[Kabar-indonesia] The Jakarta monorail adventure -- People's life imitating art?

[Joyo at aol.com]

The Jakarta Post 
Saturday, September 2, 2006

The Jakarta monorail adventure -- People's life imitating art?

David O'Brien, Jakarta

There is an episode of The Simpsons, which remains eerily reminiscent of the 
Jakarta monorail project. A monorail project sponsor arrives in Springfield 
and is enthusiastically embraced by the mayor. Marge Simpson tries to argue that 
the funds would be better committed to road repairs. However the monorail 
wins and it all ends in tears.

The ongoing saga of the Jakarta monorail would be as amusing as The Simpsons 
were not so many millions of dollars at stake along with Jakarta's mobility 
future. Here is a brief history for those that are new to the series.

Back in 2004 the contract was awarded to a consortium led by one of the 
Malaysian monorail operators. It utilized Hitachi technology (the train design used 
around current construction works is a throw back to such times). This 
consortium however was the first to face difficulties sourcing finance and their 
agreement lapsed.

The project was subsequently revived by the Indonesian members of the 
original consortium JM (PT Jakarta Monorail) joining with Omnico of Singapore. This 
new relationship started to sour soon after the joint venture contract was 
signed.

Initially there were disagreements about equity contributions and later 
disagreements over the technology to be used. Omnico proposed proven Korean 
magnetic levitation technology (ROTEM), whereas JM favored wheels on a central rail 
to be developed by local contractors.

The Korean technology was proven and backed by committed bilateral loans 
totaling US$600 million and equity of $70 million and were capable of financial 
close. With no moving parts one would assume annual operating costs would be 
lower for such technology.

The arguments about cost became very specious over this period. JM often 
quoted their solution as costing $500 million versus $600 million for ROTEM. 
However the JM capital cost estimate has now reached $650 million for the wheels on 
rail technology. It remains unclear if one party was calculating a total cost 
inclusive of interest on construction and the other perhaps the straight 
capital cost.

Nevertheless a new impasse developed until Omnico finally left the consortium 
and was replaced by a group of state owned companies and Bukaka. This new 
consortium missed a series of cut off dates for financial close but received 
generous extensions until a backer has been found and their risk mitigated by 
government.

The ministry of finance initially refused to support the project, ostensibly 
due to the lack of transparency in the tender process. It could also be that 
their independent risk assessment failed to find evidence of how the "private 
sector" (predominately state owned enterprises and Bukaka) were sharing risks 
equally with their right to construct and operate the concession.

Negotiations continued and a new form of guarantee created. This will be up 
to $22.5 million per year if passenger numbers are not met. The minimum number 
of passengers budgeted is 160,000/day.

By way of comparison Blok M Jakarta busway is reported as having 60,000 
passengers on a weekday and 40,000 on weekends. A monorail has more capacity than a 
bus but cannot run at such short intervals to drop and collect new passengers.

Now the project developer is free to gain the development profit, lenders are 
guaranteed and the task of ensuring passenger numbers falls back upon 
government. The developer/operator is likely to make little effort to encourage 
customers as there is no financial incentive to do so.

The end result is that facilities could tend to the basic side to maximize 
development and operating profits. Escalators from street level to raised 
stations could be avoided (high electricity cost), rolling stock limited in number 
and have a very basic fit out along with that of the stations.

It is now reported that the developer has identified ways for the Jakarta 
administration to help reach the magic number of 160,000. Not surprisingly these 
are all capital intensive solutions pushed back to the government for the 
"private sector" project.

The first is the development of car parking at key monorail points. Given the 
initial monorail incorporates Jakarta's Golden Triangle this represents the 
most expensive land in the country and will be a costly car park.

The developer has also helpfully suggested their previous idea to make the 
project financially feasible-- electronic road pricing. The plan was that this 
would be implemented along the monorail routes to shift people from their cars. 
The feasibility must be questionable as JM failed to reach a financial close 
with it as a solution.

The total capital cost for the project is now forecast at $650 million by the 
developer/operator. This figure is now not so far from the $600 million in 
bilateral loans and $70 million in equity that was given as a firm offer by the 
alternative Korean developer/operator.

It also seems that Jakarta Monorail has limited equity of its own. To obtain 
subsidy funding the Jakarta government claimed the project was not subject to 
tender as it is "private". However if government funds are guaranteeing, what 
is the definition of private? Subsequently the Jakarta government is examining 
the disbursement of emergency funds of nearly $25 million to accelerate 
construction.

Now the project costed at $650 million. The government is committed to 
another $22.5 million a year for five years if passenger numbers are not met as is 
likely. The project is facing a total cost of $762.5 million before estimates 
of potential capital investments in parking facilities etc.

The current fare being proposed is an average of Rp 7,500 rupiah. With 
assorted other competing transport options in the area ranging from busway at Rp 
3,500, mini bus Rp 2,000, shared taxis and motorcycle taxis, reaching 160,000 
passengers seems optimistic for the initial circle line.

The issue is that this first monorail will only run from around the golden 
triangle area. Busway brings and takes people from a key transport hub at Blok M 
to various office towers in the CBD and on to the range of businesses and 
shopping/entertainment areas of North West Jakarta. If integrated with other 
transport and with an inclusive fare similar to the busway it may be more feasible.

The capital costs of the various mass transport solutions have been reported: 
($ million per km) $45 -$105 for subway, $20-25 for monorail and $2-5 for 
busway.

For just the cost of the underwriting of the "private" consortium of $125 
million, there could be in the region of an additional 50 km of bus rapid 
transport systems. Faced with limited budget and given its success, additional 
busways and associated feeders to satellite suburbs and interchanges could offer a 
better immediate solution.

The wrier is a Technical Advisor at CSA Strategic Advisory which assists 
businesses address change by originating strategy and successfully executing. He 
may be contacted at dobrien at csadvisory.com. 

------------------------------------------ 
Joyo Indonesia News Service
------------------------------------------