Govt to guarantee loan for toll road
Rendi A. Witular, The Jakarta Post, Jakarta
In a bid to expedite the construction of a massive toll road project in Java, the government is planning to provide guaranteed bank loans for toll road companies.
Director-General of Regional Infrastructure Hendrianto Notosoegondo told The Jakarta Post that the plan was driven by the fact that toll road investors were having difficulties obtaining loans from local banks, which have just started to recover from the devastating impact of the late 1990s financial crisis.
"We want to encourage and enable toll road operators in getting loans from local banks by becoming the guarantor of the loans, so that they can get the financing needed," said Hendrianto recently.
The Directorate-General of Regional Infrastructure is under the Ministry of Resettlement and Regional Infrastructure.
Hendrianto said that the plan was now being processed by officials at the economy ministry, and a ruling on it was expected to be issued next month.
The government is planning to build a 1,486-kilometer toll road that would link Merak in Banten with Banyuwangi in East Java. The projects, scheduled to start this year and continue until 2009, are estimated to cost some Rp 77.3 trillion (about US$9.2 billion). Private investors have been encouraged to construct different sections of the road.
It will be divided into three phases with the first phase covering the construction of a 64-kilometer toll road for the unfinished Jakarta outer ring road (JORR) and the Cikampek- Padalarang stage II, in West Java.
The first project is estimated to cost Rp 3.25 trillion.
The second phase will be the construction of a 356-km section, comprising a series of highways that will connect Cikampek with Cirebon, Semarang with Demak, Surabaya with Mojokerto and Madura and SS Waru with Tanjung Perak. This stage is estimated at around Rp 16.57 trillion.
The third and largest section will be the construction of a 1,066-kilometer road at an estimated cost of Rp 57.5 trillion. The JORR part II project, Bogor ring road, Probolingo-Banyuwangi, Solo-Mantingan and Pejagaan-Pemalang are included in this category.
Hendrianto said the government believed that most of the cost for the project could be financed by local financial institutions.
However, several of the institutions have questioned that because the amount needed was significantly higher than the accumulated assets owned by all the toll roads operators, he said.
Therefore, a government guarantee was needed to enable toll road operators, such as state-owned PT Jasa Marga, to get financing that exceeded their asset value, Hendrianto said.
"This is our attempt to entice banks to finance the project, If the operators default on their loans, the government will bail them out. However, the mechanism is still being discussed," he said.
Infrastructure Minister Soenarno said recently that if the toll road firms could obtain enough money from banks to finance the project, it would boost the economy overall, especially the ailing construction sector.
The banking sector has largely declined to offer greater incentives for new lending to the corporate sector, despite improvements in many key macroeconomic indicators. Bankers argue that lending to the sector is still risky due to slow progress in the restructuring of corporate debt.