Govt to review financing for toll road investment

Rendi A. Witular, The Jakarta Post, Jakarta

The new government is looking for alternative financing schemes for the construction of a total 1,500 kilometers of toll roads, which may require some US$7.73 billion in investment, according to a minister.

Minister of Public Works Joko Kirmanto said that the current government would review the financing scheme planned by the previous government, and find other alternatives, including to let investors seek their own funds.

"The toll-funding mechanism laid out by the previous government is just one option. We will review it again... We prefer investors to seek their own funds," said Joko on Wednesday.

"I think foreign and local investors who have enough funds will race to invest in toll roads because the projects that we offer are lucrative enough, and the newly endorsed highway bill will protect their investments," Joko said.

The previous government had proposed a plan under which local banks, particularly state-owned banks, would be required to finance toll-road construction through loans. But this has been opposed by the central bank over concerns of a default, due to the lack of regulations on arrangements for loan repayments.

Joko said of utmost concern was not the funding of toll-road construction, but investment and legal certainty, particularly with regard to land clearance and the calculation of toll fees.

The House of Representatives endorsed last month a key bill on highway development, which was expected to eliminate barriers that often surface during the construction of toll roads, such as in land clearance.

The law stipulates the elimination of the public's right to protect land ownership, unless an agreement is made on the compensation rewarded by the government for the land.

The articles allow land disputes to be resolved in court, while the construction project continues.

Director General of Regional Infrastructure Hendrianto Notosoegondo said the Ministry of Public Works was currently discussing with the National Land Agency drafting a law that would specifically deal with land-clearance issues in the public's interest.

Hendrianto said that, in order to prevent speculation over the price of land allocated for toll roads, under the proposed law, landowners whose property was sought for toll roads could only sell their property to the central government, or institutions appointed by the government.

Numerous infrastructure projects in the country have run aground due to problems related to land acquisition, with investors facing widespread protests and rejection from landowners, backed by regional administrations.

Hendrianto also said, in order to immediately help the country address problems regarding its transportation infrastructure -- which has become a serious problem because of the rapid rise in the number of vehicles on the roads -- the ministry would prioritize the construction of 420 kilometers of toll roads within the next four to five years.

"Due to the limited funds available, we will prioritize the construction of these roads in the next four to five years. The projects are expected to absorb as many as 100,000 workers," said Hendrianto.

The roads are part of the planned 1,500 kilometers of toll roads that will run between Merak in Banten and Banyuwangi in East Java.

Toll road projects planned for the next five years

Length Estimated Investment

(kilometer) (US$ million) Priority I

Jakarta Outer Ring Road (JORR)

Section W1 10 80

JORR Section E2 E3 14 75

Cikampek-Padalarang stage II 40 170

Total 64 325

Priority II

JORR section W2 7 68.7

Gempol-Pasuruan 32 107.7

Semarang-Bawen 24 71.3

Cikampek-Cirebon 114 371

Semarang-Demak 25 84.1

Medan-Binjai 21 80.6

Makassar section 4 11 24.9

Palembang-Indralaya 25 49.7

Surabaya-Madura 5 70

Cileunyi-Sumedang-Dawuan stage I 23 105.5

Surabaya-Mojokerto 37 148.8

Waru-Wonokromo-Tanjung Perak 18 310.7

Waru-Tanjung Perak stage I 14 66.9

Palimanan-Plumbon (widening) 6

Cibitung-Cikampek (widening) 36.6

Surabaya-Gempol (widening) 14

Sedyatmo (widening 41

Total 356 1.657

Source: Ministry of Public Works