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t first glance, Finance Minister Agus Martowardojo’s defiance of the President’s instruction regarding the government’s guarantee for the feasibility study on the US$10 billion Sunda Strait Bridge project appeared to be an act of insubordination, a “renegade” attitude that could severely damage the credibility of the government’s policy-making capability.

But a deeper reading of Presidential Decree No. 86, which was issued last December and which gives the consortium, led by the Artha Graha business group, and consisting of Lampung and Banten provincial administrations, virtually full control over the country’s largest-ever infrastructure project, reveals many flaws, contravening the principles governing the public-private partnership (PPP) scheme in infrastructure development.

We cannot understand how the legal experts at the President’s Office could have overlooked the potentially grave consequences of the decision to give the consortium of businessman Tommy Winata’s Artha Graha group and the two provincial governments exclusive rights to carry out a feasibility study and make the basic design of the 29-kilometer bridge, which will link Sumatra and Java, Indonesia’s most-populated islands.

The government should have realized that no investors or lenders will be interested in the big project if it is not developed under the PPP scheme, given not only the huge investment required, but also the significant risks involved and the long pay-back period. After all, the tariffs passed on to the users of the bridge, which will determine the returns on the investment, will be set by the government.

PPP regulations require that the government provide investors with a guarantee fund and viability gap fund to make the project economically and commercially viable, thereby making it attractive to lenders and the investing public, as well.

But if the consortium wholly controls the feasibility study (the “brain”of the project) and all the other engineering and financing preparations for the project, how can the government make a reliable risk assessment to determine the amount of the guarantee fund and viability gap fund it will have to provide under the PPP scheme?

However, the biggest question is: “Will there be any other potential investors interested in bidding on the project, when even the government, despite being the owner of the project, knows very little about it, and the consortium, which is in charge of conducting the feasibility study, will also be one of the bidders?”

Hence, the finance minister’s recommendation that the presidential decree be amended to allow for full government control of the feasibility study is not only strategic but could also save the project from becoming a potentially huge political and fiscal “time bomb”. We appreciate the initiative taken and investment made by the consortium, called Graha Banten Lampung Sejahtera, to conduct a pre-feasibility study on the bridge and other project preparations since 2004.

But pushing ahead with such a long-term project under a flawed legal foundation would only sow the seeds of a financial time bomb for investors, possibly leading eventually to a state of legal limbo like the one that mothballed the Jakarta monorail project soon after its launch in 2001.

 In our opinion, the government should be able to find ways to compensate the Graha Banten Lampung Sejahtera consortium for the US$60 million investment it claims to have made so far on preparations and the promotion of the project to overseas investors. Potential foreign partners, including the China Railway Construction Corporation, which has reportedly inked a preliminary deal with the consortium, would also likely accept such changes as necessary in order to make the project economically, commercially and politically sustainable over the long term.