies have also previously succeeded in reducing the burden on the surrounding

environment through methods such as continuous monitoring.

c) Disaster response and support for BCP (Business Continuity Plan)

The quake-resistance levels of Japanese architecture are the highest in the world, and buildings that

utilized Japanese quake-resistant technologies are also considered to have been extremely effective

in protecting lives and serving as emergency centers during the recent major earthquake in Indonesia.

With regard to measures against the large number of natural disasters that have hit Indonesia in

recent years, such as volcanic eruptions, earthquakes, and hurricanes, it is also possible to formulate

facility plans that utilize BCP support technologies refined through natural disaster responses in

Japan. These include response measures when infrastructure is cut off, such as measures in the event

of power outages and water shortage.

d) Operations

At Soekarno Hatta Airport, with its conspicuous inadequacy of security and aging equipment,

Japanese companies will also be able to exert their competitive edge in operational aspects, such as

the introduction of advanced security systems such as fingerprint authentication systems, as well as

the introduction of the latest baggage handling systems that make use of IC tags and CT scans. Japan

47
Homepage of Central Japan International Airport (http://www.cjiac.co.jp/)

8-21
is also considered to have superb technologies in the area of BMS systems, which are able to grasp

energy consumption patterns in a building and carry out the appropriate energy management,

including tenant billing.

2) Economic aspects

While the technological superiority of Japanese companies is often acknowledged, the historical

impact of yen appreciation has given rise to an undeniable disadvantage in terms of cost. With

respect to technological capabilities that can justify high costs, it is important to work toward

convincing the parties in question.

On the other hand, in the aspect of financing through ODA and export finance institutions, Japanese

companies are believed to have a competitive advantage over other countries. As will be described

later in Chapter 9, Japanese ODA has a very dominant position with respect to the Indonesian

Government, and Japanese financial institutions are also providing loans toward infrastructure PPP

projects in Indonesia.

(3) Measures Necessary to Promote the Issuance of Orders with

Japanese Companies
The three Japanese companies that proposed this studyItochu Corporation, Shimizu Corporation,

and Japan Airport Terminal Co., Ltd.have the intention of participating in this project. The three

Japanese companies involved in this study envisage participation in the passenger terminal project as

part of a joint venture with AP-II, the current operator of Soekarno Hatta Airport, and the assumption

is that independent account projects such as hotels will be commercialized under a corporate entity

8-22
centered on a Japanese company. However, as of now, AP-II has announced to the press its

intentions to independently implement the terminal project and acknowledge external investments in

concession projects such as hotels. This is not in complete accordance with the intentions of the

three Japanese companies.

For that reason, while it is important to continue to push for swift consultations with AP-II toward

the implementation of the project, we look forward to receiving the following support from the

Japanese Government as a push toward consultations.

1) Financing

While details will be laid out in the following chapter, in the event that the Indonesia side raises a

request for yen loans for the public works portion of the project, we would like to request that the

Japanese Government take prompt steps to review the provision of yen loans, and to provide

capacity building support for AP-II and other related agencies that have no experience in utilizing

yen loans.

2) Personnel exchange, and invitational exchanges for AP-II

As it appears that the management of AP-II is conducting observations and training to airports

overseas, as countermeasures, we believe that it would be very meaningful to invite AP-II

management to conduct observations and training at Haneda Airport. We look forward to receiving

support from the Japanese Government toward such observations and training.

8-23
Chapter 9 Outlook for Fund Procurement
(1) Review of Sources of Funds and Financing Plans
The anticipated sources of funds for each of the five packages included in his proposal are laid out as

follows.

Table 9-1:Anticipated Sources of Funds for Each Target Construction Project

Project item Current anticipated sources of funds


Package (1) Taxes
Repair of runways, aprons and taxiways, Government bonds (domestic and foreign)
etc. Loans from aid agencies, such as yen loans
Package (2) In the event of public works: Same as
Utility plant buildings, people mover, Package (1)
etc. In the event of JV: Same as Package (3)
Package (3) Self-funding by AP-II and JIS
Passenger terminal buildings External loans (Subletting of yen loans from
the government, local banks, Japanese
government agencies)

Source: Prepared by the Study Team

Categorizing these sources of funds gives us the following.

Table 9-2: Target Construction Project for Each Source of Funds

Source of funds Target construction project


a) Yen loans (for the public works Package (1)
portion of the project) Consider potential for Package (2)
b) External loans
(Subletting of yen loans, banks,
bonds) Package (3 )
c) Japanese government agencies Probably for Package (2)
d) AP- II self-funding
e) JIS self-funding

Source: Prepared by the Study Team

9-1
In our consideration of possibility of funding and cash flow analysis contained in the following

chapters, we assumed that 60% of total costs for Package (2) and (3) should be raised from debt.

Given the assumption on the investment costs in Chapter 5 of 19 billion Yen for Package (2) and 70

billion Yen for Package (3) plus 10% for design and contingency, total debt would be 58.7 billion

Yen, or 7 trillion Rupiah, for Package (2) and (3) and 46.2 billion Yen, or 5.4 trillion Rupiah, for

Package (3).

(2) Possibility of Funding


1) Yen loans (for the public works portion of the project)

Financing by the Indonesian Government for large-scale public works such as Package (1) is

obtained from the broad categories of taxes, issuance of government bonds in the domestic market,

issuance of government bonds overseas, and loans from overseas aid agencies.

As described in Chapter 1, the Indonesian Government adheres to a strict code of fiscal discipline.

For that reason, for projects that require massive investments and for which returns can only be

recouped in the long-term, financing is obtained not through taxes, but through long-term debts.

The means through which a government can procure financing include the issuance of government

bonds locally and overseas, as well as loans from aid agencies; it is up to the Indonesian Government

to decide the course it wishes to take. Japan makes up a significant proportion in the area of loans

from aid agencies, and there is a high possibility for the materialization of a long-term, low-interest

loan (yen loan) from JICA should the Indonesian Government wish to receive assistance from the

Japanese Government.

9-2
Table 9-3: Balance of ODA Loans Taken Out by the Indonesian Government

(As of the Second Quarter of 2011, million USD)


Creditor Loan outstanding Share
Japan 27,001 43%
ADB 10,866 17%
IBRD 8,932 14%
IMF 3,163 5%
France 2,436 4%
IDA 2,392 4%
Germany 1,983 3%
USA 1,187 2%
Total 62,317 100%

Source: prepared by the Study Team from Indonesian Financial Statistics Vol.9, www.bi.go.id

Loan terms for yen loans are overwhelmingly advantageous to the debtor with regard to nominal

interest rate. The current distribution yield of Indonesias national debt in the domestic market has

dropped to its lowest levels historically, against a background of subsiding inflation. Despite that,

the yield on a 10-year loan is 6.75% in the local currency and 4.46% in US dollars. In contrast,

Special Terms for Economic Partnership (STEP) yen loans have a fixed interest rate of 0.2% over a

40-year loan period, and a fixed interest rate of 1.4% (similarly targeted at countries with low GDP)

over a 30-year loan period even under standard terms.

