Capital's subway project hinges on financing: Minister

Capital's subway project hinges on financing: Minister

JAKARTA (JP): Minister of Communications Giri Suseno
Hadihardjono said that implementation of the much delayed Jakarta
subway project would depend on whether the government could
secure the necessary financing.

Speaking on Thursday, he said that the government had to
participate in the project because full private sector financing
would result in very high passenger tariffs.

"The government has to participate in the project, but the
scale of participation has yet to be decided. It will still be
attractive to investors and not create too great a burden on the
government," he told reporters after opening a seminar on the
infrastructure sector.

He said the government initially agreed to award the subway
project to a private consortium grouping Indonesian, Japanese and
German investors.

But the decision was later retracted after the government
decided that the price quoted by the consortium was too high and
would result in excessively high ticket tariffs.

The minister explained that the subway project offered one of
the best options for providing a mass rapid transportation system
to serve Jakarta's 10 million population.

Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie said on Tuesday that President B.J. Habibie had
given the project the go ahead after a delegation from the
Japanese Federation of Economic Organizations (Keidanren) met him
and said they would help to build and finance the project.

Aburizal said that Keidanren would ask the Japanese government
to provide the project with soft loan financing under the
Official Development Assistance (ODA) scheme.

He added that the cost of the 14.5-kilometer subway project
has been placed at US$1.5 billion, much less than the $2.4
billion proposal submitted by the consortium stripped of the
project.

Giri declined to comment on the Japanese proposal, saying
there had yet to be official conformation from the Japanese
government. He also said the possibility of financing the project
through Official Development Assistance, known as the Miyazawa
Plan, requires further exploration.

He said that the government would open a bidding process for
private sector participation in the subway project after the
matter of government finance had been clarified.

The executive director of Asian Infrastructure Fund Advisers,
Bruce C. Allen, said that developing a subway project would
require major government participation.

"Subways around the world are generally very difficult to do
from a purely private standpoint because they're very expensive,"
he told The Jakarta Post on the sidelines of the infrastructure
seminar.

"There aren't enough examples around the world of successful
private subways, that's a sector that is particularly difficult,"
he added.

He explained that foreign investors still had the appetite to
invest in the country's infrastructure sector, provided the
government provided a proper investment framework with
transparent tariffs.

"If this issue is addressed foreign investment will come back
to develop the infrastructure in Indonesia. We're willing to bear
a lot of other risks, the one risk we can't control is tariff,"
he said.

He also added that political stability was a necessity. (rei)