Toll Road Development in Indonesia

chime channel Development in Ind starsiaIn In dosia, track is classified into frequent Road and damage Road. overt track convey the bridle-path provided for general traffic. Road itself mean land transportation fundament that comprises any splits of the passage, including the supplementary building along with the equipment thereof dedicate for transportation. Mean tour the rendering of monetary value Road in Indonesia is humanity centering that become part of a highway network system and as a national pass in which the users ar required to stick step up monetary judgeFunction of Toll Road in IndonesiaBased on rectitude 38/2004 and presidency enactment 15/2005, ships bell road has position and function described as the following The monetary cherish road is operated toa. ensures an obstructed traffic in a authentic studyb. increases the energy and effectiveness of the pricys and serve dissemination value in rescript to advance the frugal organ ic evolutionc. entirelyeviate the financial burden of the Government by way of including the exponentiation of the road user andd. to improve the equal distribution of the results of development and justice.The terms road shall be practised by the Government and/or a melodic phrase entity that is qualified to do so.The user of a cost road shall be subjected to a mandatory requirement of paying a fee for the damage to be used as a repay of investing, maintenance and development of the damage road.Requirement of Toll RoadThe terms road shall have a higher specification, higher safety and gubbins helper levels than those of the alert frequent roads which have requirement as followsThe bell shape road used for intercity traffic shall be designed at least eighty (80) kilometers per hour, and a toll road in urban atomic number 18as shall be designed at a speed plan of at least sixty (60) kilometers per hour.The toll road shall be designed to modify it to hold the hea viest axle of eight (8) tons at the lowestEach toll road link shall have railings and be served by crossing facilities in the form of bridges of tunnels.The pints which may be dangerous to toll road users shall be equipped with safety structures with the strengths and structures that atomic number 18 able to absorb fomite crash energy.Economic Function of Toll RoadThe main linguistic rule economic function of toll road is ground on achieving economic optimum that diminisherpot be described as follows Policy to win road network development and its benefits, as well as balance inter-regional developmentEnsuring equal distribution of development activities and gains, and equilibrium in atomic number 18a development with due prescript of justice,Increasing the efficacy of distribution go for improvement of the economy particularly in the to a greater extent developed areas simmpleness the financial burden of the authorities finished road user participationDecreasing congesti on in highly growth regions resulting efficient spark cartridge clips and low vehicle operating costsConcept of cosmos Private fusion (uvulopalatopharyngoplasty)The term of frequent- insular federation was used first snip in the United States to definite correlation in the midst of crossroads worldly concern and insular empyrean for educational programs for urban renewal in the mid-fifties until 1960s(Yescombe 2007). In fact, there is no single or uniformed definition of palatopharyngoplasty in the world including in Indonesia.According to Delmon (2009) uvulopalatopharyngoplasty is be as an arrangements in the midst of earthly concern and confidential entities for delivery of infrastructure services and are seen as a way of raising additional finances for infrastructure investments but to a greater extent importantly as a performer to extend or leverage better budget funding with efficiency gains.In UK, PPP is explained as an arrangement by which a government ser vice or private course venture is funded and operated finished a partnership of government and the private sphere of influence. (NAO 2009)The term PPP covers a range of different structures which can be used to deliver a jut out or a service. The term can cover a spectrum from relatively short term vigilance contracts finished concession contracts to joint ventures and partial privatizations where there is a sacramental manduction of ownership between the public and private areas which depend on the country and the politics of the time.PPP fills a space between traditionally procured government projects with governments budget and full privatization with genital organ budget, where government no longer has a direct role in ongoing operations. PPP enables to develop projects which do not have adequate profitability with revenues only from projects and are not self-sustaining. down the stairs traditional public vault of heaven approach, the public area designs, builds, ope rates, and maintains infrastructure, and mends level of