Sukarno-Hatta airport to be leased to foreign firm

JAKARTA (JP): The Soekarno-Hatta International Airport is to be leased to a foreign airport management service company under a 30 year concession contract, said the president of state-owned airport management company PT Angkasa Pura II, Miskul Firdaus.

He said that the privatization process would be completed by the end of March 1999.

"We have sent the information memo to the foreign bidders," he was quoted by Antara as saying during a breaking of the fast gathering Wednesday evening.

He pointed out that strong interest had come from airport management companies in Australia, the U.S., Germany, and the Netherlands.

The info memo is an invitation to bid for the concession which spells out the regulatory framework, the objectives to be achieved by the concessionaire and how they would be measured.

Miskul, however, said that the air traffic control division would not be privatized.

He declined to disclose the concession fee.

Angkasa Pura II is an airport management company for the western part of Indonesia. It has been selected by the government as one of the six state-owned companies to be privatized in the current 1998/1999 fiscal year ending in March.

State Minister for the Empowerment of State Enterprises Tanri Abeng has said that the objective of the privatization of Angkasa Pura II is the achievement of the best international standards, especially for the Soekarno-Hatta airport as a regional hub which has been facing strong competition from other international airports overseas.

He said that the preferred privatization method for the company was through a long-term concession including management inputs by a strategic partner to help solve the various problems of the airport management company which included lack of customer-oriented services, overdue receivables, red-tape and weak organizational structure.

Under the concession privatization method, the concessionaire receives a license, franchise or contract which sets out the conditions under which he may carry on the business, including the tariff formula and standard of performance to be met.

According to the government privatization blueprint, a concessionaire typically pays an annual fee (netted against any explicit subsidies paid by the government).

The fee can be a flat fee or may be profit or revenue related. The concessionaire bids to pay the highest fee, or to receive the lowest subsidy, or to service customers at the lowest price, or bids on a combination of such criteria.

The concessionaire is usually responsible not only for maintaining and replacing existing assets, but also for making new investments as required by the business and the license.

At the end of the concession, the assets will be returned to the government, possibly with compensation for the acquisition of new and unexpired assets. This is to discourage under-investment during the later years of the concession. The concessionaire can also bid for renewal of the concession.

The government has preferred the concession method for the privatization of Soekarno-Hatta airport because it will not sell the airport's land assets. (rei)