Funding issues stall transit projects

Next to Lebak Bulus bus terminal in South Jakarta, where dozens of public buses and minivans jostle to pass its exit gate, lies the dream of the city’s first Mass Rapid Transit (MRT) system.

There, the administration is planning to start building the main station of its first subway line that will stretch 15.5 kilometers away to Hotel Indonesia traffic circle, Central Jakarta.

It is not very convincing, though, since nothing much has happened on the two-hectare plot of land, which is a mixture of the terminal area, vigorous green thickets and a group of houses.

A row of food stalls and small shops hides it from street on-lookers.

Yur Maina, a middle aged woman who owns one of the stalls, said a number of officers had come for several times to survey the location, including her stall.

“The officers have come to measure the land since last year, but there is no clear announcement on when they will start the construction or whether I will get a dispensation for leaving my stall,” she told The Jakarta Post last week.

After almost a decade of delay due to the 1998 political and economic tumults, the administration authorized a loan from the Japanese International Cooperation Agency (JICA) to finance the subway’s
first line.

Ever since the project has experienced delays due to stalled bidding processes and land acquisition
issues.

The subway developer PT MRT Jakarta’s corporate communication division head Manpalagupta Sitorus said the company’s target to operate the first subway system is in 2016.

“We expect to finish [the project’s] basic design in November 2010 before starting the bidding process for construction, which will take a year,” Manpalagupta said over the telephone, adding that the construction was set to start in 2012.

The city also delayed the target to finish the land acquisition, that would reach a total of 2 hectares land, from 2009 to 2011.

Manpalagupta said PT MRT had asked the city to finish the land acquisition before the construction was started.

South Jakarta city secretary Manggara Pardede who handled the land acquisition for the project in South Jakarta, said there were only five plots of land in Lebak Bulus sub district that had been acquired last year.

He targeted that the land acquisition of 267 land plots in Lebak Bulus, Pondok Pinang and Cilandak Barat subdistricts would be completed this year.

Unlike other major cities in Southeast Asia that has bidded their subways in 1990s, mass transportation projects have never been easy for Jakarta.

One of the important issues that has overshadowed the development is funding.

Aside from the long unfinished road taken to start the subway, the city also saw cancelation of its monorail project in 2008, when developer PT Jakarta Monorail officially stopped the project due to legal and financial problems.

A Middle East consortium led by the Dubai Islamic Bank had earlier agreed to secure a US$500 million loan, but left after finding out the Islamic financing scheme it offered was not possible under Indonesian regulations.

Later, a local bank consortium expressed its interest to finance up to 70 percent needed for the project which was planned since 2003, but there was no follow-up.

The project left a series of idle pillars along some thoroughfares, including in Senayan, Central Jakarta, and Kuningan, South Jakarta, displaying an eyesore for the passerby.

As a result of the failures to attain the loans for the projects, the administration has resourced to temporary measures such as building more roads in the city.

The two flyovers connecting Jl. Pangeran Antasari to Blok M in South Jakarta, and Kampung Melayu, East Jakarta, to Tanah Abang, Central Jakarta, is just a beginning.

Governor Fauzi Bowo has uttered his plan to build another six turnpikes in the city.

TransJakarta, the city’s bus rapid transit (BRT), hardly contains the traffic woes since cars and motorcycles keep flowing to its exclusive lanes.

Urban expert Suryono Helambang said the city administration seemed to have no sense of urgency in tackling the chronic congestion.

He said Governor Fauzi Bowo should urge the central government to be involved in settling problems in public transportation in the capital city.

The governor’s assistant for Transportation, Industry and Trade Sutanto Soehodo said finding an investor to finance a mass transportation project was difficult because the investment was expensive and the loan was taken in the long term, giving a low return.

“Public transportation is usually dedicated for low and middle class people, thus the ticket price is low and not really appealing for local private sectors,” he said.

Teguh Hartanto, an equity analyst at PT Bahana Securities, disagreed, saying that local banks were actually interested in funding mass rapid transportation in the city if only the government was involved in supporting the project.

“[Local] banks are not interested in MRT projects now because they don’t see clear scheme and the government‘s involvement in the projects,” he said.

He said the support could be done in various forms, including giving capital investment, ticket subsidy, or clear policy that discourage the procurement or usage of private vehicle to boost the passengers of public transportation.

“Banks need to have a measurable level of risk,” he said, adding that the experience during several global economic turmoil taught the local banks to more careful in approving a funding.

Teguh said the government’s support was essential to encourage local funding.

He said international funding was more delicate because fluctuation could make the project prone to currency mismatch, which could happen as the loan was given in foreign currency while the tickets were paid in local currency.