Deadline for toll road funding nearing

Deadline for toll road funding nearing

JAKARTA (JP): Japan's Overseas Economic Cooperation Fund
(OECF) has until the end of this month to decide on funding the
Suramadu toll road in East Java, otherwise the project will be
handed over to private investors.

Secretary-General of the Ministry of Public Works Ruslan
Diwiryo said over the weekend that if, by March 31, the OECF
decides against funding the Rp 500 billion (US$217.39 million)
project, which will span the 5.4 kilometers between Surabaya and
Madura island, it will be offered to private investors.

So far, the only private investor to express interest in the
project is PT Citra Lamtoro Gung Persada, which is owned by
President Soeharto's eldest daughter, Siti Hardijanti Rukmana.

Bisnis Indonesia daily reported that she said earlier last
week that her company was prepared to conduct the road project.

The toll road will be the main infrastructure supporting the
development of Madura into an industrial center.

Eighty percent of the funding for the project is expected to
come from the Japanese government through its OECF program, and
the remaining 20 percent from domestic investors grouped in the
PT Dhipa Madura Pratama consortium.

Joint venture

Dhipa Madura Pratama has established a joint venture with a
Japanese consortium consisting of Mitsubishi Corp., C. Itoh &
Co., The Long Term Credit Bank of Japan Ltd. and the Shimizu
Corp.

Ruslan said that even if the OECF decides to fund the project,
it will have to be renegotiated, especially if changes take place
in the composition of the consortium's membership.

He said there is the possibility of new investors -- such as
Citra Lamtoro Gung -- entering the consortium, if this were
viewed as helping speed up the completion of the project.

A new investor, he said, could strengthen the capital
structure for the project and cut back the funding necessary from
the OECF.

The construction of the Suramadu toll road was scheduled to
begin in early 1995, but the OECF disagreed with the collateral
terms for the funding.

The OECF wanted the Indonesian government to guarantee the
payment of its loan and its interest if the consortium failed to
do so. But the government refused unless the OECF extended soft
loans for the project. The OECF was against this.

PT Jasa Marga, the state-owned road management company which
is a member of the consortium, was then asked to become guarantor
for the project. But the company was only willing to pay the debt
services directly related to the road's construction costs and
not the total investment of the consortium. (pwn)