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The central government announced Thursday it would not
provide a blanket loan guarantee to PT Jakarta Monorail (JM) for the
development of the transportation system in the capital, despite
previously agreeing in principle to provide the facility.
Without the guarantee, it is likely that a consortium led by Dubai
Islamic Bank will have to postpone its commitment to channel about
US$500 million in loans to JM to finance the ambitious monorail
project, which was initiated by the Jakarta administration.
The uncertainty over financing may lead to a halt in the ongoing
construction work of the project, with the potential to exacerbate the
notorious traffic jams in the capital.
Transportation Minister Hatta Radjasa said Finance Minister Sri Mulyani
Indrawati refused to provide the guarantee for the project because it
would violate several regulations concerning transparency and fairness.
According to regulations, such a guarantee should be given to project
developers appointed through a competitive bidding process, not based
on a direct appointment, as in the case of JM which was selected by
Jakarta Governor Sutiyoso.
"The finance minister requested that the Jakarta administration review
the feasibility study of the project in order to convince the Dubai
Bank that it is profitable and risk free," Hatta said after a meeting
with Vice President Jusuf Kalla.
He explained that if the JM management was able to convince the bank,
the future profit from the project could be used as a guarantee in
securing the loans and a government guarantee would no longer be
necessary.
Sutiyoso said separately Wednesday that the government had yet to reach
a final decision on the guarantee requested by the consortium.
"Every person has his or her own assumptions which are different to
others," he told The Jakarta Post when asked to comment on Hatta's
statement.
He insisted that major projects like the monorail system should be
guaranteed by the government or else no investors would be interested
in the potential risk.
The Dubai Bank syndicate has expressed a commitment to financing the
monorail project, but requires a blanket guarantee because of doubts it
would be able to turn a profit with an estimated 160,000 passengers per
day.
When completed, the monorail would serve the business districts of the
city through a 14.3-kilometer line as well as a a 13.5-km route from
Kampung Melayu in East Jakarta to Mal Taman Anggrek shopping mall in
West Jakarta.
JM has signed contracts with several companies, including state-owned
PT Adhi Karya for civil work, PT Bukaka Trans System for rolling
stocks, MTRC Hong Kong for project management and services integration
and MacDonald as independent engineers.
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