Traffic jams mean extra cost for businesses
Traffic jams mean extra cost for businesses
Rendi A. Witular, The Jakarta Post, Jakarta
A chief executive officer of a state cement firm in East Java
once said that the most devastating factor that could affect the
firm's production cost lay not in fuel spending nor workers'
wages, but on congested highways.
The CEO said a raise in utility costs could still be offset by
increasing the prices of the products, or cost-cutting measures
during production, but an executive could do nothing about
congested highways.
"Highway congestion is beyond our control. If there is no
improvement in highway capacity in the next two years, the roads
will be too crowded, and our trucks will be put in fourth place
after trucks that carry staple foods, fuel and fertilizer," said
the CEO.
In such a situation, the company's distribution chain will
often be interrupted, which would result in severe financial
losses -- not only for the producer but also for customers,
particularly companies that depend heavily on the availability of
cement, such as the property and infrastructure sector.
The relatively distressed highway networks and capacity in the
nation of 220 million people is already apparent, as evident in
the everyday congestion on nearly every road linking one province
to another in Java, the country's center of economic activities.
According to the Ministry of Public Works, from 1978 to date,
the country has only managed to build 606 kilometers of new
highway, or an average of 24 kilometers per year.
Meanwhile, new cars and trucks that hit the road reached
300,000 units on average annually in the same period.
Aside from lacking funds to finance the construction of new
roads, especially toll roads, the lower-than-expected pace of
expansion could also be attributed to an unclear mechanism in
land acquisition, and in rate policy.
Investors are reluctant to take part in this sector, due to
the absence of clear-cut rulings on the role of state-owned toll
road operator PT Jasa Marga, which functions both as regulator
and player.
"There are so many barriers that confront the private sector
in trying to engage in the toll road business," said Hendrianto
Notosoegondo, director general of regional infrastructure at the
ministry.
"But all the barriers will eventually be eliminated with the
introduction of the revised Highway Law, which will pave the way
for the private sector's participation in the toll-road
business," he said.
The House of Representatives endorsed in September a key bill
on highway development, which was to help eliminate lingering
barriers in the construction of toll roads.
It contains a clause that partly eliminates the public's right
to protect land ownership, unless an agreement is made on the
compensation awarded by the government for the land.
Some articles also allow land disputes to be resolved in
courts, without halting the on-going construction project.
Currently, the government remains helpless in dealing with
land disputes. Numerous infrastructure projects in the country
have run aground due to problems related to land acquisition,
with investors facing widespread protests and rejection from
landowners, backed by regional administrations.
Until now for instance, it has not been able to settle a land
acquisition dispute which has halted a toll road project in a
segment of the Veteran-Ulujami stretch of the Outer Ring Road in
South Jakarta.
The project was originally set for completion in May 2003.
These problems have dampened investors' appetites for
investing in the business. Besides, there are several obstacles
that have yet to be addressed by the law, one of which is the
unclear role of Jasa Marga, which currently serves as both the
regulator and player. At present, Jasa Marga is involved in all
toll road projects, whether as a joint venture or as the sole
constructor.
Another factor that should be taken into consideration is also
a policy on rates, as well as the concession period for operating
the road -- which is important so investors can calculate the
feasibility of their business.
However, Hendrianto was upbeat the new law would eliminate
those barriers. He pointed to a clause in the new law, which
would stipulate the establishment of an independent body
specifically tasked with regulating and supervising the toll road
sector, as late as September this year.
Toll road projects planned for the next five years
Length (km) Estimated Investment (US$m)
Priority I
Jakarta Outer Ring Road (JORR) Section W1 10 80
JORR Section E2 E3 14 75
Cikampek-Padalarang stage II 40 170
Total 64 325
Priority II
JORR section W2 7 68.7
Gempol-Pasuruan 32 107.7
Semarang-Bawen 24 71.3
Cikampek-Cirebon 114 371.0
Semarang-Demak 25 84.1
Medan-Binjai 21 80.6
Makassar section 4 11 24.9
Palembang-Indralaya 25 49.7
Surabaya-Madura 5 70.0
Cileunyi-Sumedang-Dawuan stage I 23 105.5
Surabaya-Mojokerto 37 148.8
Waru-Wonokromo-Tanjung Perak 18 310.7
Waru-Tanjung Perak stage I 14 66.9
Palimanan-Plumbon (widening) 6.0
Cibitung-Cikampek (widening) 36.6
Surabaya-Gempol (widening) 14.0
Sedyatmo (widening) 41.0
Total 356 1,657.0
Source: Ministry of Public Works
Rendi A. Witular, The Jakarta Post, Jakarta
A chief executive officer of a state cement firm in East Java
once said that the most devastating factor that could affect the
firm's production cost lay not in fuel spending nor workers'
wages, but on congested highways.
