INFRASTRUCTURE PROJECT: TOLL ROAD
Extensive network of infra structure, specifically road network, is of vital importance to Indonesia’s economic development, the largest archipelago in the world to form a single state. Roads play a leading role for the more the country with more than 17.000 islands, to accelerate economic development and facilitate the mobility of people and goods. Java, the main island of the archipelago, has always been the center of political, economic, social and cultural development of the republic and logically, the best available road infra structure is found on the island of Java, as compared to the other major islands such as Sumatra, Kalimantan (Borneo) or Sulawesi (Celebes). The development of the toll road construction in Indonesia began during the late 70’s, when the central government established a state-owned company PT JASA MARGA, to operate in road construction industry; the company was also given the responsibility over the management, planning, construction, maintenance and commercial operation of toll roads in Indonesia. At the beginning, the company constructed and operated the first toll road in the country named Jagorawi connecting the capital city of Jakarta with the city Bogor and Ciawi, a satellite town, some 46 kilometers south of Jakarta.
When the economic and financial crisis hit Indonesia back in 1997/1998, the state-owned toll road company was financially in big difficulty and had to postpone or even cancelled a number of planned toll road constructions. Only when the overall economic and financial conditions began to improve in 2002, was the construction of a selected and prioritized number of toll roads resumed and the company PT JASA MARGA has meanwhile, by decree of the government, changed its company strategy and function from a regulator of the toll road industry to operator of toll road networks. This policy is also in line with the strategy to liberalize the country’s overall economic climate as well as to support the privatization program of state-owned enterprises. From this period of time onwards, the toll road industry is open to private investors, domestic as well as foreign; the government, however, is determined to maintain its leading role in the construction and operation of future toll road networks in view of its consideration of treating infrastructure facilities as a strategic sector for the country’s general development. The cooperation between the state-owned toll road company PT JASA MARGA and the private investors may be developed under BTO (Build, Transfer, Operate) or BOT (Build, Operate, Transfer) schemes. Under BTO scheme, also described as joint operation without granting concession rights, the total project cost that has been invested by the private investors will be re-paid by PT JASA MARGA through revenue sharing, revenue sharing with minimum payment or fixed installment payment. Under the BOT scheme, also called joint operation with concession rights, the private investor is the operator of the respective toll road and is given the right to manage the toll road for a certain period of time, normally between 20-40 years, after which period the toll road and the right to operate will officially be transferred back to the toll road company. The BOT scheme also signifies that the operator is entitled to receive other income from the toll road operation such as advertisements/bill boards, rental space for recreational facilities such as restaurants, gasoline stations and banking facility.
Between the year 1978 and 2004, Indonesia has constructed totally 611 kilometers of toll roads; 387 kilometers are run and operated by PT JASA MARGA and 224 kilometers are jointly operated with a number of private investors. Aware of the fact that the future construction and operation of toll road projects will involve huge capital investments as well as the financial limitations faced by the government, the toll road tariffs have been raised in 2003 in order to attract the interest of private investors to venture in this potential and very profitable industry. The Indonesian government has officially announced and committed to the construction of some 1500 kilometers new toll roads to be ready for commercial use by the year 2009. In 2003, the first 21 toll road projects have been released totaling 597 kilometers and are estimated to cost in excess of US$ 3.3 billion. The toll road projects are divided into 3 development priorities, the first priority covers 83 kilometers, the second is around 380 kilometers and the third priority shall cover 1.130 kilometers respectively; bidding process has commenced and construction of the projects is expected to begin within soon.
Although considered as very potential and highly profitable, the Indonesian toll road industry still faces several hurdles and obstacles; the tariff issues, regulated by the government, are often considered not attractive enough to foreign investors with regard to certainty in calculating return on investment and recognizing this, the Indonesian government has revised the toll rod tariffs in stages, the first tariff adjustment being in 2003 as well as issuing Law no. 38 in 2004 concerning evaluation and adjustment of toll tariffs every 2 years, in order to make this industry more attractive to private investors. Secondly, a number of legal matters such as land clearing and the agreement to operate the toll road are currently under review by the government.
