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Jakarta Post

Government turns to LRT contractor for funding

  • Farida Susanty and Fedina S. Sundaryani

    The Jakarta Post

Jakarta   /   Wed, February 8, 2017   /  09:09 am
Government turns to LRT contractor for funding President Joko "Jokowi" Widodo (center), along with State-Owned Enterprises Minister Rini Soemarno (left) and Jakarta Governor Basuki "Ahok" Tjahaja Purnama, inspects the progress of the light rail transit (LRT) project on Sep. 30 in Jakarta. (Antara/Widodo S. Jusuf)

The government indicated on Tuesday that it might offer state construction firm Adhi Karya the opportunity to become an investor in the light rapid transit (LRT) project in Greater Jakarta amid financial uncertainty due a limited state budget.

The government previously appointed Adhi Karya to build the LRT project, a part of the national strategic project under Presidential Regulation No. 65/2016.

It initially planned to use the state budget to finance the project, but further cuts to the state budget meant that the government was unable to allocate funds for the project.

Coordinating Maritime Affairs Minister Luhut Pandjaitan said the government was looking for a “flexible way to fund the LRT.”

“So Adhi Karya doesn’t just have to be the one that drives it forward. It can also be an investor,” he said on Tuesday.

Luhut reiterated that the project should still finish by 2019, despite the current financing problems.

(Read also: Government considers asking Adhi Karya to invest in LRT)

The government estimates that the LRT project will cost at least Rp 22.5 trillion (US$1.6 billion) just for the first phase, a little lower than Adhi Karya’s estimate of Rp 23.7 trillion. At the same time, the government has to allocate funds for another LRT project in Palembang, South Sumatra, which might cost Rp 12 trillion.

Transportation Ministry director general for railways Prasetyo Boeditjahjono previously highlighted that building the two LRTs at the same time would be “too costly.”

“In reality, the presidential regulation stipulates that it has to be financed by the state budget. But because the cost is too high for the state budget, there is a possibility that the project might be funded by other sources,” he said.

Previously, the government floated the idea of inviting companies, such as state infrastructure financing firm Sarana Multi Infrastruktur (SMI) or state project firm Indonesia Infrastructure Finance (IIF), to first cover the costs to the contractor. The government would then pay back the loan in a 10-year installment scheme.

(Read also: LRT to set example for future projects, technology transfer)

The LRT construction in Greater Jakarta is divided into two phases. The first phase will span Bogor in West Java to Jakarta in a 42.1 kilometer-long track across Cibubur-Cawang, Bekasi Timur-Cawang and Cawang-Dukuh Atas.

Meanwhile, the second phase will construct a 41.5 km-long track from Cibubur-Bogor, Dukuh Atas-Palmerah-Senayan and Palmerah-Grogol. The whole project is scheduled for completion by 2019.

The regulation stipulates that all processes until contract signing, including the making of project criteria and the approval of technical and financial documents, must be completed within 120 days since the regulation was passed in July 2016.

However, it turns out that the government has not even signed a contract with Adhi Karya as a legal basis for the budget disbursement up until now, leaving Adhi to rely on its internal cash to go on with the project.

Prasetyo also warned earlier that the overall cost for the project might be 20 percent higher than the original estimate as the project currently adopts the design and build scheme, where contractors only work on a partial basis using a partial design.

In response to the plan, Adhi Karya president director Budi Harto stated that he would wait for the government’s final decision on the matter. The company, as of last month, has spent Rp 3 trillion on the project.

“This year, we will need Rp 7 trillion for the project,” he said via text message.

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