Wednesday, 19 November 2008

Air Transport in Indonesia: An Overview

One hundred eighty seven airports are operated by the government and SOEs. The Angkasa Puras, the SOEs, hold the monopoly on airport services in their designated region.

Deregulation in the airline industry after the 1997 crisis allowed private airline companies to compete with state-owned companies. The greatest beneficiary of this has been the consumer, who has seen fares dropped in real terms and many more scheduled flights to more destinations. Although the economic prospect of the aviation industry in Indonesia looks bright, the industry is experiencing overcrowded airport terminals and inadequate air traffic control.
Law 15/1992 on Aviation and PP 70/2001 on Airport are the governing legislation. PSP on airport services is only allowed through a joint venture with an Angkasa Pura. The draft law, submitted to Parliament and expected to be passed in 2007, removes this restriction.
An assessment of the sector regulatory framework reveals the following issues: The Angkasa Puras are responsible for project due diligence. However, they do not have the capacity to do this. The draft law assigns this responsibility to DGAT.
On procurement, the current practice shows that it is conducted on the basis of Keppres 80/2003. Perpres 67/2005 must be used, as it is designed specifically for the procurement of the PPP concessionaire, and not on goods and services.
There is no specific regulatory body in the airport sector at present. The existing institutional arrangement is far from the ideal, as the Angkasa Puras hold the monopoly on the provision of airport services, are the contracting authority and regulator for and operator of such services.
There are two possible arrangements. One assumes a new regulatory institution, with the Angkasa Puras as the contracting agency, relinquishing their operator role. The other also assumes a new regulatory institution, a new landlord airport authority as the contracting agency, with the Angkasa Puras remaining as the operator.

Source: KKPPI, Sector Review 2006

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