The Jakarta Monorail (JM), which is one part of the city’s transport master plan, will include two main lines. One will be a 14.3-km loop surrounding the business district and the other a 13-km east – west line. They are to be constructed by state-owned railway car manufacturer Inka, state electronics firm Len and local construction firm Bukaka in cooperation with Siemens Indonesia.
After a financing proposal by Dubai Islamic Bank fell through this spring, a consortium of local banks stepped in. Some of Indonesia’s largest banks, including Bank Mandiri, Bank DKI and BRI, agreed in July to finance the project. However, the details have still not been finalised, although there is hope the package will come through in the coming months.
One aspect key to securing the funding was a guarantee by the government that at least 160,000 passengers a day would use the new transit system, thus ensuring profitability and a return on the banks’ investment.
Sukmawaty Syukur, JM’s director, told OBG, “These banks would ideally like more assurances [regarding] non-fare revenues such as advertising and property rental. All of these details will be included in the final agreement early next year.”
In addition, the new governor, Fauzi Bowo, has promised his support in implementing solutions to ease the traffic congestion faced by Jakarta’s more than 14m inhabitants. This includes completing construction of the new monorail.
Despite these assurances, questions remain as to who has jurisdiction over the monorail and other transport projects in Jakarta, particularly in the case of an earthquake or other natural disaster.
“One of the remaining questions is who will be the lender of last resort in case of force majeure: the local authority or the central government? The government does not extend blanket guarantees for projects, but the central government could take over a majority stake in the project to alleviate concerns,” Sukmawaty Syukur told OBG.
Other concerns about financing are related to the pioneering nature of developing the monorail project on a build-operate-transfer (BOT) basis. As such, all of the details of the agreement have had to be individually negotiated.
“We’re hardly able to set a formula that can secure the project and at the same time benefit us with a sufficient amount of money,” said Nurfakih Wirawan, Jakarta’s assistant secretary for development. “We’re still working on risk management issues for the time being.”
“We are still finalising the details of the equity structure since the law in Indonesia for loan syndication is that 30% of the loan total must be in cash equity,” Sukmawaty Syukur told OBG. “We have a letter of intent from the banks for the remaining 70% of the project finance, but we need to finalise the details of the $145m in equity for the project. This should be finalised by February.”
Once the financing arrangements are finalised, construction should start shortly thereafter. The government already has 97% of the land for the project with the remaining 3% still to be acquired for the position of the depot. This means that land access is less of an issue than in other infrastructure projects. The target date for completion of the project is 36 months, which means it is still on track for completion by the end of 2010.
According to JM’s director, it is estimated there will be 205,000 passengers a day in the first year of operation, and 300,000 passengers a day during the following five years well above the guaranteed number being sought by the government. This would mean the monorail would be running at 80% of its capacity by the second year of operation.
Aimed at middle-income users who would ordinarily use their own cars, fares are expected to range from Rp3500 to Rp9000 (S0.37 to $0.96), which is likely to be slightly higher than bus fares, which presently average Rp3500.
The monorail project itself is firmly set in the context of a network of public transport options for the capital, which would include the $1bn mass rapid transit (MRT) system and extension of bus routes and bus only lanes. Indeed the monorail is to include two interchange points for the MRT, although the MRT is not set to be completed until 2014 with construction starting in 2009.
“The monorail project fits in with the integrated transport plan for Jakarta, which includes bus ways and the Mass Rapid Transit (MRT) system,” Sukmawaty Syukur told OBG. “All experts are clear that if by 2014 there is no public mass transport system there will be chaos in the capital.”
The project itself is the first real test of the BOT structure promoted by the government other than for toll roads. The concession timeframe is for 30 years with a possible extension of 10 years. The aim established by JM is to achieve 18% profitability after eight years of operation, a higher return than on the country’s toll road projects.
The importance of the JM project is thus not only in alleviating Jakarta’s congestion problems, but also to prove the sustainability of public private partnerships in Indonesia’s infrastructure projects.
“Infrastructure is a priority for our economy and the government needs to do more to attract funding,” said Sukmawaty Syukur. “We really need a local development bank to extend financing for infrastructure projects because commercial interest rates tend to be too high.”
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