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ASEAN, South Korea to boost regional connectivity
The governments of Southeast Asian countries, grouped in ASEAN, and South Korea have vowed to improve infrastructure links throughout the region, with the latter providing assistance and facilities to reach the goal
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span>The governments of Southeast Asian countries, grouped in ASEAN, and South Korea have vowed to improve infrastructure links throughout the region, with the latter providing assistance and facilities to reach the goal.
During the 6th ASEAN Connectivity Forum, held in the Grand Hall of the Korean Chamber of Commerce and Industry (KCCI) in Seoul from Nov. 27 to 28, ASEAN countries, including Indonesia, offered infrastructure projects to potential Korean investors through a public-private partnership (PPP) scheme.
“The total value of investment required for infrastructure [projects in Indonesia] from 2015-2019 is US$359.2 billion, consisting of a 41.3 percent contribution from the state budget [$148.2 billion], 22.2 percent from state-owned enterprises [$79.8 billion] and 36.5 percent from private-sector participants [$131.1 billion],” Otto Ardianto, a technical expert from the Ministry of Transportation, explained to the audience in his presentation.
Otto said Indonesia was offering, among other projects, a 25-year concession to develop Komodo Airport in Labuan Bajo, East Nusa Tenggara, which is expected to cost Rp 1.170 trillion. In railway transportation, Indonesia is offering a 20-year concession for South Sulawesi’s Makassar-Parepare railway project, which is expected to cost Rp 1.01 trillion.
“Recently, we have seen positive signs of increasing investment of global private capital in developing countries’ infrastructure projects,” said National Development Planning Minister Bambang Brodjonegoro, as quoted by Korea Herald. “Multilateral development banks, such as the World Bank, the Asian Infrastructure Development Bank and the Asian Development Bank, as well as government agencies of developing countries have assisted the PPP framework in most ASEAN countries to attract more private-sector and foreign investment in infrastructure projects.”
ASEAN countries need a total investment of $3.3 billion in transportation, water, energy and information and communication technology (ICT) infrastructure through 2030, the second-largest demand globally after the Middle East, according to a report by global management consulting firm McKinsey and Co. The region’s combined population of 670 million people and combined gross domestic product of $2.6 trillion presents gigantic commercial opportunities, experts say. South Korean Deputy Minister of Land, Infrastructure and Transport Park Sun-ho said Korean companies considered Indonesia an important infrastructure market.
“The most recent contract won by a Korean company is the LRT development project [phase one] in
Jakarta being conducted by [the Korea Rail Network Authority],” he said separately in a written interview.
“Given Korea’s competitive railway technology, a joint implementation of rail projects can be expected.
I also believe that the promotion of our ties to strategic partnerships, as decided at the summit in
November, along with the MOU, will give a boost to our cooperation on infrastructure projects in Indonesia,” he said.
Park said several Korean companies had expressed interest in projects planned or under way in Indonesia, such as the Intelligent Transportation System (ITS), transit-oriented development (TOD) in Manggarai and the redevelopment of Hang Nadim Airport in Batam.
“Given the strong willingness of both sides, I expect concrete projects to be discovered from such exchanges,” he said.
Park explained that the Korean government had held a road show in Indonesia as well as an invitational fellowship program for Indonesian officials and provided funding for a study on public transportation and infrastructure development in Bandung.
“To continue our cooperation on these projects, the Korean government is collaborating with the Jakarta administration and Ministry of Transportation. As for the TOD project in Manggarai, an MoU was signed between the parties in the project in September during the state visit of President Joko [“Jokowi”] Widodo to Korea,” he added.
Meanwhile, Um Sung-yong, director of global business development at Korea Eximbank, shared the bank’s experience on Indonesia’s PPP scheme.
Korea Eximbank provides total financial solutions for the Karian-Serpong water supply project, one of the most important projects in the areas of West Jakarta and Tangerang.
The purpose of the project is to supply safe water to those areas and to reduce land subsidence in North Jakarta. The entire projects consist of three parts: the Karian Dam, Serpong water treatment plants and water conveyance facilities between Karian Dam and Serpong.
Water demand in Jakarta grew from 240 million cubic meters in 2000 to 295 million cubic meters in 2014, according to 2015 data from the United Nations University.
Thus far, water for Jakarta has been supplied from the Citarum River (31 percent) and Jatiluhur Dam (65 percent), but the water is highly polluted.
The total project cost is US$243 million on a build-operate-transfer (BOT) scheme of 34 years – four years of construction and 30 years of operation. The sponsors of the project are the Korea Water Resources Corporation (40 percent), LG Corporation (30 percent) and Indonesian construction company Adhi Karya (30 percent). The water treatment facility will serve customers in West Jakarta, Tangerang and South Tangerang.
Um said the main challenge for the project was coordinating with the Indonesian government, investors and other stakeholders.
“Korean construction companies are going to Southeast Asia because the business in Korea is limited. Also, by going to Southeast Asia, the Korean companies can transfer their knowledge to their counterparts,” he added.
Other ASEAN countries also showcased business opportunities and potential PPP projects in the infrastructure sector, including airports, seaports and railway facilities.
“Korean President Moon Jae-in’s vision for a ‘future Korea-ASEAN community’ comprises people-to-people exchanges, security cooperation and economic collaboration, a goal ASEAN and Korea can pursue together,” Yoon Soon-gu, deputy minister for political affairs at the South Korean Foreign Ministry, told the forum.
The forum has been recognized and commended by ASEAN and Korean leaders in their Summit Meetings every year and praised as an example of cooperation between ASEAN and its dialogue partners for enhancing connectivity, according to ASEAN-Korea Centre secretary-general Lee Hyuk.
ASEAN is Korea’s second-largest trading partner, with two-way trade worth nearly $150 billion last year. The region is also Korea’s third-largest investment destination with $5 billion invested the previous year.
Seoul set a goal to achieve $200 billion in bilateral trade by 2020. The government also aims to raise $100 million by 2022 to create the ASEAN-Korea Infrastructure Fund to promote mutual cooperation in four key areas: transportation, energy, water resources and smart city.
Son Byeong-suk, Korea’s vice minister of land, infrastructure and transportation, said the forum would help formulate different models of strategic collaboration between companies, financial institutions and technical centers of the two regions.
“I firmly believe that combining ASEAN’s boundless growth potential and the people’s passion for national development on one hand with Korea’s experience, technology and financing on the other hand will contribute greatly to economic growth of both,” he said, as quoted by Korea Herald.