9-3
Figure 9-1: Indonesias Yield on Government Bonds in its Local Currency (Closing Prices as of
November 24th, 2011)

Source: http://asianbondsonline.adb.org/indonesia/data/marketwatch.php?code=government_bond_yields

Table 9-4: Loan Terms for Yen Loans

Grace
Income GNI per capita Standard/ Interest Repayment Procurement
Terms period
level (2009) Option rate (%) period (Year) conditions
(Year)

Below US$1.906 Standard 1.40 25 7


General
Below US$3.945 Option 1 0.95 20 6 Untied
terms
Option 2 0.80 15 5
Middle-
Standard 0.65 40 10
income
Priority Option 1 0.55 30 10
countrie Untied
terms Option 2 0.50 20 6
s
Option 3 0.40 15 5

Standard 0.20 40 10
STEP Tied
Option 0.10 30 10

Source: JICA Website

However, it is not possible to make a comparison of loans in different currencies based only on

nominal yields; there is a need to include exchange rate fluctuation risks in the review. While the

9-4
Indonesian rupiah is relatively stable against the US dollar, its value against the yen has dropped

significantly. Hypothetically, if it had received a yen loan around August 2008, the principal and

interest calculated in rupiah would have increased by approximately 35% in three years. Should it

have received a yen loan before the Asian economic crisis, the principal and interest calculated in

rupiah may have become more than five times that of the original. In comparing the cost of loans,

there is a need to recognize that the debtors outlook for exchange rate fluctuations can also play an

influencing role.

Figure 9-2: Long-term Trends for Indonesia Rupiah and Japanese Yen Exchange Rates

Most recent value/Closing


value/Price/Revised value 116.8939
High value 01/30/09 131.3907
Simple average 77.6308
Low value 04/11/97 19.0840

Source: Bloomberg

In addition, information has also been received to the effect that AP-II has raised concerns that yen

loans take too much time to materialize. Yen loans are based on a principle of cooperative formation,

and there is a need for coordination with aviation authorities and planning ministries in Indonesia,

negotiations between the Indonesian and Japanese Governments, and budgetary measures in Japan.

That is why a certain amount of time is required for the process, from the commencement of

9-5
negotiations to the granting of funds.

2) On-lending of yen loans to AP-II

As a public work, yen loans are provided directly to the government but on-lent to state-owned

enterprises when they act as the main entities to projects. However, with regard to this project,

there have been no discussions from AP-II pertaining to the on-lending of yen loans.

AP-II is a state-owned enterprise, and is able to receive yen loans on-lent from the Indonesian

Government. The terms of conditions for sub-loans are currently under review, pending the revision

of an article, by the Ministry of Finance of Indonesia, but are as follows under existing regulations48.

(i) In the event that the Ministry of Finance of Indonesia converts it to rupiah and on-lends it to a

state-owned enterprise, the interest rate will be 1% on top of the market interest of Indonesias

central bank securities (SBI).

(ii) In the event that it on-lends the loan in yen, the interest rate will be 0.5% on top of the yen loan

interest rate.

With regard to the interest rate of the central bank securities (SBI), items with a six-month period

have conventionally been used as an indicator. However, as six-month central bank securities are no

longer being issued, the substitute indicator has not been established. According to the Indonesia

Financial Statistics49, comparing the average values for September 2011, assuming that the interest

ratein the event that the policy interest rate (Bank Indonesia Rate or BI Rate) is citedis 7.75%

(BI Rate 6.75% plus 1%) (as of September 2011), the interest rate in the event that nine-month

48
Article 3 of the Regulation of Minister of Finance of Republic of Indonesia Number: 259 / KMK.017./1993
49
Bank Indonesia Website as of November 19, 2011

9-6
central bank securities are cited will be 7.28% (SBI 9 months 6.28% plus 1%) (as of September

2011); these will be more advantageous to the debtor than the average 10.57% rupiah loan interest

rates offered by state-owned commercial banks. However, as the potential of the issuance of bonds

and of obtaining loans with much more advantageous loan terms than those of the average interest

rate, as a result of the strong financial base and profitability of AP-II, is also plausible, there is a need

to be cautious in asserting the advantages.

Taking out loans in yen is not a common practice among Indonesian enterprises. According to

statistics released by Bank Indonesia, 16% of all bank loan balances as at the end of August 2011

were in foreign currency denominations50, and according to an interview study of local bank officials,

most of these foreign loans were in US dollars. According to the Indonesia Financial Statistics51

mentioned previously, the average interest rate for US dollar-denominated loans is 4.75% (as of

September 2011). Despite being significantly lower than rupiah-denominated loans, these loans are

mostly taken out by export companies that gain revenues in US dollars, and there are few companies

that would attempt to maximize interest savings while bearing the risks of exchange rate fluctuations.

In the Asian economic crisis that hit after 1997, many business operators who have retained the

memory of the rupiah crash have been reluctant to take foreign exchange risks. As the yen has also

risen significantly against the rupiah in recent years, there is a need to assess how AP-II evaluates the

foreign exchange risks that accompany the taking out of yen loans. Swaps, which hedge the foreign

exchange risks for long-term yen loans, which extends to more than 30 years, do not exist in rupiah.

(Please refer to the previous Long-term Trends for Indonesia Rupiah and Japanese Yen Exchange

Rates.)

50
Indonesian Banking Statistics, Vol.9, August 2011, p.4, Commercial Banks operation
51
Bank Indonesia Website as of November 19, 2011

9-7
In addition to these concerns, as described earlier, the promulgation of external debt reduction

policies by the Indonesian Government is also an important point to consider in reviewing the

advantages of a yen loan. As the subletting of the loan in rupiah, described in (1) above, is expected

to provide better loan terms that that for borrowing from a commercial bank, it may be a desirable

option for AP-II. On the other hand, there may be some unease as to whether or not the Indonesian

Government, in its drive to reduce public debt, will select the option of taking a yen loan as a public

debt in a case where AP-II is able to procure financing independently.

