Low toll charges discourage investors

Low toll charges discourage investors

JAKARTA (JP): Low tolls have discouraged foreign investors
from investing in the country's tollway projects, an executive of
state-owned toll road operator PT Jasa Marga said on Thursday.

Frans S. Sunito, the Jasa Marga director of development and
commerce, said foreign companies were reluctant to invest in toll
roads here because of an unattractive policy on tollways and land
appropriation problems.

"It is not so much about existing low tolls, but more of the
need to introduce a clear policy for future increases," he said
on the sidelines of a seminar on infrastructure.

A clear policy on tolls was important for potential investors
before they decide to commit to the projects, he added.

"Nobody wants to invest in a loss," he said.

Frans said the government would have to come up with a
definite formula for toll increases so that the investor would
have firm knowledge of when he could expect a return on the
investment.

"So far, toll increases are made based on our proposal to the
government and even then they are not granted for certain."

The universal practice of a toll increase formula was to be
based on the inflation rate and consumer price index, he said.

Frans said the proposal for the formula was being reviewed by
the government to see if it was viable to become a government
policy.

Another problem holding foreign investors back was the rule
that they would have to bear the cost of land appropriation,
Frans said.

He said in the past the government was responsible for the
cost of land appropriation, but since the economic crisis,
investors were expected to bear the burden.

"It is understandable, because government funding is very
limited right now. But investors need to know the extent of the
risks they will have to bear," Frans said, adding that he knew
from experience the price of land skyrocketed when there was any
sign of a buyer.

Economist Sri Mulyani said in the seminar that one of the
problems blocking foreign investors from investing in the
infrastructure sector was the country's low rates, not only in
tollway operations, but also for electricity and the
telecommunications service.

Investors, especially foreign ones, will only come if they are
sure they will receive rational returns from their investments,
she said.

Amitava Banerjee, the International Finance Corporation (IFC)
manager and regional representative for Indonesia and Malaysia,
said one way to overcome the financing problem of infrastructure
projects was to create longer term financial sources, such as
bonds.

The development of the infrastructure needed a long-term
investment of between 10 and 15 years which could not be covered
by bank loans, he said, adding that loans had a short maturity
period. (tnt)