Confusion, infighting plague bridge project

Posted on July 25, 2012

0


Hans David Tampubolon, The Jakarta Post, Jakarta | Headlines | Wed, July 25 2012, 8:54 AM

President Susilo Bambang Yudhoyono listens to a presentation regarding the engineering plan of the Sunda strait bridge during an event organized by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Kemayoran, North Jakarta, on April 15. The bridge is expected to be part of Yudhoyono’s legacy when his term ends in 2014. President Susilo Bambang Yudhoyono listens to a presentation regarding the engineering plan of the Sunda strait bridge during an event organized by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Kemayoran, North Jakarta, on April 15. The bridge is expected to be part of Yudhoyono’s legacy when his term ends in 2014.

The ambitious Sunda Strait Bridge (SSB) is supposed to be among President Susilo Bambang Yudho-yono’s legacies when his term ends in 2014. However, an apparent legal flaw in his presidential decree, which was issued to regulate the construction of the bridge, may cause the project to falter.

Finance Minister Agus Martowardojo, who has no affiliation with a political party, is struggling to get all stakeholders in the bridge’s construction to comply with the rule of law, and demands the decree be revised over concerns of not only future fiscal risks through state budget guarantee, but also the legal uncertainties for the private sector involved.

The ministry’s fiscal agency interim head Bambang Brodjonegoro said the confusion over the decree made it difficult for the ministry to achieve progress. Bambang explained that the distinctive nature of the SSB project, based on the decree, made it hard to determine what legal basis to use should the project require the government’s guarantee and involvement. Unlike other presidential decrees, the one governing the SSB project does not reference any related laws or regulations to justify its issue in regulating the project. It only states that the decree is based on Article 4 of the 1945 Constitution, which denotes the President as the highest authority in the country. The decree was drafted and signed by Law and Human Rights Minister Amir Syamsudin, a senior politician with Yudhoyono’s Democratic Party.

With such flaws, there are suspicions among politicians that the decree is a kind of blank check to facilitate a consortium led by politically wired tycoon Tomy Winata to initiate and develop the bridge.

Tomy refused to comment on the issue. Wisnu Tjandra, the vice president director of Tomy’s Artha Graha Group, said the consortium would comply with whatever decision the government made, but in the meantime, would continue to do their job in line with the stipulations of the current decree.

The SSB fiasco has also exacerbated the already strained relationship between Agus and Hatta despite repeated denials by the two ministers over their discontentment.

Agus’ insistence to halt progress on the project until the legal flaws are settled has been perceived by fellow ministers as an act of disobedience toward the President.

**

Sunda Strait Bridge left in lurch by Cabinet split

The Jakarta Post, Jakarta | Reportage | Wed, July 25 2012, 10:04 AM


Waiting for Godot: A truck driver stands on a container to view a long queue waiting to cross into Sumatra via a ferry at the Merak port in Banten in this photo taken on March 14. The planned Sunda Strait Bridge linking Java and Sumatra is at risk of faltering due to legal flaws in a presidential decree regulating the construction of the bridge.(Antara)

Waiting for Godot: A truck driver stands on a container to view a long queue waiting to cross into Sumatra via a ferry at the Merak port in Banten in this photo taken on March 14. The planned Sunda Strait Bridge linking Java and Sumatra is at risk of faltering due to legal flaws in a presidential decree regulating the construction of the bridge.(Antara)

 

 

 

The fiasco revolving around the preparation to construct the ambitious Sunda Strait Bridge (SSB) and its economic zones has not only highlighted the government’s lack of capacity in drafting regulations but also cracks within the Cabinet. The Jakarta Post’s Hans David Tampubolon explores the issue.

It is supposed to be among President Susilo Bambang Yudhoyono’s legacies when he ends his term in 2014, but it appears to be Yudhoyono’s very own decision that prevents the SSB project from smoothly taking off.

The decree Yudhoyono issued late last year for the construction of the project, which entitled a consortium led by tycoon Tomy Winata to preferential treatment in handling the project, has resulted in confusion due to several legal flaws.

Apparently aware of the future risks the project posed to the state budget and the legal uncertainties for the engaged private sector, Finance Minister Agus Martowardojo insisted on revising the decree and urged all stakeholders to comply with the rule of law.

However, his proposal was not greeted warmly by fellow ministers, particularly Coordinating Economic Minister Hatta Rajasa, whose daughter is married to Yudhoyono’s youngest son.