3) Loans from local banks

Indonesias financing environment is considered to be in good condition. Against the background of

a favorable economy, bank finance is seeing an annual growth of more than 20%, and the bond

market is also developing gradually. With the high profile and monopolistic position in air travel in

the Jakarta metropolitan area, it is considered possible for AP-II to procure tens of billions yen

necessary for the implementation of Packages (2) and (3). However, with regard to Packages (4) and

(5) which will be implemented as independent projects under JIS, despite having a monopolistic

position in the areas of treatment of air cargo and passenger services in the airport, it faces high

commercial risks as it lacks the track record of having the stable revenues that the passenger

terminals are able to generate. As such, there is a possibility that the parent company is requested to

act as guarantor.

Financing Capability of Bank Indonesia

As of the end of June 2011, the ratio of loans to local commercial bank deposits was as low as 66%52.

52
Financial Stability Report, No.11, September 2011, Bank Indonesia, page 26

9-8
In order to ensure economic growth, Bank Indonesia has even taken the exceptional measure of

penalizing banks that do not lend out more than 78% of their deposits (starting from March 2011) 53.

While the low loan-deposit ratio serves as a liquidity measure for the Indonesian economy, which

faces extreme fluctuations, a large part of it can be attributed to the lack of good financing targets.

Major banks seeking borrowers are believed to welcome new financing demands from good

borrowers.

The lending power of major Indonesian banks is a factor, but there is also a need to take note of the

fact that Indonesian regulations on the maximum lending limit that can be provided to a single

company to 20% of its shareholders equity. Under current conditions and based on Indonesian

Banking Statistics, the loan limit for the top four banks as of the end of 2010 was 252.9 billion yen.

The tens of billions yen of funds that are needed urgently for the expansion of Soekarno Hatta

Airport is unlikely to hit the loan limit ceiling.

Table 9-5: Assets and Loan Limit of the Top Four Banks in Indonesia

(IDR billion) (JPY 100 million)


Loan limit
Market Total Total Lending
Rank Bank Name (20% of
share assets assets limit
equity
1 Bank Mandiri 13.59% 449,775 8,309 38,231 3,531
2 BRI 11.37% 404,286 7,335 34,364 3,117
3 Bank Central Asia 10.84% 324,419 6,822 27,576 2,899
4 BNI 7.75% 248,581 6,624 21,129 2,815
Total 43.55% 1,427,060 29,089 121,300 12,363
Source: Prepared by the Study Team from Indonesian Financial Statistics Vol.9, www.bi.go.id

In reality, three of the four banks listed above provided a total of 4.7 trillion IDR (approximately 47

53
Bank Indonesias lending drive risk creating bad loans, Jakarta Post, March 1, 2011

9-9
billion yen at prevailing rates at the time54) for the infrastructure project in Indonesia described

below, under a financing agreement concluded in January 2010.

Table 9-6: Breakdown of Financing for Semarang-Solo Road (Toll Road, 76km)

(1 trillion IDR)
Use Source
6.83 4.70 Loan
1.84 Bank Mandiri
1.61 Bank Negara Indonesia
1.15 Bank Rakyat Indonesia
0.10 Bank Jateng
2.13 Financing
Jasa Marga(State Owned)
Sarana Pamganguan Jawa Tengah
Regional Government Owned

Source: Prepared based on an article from Projectfinancemagazine.com55

Although average loan interest rate are announced for each type of bank, these include the average

values for small and medium-sized enterprises; loans for large, blue-chip companies are thought to

carry lower interest rates than the rates shown below, and higher risk transactions, such as for

nonrecourse financing, should carry higher interest rate.

In addition, while the following statistics are valid up till September, Bank Indonesias interest rate,

which is a policy interest rate, fell by 0.25% in October and 0.5% in November. Currently, it has hit

its lowest level in history at 6%, and thecurrent rupiah interest rate may fall even lower than the rate

as of September.

54
Calculated based on the rate of 1 IDR0.01 yen
55
Four lend into Trans-Java toll road, 08 Jan. 2010, www.projectfinancemagazine.com

9-10
Table 9-7: Average Interest Rates of Yen and US Dollar Denomination Facility Loans

Average Interest Rate for Rupiah-Denomination Facility Loan (%, from Jan to Sep 2011)
Jan Feb Mar Apr May Jun Jul Aug Sep
State-owned
10.71 10.67 10.61 10.61 10.59 10.60 10.60 10.56 10.57
banks
Commercial
12.25 12.20 12.18 12.16 12.16 12.13 12.11 12.10 12.06
banks
Foreign
10.56 10.79 10.96 10.64 10.64 10.65 10.47 10.56 10.11
banks

Average Interest Rate for Dollar-Denomination Facility Loan (%, from Jan to Sep 2011)
Jan Feb Mar Apr May Jun Jul Aug Sep
State-owned
5.04 4.96 4.82 4.83 4.88 4.85 4.64 4.64 4.75
banks
Commercial
5.17 5.06 5.12 5.07 5.00 4.90 4.77 4.73 4.86
banks
Foreign
3.30 3.39 3.39 3.26 3.14 3.14 3.11 3.12 3.22
banks

Source: Prepared based on the website of the Central Bank of Republic of Indonesia, Indonesian Financial Statistics

The problem of collateral could pose a problem when receiving bank financing. With regard to the

fixed period spin-off of Soekarno Hatta Airport under consideration for this project, if the ownership

rights of the land and buildings are wholly transferred to the new company, the bank may require

collateral before providing a loan. In the event that the ownership rights remain with AP-II, there is a

need for a framework for collateral provided by a third party guarantor.

Issuance of Bonds in Indonesia

In the event that the amount obtained through the bank loan is insufficient in making up the amount

needed, there is also an option of bond issuance, with consideration for the creditability status and

high profile of AP-II. While the interest rate for bonds tends to be higher as compared to bank

financing, banks that require large amounts of long-term funding as well as power companies and

9-11
vender finance companies that have a demand for funding that exceeds the bank loan limits have

issued tens of billions yen in bonds.

4) Loans from Japanese government agencies, excluding yen loans

In the event that AP-II and the Japanese companies that will become sponsors have the intention of

borrowing at dollar denominations, there may be room to make use of low-interest, long-term

financing and guarantees from Japanese governmental financial institutions.

While it is entirely possible to offer favorable terms for the dollar-denomination facility financing

loans from the abovementioned Indonesian banks should Japanese governmental financial

institutions seek support from the Indonesian Government, there is a possibility that it could become

a burden to AP-II.

5) Risks in procurement of funds

The recent European financial crisis is in an extremely precarious state. Should its impact reach

ASEAN, including Indonesia, it is possible that it would have considerable influence on the

procurement of financing for this project. However, in such a situation, the Study Team may be able

to exert its strength in utilizing public low-interest, long-term financing from Japan even more

effectively.

