Everyone knows that Jakarta’s transport infrastructure is a mess, with surveys citing its traffic problems as some of the worst in the world. As a result, when President Joko Widodo took office, he pledged massive spending on transport infrastructure projects, both in Jakarta, and across Indonesia.
One long mooted but regularly stalled “solution” to Jakarta’s problems is the Mass Rapid Transit (MRT) project, which finally got under way while Joko was governor of Jakarta. PT MRT Jakarta, a regional-owned enterprise, is handling the project, but the expectation that the MRT will be the magic bullet for the city’s transport problems undoubtedly weighs heavy on the company.
Aiming to have the MRT ready by 2018, the company is now building the first part of the south-north corridor from Lebak Bulus to Bunderan HI. Once completed, the project will move forward to the second stage with the south-north corridor from Bunderan HI to Kampung Bandan, as well as expanding to the east-west corridor from Balaraja (Banten) to Cikarang (West Java).
AmCham Indonesia met with Dono Boestami, President Director of PT MRT Jakarta, to discuss the project, its challenges and the development plan for the MRT in Jakarta.
AmCham Indonesia: Can you explain to us about this MRT project and the process whereby your company was appointed to handle it?
Dono Boestami: It’s actually a long story. The initial study for the MRT was started 20 to 25 years ago. It has been through six presidents, and is now on its seventh president. The project could have been running a long time ago. In 1997-1998, just before (Asian economic and political) crisis came to Indonesia there was already a plan to build an MRT from Blok M to Kota; however agreement could not be reached at that time. So the project stopped.
There were a few studies already on this project. Japan and Germany made studies, if I am not mistaken, the US also. At that time, Japan’s study revealed that actually the project was not feasible, while Germany said that it was feasible but it could not offer financial support. Around 2004, the study was re-activated. Japan published another study – with financial support – and that study said that the project was feasible. After that, the basic design was made, funded by Japan with a soft loan. The Directorate General of Railways of the Ministry of Transportation executed the plan.
Under this scheme, the central government made the loan agreement with the Japan International Cooperation Agency (JICA), and then gave the money to the provincial government in the form of a loan and a grant. For the grant, the executive agency is the Directorate General of Railways (DGR) and the executing agency is the Jakarta Provincial Government (Pemprov Jakarta). For the loan, the executive agency is from Pemprov Jakarta and we (PT MRT Jakarta) are the sub-implementing agency. We are 100 percent owned by Pemprov Jakarta, so we are a regional-owned enterprise (BUMD).
Some 10-15 years ago, Kuala Lumpur, Manila, Bangkok and Jakarta had the same traffic problems. But somehow those capital cities can now manage their traffic (with MRTs); Jakarta came last in building an MRT, but we get the best technology.
How do you determine if Jakarta’s MRT project is feasible or not feasible?
If it is about feasibility, the mass transportation project should be feasible. Feasibility can be measured through economic and financial points of view. For the economic view, because mass transportation is the government’s responsibility, the project should be feasible.
The Jakarta MRT needs around Rp 15-17 trillion. Based on a 2004 study, the potential economic losses that Jakarta will experience by 2020 are Rp 65 trillion if there is no significant improvement in transportation. It should be noted that this project needs five years to be completed, so if we spend only on average per year Rp 3-3.5 trillion, it is fair in comparison to the potential economic losses.
MRT Jakarta is listed as one of 21 projects in the Masterplan for the Acceleration and Expansion of Indonesia Economic Development (MP3EI), and the only project that is running. The latest review from the Coordinating Ministry for Economy highlights 17 priority projects from that plan, and again, MRT Jakarta is the only plan that is running now. Overall, considering the potential economic losses, this project is feasible.
From the financial side, Pemprov Jakarta is actually capable. Their annual budget this year is Rp 65 trillion. The previous year it was Rp 70 trillion. This project only costs around Rp 3 trillion a year, so clearly from a financial perspective, the project is feasible.
Why was the first route chosen Lebak Bulus to Bundaran HI?
The answer is now or never. The ideal choice is the east-west corridor. However, considering the increasing population density and decreasing green areas, we see that this route needs to be the first priority. We have been waiting for this for almost 25 years. In the past, it was easy to build as there were not too many buildings compared to today. We don’t have any choice but to start first with the south-north corridor.
What will be the capacity of the MRT?
When we are fully operating, the capacity will be 150 percent – in Japan it can be 190 percent. As an illustration, 150 percent means that when it is full, your shoulder can touch another passenger’s shoulder, but you are still able to read a book. When it is finished, Lebak Bulus to Kampung Banda will take not more than one hour. Our headway will be five minutes, and we expect to reduce it to three minutes. The MRT itself is not going to be driverless, but that role will be only to push the start button and for emergency matters.
Do you think the MRT will help reduce traffic in Jakarta?
As the first phase is only for 16 kilometers, the answer is no. To overcome Jakarta’s traffic, there is a need for synergy with other regulations. We know that Jakarta is now making efforts to implement electronic road pricing (ERP), and is actively clamping down on illegal parking, trying to limit vehicle volume and also increase tariffs. The MRT needs also to be synergized with those efforts to help reduce traffic in Jakarta.