Agus’ insistence on halting progress on the project until the legal flaws are settled has been perceived by fellow ministers as an act of disobedience toward the President.

“Pak Agus is so rigid on the legal side that it makes it almost impossible to see progress in the project,” complained one economic minister.

But the Finance Ministry has plenty of reasons to worry over what the future may hold for the project, which is estimated to cost more than US$10 billion.

State budget funds would be used to guarantee the project, and given the strategic function of the bridge, the government would need to have authority in determining the toll tariff in order to avoid the public being held hostage by the private sector.

While Agus refused to comment on the issue, the ministry’s fiscal agency interim head Bambang Brodjonegoro said the confusion over the decree made it difficult for the ministry to progress further.

Bambang explained that the distinctive nature of the SSB project, based on the decree, had made it hard to determine what legal basis to use should the project require the government’s guarantee and involvement.

“As of now, there is growing confusion because the project is not considered to be fully in line with the public-private partnership [PPP] scheme,” he said.

The National Development Planning Agency (Bappenas) listed the project as a PPP, which entitled the government to take a role in its development and guarantee mechanisms.

Unlike other presidential decrees, the one governing the SSB project does not reference any related laws or regulations to justify its issue in regulating the project.

It only stated that the decree is based on Article 4 of the 1945 Constitution, which denotes the President as the highest authority in the country.

The decree also demanded the involvement of the government, but at the same time, provides almost unlimited authority for the private sector to operate.

“If for some reason, the project needs a guarantee, then which legal basis should we use? The decree needs to be revised to have solid legal standing on guarantees,” said Bambang.

Without the guarantee, it will be difficult for financial institutions to finance the project with a construction timeframe that may stretch for more than 15 years and with a return on investment achievable in 50 years.

Bambang also said that based on the decree, the project could not entirely be categorized as a PPP, which are regulated under a different presidential decree.

“Infrastructure projects can be guaranteed by the government based on the presidential decree on infrastructure project guarantees. But the project would have to follow the decree on PPP,” he said.

In a letter sent to Public Works Minister Djoko Kirmanto, Agus suggested the SSB project become a genuine PPP project, paving the way for the government to fund the project’s feasibility study and hold a fair, open tender.

The proposal, therefore, terminates preferential treatment given to Tomy’s consortium, which initiated the project, during the tender process.

According to the letter, should the consortium fail to win the tender, the government would compensate the private sector for the funds it spent in initiating the project.

The proposal, which would potentially cut Tomy out of the loop, has somehow irked fellow ministers who already have close ties with the 54-year-old tycoon, said a source at the Cabinet Secretariat.

The consortium consists of companies controlled by Tomy’s Artha Graha Network and the governments of Lampung and Banten provinces as minority shareholders.

In response to the proposal, Hatta said every input would be thoroughly considered. “Basically, all related stakeholders have agreed from the start for the project’s feasibility study to be funded without using the state budget,” Hatta said.

In a coordinating meeting on the project last week, Agus was left to defend his argument alone, while other fellow ministers preferred to keep the current decree intact and proceed with the project despite its risks.

The opposing ministers claimed a revision to the decree would tarnish the President’s image as it could send bad signals to investors, according to an official who attended the meeting.

Hatta decided to form a team consisting of several ministers to conduct a final review and reach a decision on how to resolve the deadlock over Agus’ proposal by next week.

Yudyohono’s refusal to be drawn into the development of a final solution has further muddied the waters surrounding the project’s future direction.

Wisnu Tjandra, the vice president director of Tomy’s Artha Graha Group, said the consortium would comply with whatever decision the government made, but in the meantime, would continue to do their job in line with the stipulations of the current decree. “In line with the presidential decree, we plan to conduct a feasibility study and complete the basic design of the project. This might be different from the finance minister’s opinion,” he said.

The bridge is not only considered a symbol of national pride, but also a strategic facility to help alleviate logistical bottlenecks currently plaguing the crossing between Java and Sumatra. Ports at the two points have become overcrowded to the point that trucks hoping to cross by ferry are forced to queue for more than 10 kilometers on either side of the strait.

Indonesian Institute of Sciences (LIPI) economist Latif Adam said the SSB fiasco had once again highlighted the lack of capacity of government officials in issuing regulations.

“Most of the time, they [state officials] formulate a regulation without considering whether it will contradict other regulations,” Latif said.

“I believe the finance minister’s move to revise the decree must be supported and be appreciated by all parties because he is trying to provide legal certainties for the project,” he added.

