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.