Japan firms get nod for subway project

JAKARTA (JP): The government gave the nod on Tuesday for Japanese firms to build a subway system in the city and an electric railway connecting the capital to Surabaya, East Java, according to a business leader.

Chairman of the Indonesian Chamber of Commerce and Industry Aburizal Bakrie said that President B.J. Habibie has given the "green light" for the two projects to proceed after a business delegation under the Japan Federation of Economic Organizations, known as Keidanren, proposed to him their participation in the building and financing of the two mega projects.

"The President said both of the two projects proposed by Japan had received the green light from the Indonesian government," Aburizal quoted Habibie.

At its Tuesday meeting with Habibie here, the prominent Japanese business lobby group proposed that the Indonesian government lists the two projects when it requests soft financing from the Japanese government through its Official Development Assistance (ODA) program.

"We hope the Indonesian government will assign high priority to these two projects when they submit their request of ODA to the Japanese government," Keidanren Chairman Takashi Imai told a press briefing Monday afternoon.

Aburizal said investment in the 14.5-kilometer subway project is estimated at about US$1.5 billion and the electric railway connection to Surabaya would cost about the same amount.

On Tuesday, the Keidanren delegation, which is scheduled to leave for Malaysia today, also met with Coordinating Minister for Economic, Finance and Industry Ginandjar Kartasasmita and Kadin representatives.

Meanwhile, a special envoy for Japan and South Korea, Kusumo A.M., said Tuesday the Japanese loan required that 50 percent of the projects' technical expertise and material inputs are imported from Japan to boost its domestic economy.

The recovery of Japan's economy, which has been in the doldrums, is believed to be a key factor in rescuing the region's ailing economies.

"The Keidanren wants to concentrate on financing infrastructure projects which will combine ODA and private sector financing," he told reporters after the Japanese met with Ginandjar.

Kusumo said the ODA financing might come partially from the US$30 billion fund pledged by Japan under the so-called Miyazawa plan, and from the Ministry of International Trade and Industry.

The two megaprojects were canceled by the government in August 1997 due to financing difficulties in the wake of the rupiah's sharp plunge against the U.S. dollar.

The subway project, which will connect the Blok M shopping area in South Jakarta and the commercial district of Chinatown in West Jakarta, was initially planned to be built by a consortium of Indonesian, Japanese and German companies.

Jakarta Governor Sutiyoso announced last July that the project would resume and would begin construction early next year through a new consortium led by Japan's Itochu Corp, which scaled down the investment estimate from $2.4 billion to $1.5 billion.

But in August, the government announced that the project would be delayed again.

The project was aimed at helping solve the city's chronic traffic density and reducing pollution, but many criticized the government which it said should instead concentrate on providing basic supplies to survive the current crisis.

At the press briefing Tuesday, Imai said the economic downturn had forced Japan's manufacturing base in Indonesia to export its products, which were previously sold in the local market.

"Japan views Indonesia as a manufacturing base into the future," he said. (das/prb/rei)