New bill to lure highway investors: Minister

Rendi A. Witular, Jakarta

The much-anticipated bill on toll roads is expected to facilitate the liberalization of the sector, paving the way for more foreign investment, a minister said.

Minister of Settlement and Regional Infrastructure Soenarno said the bill was designed to open the toll road sector to private investors, while eliminating barriers that often surfaced during the construction phase of toll roads.

"The bill will help liberalize the sector by separating the functions of regulator and operator, both of which are currently held by state toll operator PT Jasa Marga," Soenarno said on Monday after a hearing with the House of Representatives Commission IV for transportation and infrastructure.

At present, Jasa Marga is involved in all toll road projects, whether as part of a joint venture or as the sole constructor.

Soenarno said the bill required the establishment of an independent body specifically tasked with regulating and supervising the toll road sector.

The bill is also expected to resolve the two greatest problems faced by investors: land acquisition and determining the toll rate.

According to the bill, investors will have the freedom to decide upon toll fees and a time frame for its increase in their business plan, as well as the concession period for operating the road. The proposed independent body, along with the infrastructure and settlement ministry, is to review and approve the business plan.

The new mechanism will enable investors to draw up a schedule of interim toll fees as early as possible in the process to calculate the feasibility of the business.

At present, tariff hikes are entirely dependent on the government.

Another crucial point raised in the bill is an obligation for landowners to cooperate in land acquisition and compensation processes, so the toll road projects may proceed smoothly.

Numerous infrastructure projects in the country have run aground due to problems acquiring land, with investors facing widespread protests and rejection from landowners.

The most recent toll road project halted due to land acquisition problems is the 1.3 km segment of the Veteran-Ulujami stretch of the Outer Ring Road in South Jakarta, originally set for completion in May 2003.

Five plots of land remain to be acquired for the project, and Jasa Marga was forced to change the route after lengthy and tough negotiations with landowners that produced no solutions.

Soenarno said the bill would allow disputes that emerged after the land price had been agreed upon to be resolved in court while the construction project continued.

The bill also allows toll operators to seek financing for highway projects by issuing asset-backed securities -- a type of bond backed by underlying asset pools -- in which the toll road will be used as collateral.

"Financing is the most crucial issue in toll road projects. We plan to help toll operators gain easier access to financing resources, so they may complete our massive toll road projects in time," said Soenarno.

He was referring to the 1,486 km toll road that will link Merak, Banten, and Banyuwangi, East Java, which is expected to cost about Rp 86 trillion with completion scheduled for 2009.