9-12
(3) Cash Flow Analysis
In financial analysis, based on the involvement form b) in Chapter 8 (1), the concession rights for 20

years of operation of Soekarno Hatta Airport are acquired at a consideration of 600 billion IDR

(approximately 5.1 billion yen56) yearly, and the feasibility of the project was verified through the

computation of its Financial Internal Rate of Return (FIRR) in order to derive the health of its

investment and profit balance, in the event that a terminal renovation and extension project is

implemented. This assumption differs from AP-IIs policy of having AP-II independently develop

and manage the terminals, and ultimately, the review was conducted only as one of the project

implementation options available.

As described in the appended materials, assuming that 40% of total investment costs by equity and

the remaining 60% by local debt (12% fixed interest and twenty-three year term), return on equity

(ROE) is a satisfactory 15% when the ancillary facilities are not included (See Table 9-8); however,

should the ancillary facilities be included, the rate will be 11%, a level at which judgment could fall

either way (See Table 9-9). In addition, as there is a risk that aviation demand may decline as a result

of various factors such as terrorism, war, and infectious diseases, a down-side case hypothesis was

also established in which the number of passengers decreases by 10% every three years. In this case,

the return on equity (ROE) will be 14% if ancillary facilities are not included and 10% if they are

included (See Table 9-10 and Table 9-11).

However, as investment yield is largely dependent upon the increase in concession costs to AP-II,

the appeal of the project to Japanese companies will depend upon negotiations with AP-II.

56
As of November 30th, 1 IDR = 0.0085 yen (Bloomberg.com)

9-13
The cash flow analysis is based on the following key premises.

Form of involvement: A joint venture is established in partnership with AP-II, and concession rights

to operate Soekarno Hatta Airport for 20 years are acquired.

Premises for income

Under the base case, based on the estimates in the interim report drawn up by the JICA Master

Plan Team, the total number of passengers on domestic and international routes are expected

to continue increasing in the future, reaching the maximum permissible number of 60 million

people by 2017, and flattening out thereafter. Under the down-side case, starting from 2018,

the number of passengers is predicted to decrease by 10% every three years.

Air traffic control operations, which are under review to be transferred to the government, are

not included in the income forecast. (The air traffic control revenue for 2010 for this airport is

assumed to be 82% of AP-II.) There are no changes to landing and aircraft parking fees, and

income is predicted to increase at the same rate as that of passenger increase.

Airport tax is assumed to stay at current levels40,000 IDR for domestic routes and 150,000

IDR for international routes.

With the enhancement of commercial facilities, the unit sales for each passenger has been

raised to approximately 220,000 IDR (in line with other international airports) by the year

2019 for international route passengers, and to approximately half of that at 120,000 IDR for

domestic route passengers. The airport receives 15% of the amount as concession revenue.

Floor rent is taken to be same amount as it currently is, and vacancy rateincluding the

increased floor spaceremains at 80%.

9-14
Premises for expenses

No significant cost reductions are predicted. Operating expenses for Soekarno Hatta Airport

for 2010 are expected to increase at the same ratio as the terminal floor area. (Operating

income for 2010 for the airport is assumed to be 82% of AP-II.)

One trillion IDR (more than 60% of Soekarno Hatta Airports operating income for 2010) is

paid to AP-II as the concession fee collateral for the operation of Soekarno Hatta Airport.

The establishment of the new company is taken to be the year 2012, and construction

investment takes place in the four-year period from 2013 to 2016. From 2016, it is predicted

that the total building floor area (307,147 m2 as of 2010) will double to 682,147 m2, and the

floor area that can be leased will increase 6.25 times from the current 8,000 m2 to 50,000 m2.

Ancillary works, including airside projects and unmanned people mover, are assumed to come

under the national budget for public works and be transferred to Soekarno Hatta Airport at no

charge. However, a second scenario, in which ancillary works are undertaken at the expense of

Soekarno Hatta Airport, is also under consideration.

The operating cost of the unmanned people mover is predicted to be 50 billion IDR per year

(approximately 425 million IDR57).

60% of investment costs will be financed with a rupiah-denomination loan at 12% interest,

and the loan will be returned over 19 years (5% of principal every year, and 10% in the last

year only) from the year after works on all terminals have been completed.

One trillion IDR (more than 60% of Soekarno Hatta Airports operating income for 2010) is

paid to AP-II as the consideration for concession rights.

57
As of November 30th, 1 IDR = 0.0085 yen (Bloomberg.com)

9-15
Table 9-8: ROE for Package (3), without ancillary facilities (BASE CASE) (IDR million)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

9-16
Table 9-9: Equity IRR for Packages (2) and (3), with ancillary facilities (BASE CASE)
(IDR million)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

9-17
Table 9-10: Equity IRR for Package (3), without ancillary facilities (DOWNSIDE)
(IDR million)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

9-18
Table 9-11: Equity IRR for Package (2) and (3), without ancillary facilities (DOWNSIDE)
(in million rupiah)

Source: Prepared by the Study Team based on financial statements of AP-II and other sources

9-19
Chapter 10 Action Plan and Issues
(1) Status of Activities for the Implementation of the Project
1) Status of activities of three Japanese companies

Three Japanese companies, namely ITOCHU Corporation, Japan Airport Terminal Co., Ltd., and

SHIMIZU Corporation, are enthusiastic about participating in the Soekarno Hatta Airport expansion

project. As indicated in Chapter 8 (1) of this study, the three companies propose to participate in the

project in its entirety. Specifically, the companies envision participating in the passenger terminal

project jointly with AP-II, the current operator of Soekarno Hatta Airport, and furthermore,

establishing standalone businesses, including hotels, with Japanese companies fulfilling a central

role in the corporate structure.

As of this reports publication, AP-II has announced to the press its policy to implement its own

terminal project and to permit foreign investment in concession projects, including hotels. This

policy contradicts partially with the wishes of the three Japanese companies.

In parallel with this study, Japan Airport Terminal Co., Ltd. has proposed to forge a business alliance

with AP-II for the operation of the airport. Japan Airport Terminal Co., Ltd. has over a 50-year track

record with terminal building operations at Haneda Airport. Soekarno Hatta Airport shares many

similarities with Haneda Airport, including: its positioning as a capital city airport; the characteristics

of its passengers (the number of domestic flight passengers significantly outweigh the number of

international flight passengers); and its function as the hub airport of the country. It is thus believed

that the business alliance will be extremely effective for the future operation and management of

Soekarno Hatta Airport.

