Foreign investors invited to enter toll road projects

JAKARTA (JP): Foreign investors will be invited to buy stakes in 13 toll roads currently in operation or under construction in a rescue effort to stop them collapsing, a government official said on Friday.

Secretary-general of the Ministry of Public Works Sunaryo Sumadji said the more than 510 km of toll roads -- part of the Trans-Java network connecting Jakarta and Surabaya -- should be saved because they had "significant national importance".

"We expect the entry of foreign investors either through financial lending or strategic partnerships," he told the media on the sidelines of a seminar on infrastructure.

Nearly US$1 billion is needed, he added.

Sharp depreciation of the rupiah against the U.S. dollar has inflicted a devastating impact on many toll road operations because earnings were in local currency but most of their debts were in foreign exchange, he said. The decline in traffic volumes and the government's decision to delay new tariff increase worsened the situation of the toll road operators.

"Those under construction are faced with high interest rate charges."

Sunaryo explained that several foreign investors had shown strong interest in participating in the refinancing, but further negotiations with the operators and the government were needed to obtain a clear and precise risk sharing mechanism.

"The issue of certainty in the regular review of the toll tariff will be the most difficult."

Many foreign parties voiced unease at the unstructured basis of the current review system, founded on a presidential decree.

"There isn't any guarantee for investors ... sometimes we revised (tariffs) every two years, sometimes in three years. It really depends on the sociopolitical condition," he said.

Sunaryo promised the government would create a more conducive investment environment.

"The government has embraced the need to establish clear, fair and transparent policies, and regulations as a matter of urgency."

The 13 toll roads are part of 79 awarded to private companies under a build, operate and transfer (BOT) scheme. Most of the projects have been battered by the cumulative effects of the crisis and allegations of rampant corruption, nepotism and collusion practices in their operations.

Sunaryo pledged that the government would make sure that the 13 toll projects were free of the practices before foreign investors stepped in. (rei)