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Directorate General of Highways (Bina Marga) and
Indonesia Highway Corporation (Jasa Marga)
FINAL REPORT
Highway Toll S tudy (TANO. 2762)
Asian Development Bank
Submitted by
Jan A. Johnson ALM Resources Ltd. Sooke, B.C., Canada
J U I Y 2,1997
Harun al-Rasyid S. LUBIS Traffic Laboratory,
Institute of Technology, Bandung
ABBREVIATION
liina M'irga
I3K130U
BOI'
BTO
B r's CI'I
F IRR
Fcx
1 IDM
IIHCM
1 DC
IRMS
JM
JV
KEPPRES
MCI
MOF
Agency)
Directorate. of l+igl i \v~\ , , [lcpirtmc~nt ot I'uLiIic Work
: Bcsar Kcuntung:,in I3iai.a Opcr,isi l<cmci~irci~in (Vcliiclv operating cost s,i\,ings, including tiiiw sci\,ing)
: Build - Operate - Transtcr
: Buici - Transfer - OpcrCik~
: Biro Pusat Statistik (Bui-c.,iLi tor Central Statistic)
: Consumer Price Incicx
: Economic I11te1~1al Rat<! ~t I<ctLtrli
: Financial Intcrnal Rate of Return
: Foreign Exchange
: Highway Design and Maintcixincc Model
: Indonesia lHigliwa\. Capacit\r Mnn~ial
: Interest during construction
: Interurban Road Management S\rsteiii
: PT'. Jasa Marga ( Indonesia Highway Corporation)
: joint Venture
: Keputusan Presiden (Presiclcntial Decree)
: Mitra Pacific Consulinclo
: Ministr~, of Finance
PCI
PCU
PPN
PW
I? i 11 ba 11s Rp.
1: 1'1'
RUCM
-1 r; 13
voc
vo 1
: Pacific Consultant International
: Passenger Car Unit
: Pajak P e r t a ~ i i b ~ ~ h a n Nil,ii ( V ~ l u e Added Tax)
: Department of Public \Voi-k
: liurc'iu tor I< &I], P.T J'is'i k4argCi
: Ru piali ( I ncloncsi~in CU rrciici~)
: Rcnclel, Palmer & 'frini tton
: R o a d User Cost Mocicl
: '1 ' a1 : l t t - - IZCgLIlator\. l3o'lrLi
: Vehiclc Operating Cost
: Value of Tiine
EXECUTIVE SUMMARY
1. OVERVIEW The Government of Indonesia and Jasa Marga ha\,e had almost 20 years of experience with toll roads, starting with the opening of the jagorawi Toll R o d in 1978. In that time, under the orfi"l1imtion of J a w Marga, sc\'cn toll roads ,111Li
two bridges totaling 324.2kill ha\^ been constructed and operated. Sincc IWh, BTO, BOT a nci joint o pcra t i o i i pa r t iic rsli ips wit I1 outs i dc coni pa n ics t 111-0 LI g h lx) t 11 state enterprises and private consortiurns ha\,e been encouraged. Widening avenues of participation enables a larger toll road pwgratiimc to be undcrt,ikcs.n and mobilizes private domestic and foreign capital for invcstmcnt in the higher volume links of tlie road svsteiii.