10-1
2) Status of other activities in Japan

Ahead of this study, JICA, at the request of DGCA, is implementing the Project for the Master Plan

Study on Multiple-Airport Development for Greater Jakarta Metropolitan Area in the Republic

Indonesia. The objective of the aforementioned study is to formulate a master plan for the

development of a new airport and Soekarno Hatta Airport for coping with the anticipated continued

increase in air traffic demand in Jakarta as a result of Indonesias economic development.

The Soekarno Hatta Airport expansion project has also been designated as a fast track project

based on the Memorandum of Cooperation on the Cooperation for Establishing Metropolitan Priority

Areas (MPAs) signed between the Governments of Indonesia and Japan in December 2010. With a

view to materializing the MPA concept, JICA has been implementing the Master Plan Study for

Establishing Metropolitan Priority Area for Investment and Industry (MPA) in JABODETABEK

since May 2011 and supporting the realization of the project through high-level talks among

government-related organizations.

(2) Status of Activities of Relevant Government Agencies and

Implementers in Indonesia for the Implementation of the

Project
1) Status of activities of AP-II

AP-II formulated an expansion plan in 2007 for increasing the number of runways and terminals in

response to the increasing demand of Soekarno Hatta Airport. This plan, however, has not been

approved based on the view of DGCA that a drastic resolution is necessary.

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Meanwhile, there are signs that the increase in airport demand is exceeding forecasts. Furthermore,

the situation was having a major impact on the operations of Soekarno Hatta Airport. In this light,

AP-II formulated and presented the Grand Design in 2011 to serve as the future plan for the whole

Soekarno Hatta Airport. At a private-sector session of the Japan-Indonesia administrative

vice-ministerial meeting on transportation which was held in Tokyo in July, Deputy President

Director of AP-II who was in attendance explained the Grand Design and stated that AP-II will

quickly select a Project Management Consultant (PMC) and move forward with the project.

However, as of the interview conducted by the Study Team during the site survey, the PMC had not

yet been selected.

2) Status of activities of DGCA

DGCA, as a national authority responsible for overseeing aviation administration in Indonesia, has

asked JICA to carry out a master plan formulation study as discussed earlier. The objective of the

study is to establish a vision for the modality of the airports of the Greater Jakarta Metropolitan

Area.

(3) Legal and Financial Restrictions of Indonesia


This section will present an overview on the possibility for foreign companies to enter the

anticipated project and whether there is preferential treatment as well as on the licenses which

companies should acquire for the implementation of this project. At the same time, while not directly

applicable to this project, this section will discuss the applicable PPP for the development of new

airports.

1) Regulations on foreign entry and preferential treatment

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2) Necessary licenses for establishment of new joint ventures and business management

3) Infrastructure development using the PPP method

1) Regulations on foreign entry and preferential treatment

Conditionally open business fields

The sectors in which foreign entry is prohibited in Indonesia are listed in the Presidential Regulation

No. 36 of 2010 (May 25th, 2010), Appendix I List of Business Fields Closed to Investment. With

regard to the transportation sector (airport), the investment sector related to this project, only Air

Traffic Guiding Service applies among the business fields listed. Among the List of Business

Fields Open, With Conditions, to Investment in Appendix II of the said Regulation, the (partial) list

of conditions to foreign entry applicable to the transportation sector, which are believed to be

relevant to this investment project, are as follows. With regard to airport-related services, no

regulations on foreign entry exist in particular except for those business fields which set forth a

maximum foreign investment restriction of 49%.

10-4
Table 10-1: Sectors in Indonesia Open with Conditions to Foreign Investment (Airport-Related)

Business Field Condition

10. Transportation Sector (Airport-Related)


Terminal supporting business Max 49% foreign investment
Airport service Max 49% foreign investment
Air transportation supporting service (reservation system via
computer, ground handling for passenger and cargo, and aircraft Max 49% foreign investment
leasing)
Air transportation non-commercial Max 49% foreign investment
Services related to airport Max 49% foreign investment
Freight forwarder service Max 49% foreign investment
Airplane cargo service Max 49% foreign investment
General Selling Agent (GSA) of foreign air transport company Max 49% foreign investment

Source: Presidential Regulation No. 36 of 2010, Appendix I & II (May 25th, 2010)

2) Necessary licenses for establishment of new joint ventures and business management

First, joint ventures between Indonesian and foreign companies must apply for deed of establishment

and investment plan registration as a Limited Liability Company (LLC) with the Investment

Coordinating Board (BKPM). Then, joint ventures will obtain a Capital Investment Approval Letter

from BKPM.

Registrations58

The following is an outline of the investment plan, deed of establishment, and company registrations

required for new companies.

58
JETRO website: [Indonesia Investment System Procedures and Necessary Documents for Establishing a
Company by Foreign Enterprises]

10-5
Table 10-2: Outline of Registration Procedures Required for Establishing New Companies

Registration Procedure Applicable Law


Investment Register investment plan with BKPM of BKPM Regulation No. 12
registration Indonesia and obtain initial approval. dated December 23rd, 2009
Obtain investment basic license only for (Issued January 2010)
investments in business fields requiring
financial accommodation.
Investment registration may precede or follow
company establishment.
Prepare quarterly reports on progress of
construction work to BKPM and BKPM
authorities at the provincial or city levels.
Deed of Apply and register with Ministry of Justice and Same as above
establishment Human Rights. Obtain approval letter for
establishment from Minister of Justice and Human
Rights.
Company Register company with Ministry of Justice. After Regulation of Minister of
registration obtaining Approval Letter from Minister of Justice, Trade No. 37 dated
apply with Ministry of Trade. Certification of September 4th, 2007
company registration issued immediately (effective (No.37/M-DAG/PER/9
5 years). /2007)
Source: JETRO website: [Indonesia Investment System Procedures and Necessary Documents for Establishing a

Company by Foreign Enterprises]

Land rights59

Currently, Indonesia has 11 types of land rights which individuals and companies may possess with

government approval pursuant to the laws and decrees prescribed regarding land60. Among the 11

types, six types (right of ownership, business operation right, right of building, right of use,

reclamation right, and right to harvest and lease forestry products) require government approval. The

59
JETRO website: [Indonesia Investment System Procedures and Necessary Documents for Establishing a
Company by Foreign Enterprises]
60
Government Decree No. 5 of 1960 Basic Agrarian Law and Government Decree No. 24 dated July 8th, 1997
Real Estate Registration System

10-6
remaining five types (land lease right, tenancy right, right of pledge, residency right, and right to

lease agricultural land) may be transferred and obtained among stakeholders without government

approval.

