Dhoho Kediri Airport inauguration: New chapter for public-private partnership
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Bisnis Indonesia - Peresmian Bandara Dhoho Kediri: Babak baru pemerintah-swasta
21 October 2024
By Maria Yuliana and Rinaldi Azka
Jakarta, ID - Dhoho Airport in Kediri, an unsolicited project constructed using the public-private partnership (PPP) scheme, was finally inaugurated on Friday (18/10). This project serves as a gateway for other PPP infrastructure development initiatives.
Dhoho Airport was built by Gudang Garam Group, owned by tycoon Susilo Wonowidjodjo. It is the first unsolicited project in the transportation sector to be executed using the PPP scheme.
The inauguration of the airport was conducted by Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan and Transportation Minister Budi Karya Sumadi.
Luhut spoke about the long journey of the unsolicited project.
He stated that the airport is crucial for accelerating economic growth in southern Java.
Dhoho Airport is the first unsolicited project in Indonesia to implement the PPP scheme. The project was initiated by the private sector with support from the government.
According to Luhut, this reflects an effective collaboration between the public and private sectors, serving as an example of how PPP can address construction challenges swiftly and efficiently.
The project is expected to have a significant multiplier effect, creating jobs and increasing people's incomes.
“In addition to serving as an airport, Dhoho Airport is also accelerating other infrastructure projects, such as the construction of a toll road to facilitate people's mobility,” Luhut stated.
Meanwhile, Transportation Minister Budi Karya stated that the government was pleased with Dhoho Airport, as it can significantly impact the economy and tourism in Kediri.
Budi Karya expressed his appreciation for the construction of the airport by PT Surya Dhoho Investama (SDHI), a subsidiary of PT Gudang Garam Tbk (GGRM).
He hopes that similar initiatives can be undertaken by the private sector in other regions.
“What Surya Group has achieved marks the first time a private company has invested in an infrastructure development project of this scale. The investment is substantial, nearing Rp12 trillion,” Budi stated.
Previously, PT Surya Dhoho Investama President Director, Istata T. Siddharta, mentioned that the maiden flight in Kediri in April 2024 marked a milestone in air connectivity development and economic growth in southern East Java, particularly in Kediri Regency and its surroundings.
On the land side, the airport features a passenger terminal spanning 18,224 square metres. In the future, the airport will accommodate international flights, including those for hajj and umrah.
The passenger terminal is designed to accommodate up to 1.5 million passengers annually in its initial phase. This capacity is expected to increase to up to 10 million passengers annually in the ultimate phase.
Currently, three airlines operate at Dhoho Airport: Super Air Jet and Batik Air, each offering eight routes, and Citilink, which offers one route.
PPP relied on
In the 2025 state budget draft (RAPBN), at least 35 projects are planned to implement the PPP scheme. These projects span various sectors, including transportation, toll roads, bridges, drinking water, telecommunications and informatics, energy, electricity, and energy conservation.
Centre of Reform on Economics (CORE) Indonesia Chairperson, Mohammed Faisal, stated that PPP remains the top choice for financing projects due to limitations in the state budget (APBN). He also noted that funding is expected to come from the private sector, in line with economic growth.
“Projects must be selected more carefully. One challenge is to establish a clear cooperation scheme between the government and business entities. Another challenge is the slow economic growth, which affects the performance of both the government’s budget and the private sector. This factor will become increasingly significant in the future,” he explained.
He emphasised that the PPP scheme is often overlooked by the private sector due to the rate of return on capital being below market value. He mentioned that three indicators must be met, namely the benefit-cost ratio, internal rate of return (IRR), and net present value.
“If the return rate is too low, the private sector will not be interested. If it is only slightly lacking, the government can provide initial funding. However, the project must have a high economic value,” he added.
Additionally, the financial health of the business entity must be taken into account. Therefore, the track record of the business entity is also important.
According to records from Bisnis, Gudang Garam has invested at least Rp15 trillion in the development of Dhoho Airport through the SDHI entity.
SDHI signed a cooperation agreement with the government to develop Dhoho Airport on 7 September 2022. The PPP agreement has a duration of 50 years, beginning from the first stage of commercial operations.
Moreover, Gudang Garam is currently planning to develop the Kediri-Tulungagung toll road as another unsolicited project, also implementing the PPP scheme. The project is planned to span 44.17 kilometres (km) and is estimated to cost Rp9.92 trillion.
The toll road project initiated by GGRM will have a concession period of 50 years. It will be operated by PT Surya Sapta Agung Tol.
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