2. OBIECTIVE AND SCOPE The objective of this Higliwav Toll Stuciv 11'1s been to recommend r i i i cippropri'itc toll setting and tariff adjustment mechanism which ciiii be applied by Jasa M'11-p
and joint venture companies for existing aiid planned toll roads. Several ii1cic.x formula approaches using different measures of inflation, including consuiiier prices indices were examined and discussed with Government, PT Jasa Mar31 (Persero) ancl ADB. In acidition, options for simplifying atid streainlining of institutional procedures for tariff cietcrminatioii and adjustment have been proposed for consideration b\' Go\wmiient. The goals for cievclotiiii:; '1
methociology and process for setting and revising rates included tlie folhviiig: - Preserving atid extending the pliilosophv and intent of
Law NuIiibcr 13, 19SO On Roads to acicircss contemporarv I3CX issues
- Full cost recovery
- Transpareiicv
- Consistencv 81 prcdictabilitv
- Provision of adequate private investor incentives
Achieving these goals clemaiids attaining tlie best balance among sometimes competing objectives. This balance is required in order to allocate development resources in the most optimal fashion ancl maxiinize the coiitribution to the I c ~ q - term, over-arching objectives of national and regional development and advancement of equiti?. These objectives, originally embodied in Law N L I I ~ T C I - u, (reproduced in Appendix 1) include the following:
economic efficiencv financial viability
I
affordabilitv to users
The approach taken in this study was to first examine the behavior of traffic anci revenues 011 existing toll roads and to review the histor\, o f toll tariffs and the iiiipact o f tariff adjustments upon traffic and diversion. To accomplish this, a set of case studies were selected i n consultation with jasa Marga which reprcscnted a cross section of toll roads in !a\u. C;lsc studies included the following:
lass Miirzci Priva tc loin t Vcntu re Urban
Mature: CaMU ng-7-omallg Cawang-Ti. Priok Developing: Jatingaleli-Kra~i\.a k Pd. Pinang-Kp. Ranibut,in
I ntcru rba I 1
Mature: Developing: I-'adalaraiig-Cileun\~i Tangcrang Barat-Mcrak
Analvsis included a rc \%w of traffic volume and coinposition on these selected toll roads anci utilized available origin/destination data to obtain profilcy on USCY
behavior before ancl after toll taritt changes. With the assistance and cooperation of Jasa Marga, travel time and speed survevs were carried out and VOC's cstiniated f o r toll and non-toll alternative routes. With this set ot finclings, analysis of Jasa Mar31 traffic data, and past studies on demand elasticity, estiniates of traffic diversion \\'ere made.
A re\.icw of the costs of toll roads- capital, operating, ancl maintenance, ~ v a s carried out. This also included a comparison of the toll tariff for different \rehick classes with respect to road maintenance cost assignment bv vehicle type.
To assess the impact of different toll levels upon economic anci financial returns, a case study of a project under investment process was analyzed to assess the consequences of different toll levels upon the satisfaction and trade-offs anicing these yield objectives.
The economic rate of return (ERR) with and without toll diversion effects bvas calculated ancl compared with the financial rate of return to the private joint venture. Sensitivity tests on critical variables including construction cost o\w- runs, opening year traffic, and traffic growth rates were carried out as well as tests of toll rates and diversion effects on traffic and toll revenue vields.
A critique of risk allocation measures ancl current government policv regarding land acquisition costs, toll tariffs, ancl revenues was undertaken. The assessment
took into account the connection between le\rels of risk, variabilitv of financial return and the implications for tariff setting and cost recoverv.
The analyses of the case studies provided a fraiiicwork for the analvsis of tlie toll tariff setting and adjustiiicnt mechanism. A toll tariff adjustment formula has been proposed and options p u t forward for institutioiializing rate rcvicci. and adjustment for existing and planned toll roads.
3. STUDY FINDINGS
3.1 Traffic voluiiic has increased dramaticallv on the toll road system. In the Jabotabck region, growth has been highest, For the Jakarta -Cikaiiipek, a\waglt a cvowtli lias been in tlie order of 77'X annuall\, since 1990, but as shown in thc below table, lias started to moderate. For toll roads outside of the Jakart'i 'ire'> of influence, growth has also iiiodcratcci from their initiallv high rates sliortl\. after opening. This is notable on the Randung bvpass, Padalarang-Cileun\i '>lid
the section in Semarang, Jatingaleh-Krapva k.
Toll Road Traffic Volumes and Revenues
Traffic Growth (ADT: % avg. chg/yr). 1990-'95 1993-95 __ 1994-'95
Cawang-Tomang 16% 14% 13% 11% Cawang-Tg. Priok 23% 17% 16% 9% Jalingaleh - Krapyak 15% 18% 8% 8%
Padalarang -Cileunyi 34% 22% 17% Dupak-Kebomas 40% 34%
Jakarta-Cikampek 22% 19% 18% 13%
The same phenomena can also be noted in revenues, but which have in gencral grown faster than traffic. I n the case of Cawang-Tomang-Taiijung Priok toll roads, this is explained largely by tariff increases in 1992 and 1995. For the other cases, growth in Tariff Class 11 traffic was the major cause.
