Jakarta to issue bonds to get stalled subway project on track

JAKARTA (JP): The Jakarta administration will issue municipal bonds to partly finance the construction of the US$1.5 billion Fatmawati-Kota subway project, deputy governor for financial affairs Budihardjo Sukmadi said on Monday.

"Hopefully the administration could finance 22 percent of the project through the issuance of municipal bonds," Budihardjo told reporters after a meeting with city councilors discussing the project.

"We also hope that the central government will bear the remaining 78 percent of the project, which will be built with a soft loan from the Japanese government."

He said the city administration would not be able to repay the loan and suggested central government should consider the project as a national one.

"By issuing the bonds, the city administration could repay 22 percent of the loan, while the remaining 78 percent of the loan should be paid by the central government," he said.

"In many countries, Mass Rapid Transportation (MRT) projects were supported by their respective central governments," Budihardjo said.

City council speaker Edy Waluyo said the council would ask the central government to prioritize the project.

"The central government should finance the project since the city can not bear all the costs," Edy said separately on Monday.

Transparency

He called on the city administration to carefully consider its plan to issue bonds and to avoid the public suffering losses in the future.

He said all decisions should be made in a transparent way, including the decision on which private investors would be invited to join the project.

Vice President Megawati Soekarnoputri voiced her support earlier this month for the city administration's plan to construct the 15-kilometer subway.

Governor Sutiyoso expected that work on the subway, which will span from Fatmawati in South Jakarta to downtown Kota in West Jakarta, could start in April next year.

He said a consortium called the Indonesia-Japan-Europe Group (IJEG), which earlier expressed interest in the project, would be asked whether they were still interested in participating.

The consortium includes Japanese companies, led by the Itochu Corp., European firms led by Ferrostaal AG of Germany and Indonesian firms led by PT Citra Lamtorogung, PT Bukaka Teknik Utama, PT Bakrie Investindo, PT Pembangunan Jaya, PT Lippo, PT Suhamthabie and PT Steady Safe.

The project, which has been postponed since 1997 due to the economic crisis, will be financed by a special yen loan with an annual interest of 0.75 percent. The loan is repayable in 40 years with a grass period of 10 years.

Japanese Ambassador Takao Kawakami confirmed last Friday his government would continue to study the plan.

However, he insisted that the plan to build an MRT system in Jakarta was still a long way from being realized. (jun)