All these hurdles need a breakthrough from the government in order to give the investors the comfortable and assured investment climate. When compared with other, neighboring countries in South East Asia like Malaysia and Thailand, the available network of toll roads in Indonesia in relation to its total land mass, is still pretty low; Malaysia for instance, a country not even one third in size compared to Indonesia, has more than 1.000 kilometers on toll road in operation. This indicates, that Indonesia is still far behind and at the same time, offers the opportunity for future toll road development, since the country needs the toll roads for its future economic development and growth.
When the economic and financial crisis hit Indonesia back in 1997/1998, the state-owned toll road company was financially in big difficulty and had to postpone or even cancelled a number of planned toll road constructions. Only when the overall economic and financial conditions began to improve in 2002, was the construction of a selected and prioritized number of toll roads resumed and the company PT JASA MARGA has meanwhile, by decree of the government, changed its company strategy and function from a regulator of the toll road industry to operator of toll road networks. This policy is also in line with the strategy to liberalize the country’s overall economic climate as well as to support the privatization program of state-owned enterprises. From this period of time onwards, the toll road industry is open to private investors, domestic as well as foreign; the government, however, is determined to maintain its leading role in the construction and operation of future toll road networks in view of its consideration of treating infrastructure facilities as a strategic sector for the country’s general development. The cooperation between the state-owned toll road company PT JASA MARGA and the private investors may be developed under BTO (Build, Transfer, Operate) or BOT (Build, Operate, Transfer) schemes. Under BTO scheme, also described as joint operation without granting concession rights, the total project cost that has been invested by the private investors will be re-paid by PT JASA MARGA through revenue sharing, revenue sharing with minimum payment or fixed installment payment. Under the BOT scheme, also called joint operation with concession rights, the private investor is the operator of the respective toll road and is given the right to manage the toll road for a certain period of time, normally between 20-40 years, after which period the toll road and the right to operate will officially be transferred back to the toll road company. The BOT scheme also signifies that the operator is entitled to receive other income from the toll road operation such as advertisements/bill boards, rental space for recreational facilities such as restaurants, gasoline stations and banking facility.
Between the year 1978 and 2004, Indonesia has constructed totally 611 kilometers of toll roads; 387 kilometers are run and operated by PT JASA MARGA and 224 kilometers are jointly operated with a number of private investors. Aware of the fact that the future construction and operation of toll road projects will involve huge capital investments as well as the financial limitations faced by the government, the toll road tariffs have been raised in 2003 in order to attract the interest of private investors to venture in this potential and very profitable industry. The Indonesian government has officially announced and committed to the construction of some 1500 kilometers new toll roads to be ready for commercial use by the year 2009. In 2003, the first 21 toll road projects have been released totaling 597 kilometers and are estimated to cost in excess of US$ 3.3 billion. The toll road projects are divided into 3 development priorities, the first priority covers 83 kilometers, the second is around 380 kilometers and the third priority shall cover 1.130 kilometers respectively; bidding process has commenced and construction of the projects is expected to begin within soon.
Although considered as very potential and highly profitable, the Indonesian toll road industry still faces several hurdles and obstacles; the tariff issues, regulated by the government, are often considered not attractive enough to foreign investors with regard to certainty in calculating return on investment and recognizing this, the Indonesian government has revised the toll rod tariffs in stages, the first tariff adjustment being in 2003 as well as issuing Law no. 38 in 2004 concerning evaluation and adjustment of toll tariffs every 2 years, in order to make this industry more attractive to private investors. Secondly, a number of legal matters such as land clearing and the agreement to operate the toll road are currently under review by the government.
All these hurdles need a breakthrough from the government in order to give the investors the comfortable and assured investment climate. When compared with other, neighboring countries in South East Asia like Malaysia and Thailand, the available network of toll roads in Indonesia in relation to its total land mass, is still pretty low; Malaysia for instance, a country not even one third in size compared to Indonesia, has more than 1.000 kilometers on toll road in operation. This indicates, that Indonesia is still far behind and at the same time, offers the opportunity for future toll road development, since the country needs the toll roads for its future economic development and growth.
posted by Zumrowi Yunus at
3:35 PM
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