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Private sector financing problems have been blamed for the
slow progress in expressway construction. While many blame bank lending
regulations and bankability, this is not, in reality, an easy matter to
resolve.
Recently, the newspapers announced that six urban expressways in
Jakarta will be ready to go to tender in July, with construction
expected to start this year. But a few weeks later, the public works
minister announced that the schemes would not go ahead this year, and
would, in fact, be delayed for several years as a result of funding
problems.
Meanwhile, traffic jams continue to be the daily banes of Jakarta's
commuters. The situation is getting worse, especially during the
morning and evening rush hours. No end is in sight as those commuters
who live in the surrounding satellite cities to the east and west of
Jakarta have no option but to use the expressways to access the city
center.
After the crisis, the average growth in the number of vehicles in
Jakarta reached 11 percent annually. Yet, apart from the completion in
1996 of the 13-kilometer port expressway linking Jembatan Tiga in West
Jakarta and Tanjung Priok -- the last segment of the Jakarta Inner
Urban Tollway (JIUT), which connects all of the city's expressways --
we have seen little progress in the development of Jakarta's expressway
network in recent years.
The current 46-km JIUT was only designed to handle 510,000 vehicles
daily. However, there are now five million vehicles in Jakarta, of
which 98 percent are private cars. Obviously, this means that growth in
vehicle numbers has surpassed road capacity. Thus, there is an urgent
need for major road-infrastructure construction in Jakarta.
The various efforts to tackle the traffic jams have yielded little in
the way of results. The "three-in-one" system has been in effect for
almost a decade, but can be circumvented easily, e.g., such as through
the hiring of three-in-one "jockeys".
The construction of busway corridors, which take up one lane in each
direction on a number of major roads in Jakarta, has not resulted in
lighter traffic. Even the success of the proposed Electronic Road
Pricing (ERP) scheme, which will require all private vehicles to pay
when passing along roads that have busway routes, is far from certain.
So, why has the construction of expressways been so slow? Many are
aware of the many uncertainties that private-sector investors face,
such as complex tendering procedures and uncertainties over land
acquisition. Another crucial problem concerns the financing impediments
faced by private investors.
Expressway financing relies on the private sector as the government is
prohibited from financing expressway construction out of the national
budget. Therefore, resolving the impediments to private-sector
financing is crucial.
So, how much money is required? Previous studies showed that the total
investment, including land acquisition, required for six urban
expressway routes in Jakarta, with a total length of 86 kilometers,
would be Rp 23 trillion, or nearly Rp 270 billion per kilometer. This
is four times the cost of the 34-km Kanci-Pejagan expressway in
Cirebon, for which the contract documents were recently signed and
where the cost is expected to amount to Rp 2.2 trillion, including land
acquisition, or Rp 65 billion per kilometer. However, the suggested
cost of the expressway will further increase if the project is
continuously postponed. If this were to be the case, the proposed
1,000-km trans-Java expressway could cost Rp 65 trillion.
In a recent discussion involving corporations, banks and
representatives of Bank Indonesia. One of the speakers, the
representative of a commercial bank, outlined the many impediments to
bank financing of expressways.
Banks face many regulatory barriers despite being given verbal
encouragement by the government to jump-start infrastructure financing.
The banking system has over Rp 250 trillion invested in central bank
certificates (SBIs), and Rp 108 trillion in equity. Many argue that
this money should be used to finance infrastructure.
Many, however, fail to understand that the banks can only use a small
portion of this money to finance expressway development as they cannot
lend unlimited amounts to particular sectors or companies without
violated legal lending limits.
The authorities seem to be aware of this problem. For example, the
central bank announced last year that it planned to revise the
regulation that restricts bank lending for purposes of land
acquisition. But, to date, there have been no concrete changes. Thus,
it would be better if we sought other alternative financing sources,
rather than focusing solely on the banking sector.
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