Right of ownership is approved only for Indonesian nationals and may not be acquired by foreign

nationals. Therefore, it has traditionally been the case with joint ventures between foreign and

Indonesian companies that Indonesian investors apply for the right to conduct business operations on

the land and register the right in their names. These title holders lease the use of the land to joint

businesses, and in this way, joint ventures have used the land for business operations61. Meanwhile,

ever since the 1994 government regulation allowed the formation of companies with 100% foreign

investment, foreign joint ventures have been able to acquire the land business operation right directly

under their names.

According to Presidential Decree No. 34 of 1992 concerning the use of the land for which the land

business operation right and right of building were granted to a foreign joint venture, a foreign joint

venture, with regard to the business operation right granted to it: 1) May assign the right (however,

prior approval of the Minister of Territorial Jurisdiction is necessary); 2) May turn the right into a

loan guarantee through establishing a mortgage; and 3) May retain the right for a maximum of 35

years and extend the right for a maximum of 25 years. While there are advantages, including the

possibility of renewal, there are also restrictions. 1) A foreign joint venture may not use the land for

purposes other than those prescribed in the business operation right (e.g., constructing a building

61
Regulations on business right and construction right concerning foreign investment companies established through
mergers between an Indonesian investor (for this project, we assume AP-II) and a foreign investor (for this project,
we assume JIS) (i.e., newly established joint ventures): Presidential Decree No. 32 of 1992 (follow-on law of
Presidential Decree No. 23 dated March 20th, 1980).

10-7
which serves a purpose other than the initial purpose). 2) If a foreign joint venture uses the land for

uses and under conditions other than those prescribed in the contract, the business operation right

will be revoked. 3) The right will apply only to the businesses of the foreign joint venture. 4) The

right applies only to land for which an Indonesian investment company has already acquired the

business operation right.

If the land is not owned by an Indonesian investment company (i.e., if the land for construction and

business operations under this project is owned by the Indonesian Government and is provided to

AP-II for the aviation business), the foreign joint venture may be granted the right to manage the

land provided by the government by the Minister of Territorial Jurisdiction (Land Minister

Regulation No. 9 dated December 6th, 1965). On this basis, an Indonesian investment company is

permitted to transfer the right of use and right of building associated with the aforementioned land to

a foreign joint venture. The following is an outline of the right of building, right of use, and right of

operation.

10-8
Table 10-3: Outline of Key Land Rights
Land Right Right Holder Condition Deadline
Right of building: Indonesian Right may be assigned through Effective for
nationals, sale/purchase, exchange, capital maximum of 30
Right to construct corporations participation, donation, or accession. years with
and own buildings in Indonesia Right may also be turned into loan possibility of
built on founded in guarantee through mortgage (mortgage 20-year maximum
government-owned line with expires with determination of right of extension.
land, land for Indonesian construction) Extension of right
which right of law Obligations of right holders include: of building on land
operation was (including 1) Payment of amount and by the payment for which right of
granted, or foreign method stipulated in the decision regarding operation was
individually-owned investment the right of building offered requires
land companies), 2) Use of land according to the purposes and prior agreement
etc. conditions set forth in the decision regarding with right holder.
the right of building and contract Renewal possible.
3) Maintain land and buildings in favorable
stage and preserve the environment
(Pay sufficient considerations to interests of
local communities)
4) Following the determination of the right,
swiftly return the land to the
Government/holder of the right of
operation/landowner
5) Following the determination of the right,
return the title certificate to land authorities
Right of use: Indonesian Right may be assigned through In principle,
nationals, sale/purchase, exchange, capital maximum of 25
Right to use corporations participation, donation, or accession. years with
government-owned in Indonesia Right may be turned into loan guarantee possibility of
land, land for founded in through mortgage (mortgage expires with 20-year maximum
which right of line with determination of right of use extension, if the
operation was Indonesian Obligations of right holders include: land is
granted, or law 1) Payment of amount and by the payment government-owned
individually-owned (including method stipulated in the decision regarding or is land for
land foreign the right of building, contract for use of land which right of
investment with operation right, and contract for right of operation was
companies), use with landowner granted and the
etc. 2) Use of land according to the purposes and land is used only
conditions set forth in the decision regarding for the same
the right of building, contract for use of land purpose. Renewal
with operation right, and contract for right of possible.
use with landowner
3) Maintain land and the buildings on the
land in favorable stage and preserve the
environment
4) Following the determination of the right,
swiftly return the land to the
Government/holder of the right of
operation/landowner
5) Following the determination of the right,
return the title certificate to land authorities

10-9
Right of operation: Government Those granted with the right of operation are Registration is
agencies, recognized to have the following rights: specified if the
If land provided by including (1) To plan the purpose of the application effective date for
the Government to ministries and use of the aforementioned land the right of
a government and agencies (2) To use the land for the purpose of its operation exceeds
agency is provided and application and use five years. If
to a third party for directorates (3) To assign a six-year right of use to part of effective dates are
the use of the land, general the land to a third party not specified in
the right granted (4) Receive funds in the form of income, particular, it is
by the Minister of compensation, and annual payments deemed to be over
Territorial The following restrictions apply to (3): five years.
Jurisdiction to the 1) Maximum area which can be assigned: (Provisions on
aforementioned 1,000m2 registration are set
government 2) Assignee is restricted to Indonesian forth in the
agency nationals and corporations located in Minister of Land
Indonesia which were established according Regulation No. 1
to Indonesian law. Assignment is permitted dated January 5th,
only once. 1966).
Source: JETRO report, Real Estate Usage System in Indonesia (2010).

Applicable laws: For right of building and right of use, Government Decree No. 5 of 1960 Basic Agrarian Law,
Government Decree No. 24 of 1997 Real Estate Registration System, and other laws; for right of operation,
Minister of Land Regulation No. 9 dated December 6th, 1965.

Building license62

The construction of a connecting building to Soekarno Hatta Airport requires the acquisition of a

building license. Specifically, pursuant to the provisions of the Minister of Home Affairs Regulation

No. 32 dated April 30th, 2010, the company will apply for and obtain a building license from the

provincial or city public works authorities with regard to buildings and non-buildings (e.g., parking

space, sports court, pool). The provincial governor and city mayor (in the case of Jakarta, special

provincial governor) issue the building license pursuant to the localitys District Spatial Plan Details

(RDTRK), Plan for Building and Environment (RTBL), or district technology plan (RTRK). The

building license is also a precondition for receiving public services (e.g., electricity, water, sewage,

and telephone).

