Jakarta Monorail struggles to reach deal before deadline

Jakarta Monorail struggles to reach deal before deadline

Bambang Nurbianto, The Jakarta Post, Jakarta

Almost a year after PT Jakarta Monorail (JM) signed a concession
agreement with the city administration, the company is still
struggling to close a deal with potential financiers.

JM Director Sukmawaty Sjukur said on Wednesday she could not
mention the target date for the financial closing because JM was
still waiting for official offers from monorail car producers
from China and South Korea.

Sukmawaty said that JM had proposed an extension of its
agreement with the administration because it was unlikely to
complete the financial closing by the end of this month.

"We are trying to complete the financial closing as soon as
possible, but we are also proposing an extension of our agreement
with the administration," she told The Jakarta Post.

The agreement between the administration and JM was signed on
May 31, 2004.

Under the agreement, signed by Governor Sutiyoso and JM
president director Ruslan Diwiryo, the company is required to
complete a financial closing within a year, which could be
extended for six months. Beyond that, the two parties may have to
sign another agreement.

The process could be lengthy as JM is still looking at
suppliers of monorail trains that can give financial support.

According to Sukmawaty, there are three choices -- South
Korea's Rotem company, China's Citik, and Japan's Hitachi.

She said Rotem and Citik were expected to submit their
official offers to JM before the agreement with the
administration expires on May 31.

Sukmawaty added that Japan's Hitachi also plans to submit its
revised offer to JM and has expressed its plan to lower the
price. She said that initially Hitachi submitted a proposal to
supply monorail cars at a total cost of US$400 million.

JM considered the offer too high, particularly after failing
to gain financial support from the Japanese government.

Sutiyoso and executives of the company visited China and South
Korea recently to seek alternative monorail train suppliers.

Sukmawati said South Korea's Rotem and China's Citik expressed
interest in supplying monorail trains at lower prices. "But we
still don't know the exact figure of their respective offers," he
added.

Chairman of City Council Commission D for development affairs
Sayogo Hendrosubroto warned the administration to be careful in
negotiating with JM, particularly regarding its demand for an
annual subsidy of $20 million and demand for equity with the
administration.

"We must be careful in negotiating with the developer.
Otherwise, we would face a complicated financial dispute because
the feasibility study did not consider many things, including
guarantee on the number of users of the two monorail lines to be
constructed," he added.

Sutiyoso said the administration may extend its agreement with
JM, in the hope that the firm could find cheaper monorail
technology so that the city administration would not have to give
an annual subsidy to the company.

"If the total cost of the project is less than $500 million,
the administration will not give a subsidy," he told The Jakarta
Post on Wednesday.

JM is supported by three local companies -- PT Adhi Karya,
Global Profex Synergy and PT Radian Pilar Pasifik -- and three
foreign companies -- Singapore Mass Rapid Transit (SMRT),
Singapore Technology Electronics (ST - Electronics) and Hitachi
Asia Ltd.