quantity and standards of service quality, while under privatization approach, the private heavens conducts all of these aspects in place of the public vault of heaven. Under PPP approach, the public celestial sphere is ultimately accountable for service plannings, although the private sector designs, builds, operatesthither are various characteristics of PPP as followsPPP is an arrangement between public and private sector. Usually, it takes form of arrive or Agreement. PPP is utilise as a method for readiness of public services. domain Services in this definition, are not moderate to road services.Public sector remains responsible for the project because a PPP project is operated to deliver public services specified by public sectors.PPP often includes investment and crook of facilities by private sectors. But there can be PPP which does not include facility construction.PPP is applied only when it delivers surve y for silver. It means bridal of PPP is recommended if it can bring larger benefits to the public compared to other means of project.PPPs can follow a variety of structures and contractual formats. However, all PPPs combine three key characteristicsA contractual agreement defining the roles and responsibilities of the parties, cognizant take chances-sharing among the public and the private sector partners, andFinancial rewards to the private party sufficient with the achievement of pre specified outputs.PPP is one tool available for last makers in reforming infrastructure or service delivery. It is most effective way when it is accompanied by other reform activities to underpin and reinforce the PPP and to restrain sustainable improvement. A successful PPP is designed with elaborated attention to the context or the enabling environment within which the partnership will be enforced. Where the operating environment can be amend to be more conducive to the goals of PPP, this should be accomplished. Where elements of the operating context cannot be changed, the PPP design must be tailored to accommodate existing conditions.To be successful, PPP must be built upon a sector diagnostic that provides a realistic assessment of the current sector constraints. Specifically, the sector diagnostic will cover (1) technical issues (2) legal, regulatory, and policy frameworks (3) Institutional and cleverness status and (4) Commercial, financial, and economic issues.Objectives of PPPThe prime objective of government in utilise PPP is to achieve modify value for money, or improved services for the same amount of money as the public sector would spend. Besides that, other objective is desiring to provide increased infrastructure provision and services within imposed budgetary constraints by utilizing private sources of finance, if accomplishable, via finish off balance sheet structures or to accelerate delivery of projects which might other than have to be delaye d.The primary(prenominal) Principles of PPPAccording(Agency 2012) in Design, Build, Finance and manoeuvre (DBFO) of Road examine, the main principles of PPP area. Transfer of RiskThe gamble allocation between every(prenominal) stakeholder must be well intercommunicate therefore every party twain government and private do it every gamble on staging of toll road development such as design, construction and operation/maintenance, including financing of its project.b. Value for MoneyThe government has authority to determine the economical and financial of project, in using government money and private money or junto both of them.c. Managerial ResponsibilityPrivate sector have capability and duty to manage, operate and maintain of road projectd. Payment for ServiceFor road project that full financed by government, the staging of road development is carried out by Private Sector. The Government has authority to regulate and monitor every progress of its staging. Government will pay the private sector establish on performance of project and has right to terminate project if it is needed.e. PartnershipThe government and private are committed to cooperate in go for to get efficient and effective result.f. Private-sector InnovationBy understanding assay factors in road project, the private sector has used innovation for efficiency of road development staging. The Private Sector concept encourages a arable partnership between the public and private sectors, by using private capital and commercial expertise to fund initial construction and long-run maintenance of Private Sector roads in operation year. enthronization ConceptRegarding (Horngren 1994) investment decisions concerning long-term plan for the use of capital (capital budgeting) make up of six staging process (1) identification stage, choosing type of investment capable with organizational objective, (2) search stage, seeking alternative investment capital that can meet the organizational goals, ( 3) information-acquisition stage, searching data and qualitative and quantitative summary of