The CEO said a raise in utility costs could still be offset by
increasing the prices of the products, or cost-cutting measures
during production, but an executive could do nothing about
congested highways.
"Highway congestion is beyond our control. If there is no
improvement in highway capacity in the next two years, the roads
will be too crowded, and our trucks will be put in fourth place
after trucks that carry staple foods, fuel and fertilizer," said
the CEO.
In such a situation, the company's distribution chain will
often be interrupted, which would result in severe financial
losses -- not only for the producer but also for customers,
particularly companies that depend heavily on the availability of
cement, such as the property and infrastructure sector.
The relatively distressed highway networks and capacity in the
nation of 220 million people is already apparent, as evident in
the everyday congestion on nearly every road linking one province
to another in Java, the country's center of economic activities.
According to the Ministry of Public Works, from 1978 to date,
the country has only managed to build 606 kilometers of new
highway, or an average of 24 kilometers per year.
Meanwhile, new cars and trucks that hit the road reached
300,000 units on average annually in the same period.
Aside from lacking funds to finance the construction of new
roads, especially toll roads, the lower-than-expected pace of
expansion could also be attributed to an unclear mechanism in
land acquisition, and in rate policy.
Investors are reluctant to take part in this sector, due to
the absence of clear-cut rulings on the role of state-owned toll
road operator PT Jasa Marga, which functions both as regulator
and player.
"There are so many barriers that confront the private sector
in trying to engage in the toll road business," said Hendrianto
Notosoegondo, director general of regional infrastructure at the
ministry.
"But all the barriers will eventually be eliminated with the
introduction of the revised Highway Law, which will pave the way
for the private sector's participation in the toll-road
business," he said.
The House of Representatives endorsed in September a key bill
on highway development, which was to help eliminate lingering
barriers in the construction of toll roads.
It contains a clause that partly eliminates the public's right
to protect land ownership, unless an agreement is made on the
compensation awarded by the government for the land.
Some articles also allow land disputes to be resolved in
courts, without halting the on-going construction project.
Currently, the government remains helpless in dealing with
land disputes. Numerous infrastructure projects in the country
have run aground due to problems related to land acquisition,
with investors facing widespread protests and rejection from
landowners, backed by regional administrations.
Until now for instance, it has not been able to settle a land
acquisition dispute which has halted a toll road project in a
segment of the Veteran-Ulujami stretch of the Outer Ring Road in
South Jakarta.
The project was originally set for completion in May 2003.
These problems have dampened investors' appetites for
investing in the business. Besides, there are several obstacles
that have yet to be addressed by the law, one of which is the
unclear role of Jasa Marga, which currently serves as both the
regulator and player. At present, Jasa Marga is involved in all
toll road projects, whether as a joint venture or as the sole
constructor.
Another factor that should be taken into consideration is also
a policy on rates, as well as the concession period for operating
the road -- which is important so investors can calculate the
feasibility of their business.
However, Hendrianto was upbeat the new law would eliminate
those barriers. He pointed to a clause in the new law, which
would stipulate the establishment of an independent body
specifically tasked with regulating and supervising the toll road
sector, as late as September this year.
Toll road projects planned for the next five years
Length (km) Estimated Investment (US$m)
Priority I
Jakarta Outer Ring Road (JORR) Section W1 10 80
JORR Section E2 E3 14 75
Cikampek-Padalarang stage II 40 170
Total 64 325
Priority II
JORR section W2 7 68.7
Gempol-Pasuruan 32 107.7
Semarang-Bawen 24 71.3
Cikampek-Cirebon 114 371.0
Semarang-Demak 25 84.1
Medan-Binjai 21 80.6
Makassar section 4 11 24.9
Palembang-Indralaya 25 49.7
Surabaya-Madura 5 70.0
Cileunyi-Sumedang-Dawuan stage I 23 105.5
Surabaya-Mojokerto 37 148.8
Waru-Wonokromo-Tanjung Perak 18 310.7
Waru-Tanjung Perak stage I 14 66.9
Palimanan-Plumbon (widening) 6.0
Cibitung-Cikampek (widening) 36.6
Surabaya-Gempol (widening) 14.0
Sedyatmo (widening) 41.0
Total 356 1,657.0
Source: Ministry of Public Works