Revenue Growth (ADT: % avg. chg/yr). 1990-'95 1993-95
Cawang-Tomang 25% 24% 16% 16% Cawang-Tg. Priok 26% 28% 19% 15% Jalingaleh - Krapyak 20% 26% 8% 8% Jakarta-Cikarnpek 31% 26% 22% 1 7% Padalarang -Cileunyi 31% 25% 19%
3.2 Toll roads organized by Jasa Marga tend to have lower tariffs per kn1, particularly interurban toll roads. Padaleunyi, Cikampek, and Jagorawi charge in the Rp. 80-90/km range, while the privatclv organized Jakarta-Merak toll road tariff is Rp. 153/km. Tolls on Jakarta urban toll roads tcnci to Lx. the highest, from Rp 250/km up to more than 550/ kin, the latter again for privatel\. organized segments of the system.
Studies on travel elasticity with respect to tariffs on interurban toll roads l ~ i \ t -
indicated values in the order of -035 for Class I traffic and from -.OX to -0.33 f o r Class 11. The cross section of toll road cases examined h o w c \ ~ r showed that in most cases, traffic tended after a few months to recover to its prwious growth trend.
Toll Tariffs, Elasticities, and Vehicle Operating Cost Savings
I n several studies for Indonesian toll roads diversion effects haw becn modeled as a function of toll tariff divided bv travel time savings. Other approachc~s ~41icli amount to the same have been the construction of diversion cur\'es A S '1
function of total traffic volume in the corridor which in turn affects congestion and user costs 011 the alternative, non-tolled road. Casc studies confirmcd t h c hypothesis that once corridor traffic reaches 30,000 ADT, Class I traffic diversion increases more rapidly, with Class I1 traffic following once total traffic reaches -10,000 ADT.
Field surveys on case study roads measuring comparative distance and travel time between toll and non-toll alternative roads indicated wide variations in estimates of user savings compared to toll tariffs, ciepending upon the vchiclc operating cost (VOC) model employed and the value of passenger time. A comparison of the results of the new revised PCI VOC model commissioned by Jasa Marga was made with the results from the original PCI moclel used for BKBOK measurement. This comparison indicated that for several urban toll roads the tariffs match or exceed user savings for what is considered a realistic (Rp 7000/1ir/vehicle) valuation of time for users outside of Jakarta. If the lower value of time (3281 Rp/hr) from the Indonesian Highway Capacity Manual (IHCM) is applied with the new VOC model, only tariffs on the Cikampek ancl Semarang case studies meet the 70% of user savings guideline applied by Bina Marga.
The aspects of vehicle operating cost ancl value of time are discussed in detail in Chapter 4. A simple VOC model specification which avoids laborious data in its implementation is preferred for the purpose of toll tariff adjustment. In the meantime the choice for such a.model is the revised PCI model. However, it was noted in meetings with Bina Marga that studies are on-going to validate the revised PCI formula as well as examine further an updated realistic value of
4
time. In parallel with studies by the Institute of Road Engineering on calibration of the HDM VOC model for the Interurban Road Management Systems (IRMS), the Transport Road Research Laboratorv of tlie U.K. has just started studieh on the value of time.
4. CIAWI-SUKABUMI TOLL ROAD PROIECT CASE STUDY
4.1 Economic Analysis An cconomic analysis was carried out on tltc poposeci toll r o a d project bct\v<-t’n Ciawi and Sukabumi, part of the link between Bogor and Bandung, and ‘111
alternative to the congested Puncak route. Benefits were based on the p)tcntial traffic which would divert to the new highwav facility, with and without tolls, coinpared with continued use of the existing 11ighway. Benefits were nieasurcci in terms of economic \d~ic le operating cost and passenger time sa\rings potentially gained on the new highway facilih,, coinpared with costs of usin;: tlw existing road. Benefits to potential generated traffic along the corridor were a h 1
taken into account, am1 following standard practice, estimated a t one halt the- unit benefits to normal growth traffic.
Estiiiiates of traffic diverting to the new highwav with and without tolls wcrc based on the volume/capacity and speed- flow relationships from the I tiCh.1. TIie nuimber of trips diverting to the new highway woulcl be however limited h\. tlie tiumber of through trips. Local trips were assumed to remain largely on the old road. The result of examining the project as a non-toll facility with its lower capital cost would be an economic internal rate of return (EIRR) of 29.8%. Wlicn domestic costs and time savings benefits are adjusted using standard conversion factors’ and opportunity costs to reflect the real cost of non-tracleci components, the effect is to increase the EIRR to 30.7%.