various alternative investment capital, (4) selection stage, choosing one capital investments base on financial analytic thinking by the method discounted cash flow ( net present value (NPV) and internal rate of return (IRR)), payback and accrual accounting rate or return, (5) financing stage and (6) capital punishment and control stage. Those all concepts shall be directly apply to initial investment concept, including Public Private PartnershipRisk allotment in Public Private PartnershipDefinition of RiskIn term definition, chance of infection is unpredictable variation in value. It includes the possibility of unexpectedly good or unexpectedly bad, outcomes. The lay on the line of a project is unpredictable variation in the total value of the project, taking account not only of the value of the project company but similarly of the value accruing to customers, the government, and other stakeholders. A stakeholders guess in a project is unpredictable variation in the value of the stakeholders interest in the project. Each risk should be allocated, along with rights to make related decisions, so as to maximize total project value, taking account of each partys ability to(Irwin 2007) 1. Influence the corresponding risk factor. 2. Influence the sensibility of total project value to the corresponding risk factor, for example, by anticipating or responding to the risk factor. 3. Absorb the risk.Risk in Public Private PartnershipThe purpose of the risk identification stage on toll road project is to define as extensively as possible, a list with all types and sources of risks and uncertainties that might have an impact on the project. It is a crucial stage for the risk management process, because if a risk cannot be place, it cannot consequently be evaluated and managed. (Tanaka, et al. 2005) Toll Road project risks should be assigned to the public or private en tity that is best at tyrannical and managing them.In most of the cases, the private sector has taken on risk associated with the design, financing, construction, operation and maintenance of facilities, general regulatory risks as well as cover for insurable force majeure events. On the other hand, the public sector has been responsible for environmental license approvals and other planning permits, right-of-way land acquisition, discriminatory regulatory risk, and uninsurable force majeure events and political risks.Risk Allocation Principles in Public Private PartnershipDetermination of the Concession obligations in a PPP Agreement need to conform with the risk allocation principles soundless by every party . An optimal risk allocation is racy in maximizing the value for money. The common principle for risk allocation is that a risk should be allocated to party which is relatively able to manage the risk, or having the least cost of absorbing such risk. If this principle is im plemented properly, it is expected that the risk premium and the project cost would be cast down leading to positive impact to the project stakeholders.The implementation examples of such principle in the market are as followRisks which have not been managed well in the past, or those which the agency has little experience in managing, should be transferred if cost-effective, particularly where the risk can be influenced by the arrogant partyRisks which are outside the control of either party, or are equally influenced by both parties (e.g. certain force majeure events) should be sharedRisks that the government can manage well, or is in a more informed position to control than the private sector (e.g. planning approvals, economy risks) should be retained andThere may also be or so risks that, while transferred, may possibly remain an exposure for the public sector (e.g. risk of sponsor default). If an event cannot be resolved satisfactorily, the government steps in and assumes full debt instrument for the risk (or the project as a whole). This is appropriate where the project is delivering critical social infrastructure and associated services.Models of Risk Allocation of Public Private PartnershipsOne of PPPs benefits is there is possibility to share the possible risk of the project between private sector and government. On one hand, the private sector has the capability to deal with commercial risk, but on the other hand, they need to relief from non-commercial risk that beyond their control (Soedjito 2009). Models of risk allocation in public private partnership is depicted inThe common models for public private partnerships are BOT and concession and the difference between these two depends on the level of support provided by the government.Risk legal opinion ApproachesFrom a review on the existing methodologies used for the evaluation and assessment of risk in the financial appraisal of projects, two main categories of approaches were identified q ualitative techniques and quantitative techniques.Qualitative TechniquesQualitative techniques have been used for compilation a list of the main risk sources and describing their likely consequences, without entering in details about the quantification of their probability of occurrence. (Merna and Njiru 2002). The next step after all sources of risk are identified is to define some kind of order of priority. On the limited time, risk assessment may be coloured towards the use of relatively simple procedures such as qualitative and semi-quantitative techniques (Ward, 1999). denary TechniquesQuantitative techniques aim to represent the likelihood and impact of risks in hurt of the usual planning measures, such as time and money (Grey, 1995). 