62
JETRO website: [Indonesia Investment System Procedures and Necessary Documents for Establishing a
Company by Foreign Enterprises]

10-10
Business license63

A company which is newly founded for the said investment project must acquire a business license.

The company will apply for and obtain the license from BKPM or the provincial BKPM authority.

The business license for foreign companies is effective for 30 years from the start of business or

production. After obtaining the business license, the company will bear an obligation to:

Prepare quarterly reports on the progress of the construction work to BKPM and BKPM

authorities at the province or city; and

Provide reports on investment activities in the first and second half of the year to BKPM and

BKPM authorities at the province or city.

Taxation and preferential treatment measures which will serve either as investment incentives or

disincentives for the implementation of the project are listed below.

A variety of license and non-license procedures are required for activities ranging from the founding

of a new company to the start of construction and business operations. In recent years, however,

these procedures have become simplified. For example, One-Stop Integrated Services are provided

which allow for the submission of most applications at a single location within the BKPM (Articles

26 and 28 of the provisions of the New Investment Law No. 25 dated April 26th, 2007). One-Stop

Integrated Services are available also in the special province of Jakarta at the Jakarta Investment and

Promotion Board (BPMP) (Governor Regulation No. 14 dated January 20th, 2010). According to the

overview provided by JETRO, the services provided by One-Stop Integrated Services are as follows.

63
BKPM Regulation No. 12 dated December 23rd, 2009 (issued January 2010). JETRO website: [Indonesia
Investment System Procedures and Necessary Documents for Establishing a Company by Foreign Enterprises]

10-11
Table 10-4: List of Services Provided by One-Stop Integrated Services

License Services Non-License Services


a. Investment registration m. Producer import license (API-P)
b. Basic permit for investment n. Expatriate employment plan (RPTKA)
c. Basic permit for investment expansion o. Recommendation for temporary residency
visa (TA 01)
d. Basic permit for investment modification
p. Expatriate employment permit (IMTA)
e. Business permit, business expansion permit,
permit for joint business with investment q. Local incentives
company, permit for business modification:
r. Information and complaint services
Commerce, agriculture, fisheries, livestock,
forestry, industry, tourism, mining,
transportation, information and communications,
labor, education, services, public works services,
and other services
f. Location permit
g. Permit of land use appropriation (IPPT)
h. City special planning (KRK) / Building
arrangement plan (RTLB)
i. Permit for construction of buildings
(IMB)/IPB/KMB
j. Nuisance Act Permit (UUG/HO)
k. Company registration certificate issued by
Ministry of Trade (TDP)
l. Other permits necessary for investment
Source: JETRO Indonesia Investment System Investment Promoting Organization Investment Promoting

Organization Details

The following paragraphs summarize the financial incentives available for the anticipated

construction project (multilevel parking garage at the building connecting to Soekarno Hatta Airport,

commercial business complex, hotel) and real estate rental business.

Relevant taxation systems, etc.64

1) Value-added tax (VAT) (PPN in Indonesia): Standard tax rate = 10%; tax rate reduction measures

available for specified products and services.

64
JETRO website: Indonesia Investment System Taxation System Other Taxation System Details

10-12
VAT on hotel and parking space services

According to the revised VAT law65, hotel services and parking space services are not subject

to taxation.

VAT on rents

100% of service fees are subject to VAT on rents of commercial business buildings (e.g.,

shopping malls, offices) (No.SE-14/PJ.53/2003 dated June 3, 2003). If the VAT is not shifted

to the rents of tenants, the owner of the real estate will bear the costs.

2) Land and building tax

A 0.5% tax is applied to the taxable amount. If the Governments appraisal value is less than 1

billion rupiah, the taxable amount is equal to 20% of the said amount. If the Governments appraisal

value is more than 1 billion rupiah, the taxable amount is equal to 40% of the said amount.

Preferential treatment of foreign companies

Preferential tax treatment is offered to companies in Indonesia (however, limited to Limited Liability

Companies) in which foreign investors are investing. Specifically, Article 18, paragraph (3) of the

New Investment Law No. 25 dated April 26th, 200766 set forth that facilitation measures are

provided to businesses which meet at least one of the following conditions. The underlined

conditions are believed to apply to the said investment project.

Take in many workers

Included in high priority fields

65
The Value-Added Tax Law No. 8 of 1983 was amended for the third time through Law No. 42 dated October 15th,
2009. Issued on April 1st, 2010. Minister of Finance Regulation No. 80 dated April 5th, 2010 (No.80/PMK.03/2010)
has been issued to serve as administrative instructions.
66
BKPM website (http://www6.bkpm.go.id/contents/p14/tax/14)

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Include infrastructure development

Conducts technology transfers

Implements pioneering business

Invests in frontier areas, underdeveloped areas, border areas, or other areas deemed in need of

investment

Engages in activities directed at maintenance of natural environment

Conduct research and development and innovative activities

Has partnerships with very small as well as small and medium enterprises or with

cooperatives

Industry that utilizes the countrys capital goods, machinery, or facilities

The contents of the preferential tax treatment are presented below. Article 18, paragraphs 4 to 6 of

the New Investment Law set out provisions on preferential tax treatment, while paragraph 7 of the

said law provides that the Ministry of Finance (MOF) will prescribe the details of the treatment set

forth in paragraphs 4 to 6. Because the measures will be offered in line with the Governments

National Industrial Policy (Article 19 of the said law), it is believed that the applicable details will be

amended as appropriate.

10-14
Table 10-5: Preferential Tax Treatment for Foreign Investors
Preferential Tax
Contents of Regulation Applicable Law
Treatment

Income tax Income tax reduction for investments up to a specific limit Article 18,
reduction which were made during a specified period paragraph (4) a of
New Investment
Law
Import duty - Reduction of import duty on capital goods and Article 18,
reduction equipment which cannot be procured domestically paragraph (4) b&c
- Reduction of import duty on raw materials and of said law
ancillary materials which were imported with
conditions during a specified period
VAT exemption Exemption (for a specified period) or tax payment Article 18,
and extension extension for VAT on capital goods and equipment which paragraph (4) d of
cannot be procured domestically said law
Special Rapid amortization Article 18,
depreciation paragraph (4) e of
said law
Fixed asset tax Reduction of fixed asset taxes in specific business fields in Article 18,
reduction specified regions and districts paragraph (4) f of
said law
Corporate tax Reduction of corporate taxes of specified amounts and for a Article 18,
reduction specified period. New investments in pioneer industries paragraph (5)
(industries with significant ripple effects; industries with
high added value, high external economic potential, new
technologies, and strategic value for the national economy)
Import duty Import duty reduction for all investors updating their Article 18,
reduction existing facilities paragraph (6)
MOF additional MOF will set forth the details of the above system of Article 18,
measures preferential financial treatment. paragraph (7)
Source: New Investment Law dated April 26th, 2007.

