The government on Friday vowed at the National Summit to make infrastructure development a priority over the next five years, including construction of over 20 toll roads in collaboration with private investors. Land acquisition, however, remains a major obstacle, with many projects often slowed or even canceled due to uncertainty on the issues.
“Twenty-two new toll roads to be finalized by 2014 with help from the private sector, but there are two more sections that will be fully financed by the government,” said Nurdin Manurung, the head of the Toll Road Regulatory Agency (BPJT).
Nurdin said the sections in questions were the 80 kilometer-long Medan-Tebing Tinggi stretch, worth Rp 4.4 trillion ($462 million); and Cileunyi-Dawuan, a 60-km toll road requiring Rp 3.8 trillion in investment. The estimates do not include funds for land acquisition.
“The government will have to fully finance the two projects because they had been put up for tender several times but drew no investor interest” because the expected return rate was low, Nurdin said.
Djoko Kirmanto, the public works minister, said the government would require foreign loans for the overall project. “But the priority will be toll road sections with a financial return rate over 18 percent,” he said.
Despite a lower rate of return, Djoko said Medan-Tebing Tinggi would be among the sections bankrolled through foreign loans, especially from Chinese banks, because it connected to an airport under construction in Kualanamu, North Sumatra.
Djoko also said the financial burden for Cileunyi-Dawuan toll road section would be divided equally between the local and central governments.
The private sector, however, pointed out that toll-road projects were still hampered by contradictory land clearance and acquisition regulations. If a proposed road is to pass through farming, forestry or mining areas, investors must deal with a tangle of rules that can throw projects off track, making them more costly.
“Freeing up land should be the government’s responsibility, not the investors’,” Frans Sunito, president director of PT Jasa Marga, the country’s biggest toll road operator, said on Thursday. “Whenever projects are halted, investors must continue paying [construction crews].”
“The musyawarah process [negotiations over land acquisition] slows construction,” Frans said, adding that the current law could be replaced by an regulation in lieu of law to speed completion of projects. “If residents are unhappy, they can take matters to court, but the project must go on.”
Lukman Purnomosidhi, chairman of housing development for the Indonesian Chamber of Commerce and Industry (Kadin), said the tender process for government projects also needed to be streamlined.
“The nation has only finished 690 km out of a planned 1,700 km in toll roads since 1978, and only 101 km in the last five years,” Lukman said. “BPJT needs to be more independent and simplify its bureaucracy.”
The government is working to reform regulations on spatial planning and land acquisitions for infrastructure projects as part of its 100-day plan.
One cabinet minister, who asked not to be named, said the government would do its part to untangle contradictory regulations between the forestry, agriculture, mining and public works ministries.
When asked by reporters how the new presidential working group could iron out problems surrounding toll-road development, unit chief Kuntoro Mangkusubroto said on Thursday that it would closely monitor the issues, especially land acquisition.
“Not all projects will be successful. It’s our role to remind [operators that progress must continue] and help to settle the problem,” he said.
But Teras Narang, governor of Central Kalimantan, complained during the summit on Thursday that there was too much focus on toll roads while other infrastructure required equal attention. The province has no toll roads.
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