2 of the most massively used quantitative risk analysis techniques in the financial appraisal of projects are deterministic analysis techniques and probabilistic analysis techniques (Merna and Njiru, 2002).Sensitivity analysis, as part of de terministic techniques, is probably the most exercise approach among the quantitative techniques. Sensitivity analysis examines the effect of changes in the value of the models dependent variable resulting from the changes in the value of one or more of the input variables to the model.The most popular form of sensitivity analysis is the one-factor-at-the time approach, wherein the main advantage is that it allows interpretation of the results in an easily understandable way. other form of sensitivity analysis is the scenario analysis, which recalculates the model for a combination of co-occurrent changes in the input variables (Van Groenendaal and Kleijnen, 1997).Frequently, three types of scenarios are distinguished an optimistic case, a base case, and a pessimistic case. Some of the major shortcomings of using sensitivity analysis are 1. Equal probability of occurrence is given to all scenarios (despite the likelihood of getting some scenarios with extreme values is lower) 2. Possible inter-dependencies between the variables are ignored 3. In big projects with many items/activities, a combination of all variables can create a too large set of scenarios.Implementation of Public Private Partnership (PPP) in IndonesiaIndonesian government through Ministry of Public Works based on govern of parson of Public Work number 567/KPTS/M/2010 operated 757.47 km and plans 4618 km of toll roads as part of the national road network dual-lane in 5 major islands in Indonesia (see )In the implementation of toll road development in Indonesia, there were some periods due to regulations and edict in valid at that period of time as follows origin breaker point (1978 1983), Fully financed by Government funds (Government Equity).Second Period (1983 1990), Subsidiary Loan Agreement (SLA) to PT Jasa Marga (two step loan), State have Enterprise for toll road development.Third Period (1990 1994), Cooperation with private sector using BOT dodging. Fourth Period (1994 2005) , Modified BOT scheme (i.e., revenue sharing concept, land acquisition cost is part of investment cost borned by the investor).Fifth Period (2005 present), using Build Operate Transfer (BOT)/ PPP intention legal philosophy and Regulation for Public Private Partnership of Toll Road in IndonesiaAfter regulatory reform with the Road Law No.38/2004 and Toll Road Government Regulation No.15/2005 allow the development of toll roads through public private partnership, including domestic and international investor. Main regulatory framework for toll roads includes law, regulations, and decrees are presented as followsLaw No. 38 of 2004 concerning RoadGovernment Regulation of the Republic of Indonesia No.15 of 2005 concerning Toll RoadRegulation of minister of religion of Public Works No. 295/PRT/M/2005 Concerning Indonesia Toll Road AuthorityPublic Work Ministerial reign No. 369/KPTS/M/2005 on National Road net profit win Plan to include toll road network master planPresidential Decre e No. 36/2005 on Land learning for Public PurposePresidential Decree No.67/2005 on PPP between Government and Enterprises on Infrastructure ProvisionFinance Ministerial Decree No.518/KMK.01/2005 on Risk Management UnitDecree of Minister of Public Work number 567/KPTS/M/2010 on Status of Toll Road in IndonesiaImplementation Framework on Toll Road Project in IndonesiaAccording to the Road Law No.38 of 2004 concerning Road and the Government Regulation No.15 of 2005 concerning Toll Road, roles and institutional framework of toll road project are defined as showed in and Figure 2.. Government of Indonesia set up Indonesia Toll Road Authority (BPJT) which has authority for preparing feasibility study, Environmental opposition Analysis (EIA), bidding documents and selecting private concessionaires. Indonesia Toll Road Authority also has duty to implement a part of toll road management in Indonesia such as set toll road concession, commercialization of toll roads, supervision of toll roa ds including monitoring and evaluation in Indonesia. This authority is also to deliver Public Private Partnership scheme in