Organizing the Ciawi-Sukabumi highway as a toll facility would increase construction and operation costs and reduce utilization because of the impact of tolls upon diversion. This would have the effect of increasing the adjusted economic cost from 372.1 billion Rp. to 415.6 billion. It was assumed that cost for land acquisition would remain the same as for a non-toll facility.
The base case economic return for the project organized as a BOT toll road was found to be 24.1%. Increasing costs by 10% would lower the EIRR to 22.8%. A combined scenario of costs increased by 10% a i d traffic reduced by 10% would reduce the EIRR to 21.8 %. An increase in toll levels would reduce traffic and
’ Appendix 12. ADB Project Appraisal. Ciawi-Sukabumi Toll Road Project, May, 1997: SCF of0.943 applied on domestic, ion-traded components. and unskilled labour valued at 75% of wase rate: Non-wol-h and umkilled labour travel time saving similarly adjusted 011 benefit side.
consequently the volume of user benefits, which in turn reduces potenti'il generated traffic. A 25% increase in tolls ~ ~ o u l c l decrease diversion from thc existing road, to 35% and 16% shares for Class 1 and Class 11 traffic after opening.
Conversely, decreasing the tariff level ~ o u l c l increase diversion and the n u m l ~ c ~ r of users benefiting from the new facility. Diversion has been estiniatccl t o amount to 58% a n d 35% after opening for the two user groups. BY 2005, t h L w shares coulcl climb to 65% and 39% of corridor traffic. The EIRR in this cnsc- woulcl be 26%.
4.2 Financial Analysis Costs, toll tariff schedules, and the structuring of financing tor thc financLiI analysis have been based on tlie estiniates and proposals prepared b \ z PI' UuL>! i , i Marga Utama. Total costs cif the project including assumed S'X inflation during construction, and financing costs amount to SOS.5 billion R p . Excluding intercst during construction, the estimated cost wciuld be 668.5 billion R p in currcmt terms. In constant 1996 Rp. terms the financial cost woulJ be 556 billion Rp.
Several sensitivity tests were carried out to cleterminc the impact on the financiil rate of return from variations in kev parameters. Applving the current Rp. cost streams against traffic flows and tariffs assuined lw RPT/Bukaka, that is with generated traffic starting at 25 % of normal traffic in opening year and increasing to 30% bv 2005, the base financial internal rate of return (FIRR) on the projc'ct woul~l be 20.9% over the concession period. With tlie Bukaka financial structure as proposed, the return on equity would be 26.3%.
I n constant 1996 Rp. terms, this FIRR cash flow woulcl \field a project return of . , 14%. This coinpares favourablv with a weighted real cost of capital i n the orclcr of 7%.
A decrease in tariffs by 25% would increase Category I traffic by 20 to 25% and Category 11 traffic by around 15%. This would increase benefits to tlie econoniv, raising tlie EIRR to 26% from the base toll case return of 24%. From the private investor point of view, the impact would be negative with lower toll road revenues, decreasing the FIRR in constant terms for the project to the order of 12% from 14%.
Increasing tariffs by 25% would decrease diversion to tlie toll road, reducing traffic by 12 to 15 %. This would have the impact of reducing the EIRR to the economy to the order of 20%, but increase returns on tlie project to the order of 16%.
Given tliis situation wliere tlie imposition o f higher tariffs has the effect of tolling - off traffic and reducing the benefits to the economy o f potential transport savings, but perceived congestion relief and time savings remain high enough to still produce increasing toll revenues, the main reference point for BOT tariff setting becollies the financial return to the in\wtor. Tariff-traffic sensitivit\. tcssts indicate that the proposed tariffs arc still l~clow the investor rcvenuc~- maximizing level. I f re\’ctitic maximizing bccanic the tariff-setting critcri‘i, economic benefits would be reduc<d w i t h thc ISIRR to the ecoiioni\~ f‘illiiig below 20%.
