Indonesia
The public debate over major projects, such as the planned Sunda Strait Bridge, is a healthy sign that democracy is functioning in Indonesia.
President Susilo Bambang Yudhoyono declared that the project was needed to strengthen economic links between the two islands containing 80 percent of the nation's population. He also worries about the future unity of the nation, if a bridge is built between Sumatra and Malaysia, while Sumatra and Java are still separated by the Sunda Strait.
The president's concerns are debatable. The view that the Sunda Strait separates Java and Sumatra and, as such, a bridge is needed to link the two islands, shows that the president lacks an understanding of the maritime paradigm, which views the sea as a connector, not a barrier.
The president's perception of a bridge as an economic link should also be questioned. Economic links are dominated by the transport of goods and services rather than people, and the cheapest transportation is by sea. This is why the Suez Canal, the Panama Canal, the Strait of Malacca and the Strait of Hormuz are seen as the four most strategic sea lanes for world trade. So it seems rather ironic that Indonesia, blessed with the Sunda Strait, wants to change its function by building a bridge.
Then there is the question of cost. Building a 29-kilometer bridge will cost around Rp100 trillion. This could treble if the investment needed to develop economic regions at the two ends is included. This is a vast sum. Four years ago the Dublin Port Authority Consortium offered to build a fleet of large all-weather ferries and port facilities on both sides of the Sunda Strait for only around Rp6 trillion.
Indonesia is not a nation with an excess of money. The 2012 budget's allocation for infrastructure development for the entire country comes to only Rp161.5 trillion. Conversely, only Rp99.2 trillion was set aside for poverty alleviation, which is a constitutional obligation of the state. The government needs to focus on making improvements to basic infrastructure such as bridges, highways, railroads, electricity transmission and airports.
What if private investors want to fund the project? Initial studies have concluded that it would not be possible for the project to be financially viable if it only depended on income from tolls paid by bridge users. Private companies would only be able to make a profit if the project owners were granted special concessions to develop the regions at the two ends of the bridge.
Therefore it is good news that Graha Banten Lampung Sejahtera has said it wants to build the bridge. Especially since Artha Graha which has a 95 percent shareholding, with the remainder owned by the Banten and Lampung regional governments says it has already obtained US$17.7 billion in loans from the China Railway Construction Corporation through a memorandum of understanding signed in March. The problem is to determine how much of the project risk will be borne by the Indonesian government.
This is an important question, given the recent loan to fund the purchase of 16 M-60 airplanes for Merpati Airlines, which was initially said to be purely a business arrangement between PT Merpati Nusantara and a Chinese state-owned enterprise, but which turned into a loan guaranteed by the Indonesian government. In that deal, it would have been better to have purchased higher quality CN 235 planes made by PT Dirgantara, which were on offer at a better price.
This bitter experience should make Finance Minister Agus Martowardojo feel that Presidential Regulation No. 86/2022 on the Development of the Sunda Strait Strategic Areas and Infrastructure needs to be amended. Minister Agus has an interest in ensuring that this strategic project does not become a financial burden on the nation like the Jakarta monorail project, which stalled and cost the nation around Rp600 billion. Then there is the fact that Bank Artha Graha still has unpaid loans with Bank Indonesia.
Minister Agus's proposed revisions to the presidential regulation should be accommodated as soon as possible. Furthermore, the government should improve the sea transportation system in the Sunda Strait, which is daily overwhelmed with lines of thousands of trucks. Development of shipping facilities, railroads and toll roads at the end of the two islands would be far cheaper and more beneficial than building a bridge. A study by the Bandung Institute of Technology concluded that the Sunda Strait Bridge would only reduce transportation costs by 3 percent, far less than the 12 percent reduction that would result from developing sea transportation, 8 percent from railroads or 4 percent from toll roads.
So let us look at the Sunda Strait as a link between Java and Sumatra, not as a gap that must be bridged.
Tempo
No. 49/12, July 31, 2012
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