City seeks public funds to finance subway plan

City seeks public funds to finance subway plan

JAKARTA (JP): The city administration is to intensify the
collection of funds from the public to finance the development of
Indonesia's first subway system, which will link Blok M and Kota.

One of the ways suggested to collect the required funds is by
reactivating lapsed tax regulations. These include the fuel tax,
street tax and streetlight tax. Creating new regulations, such as
congestion pricing and an employee tax, is also being considered.

"The city administration has not yet enforced many potential
sources and we estimate the total revenues from the taxes will
reach Rp 868.8 billion (US$377 million) by the year 2025," Slamet
Sularno, an executive of the subway project's management unit,
said over the weekend.

For instance, the fuel tax, which is based on Article 13 Law
No.11/1957 stipulates that the gasoline price can be increased by
five percent with the extra charge being considered city revenue,
Slamet Sularno explained in a seminar on revenues improvement and
congestion pricing scheme for supporting the development of Mass
Rapid Transit Project in Jakarta.

The city administration plans to build a 14.5 kilometer subway
system connecting Blok M in South Jakarta with Kota in West
Jakarta. The total cost of the project is estimated at US$1.5
billion.

Several investors from Indonesia, Europe and Japan, along with
the city administration, have formed a consortium to finance the
project's basic design, which will cost $8 million.

The Japanese companies in the consortium are led by the Itochu
Corp. and the European firms by Ferrostaal AG of Germany.

The Indonesian investors consist of PT Bakrie Investindo, a
subsidiary of the Bakrie Group, PT Pembangunan Jaya, PT Lippo, PT
Bukaka/PT Kuda Perkasa, PT Suthamthabie and PT Steady Safe.

The funds invested in the basic design's preparation will
become part of the investors' equity in the project.

Slamet explained that the current city revenues are not
adequate to finance the project, although they are considered the
highest among the 27 provinces. For instance, in the 1996/1997
fiscal year the city revenues are estimated to have been Rp 2.1
trillion.

"It will be difficult for the administration to rely on its
current revenues because it should start allocating $25 million
every year for five years as the project's equity and another $35
million per year over a period of 25 years to pay back the loan,"
Slamet said.

The deputy governor for economic and development affairs, Tb.
M. Rais, also said that collecting public funds is a way to
secure the investment of the project.

"It is impossible merely to rely on the government and the
ticket fares to pay back the investment or to finance the
subway's operation and maintenance activities," he said in the
seminar.

The city administration also plans to implement a new system,
called congestion pricing, which requires all vehicles, except
public buses, to pay a certain amount of money when using certain
roads.

The project's management unit estimated the system will
collect as much as $11 million per year during the construction
of the project and as much as $62 million per year after the
construction is completed.

A study conducted last year showed that most vehicle owners
are willing to pay Rp 2,000 for congestion charging.

The system will be implemented in two phases, during the
construction of the subway and after the project is completed.

"The first phase will begin next year in the three-in-one
areas or in another option area which covers the three-in-one
areas plus Jl. Rasuna Said and Jl.Prof. Satrio," Shoyama Takashi,
from the management unit, said.

The system is also aimed at easing the city's traffic
congestion and air pollution as recent research showed that the
total losses caused by congestion reach $1.5 billion every year.

Takashi also suggested that the city administration give
regular presentations about the system to the public before
implementing it. (yns)