Headlines—Indonesia
There are signs that the government will take over the preparatory work on the Sunda Strait Bridge project. It will reduce the need to provide financial guarantees.
Despite the delay, the Team of Seven working on the Sunda Strait Bridge project finally held a meeting, on Thursday morning last week. Two days earlier, they had to cancel their meeting, for a very simple reason. On Tuesday, Finance Minister Agus Martowardojo was suddenly summoned to the Presidential Palace. The following Wednesday, the meeting was further cancelled because a cabinet meeting on politics and security was being held, led by President Susilo Bambang Yudhoyono at the Attorney General's Office.
Five members of this team attended the first meeting at the Office of the Public Works Ministry in Kebayoran, South Jakarta. In addition to Finance Minister Agus, also present were the ministers of the National Development Planning Board (Bappenas) Armida Alisjahbana, of Industry, M.S. Hidayat, Minister/State Secretary Sudi Silalahi, and the host, Public Works Minister Djoko Kirmanto. Also present was Transportation Minister E.E. Mangindaan, who was invited to give his comments.
After about two hours, each of the ministers left the meeting, but none willing to explain what was discussed at the meeting. According to a Tempo source, the meeting participants were under strict orders not to give any statements to the press about the Sunda Strait Bridge project. Armida, who is usually communicative, was not talking. "I cannot talk about it yet. The team will work next week to formulate some points," she said.
Only Mangindaan had something to say, albeit precious little. The Transportation Ministry, according to him, was connected to the project because of a plan to set up a railway on the bridge. "[Such as] how to develop a strategic area, a train station. That's all. I am only helping so the project can go forward." Other than that, he was "a good listener."
Transportation Deputy Minister Bambang Susantono explained how the project was linked the Sunda Strait Bridge. First, there will be a railway to connect the trans-Java and trans-Sumatra railways. This connection will increase shipping logistics via train. This is good to reduce the burden on the major roadways. Secondly, construction of the bridge must follow the norms of international maritime organizations. And third, a study must be done in order to reposition the ferry route.
Danang Parikesit, head of the Indonesian Transportation Society said that connecting infrastructure between Java and Sumatra must be a part of the national plan, not a project run by private interests, whether solicited or unsolicited.
This is because the project is very large, both in terms of funding and construction needs. Second, it is difficult to determine the level of risk involved, such as the production risk (in terms of technology, construction costs, procurement of materials, and output risks). "It is not easy to predict the risks during construction and output. On that account, the government should be involved," said Danang, who is also a special staff to the Public Works Minister.
If the Team of Seven decides the government will fund the feasibility study, Danang asked who will carry it out. "The Public Works Ministry or a private firm?" Another problem: if the government both provides funds and conducts the study, Danang pointed out the risks which must be borne. For instance, if the number of vehicles using the bridge is more than projected which will give high profits for investors it must be regulated whether or not the government can ask for a share of the profits. On the other hand, if traffic levels are too low, it means investors will not make as much as they hoped. Will the government cover the difference?
The professor of transportation at Gadjah Mada University in Yogyakarta added another option: the government can bear the costs, while a private company conducts the study. In this context, the main thing is the ceiling or limit.
The government must set strict conditions so that the results of the study cannot be steered in a certain direction. This can be done, for instance, by making a rule that the study findings must be technology-free. This means technology from anywhere can be used. The sources of funding must be neutral and should be beneficial to the project. "The key is a tight fence."
A Tempo source said that the Finance Ministry was still working on a funding alternative. One is to use state funds to pay for the preparation stage until the feasibility study is completed. As such, the source or the government will only conduct the feasibility study. The results will be used as a reference in the bidding process for activities related to the feasibility study and construction work.
This concept, the source added, resembles the construction of the 2 x 1,000 megawatt Central Java Steam-Powered Electrical Generator (PLTU). This cooperation was the first large-scale public-private partnership made based on Presidential Regulation No. 13/2010, which was supported by a guarantee from the Finance Ministry through PT Penjaminan Infrastruktur Indonesia (Persero).
Unlike other private procurements of electrical generators, which were funded by investors from China, the Central Java PLTU went through a market consultation process in order to judge market interest. The project was implemented through international bidding.
Danang emphasized the complexity of the Sunda Strait Bridge megaproject. He supports efforts to share the problems with the public as much as possible and prevent from their return, later on.
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Public outcry over the planned Sunda Strait Bridge project has upset the management of Graha Banten Lampung Sejahtera. Its president director, Agung R. Prabowo, sent a letter to the chairman of the Sunda Strait Strategic Area and Infrastructure Development Board's advisory council, Hatta Rajasa concurrently the Coordinating Minister for the Economy. The letter dated July 24 was signed by Agung and two other directors: Winarjono and Suryono.
