Wednesday, 04 July, 2012 | 19:11 WIB
Taking Precautions in the Sunda Strait Bridge Project
TEMPO Interactive, Jakarta:Finance Minister Agus Martowardojo’s reluctance to approve a feasibility study by the private sector on the construction of the Sunda Strait Bridge is entirely appropriate. The project budget is expected to be enormous and if the feasibility study reveals that the plan is not feasible, the losses that the state will incur will also be enormous. Clearly, the government must take extreme caution in the development process at this strategic region.
Minister Agus said the government should prepare the feasibility study for the Rp-100-trillion-project. It is common knowledge that projects that the government works on in collaboration with the private sector often create more losses than benefits for the government. The minister seems to want to avoid such an outcome.
Early involvement in planning will ensure the government is more informed about the feasibility of the bridge. The government will be able to gauge whether the project will work or not. The government can also calculate the loans that need to be obtained from external funding and determine how to use the guarantee. Furthermore, risks are more easily measured by the government if they are responsible for the planning too.
The reasonable consideration made by the Finance Minister, strangely, is incongruent with Presidential Decree No. 86/2011, which was signed last December. It is unclear how the Policy on the Development of Strategic Areas and Sunda Straits Infrastructure ended up accommodating the Banten-Lampung Consortium, which includes the Artha Graha Network owned by Tommy Winata.
The consortium, which was established by enterprises owned by Banten and Lampung provinces, has been appointed as the executor of the feasibility study. The consortium, also mentioned as the project initiator, has also been requested to prepare a basic design, cooperation plan, project funding and the source of funding. In addition, the consortium also draws up a schedule, design process and assessment techniques.
With such an elaborate job description, it is not impossible that the consortium will have full control over the strategic project. Evidently, prior to the execution of the feasibility study, the consortium has requested a guarantee for the feasibility study project worth Rp3 trillion from the government. The consortium claims they have disbursed US$60 million for the pre-feasibility studies since 2004.
It is hard to understand why the consortium—which will be participating in the bidding for the construction of the 29-kilometer bridge—was appointed as the party in charge of preparing the feasibility study. How can the government select other companies if the regulations prepared by various ministries were in favor of the consortium?
In terms of project cancellation, the consortium will also be entitled to compensation from the government in regard to the costs that have been disbursed for project preparation, including all intellectual properties related to it. The consortium will also receive compensation of added value of up to 10 percent, or for the rights to match, or from the purchase of the project initiative by the winner of the auction that is not a part of the consortium.
The presidential decree has practically left Minister Agus in a tight position. The minister’s idea that the government conduct the feasibility study may not be taken up. Agus’ idea can only be realized though an important breakthrough: revisions of the Presidential Decree on the Sunda Strait as soon as possible. Without revisions, the development of the strategic region will continue to take a bite out of the state finances.