Froin the investor’s point of view, the financial return to the project must ‘1s ‘1
minimum exceed the cost of capital. Based on the Bukaka financial plan w i t h h0 : 40 domestic : offshore debt a t interest rates of 20% a n d .ll% respccti\d\., tht , weighted nominal average cost of debt is in the order of 17% when coiiiniitm~~nt fees ancl charges arc included. Tlic forecast project rate of return in current terms a t 20.9% yields a margin of 4 percentage points over this. A SIOWCY clcvclopnicnt of generated traffic, not reaching 20% of normal growth traffic until five years after opening would rcciucc the FIRR in current terms to 17.h%, o r in constant, real terms, to tlie order of 11 ’%.
4.3 Conclusioiis Return on investor equity, tlic other benchmark for finaiicial fcasibilitv, must ,it least be comparable with returns available in otlicr sectors of comparable risk. A margin of 5 percentage points over ‘1 5 to 10-vcar average doniestic cost ( i t capital (nominal) at 20-21% could be taken as a reasonable long term liurcllc rate of return. The forecast nominal 26% return on equitv for tlie financial base crlsc‘ fits within this zone of imwtor liurclle rates and is lower than what might be acliievecl in otlier sectors.
A combination of adverse outcomes in the project such as a 10% cost over-run combined with 10% less traffic than anticipated would reduce real returns to tlic project to a real 11.7%. Given the cost of capital and tlie risks on costs ancl revenues, tlie tariff levels as proposed represent a reasonable compromise in tlie trade-off between economic returns to the national econoinv and returns to private investment
5. RISK ALLOCATION AND MITIGATION
In contrast to some otlier countries offering toll road concessions, Indonesia does not offer guarantees of opening year traffic, traffic growth, or minimum levels of income from toll tariffs. Toll tariffs and rate adjustments are established by Presidential decree and these are not officially set until tlie road is essentiallv
._
colilpletecl. Hence, risk coverage and distribution for prospective investors are built into the terms of concession. These terms include the opening toll tariffs, revenue sharing arrangements with Jasa Marga, the length of concession, and the construction period. While rapid]\, growing traffic levels produce a huovalnt atiiiosphere for revenue projections, risk balancing among the Government, as^ Marel, ancl the bidders has resulted in lengtliv and complicated negotiations.
5.1 Risk allocation/Miti~ation For toll roads which undergo a bid process, lass Mare1 has adopted a numbcr of nieasures to rcciuce the risk of default b \ r contractors before o r during tlw construction process. These uwasures include pre-clualifica tion of firms based ( in
financial capability and construction expericnce, tencler document provisions, and analvsis of cash flow and Ieiidcr commitments in tlic process of hid evaluation.
Major sources of risk in cost o\'erruii and timc delay arc largel!s borne b\. th(, bidder. While Jasa Marga guarantees that the government will acquire tlic right of wav, the bidder funds land acquisition cost and bears the risk f o r cost over- runs and delay. While negotiations around this p i n t include the extension o f concession periods as compensation, considerable front-end risk still persists. Room exists for the Government to assume more of tlie responsibility for land acquisition, including exercise of powers to freeze land values along the riglit ot w a y to curb speculative inflation of land prices.
As discussed in the section below, toll tariff risk has two elements; these arc comprised of firstlv, the initial opening tariff and secondly the meclianism and policy for future adjustments. The concern of investors is that adjustments will not keep pace with debt service, operating, maintenance, and periodic maintenance costs, particularly in an atmosphere of escalating prices, deteriorating exchange rates, ancl significant portions of off-shore debt to repay.
Under current practice, the opening toll tariff is not officially accepted until thc road is essentially complete. Jasa Marga can assure best efforts in processing tlie proposed rate through officials channels up to the President's desk, but until the KEPPRES is signed, the risk is with the investor. The contract with Jasa Marga in the Authorization Agreement contains a proposed forinula for bi- annual tariff escalation based on the consumer price index. However, risk remains that adjustments inav not be approved in a future administration. This uncertainty has perhaps reduced the number of potential bidders, and for those accepting the risk, led to higher premiums to cover the perceived risk
6. TARIFF SETTING AND ADIUSTMENT MECHANISMS
The nature of toll road investment inakes this particular forin of BOT venture more difficult to structure and finance than other forms of infrastructure o r utilities. Toll road in\vstnicnt costs arc concentrated at the beginning ot tl1<> project, pav-back periods are gcwerall\~ long, anci rc\'cnucs arc more difficult to predict than for other tiyes o f BOT investments. Unlike a power plant scr\.in:; one bulk customer, toll road usage is the product of thousands of incii\.idual customer decisions with the attendant wide variety of t r ip purposes and willingness to pay, For these rcascins, rcvcnue-maxiiTiij5iiig tariffs anci higher yields on equitv are sought b\r investoi rates of return tend to be higher than for other types of BOT projects in order to attract investors.
