Indonesia's rusting infrastructure stymies growth

By Sara Webb

MERAK, Indonesia (Reuters) - Indonesia's rust-bucket ferries are a symbol of the decrepit infrastructure which has plagued Southeast Asia's biggest economy and prevented it from matching China's meteoric growth rate.

Delivering a truckload of goods across one of the biggest of the 17,000 islands in Indonesia's archipelago can take a week, when a journey of the same distance might take a day in Europe or the United States.

At Merak, a busy port on the western tip of Java island, lorries loaded with coffee, sugar and fruit from the island of Sumatra drive off a rusty ferry. Trucks carrying brand new motorbikes take their place for the three-hour ferry ride across choppy seas to southern Sumatra.

When the ferry docks in resource-rich Sumatra, some of the trucks must then navigate their way through narrow, dirt roads over mountains and through forests to Banda Aceh in the north. The 1,600 km (994 mile) journey might take close to a week.

From the island of Sabang in the west to Merauke in the east, Indonesia spans over 5,000 km, or roughly the distance from Anchorage, Alaska to New York City. Indonesia is heavily dependent on ferries for transport between its islands.

Yet years of neglect and a lack of funding in the wake of the Asian financial crisis mean that much of Indonesia's infrastructure needs to be modernised or expanded.

"Infrastructure is key to Indonesia's success," says Edwin Soeryadjaya, whose firm Saratoga Capital has invested in a section of the Trans-Java tollroad, an ambitious project that will stretch over 1,000 km from one end of Java to the other by the time it is completed in 2010.

New infrastructure could help Indonesia's growth rate spurt from 6.3 percent in 2007 to as much as 8 percent, said Bill Belchere, a Hong Kong-based economist at Macquarie Securities.