City may subsidize monorail fares
City may subsidize monorail fares
Damar Harsanto, The Jakarta Post/Jakarta
The Jakarta administration said on Friday that it would in all
likelihood provide fare subsidies for the monorail to keep prices
at affordable levels, but it would not participate as an equity
partner, as requested by PT Jakarta Monorail.
"We will probably agree to provide subsidies to keep fares
affordable for Jakarta residents. But, we don't want to take part
directly in the project financing," assistant to the city
secretary for development affairs Hari Sandjojo said at City
Hall.
PT Jakarta Monorail, which is owned by PT Indonesia Transit
Center (55 percent) and Omnico Singapore Pte. Ltd., has been
appointed to build and operate two monorail lines that are
expected to be operational by the end of 2007.
The project consortium had asked the city administration for
an equity injection of US$60 million, and for an annual subsidy
of $20 million for a period of eight years.
Hari said the administration found it too burdensome to
completely fulfill the two requests.
He acknowledged that a clause in the construction contract
stipulates that the administration has to do everything in its
power to facilitate the company obtaining loans from banks.
"But, it doesn't mean that we have to be directly involved in
the project's financing," he said.
He said that the subsidies provided by the administration
would be significantly lower because of the switch from using the
costly Hitachi monorail technology to cheaper technology from
South Korea and China.
International auditor Franklin and Andrew, he said, was
reassessing how much the alteration in the technology used would
reduce the project's total cost.
Jakarta Governor Sutiyoso acknowledged that the administration
could not afford the Hitachi technology, costing $650 million.
"It's too expensive for us. It would be better for us to look
for other technologies that are cheaper," Sutiyoso said.
He admitted that the administration was still in the dark
about how much cheaper the South Korean and Chinese monorail
technologies would be, compared to the Japanese technology.
He said that early in April he would dispatch a team to South
Korea and China to study the technologies.
The alteration in technology was the second time this had
occurred, with the administration last year terminating
cooperation with Malaysian MTrans Holding over the same monorail
project, which was costed at $540 million.
The Malaysian firm refused to build two monorail lines
simultaneously as required by the administration, due to
financial constraints. The administration then turned to Hitachi,
which though $110 million more expensive, was claimed to be more
reliable.
PT Jakarta Monorail said earlier that it would speed up
construction of the monorail this month.
Unfortunately, the project has made little progress since the
initial groundbreaking ceremony witnessed by then president
Megawati Soekarnoputri, because of significant financial
difficulties.
Despite the obstacles, both the company and administration
claim that the project will stay on schedule.
The monorail project is slated to become operational in 2006,
under a 30-year build-operate-transfer scheme.