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The unfinished six-lane highway ends a five-minute walk from Nur Salim’s rice paddy in Java. The road, part of a commercial artery through the world’s most-populated island, is stalled because the farmer wants more money for a plot the size of a tennis court.

“We’re going to fight to the end,” Salim, a 55-year-old goatherd, said in his dimly lit wooden house. “We have no deadline.”

President Susilo Bambang Yudhoyono campaigned for re-election in July on a pledge to double spending on roads, rails and ports to $140 billion over the next five years, part of a push to deliver economic growth of at least 6.6 percent.

He has a way to go. During his first five-year term, only 125 km of toll roads were built, compared with China’s 4,719 km of toll roads last year alone. He hasn’t exercised his authority to confiscate land, a power only the president has.

Aging ports and railways add to the country’s transport woes, while power cuts in urban areas crimp growth, the government’s statistics agency says.

Failure to jumpstart construction risks the gains that have made Indonesian stocks among the best performers in Asia. Higher costs caused by inadequate transport may also threaten the country’s position as the world’s largest exporter of power-station coal and tin and the second-biggest exporter of palm oil.

The highway across Java, an island of about 140 million people, is stalled because a 1961 law says that only the president can seize land if owners refuse to sell. Yudhoyono’s administration is drafting a new law to make seizures easier.

Indonesia, the third-fastest growing economy in the Group of 20 last year, ranked 96th in terms of infrastructure quality of 133 states in the World Economic Forum’s 2009 Global Competitiveness Index. China was 46th and India 76th.

Inadequate roads, ports and railways mean orange juice from the Indonesian side of Borneo costs more than that from China, four times as far away, according to Zaldy Ilham Masita, chairman of the Indonesia Logistics Association (ALI).

“Companies come here because they see a huge market that will buy their goods, but they don’t intend to make Indonesia a production center because of the high logistics costs,” Zaldy said.

Logistics costs are the equivalent of 25 percent of GDP in Indonesia, versus 19 percent in Thailand and 10 percent in the US, ALI says.

“We have been screaming about this infrastructure problem for years,” said Iskandar Zulkarnain, president of shipping company PT Internusa Hasta Buana.

Jakarta’s Tanjung Priok port, the largest of the country’s more than 2,000 seaports, will soon reach capacity, the World Bank says. A 180-km railroad from Bandung, Java’s third-largest city, stops 1 km short of the main port. Meanwhile, container trucks can take all day to move 12 km to the nearest highway, according to the American Chamber of Commerce.

The Trans-Java Expressway, spanning the same distance as New York to Chicago, has been hobbled by land-acquisition difficulties since its conception in 1988. More than half the land for the 1,192-kilometer highway, about a quarter of which has been built, hasn’t been obtained, according to the Public Works Ministry.

Nur, the goatherd, said government officials didn’t properly value his land and haven’t contacted him for six months. He said he would accept Rp 350,000 rupiah ($37.51) per square meter for his 200-square-meter plot, Rp 50,000 a meter more than he was offered.

“How can they call this a negotiation?” said Nur, who voted for Yudhoyono twice and opposes any efforts to change the land law. “We are ready to sacrifice our land only if the process is transparent and the price is right.”

 

Bloomberg