Land acquisition

Land acquisition

Technical and financial capability appear to be insufficient
to enable development plans to reach fruition unless the
government succeeds in dealing with the issue of land acquisition
properly. As may be obvious to many, numerous infrastructure
projects in the country have run aground on this classic problem.

Chairman of the Indonesian Toll Road Association Fatchur
Rochman once revealed that most of the land needed for the
construction of 296 kilometers (km) of toll road in the country
had not yet been acquired.

PT Jasa Marga, the state-owned toll road management company,
seems to have the political support of the Jakarta administration
and the central government to turn its dream of establishing an
integrated urban highway system into reality.

However, political support appears insufficient to acquire the
land needed for toll road projects.

PT Jasa Marga has had to accept that protests by landowners
are commonplace, despite its efforts to take the right steps and
follow the correct procedures in buying the land necessary.

The most recent example of a project stagnating due to land
acquisition problems is the 1.3-km segment of the Veteran to
Ulujami stretch, a section of the Jakarta (southern) Outer Ring
Road originally scheduled for completion in May 2003. Five plots
of land have still to be acquired.

Other residents accepted PT Jasa Marga's offer of Rp 2.2
million per square meter (sq.m.) before the project commenced two
years ago. However, the remaining landowners are now demanding Rp
3 million per sq.m., arguing that the price of land in the area
has risen to Rp 4 million per sq.m.

It is impossible for PT Jasa Marga to meet the demands of the
five remaining landowners, since it would mean that the company
would also have to pay more to other landowners who had already
received compensation.

Many observers believe that there must be something wrong with
land acquisition and compensation procedures in Jakarta. The
accepted procedure is to call a meeting between the local
residents and the government, usually represented by, at the very
least, the Ministry of Settlement and Regional Infrastructure, PT
Jasa Marga and the local administration.

In the case of the Veteran to Ulujami segment, negotiations
began smoothly and the landowners accepted Rp 2.2 million per
sq.m., based on the market price of land at the time. Problems
emerged after the municipality failed to issue a decree on the
latest market price of the land, which had to be based on the
current property tax (NJOP) assessment. The payment of
compensation by the municipality was also too slow, which
prompted landowners to claim greater compensation.

The chronology of events, however, indicates that the
residents supported in principle the government's plan for the
urban highway network, and the dispute is no longer PT Jasa
Marga's concern. The sticking point appears to be the
municipality.

In the light of all of this, there is a need for Jakarta
Governor Sutiyoso to step in and sort out the mess.

The dispute over the land needed for the 1.3-km stretch in
question has inflicted a total loss of at least Rp 1 billion on
PT Jasa Marga.

As the government and PT Jasa Marga have had to look to
investors to finance toll road projects, all relevant regulations
and policies must be reviewed to assure investors that the toll
road business still has promise.

The two greatest problems that investors face are land
acquisition and determination of the toll rate once the turnpike
becomes operational.

It is time for the government to take the necessary steps to
facilitate the land acquisition process. Payment of compensation
should also be monitored to ensure that the process is completed
on schedule and that no fraud occurs.

Disputes that emerge after a deal on the land price has been
reached should be resolved in court while the construction
project continues.

The government should also determine a schedule of interim
toll fees as early as possible in the process to enable investors
to calculate at an early stage whether the business is feasible
or not. Under such circumstances the government's program to
develop an integrated toll road network could be implemented
smoothly and investors assured that their long-term investment
would be genuinely safe and profitable.