toll road investment.Toll Road investing part in IndonesiaProcedure of toll road investment, from project preparation through sign of concession agreement, is shown in . The whole process take rough 24 months (2 years). Then, it is followed by implementing the agreement through the whole period in accordance with the concession period agreed which vary 30 to 40 years depend on the project condition and project by project basis.AGREEMENT IMPLEMENTATION( 14 months)( 4-6 months)PREPARE PQ DOCUMENT move on PQ DOCUMENTPREPARE BID intentSUBMIT BID PROPOSAL BID BONDRECEIVE NOTICE AWARDPRIVATE sectorSIGN CONTRACTPERFORMANCE BOND, LAND ACQUISITION COST, FINANCIAL blockingBID CONFERENCE-BID PREPARATIONPQ AND BID INVITATIONPREQUALIFICATION OF BIDDERRECEIPT AND OPENING BID cipher PREPARATIONEVALUATION OF BIDAPOINTMENT OF SUCCESFUL BIDDERCONSESSION AGREEMENTBPJT/GOVE RMENTPREPARE SPECIAL innovation VEHICLEFigure 2. Toll Road Investment Procedure(source BPJT 2010) subsisting PPP Model of Toll Road Project in IndonesiaThere are 3 (three) models that can be applied under the PPP scheme in Indonesia, depend on the economic and financial viability of the projects (Karsaman 2008). These models are shown in Figure 2.Scheme 1, where the economic viability of the toll road is good but its financial viability poor, the government take over the finance and construction of the toll road, but when it has been finished, then it will tendering for its operating maintaining to private sector. This has been applied in Tanjung Priok Access Road, Jakarta and Suramadu Bridge, eastmost Java.Scheme 2, where the economic viability of the toll road is good but its financial viability is marginal, the Government can support Land Acquisition and partly construction cost and the private sector has to finance and constructing other part and then operate and maintain the toll road. This scheme is applied in Solo-Ngawi-Kertosono Toll Road (Central Java and East Java) case and might be applied in other links.Scheme 3, where the economic and financial viabilities of the toll road are good, the private sector has to finance and constructing all of the road and then operate and maintain it through the concession period. This scheme is applied in most of the toll road development in general.Financial Feasibility of Toll Road InvestmentIndikator Kelayakan yang akan dipergunakan dalam studi ini, adalah 1. Net perplex Value (NPV)Net Present Value adalah selisih antara Present Value Benefit dikurangi dengan Present Value Cost. Hasil NPV dari suatu proyek yang dikatakan layak secara finansial adalah yang menghasilkan nilai NPV bernilai positif. Dalam hal ini semua rencana akan dilaksanakan apabila NPV 0, atau persamaan di atas memenuhi Net Present Value (NPV) = PVBenefit PVCost = positifHal tersebut berarti bahwa pembangunan konstruksi jalan akan memberika n keuntungan, dimana benefit/ cash flow positif akan lebih besar dari pada cost/ cash flow negatif.2. sexual Rate of Return (IRR)3. Payback RatioRasio DSCRPublic private partnership (PPP) are a generic term for the relationships formed between the private sector and public bodies often with the aim of introducing private sector resources and/or expertise in order to help provide and deliver public sector assets and services. The term PPP is used to describe a wide variety of working arrangements from loose, informal and strategic partnerships to design-build finance- operate (Private Sector) type service contracts and formal joint venture companies. (4Ps, UK local government procurement agency)In general, the basic concept of toll road development and management are as follows.1The Government establishes Master Plan of Toll Road Network as a guidance of toll road development, while the toll road links will be determined by the Minister.Government holds authority of toll road develo pment, where as parts of the authority concerning toll road business are being executed by Indonesia Toll Road Authority BPJT (Task and authorities of BPJT are described in Minister of Public Works Regulation No.295/PRT/M/2005.)Toll road business can be financed by the Government and/or qualified business entity. Financing by Government is for the toll road links that economically feasible, but not financially feasible. Financing by business entity is for toll road links which are both economically and financially feasible.Under particular conditions, where the toll road can not be developed by business entities, the Government will take proper execution in accordance with the authorities.Initial tariff will be establish by Minister as stated in concession agreement.The tariff will be adjusted every two years based on inflation index, an determined by the Minister.Procurement of either part of all aspects of toll road operation will be done through an open and transparent tender process.Land acquisition is responsibility of the Government, however its budget can be provided by Government and/or business entity.