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NEWS UPDATES Asean Affairs  27 October 2010

Indo car sales outstrip road capacity

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Booming car sales are rightly touted as a sign of the strength of Indonesia's economy and the emergence of a middle class with robust purchasing power. But Indonesia is selling cars faster than it is building roads, increasing gridlock in cities and doing no favors for its efforts to attract foreign investment.

Analysts expect Indonesia, Southeast Asia's largest economy, to build just 14 kilometers of toll roads next year, about as much as India builds each day.

By contrast, the record number of 700,000 new cars being sold in Indonesia this year would stretch 2,800 km if placed end-to-end - as long as the main islands of Java and Sumatra together.

"How to accelerate infrastructure development, how to build more toll roads ... that's something we are working on," said Standard Chartered economist Fauzi Ichsan in Jakarta, where traffic and heavy rains can lead to four-hour commutes.

Gita Wirjawan, chief of the Investment Coordinating Board (BKPM), said there was no point to building cars if there were no roads for them to drive on.

But the problem is not only in Jakarta. Cities such as Balikpapan in coal-rich Kalimantan are now overrun with new sports utility vehicles.

The government aims to get 800 km of toll roads built by the end of its term in 2014, though infrastructure analyst Pandu Anugrah at Bahana Securities in Jakarta sees just half of that figure being realized - still a sharp improvement if it happens.

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