3) Infrastructure development using the PPP method

The Yudhoyono administration in Indonesia, from its first term (2004-2009) and into its second term

(2009-2014), has consistently improved the infrastructure promotion environment by identifying

public-private-partnerships (PPP) as an approach for developing the investment environment without

increasing foreign debt.

Applicable law: Enforcement of Presidential Decree No. 67 of 2005 concerning infrastructure

PPP procedures

A Memorandum of Understanding (MOU) regarding the system of responsible authorities for

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PPP was concluded in 2010 among three agencies: BKPM; BAPPENAS; and MOF.

To cover for the risk of the PPP business, Minister of Finance Decree No. 38 of 2006

concerning risk management of PPP projects was enforced. In 2006, a risk management unit

which manages support measures was set up within the Ministry of Finance. Procedures

pertaining to site acquisition were amended (2006). The Indonesian Infrastructure Guarantee

Fund (IIGF) was established (2010).

To ensure public financing for PPP projects, the Infrastructure Finance Facility was

established in 2009 and the Infrastructure Investment Fund in 2010.

To promote infrastructure PPP projects, the Infrastructure Summit has been held (2005 and

2006) and the PPP Book has been issued (2009 and 2011).

The Government of Indonesia67, in hopes of receiving bids from foreign companies, intends to issue

the PPP Book annually, which will serve as an infrastructure PPP project plan, and will disclose

the tender results of infrastructure PPP projects as well as potential projects, priority projects, and

tender projects. The PPP Books up to PPP Book 2011 have listed multiple new airport development

and enhancement projects among the air transportation projects. Existing airports are owned by

state-owned companies, AP and AP-II, and it is believed that airport expansion and renovation

projects, including PPP Soekarno Hatta Airport, will be implemented by AP and AP-II.

All PPP projects are 1) assumed to be economically viable, and 2) from the perspective of

whether or not projects by themselves are financially viable:

(a) For projects which are financially not viable by themselves, hybrid financing is envisioned, in

which the public sector will bear the construction costs and the private sector will bear the O&M

costs.

67
Reference: BAPPENAS, Infrastructure Project Plan PPP Book 2010-2014.

10-16
(b) If projects are financially marginal by themselves, PPP with Government support is envisioned,

in which the public and private sectors will bear the construction costs and the private sector will

bear the O&M costs.

(c) If projects are financially viable by themselves, a regular PPP is envisioned, in which the private

sector will bear all the costs (construction costs and O&M costs)68.

A rough guide to understanding the PPP projects listed in the PPP Book for private companies:

Potential projects indicate projects which are at the stage of preliminary economic analysis,

including cost recovery; Priority projects indicate projects requiring pre-FS or FS; and

Tender projects indicate projects approved by the Government (MOF).

The PPP projects listed in priority projects specify the type of solicitation. While a great

majority of the projects are solicited projects which are submitted in accordance with the

solicitation from the contracting agency, unsolicited projects which are submitted at the

discretion of the private sector in the absence of solicitation are permitted. In the case of the

latter, the contracting agency may purchase the project for a price commensurate with the

contents of the FS proposal (if not participating in a tender), or offer bonus points (10%

maximum) to the assessment of the bidder at a tender, and thereby, giving the bidder

preferential treatment69. Therefore, it is believed that while all infrastructure PPP projects are

subject to competitive tendering, waiting until the competitive tendering is in fact too late and

68
Reference: BAPPENAS, PPP Policy and Regulation in Indonesia, by Dr. Ir. Bastary Pandji Indra, MSP Director
for PPP Development (8 February 2011).
69
BAPPENAS, by Bastary Pandji Indra, Director for Public Private Partnership Development, Infrastructure PPP in
Indonesia, Bangkok, 15 February 2009.

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it will become essential for companies to participate earlier on, i.e., during the pre-FS or FS

stage (priority project stage).

In accordance with the MOU concluded in August 2010, BAPPENAS will offer guidance for

the development of PPP projects throughout the process (planning and preparations) until the

tender of a PPP project. The MOF is responsible for viability gap funding (to supplement

construction funds) and debt guarantees for the Government-funded portion of PPP projects70,

while BKPM is responsible for promoting PPP projects and marketing.

The main contracting agencies are the Ministry of Transportation (airport, port, railway, coal railway,

and urban transport), Ministry of Public Works (toll roads and water supply and sewage), the

Government-owned national electricity company PLN (power generation), and provincial

governments. Domestic and international companies wishing to make a bid must negotiate directly

with the contracting agencies.

(4) Necessity of Additional Detailed Analysis


1) Promotion of detailed plan of passenger terminal project

This project is crucial for the future development of the Indonesian economy, and its swift

commencement is desirable. On the other hand, Soekarno Hatta Airport is the gateway of

international flights in Indonesia and serves as the hub of its domestic flights. As such, a diverse

range of challenges need to be solved for promoting the plan. AP-II has indicated its intent to move

forward with the project by recruiting a PMC, and this is an effective method for advancing this

project. However, ultimately, the operator will need to make its own judgment.

70
Presidential Regulation 78/2010 and Ministry of Finance Regulation PMK 260/2010.

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The three Japanese companies have indicated its wish to participate in the project as co-business

operators. These companies have an extensive background in project promotion. In particular, with

respect to promoting the project, the Study Team believes that it will be extremely effective to

implement additional detailed analysis concerning the passenger terminal project and making a

proposal to AP-II from the perspective of the business operator.

2) Considerations regarding Japanese support, including ODA loans

As of the publication of this report, AP-II has indicated its intent to start this project using its own

funds and bank loans. However, in addition to this project, AP-II has plans to repair nine airports,

and their financing is anticipated to pose a significant challenge. In particular, bearing in mind that

Soekarno Hatta Airport serves as a core business for AP-II, it is believed that financial assistance for

this project will have tremendous impact on AP-IIs management.

In this light, as this study has proposed, the Study Team believes that offering financial support

including the use of ODA loans for certain project components such as the construction of basic

facilities will be very effective for moving along this project. However, as AP-II, the state-owned

company, will be the core implementer of this project, the use of ODA loans will require

consultations with the Indonesian Government. Such factors may significantly affect scheduling and

other aspects. The promotion of this project will require the cooperation of the Government of Japan

for the early implementation of various procedures.

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