The way we see it is to actually change the culture of the way people travel. It is now hard to get people to take a walk. So, we will re-design sidewalks, we will increase interconnectivity within buildings. Outside the country, the range that is acceptable for people to take a walk, or use a bicycle is around 450-700 meters. In Jakarta, we will make it short to 350 meters, and we will develop the design. Just for your information, Dukuh Atas will be transformed into a big hub. There is already the Sudirman train station and busway there, but in the future, there will be two lanes for airport trains there, a waterway and another six lanes of highway. We expect to build a skywalk to make it easier for people to move around the area. The master plan for this will be ready next year.
What are the challenges to building this kind of project in Jakarta and Indonesia?
From what we learned from this project – which also applies to other infrastructure projects in Indonesia and other countries – weak project preparation is the only challenge. Project preparation can be in the form of administrative, as well as legal preparation. When the MRT Jakarta project was given to us, we started reviewing the project preparation. We hired the best lawyer. Our auditor came from the Top 4 firms. However, after our review, we found that we still had a lot of work to do. I shared this with Jokowi (Joko Widodo, Jakarta governor at that time). Jokowi asked us to ground break the project the following week. We said we couldn’t, and we delivered the findings. It is to be noted that for the preparation, we must deal with several organization bodies such as the ministries of finance, transportation, home affairs, national planning, law and justice, environment and the provincial legislative councils (DPRD). Even for the Ministry of Finance, we were dealing with five echelons. When the Presidential Unit for Development, Supervision and Oversight (UKP4) still existed, we also reported to them.
The second is strong leadership. What I mean here is leadership that believes it is ok for them not to get credit for what they do. This is a mindset that not all bureaucrats have. At that time I said to Jokowi and Ahok (now Gov. Basuki Tjahaja Purnama, then Jakarta’s deputy governor) this project is not going to finish within five years (exceeding their then-tenures in office). I asked “It is okay for both of you?” and both of them said “It is ok, we are not even thinking about that.”
This kind of mentality is what other leaders don’t have. This mentality will greatly help the project. So the key is project preparation. For the MRT, because it has a loan from Japan, we have a lot of help from Japanese engineers. This helped us a lot in project execution.
Can you explain the project’s funding.
We received a tight loan from Japan. The Indonesian government received it from JICA (Japan International Cooperation Agency) through the finance ministry. The central government then gave the funding to Pemprov Jakarta in the form of a grant (49 percent) and a loan (51 percent). Pemprov Jakarta then gives the funds to PT MRT Jakarta in the form of fee equity. This scheme is very interesting. Our project has been recognized by World Finance Magazine as one of top 20 infrastructure projects all over the world – we are placed No. 16. Actually the total funding needed is considered small; it is only $1.5 billion for the first phase. We will borrow from Japan 125 billion yen in total. The rest will be topped up from government capital.
Do other regional-owned enterprises get funding schemes similar to the MRT?
No, we are the first the using the three-sub level agreement funding scheme: from central government and JICA, central government to Jakarta government and Jakarta government to PT MRT Indonesia. This kind of scheme can be a template for other projects. However, not all regions may follow this, as the budget size may be smaller than Jakarta.
What are the obligations of the government under this loan?
All obligations are written into the JICA guidelines. Under the agreement, it was written that for the civil work, Japanese construction companies should get a minimum of 30 percent. For the signaling system, they required a higher Japanese content at 80-90 percent.
However, the Japanese content definition is also very broad. The product is allowed to include products that are not produced in Japan. For instance the tunnels, we produced them in Karawang, but we partner with Kobe Beton and Wika Beton. So the definition accommodates flexibility, however, still, there are some areas in the project that should come from Japanese-owned companies.
The lesson learned from this is that for the future we will prefer non-tight loans, so we can have flexibility to use any technology available all over the world. JICA actually allows it, in Bangladesh the project with JICA is based on non-tight loans, so we just need to fulfill the requirements.
In the future, we will also request more in-depth studies for the current project is designed and being built. Nothing is wrong with that, but what needs to be understood is that in design and building, as time goes by, there is the possibility of changes. The consequences of the changes are cost and time. We need to be active to prevent this.
What is the budget for this project?
We have two corridors in total, south-north (the one we are working on now) and the east-west corridor. For south-north, we need $3 billion. It is quite similar for east-west, we need around $93-100 million per kilometer that we build.
Is the government open to capital from other countries? Is this allowed under the JICA framework?
We are still open to funding. For the second phase of south-north (Bundaran HI-Kampung Bandan) there is no commitment yet. JICA also has not made any commitment; however it has already funded the study for the second phase as part of first phase loan. For east-west also there is no commitment yet to the project.
We have already proposed a budget to the Ministry of Planning (BAPPENAS) through Pemprov Jakarta for the east-west corridor from Cikarang to Balaraja. The route itself will be 87 km. We expect this corridor to be finalized in 2025. This depends on BAPPENAS to decide whether this project will be funded from the State Budget, or by loans.
What is the business development plan of this project?
Before answering that, we need to know first the objective of the government in creating this project. Is the objective to make people that use personal cars to move to this system? If that is the objective, PT MRT Jakarta cannot set ticket fares that are too cheap. We are 100 percent owned by Pemprov Jakarta anyway, it just needs to receive a dividend at the end of the year. However, if the government wants to make it free so everybody can use it, it will be no problem for us also. That is why we will leave this issue to Pemprov Jakarta. Besides, as I explained earlier, we will be maximizing transit-oriented development, especially partnerships with the land/building owners near the MRT corridors.
