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)