Twenty-two members of the City Council took to the floor of a plenary session on Tuesday to oppose the administration’s proposed Rp 1.7 trillion (US$185.3 million) bond issuance plan.
The dissenting members — represent the Indonesian Democratic Party of Struggle (PDI-P), a coalition of the National Mandate Party (PAN) and the National Awakening Party (PKB), and the Great Indonesia Movement Party (Gerindra) — lack the 48 votes on the 94-member council needed to vote down the bond issue.
PDI-P council member William Yani said that the city administration had not yet been able to spend its annual budgets.
“We have been seeing a large surplus over the last few years. Why not finance infrastructure construction using the leftover funds, instead of generating money from bonds?” William told the council.
The administration previously said it would have at least a Rp 3.68 trillion surplus from its budget of
Rp 30.9 trillion for 2011, less than the staggering Rp 4.9 trillion surplus it booked in 2010, when 30 percent of the budget was unspent.
The bonds, expected to be issued this year, would finance four projects: Pasar Rebo Regional Hospital in South Jakarta, the Casablanca waste management facility in East Jakarta, low-cost apartments in Penjaringan, North Jakarta, and the Pulogebang Bus Terminal in East Jakarta, according to the city.
The bonds would mature in 10 years with interest rates between 7.3 percent and 9.5 percent, similar to central government bonds, the city said.
Wanda Hamidah, a representative of the PAN-PKB faction, said that the bond issue would burden the city and residents for years, adding that future administrations would likely borrow to repay the debt, creating a cycle of inter-generational debt.
“It’s better for the city to improve its financial management and make efficiency efforts before resorting to borrowing money,” she said.
Gerindra councillors rejected the proposal, refusing to participate in discussions.
If the proposed bylaw is passed, Jakarta would be the first city in Indonesia to use bonds to fund infrastructure projects.
Under a 2005 government regulation, the amount of a region’s bond and loan repayments cannot exceed 75 percent of its revenue from the previous year. Regions must also maintain a minimum 2.5 percent debt-to-service ratio and obtain Finance Ministry permission.
Other Council members said that they would back the administration’s plans, urging the city to make more preparations and tightly monitor implementation.
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