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.