Latif said a failure to revise the decree would trigger growing mistrust from private investors considering participation in PPP projects.

“Therefore, I advise all ministries to work together to make the SSB project a good example of a PPP,” he said.

***

The SSB and SBY’s legacy

Hans David Tampubolon, The Jakarta Post, Jakarta | Reportage | Wed, July 25 2012, 10:09 AM

President Susilo Bambang Yudhoyono listens to a presentation regarding the engineering plan of the Sunda strait bridge during an event organized by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Kemayoran, North Jakarta, on April 15. The bridge is expected to be part of Yudhoyono’s legacy when his term ends in 2014.

President Susilo Bambang Yudhoyono listens to a presentation regarding the engineering plan of the Sunda strait bridge during an event organized by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in Kemayoran, North Jakarta, on April 15. The bridge is expected to be part of Yudhoyono’s legacy when his term ends in 2014.

 

 

The Sunda Strait Bridge (SSB) project has been a dream since the 1950s, when the nation’s first president, Sukarno, first spoke of connecting the nation’s major islands of Sumatra and Java.

Although inspired by a proposal from Sedyatmo, a professor from the Bandung Institute of Technology (ITB), Sukarno never realized the dream of the bridge, nor did his successor Soeharto.

Six decades later, President Susilo Bambang Yudhyono decided to revisit the dream, agreeing to a proposal made by tycoon Tomy Winata for the Rp 100 trillion (US$10.9 billion) SSB project.

Tomy, whose real estate and banking empire was formed using connections with senior Indonesian Military and National Police officers, also has a special relationship with Yudhoyono and members of his inner circle, such as Lt. Gen. (ret.) TB Silalahi and State Secretary Lt. Gen. (ret.) Sudi Silalahi.

Yudhoyono issued a presidential decree in late 2011 for the construction of the bridge, authorizing preferential bidding consideration for Graha Banten Lampung Sejahtera, the consortium led by Tomy that initiated the SSB project.

Ground breaking for the bridge is slated to begin in 2014, just before the end of Yudhoyono’s presidency. Term limits bar the President from seeking a third term.

“The bridge is poised to become Yudhoyono’s legacy,” Democratic Party lawmaker Achsanul Qosasi said. “That’s why every effort is needed to keep things flowing smoothly.”

According to the proposal, the bridge will provide a road and rail connection between Java and Sumatra, relieving pressure on the two seaports that handle most of the passenger and cargo traffic between the islands: Merak Port in Banten to Bakauheni Port in Lampung.

A ferry journey between the ports takes between three and four hours, while a fast-boat ride takes around 45 minutes. However, ferry and fast-boat services are regularly disrupted by high tides, leading to huge backups on both sides of the strait.

Electric trains are expected to cut the transit time across the strait to 30 minutes after construction of the SSB is complete.

Plans call for the bridge to span 29 kilometers — six times the length of the Suramadu Bridge that connects Java and Madura Islands.

According to Coordinating Economic Minister Hatta Rajasa, whose daughter is married to Yudhoyono’s youngest son, the SSB was important for Java, Sumatra and the entire nation.

“Our economy is on the move. However, due to a lack of connectivity in the Sunda Strait region, trucks transiting from Java to Sumatra and vice versa are forced to wait in lines as long as 10 kilometers,” Hatta said.

“Around two million 4-wheel vehicles cross the strait annually. The bridge is very strategic. If it is complete, trucks from Medan [North Sumatra] can traverse the strait easily to transport supplies to as far as the eastern part of the country,” Hatta added.

However, Yudhoyono’s plans to build a bridge may go to nowhere, as the presidential decree authorizing the bridge’s construction would leave the government responsible for a huge financial guarantee, and fails to give the private sector the legal certainties needed to embark on a large scale infrastructure project.

Whether to revise the decree is now under discussion by Yudhoyono’s Cabinet ministers.

Finance Minister Agus Martowardojo has been leading the charge for reconsideration, much to the reported consternation of Hatta and Public Works Minister Djoko Kirmanto.

The discussions may lead to delays that make it increasingly unlikely that Yudhoyono will be in office when the ground is finally broken on the project.

Graha Banten Lampung Sejahtera currently has less than 18 months to complete a feasibility study, the start of which has been delayed pending the government’s decision on whether to have an independent third party make the study or to leave the consortium to do so.

****

 

 

 

Posted in: EKONOMI