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How to address non-performing toll concessions
The government has set an ambitious target of toll road development, including completing the trans-Java highway by 2018 and commencing the massive development of the trans-Sumatra highway.
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State toll road operator PT Jasa Marga for Semarang Batang accelerates Batang-Semarang toll road construction activities ahead of this year's Idul Fitri exodus, which will peak onJune 23-24. The toll road is 83.59 percent completed. (JP/Suherdjoko)
T
he government has set an ambitious target of toll road development, including completing the trans-Java highway by 2018 and commencing the massive development of the trans-Sumatra highway. But the way it is pursuing the target raises questions.
It has become an open secret that some, if not many, toll concession holders face difficulties in starting their construction projects due to various reasons, with the main reasons being a failure to secure financing and acquire land.
Under the concession agreements, the government holds all the cards vis-à-vis concession holders. The government has set a deadline for the concession holders to complete construction, and when they miss it and are considered to be in default the government can revoke the concessions and retender them to other companies.
However, instead of taking strong measures against defaulted concession holders by annulling their contracts, the government often opts for lenient and easy measures by buying the concessions, at the expense of taxpayers.
Public Works and Public Housing Ministerial Regulation No. 01/ PRT/M/2017, issued on Feb. 6 (Reg. PUPR No. 01/2017), which implements government regulations No. 15/2005 and No. 43/2013 concerning toll roads, confirms the leniency.
The ministerial regulation seems to justify the government’s reluctance to exercise its power to punish defaulted concession holders. The policy instead advocates a “change of share-ownership” in the concessions to expedite the toll road projects.
The new regulation also assigns state-owned enterprises (SOEs) to manage toll projects that are economically viable but not financially, through the formation of a new company, the shares of which are to be owned by those state-owned companies. This assignment is supposed to be governed by a presidential regulation, which has not yet been issued.