In this letter, Agung lamented the latest situation surrounding the planned building of the bridge. A polemic began after Presidential Regulation No. 86/ 2011 on the development of the Sunda Strait strategic area and infrastructure was released last December. "We are discouraged at the dynamic which has lately developed."
Agung also said that all the measures taken by the company which was named the initiator in that presidential regulation have been reported to the CEO of the Strategic Area and Infrastructure Development Board. However, he complained that of the 13 letters sent, only one had received a response.
Since the official meeting between the company and the government last February, the CEO had never given Agung any more notifications. The company is not even aware of the scope of preparations for the bridge project.
The Sunda Strait Bridge is infrastructure which is designed to connect the province of Banten at the western tip of Java island with Lampung province at the southern tip of Sumatra island. The government has put this megaproject in the Master Plan for Accelerating and Expanding Indonesian Economic Development or MP3EI, along with a number of other projects. Construction of this 29-kilometer-long bridge, which is valued at Rp100 trillion, will begin in 2014.
The furor began after Presidential Regulation No. 86/ 2011 was issued. The Finance Ministry questioned two articles in that regulation. According to Article 25, the government must pay compensation for preparation costs if the project fails to be carried out. Article 30 says that the government supports and guarantees the project. Support can take the form of fiscal and non-fiscal contributions, or financial compensation.
Bambang Brodjonegoro, head of the Fiscal Policy Board at the Finance Ministry, once said that Presidential Regulation No. 86 was confusing. It is mentioned there that the mechanism for guaranteeing the bridge project was based on Presidential Regulation No. 78/2010 on guaranteeing infrastructure. In fact, Presidential Regulation No. 78 sets a condition that guarantees can only be given for projects which are public-private partnerships, in accordance with Presidential Regulation No. 67/2005. For this reason, Bambang suggested revising the presidential regulation.
The issue of project guarantees is also what drove Finance Minister Agus Martowardojo to try to take over the project's preparation stage. He suggested that this phase be carried out by the government. He sent a letter to Public Works Minister Djoko Kirmanto on June 8. In it, he asks Minister Djoko to take responsibility for the project and the feasibility study.
Agus is ready to provide State Budget funds as cost of the feasibility study up to the bidding process. He also proposed separating bridge construction from area development.
Public Works Deputy Minister Hermanto Dardak said that the State Budget funds could be the source of funding for the preparatory stage of the project, which will cost about Rp2 trillion. A Tempo source said, Minister Armida Alisjahbana gave her approval of the project.
Essentially, the objections center on whether this stage of the construction should be funded and controlled by private or foreign interests, he said. This is to reduce the risks associated with providing guarantees. It is also believed that funding on their own will make the results of project preparations more objective in the eyes of prospective investors who will take part in the bidding.
This suggestion is opposed by the consortium and Minister Hatta. In early July, Banten Governor Ratu Atut Chosiyah and Lampung Governor Sjahroedin Z.P. sent letters of protest to Minister Agus. In line with the Presidential Regulation, these two governors questioned the stubborn stance of Minister Agus, which they felt could delay construction of the bridge and other projects related to it.
Recently, Hatta softened. He formed the Team of Seven to take another look at the presidential regulation. "The Team of Seven is assigned with reformulating it in two weeks' time. Their conclusions will be reported at a plenary meeting of the Advisory Board."
Agung Prabowo feels that the strong stance of Minister Agus against Presidential Regulation No. 86 triggered the commotion. The debate in the media, he said, can raise the project's risk level and lower the rank or scale of priority for investment and funding. As a result, funding will become costly. In order to reduce public outcry, the consortium is offering five solutions.
One way is for the company not to object if a certain ministry or party entrusted by the government takes over leadership of the bridge construction. However, it was asked to ensure that funding still be done according to Presidential Regulation No. 86.
The company is offering and also does not object if the stock of Graha Banten Lampung is controlled by the government. "Our ownership can be reduced to the lowest level, even down to a token share. The company is willing to help if the government needs it."
Another option, wrote Agung in his letter to the director of the Team of Seven, is that Presidential Regulation No. 86/2011 does not need to be revised. This means that Graha Banten Lampung can go forward with measures to prepare the project.
Agung neither denied nor confirmed the existence of that letter. He only had a brief message. "We obey and we are loyal to the valid and legal decisions of the government," he told Tempo last week.
By Retno Sulistyowati, Rosalina
Tempo
No. 49/12, July 31, 2012
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