The cornerstone of a sound BOI policy is tlie establishment of 'i predictciblL* svstein for setting and adjusting toll tariffs. The most successful approach to this svstem is tlie incorporation in tlie bidding procedure anci autlioriz,ition agreement of a foriiiula which rcsol\vs uncertaintv on tariffs anci lienci~ increases investor confidence on revenues. This resolution can be met through .i tariff adjustment mechanism with cost indexing.
6.1 Current System Under the original 1980 Icgislation anci later implementing regulations,' thl, designation of a road section as a toll road anci toll tariffs by type of vehicle ' 1 ~ '
cieterniined by the President at tlie proposal of tlic Minister of Public Works. A toll road can only be officially designated when i t is essentiall\. coinpletc and tolls cannot be stipulated until this forinality is carried out. As presentl\, administered, this process requires a new Presidential Decree (KEPPRES) ever\' time a rate is filed, inclucling opening of new interclianges on existing toll roads where no change in vehicle/km rates may be entailed.
A lengthy and bureaucratic process is entailed to inove the tariff' setting and adjustment proposal up to the Presiclent's desk. Starting with the investor submitting the proposal to Jasa Marga for review, it is then passed to the Ministry of Public Works. Here it is reviewed in detail again bv the Subdirectorat Jalan To1 for conformance with BKOK guidelines. The proposal is then submitted to the Minister of Public Works for approval. It then is passed up to the Cabinet Secretariat for review, and if approved, will be submitted to the President for decision.
' "Law # 13 of 1980 On Roacis" governing tlie administration of the road network system , a n d Government Regulation #S, 1990 Regarding Toll Roads.
Tender documents issued by Jasa Marga in tlie 1995 bidding rounds stated that initial toll tariffs must be proposed by investor with reference to other toll roads. Guidelines also included the maximum tariff limit of 70% of BKBOK. The general guidelines suggested that for classifying tariffs bv vehicle tvpe, Categor!, IIA (medium, '-axle vehicles) tariffs shoulci be about 1.5 times Categorv I (light vehicles) and Catcgorv IIB (heavy, >7 axles), about 2 times Categor\, I .
Be\wnd pledges of best efforts, toll road B 0 1 ' projects have no binding agrcemcmt on tariffs until tlie facilitv lias been constructed and the President lias ' ~ p p r o \ . ~ d tlic application. Similarly, there is no guarantcc that future applications tor taritt adjustments will be appro\~cl on a systematic (11' regular basis. A s ' L 1' I S C U S S C ~ ' - . . 1 previously financing for projects must be arrangcd i n a framework which cannot guarantee a tariff which will necessarilv co\rer debt service costs. This clement of uncertainty and risk must then be incluJcd a s a n implicit premium on the cost of financing, particularlv for offshore funds.
Within the philosopliv of Law Number 13, i t is necessary to develop ii set ot aciministrative guidelines which will further interpret user savings for urban and interurban toll roads. Increasingly as traffic builds in certain corridors, congestion and delay costs will preciominate in the user savings function against which tariffs are compared. Particularlv for urban toll road systems, congestion charging by time of day should be introduced with lower rates for night anci oft- peak users. Lower tariffs for night-time use of interurban toll roads should also be considered for trucks anci buses wliicli are presently tolled-off sevc'ral stretches of the toll road system. This would encourage better utilization of tl ic> toll road assets and reduce lieav\T traffic on tlie non-tolled public network.
The index formula and guidelines contained in tlie Authorization Agreement represent an approach which is already familiar to investors. Proposals to further elaborate this formula in terms of framework for calculation anct procedures for implementing are set out below. Finally a number of options have been offered to formalize tlie process and provide an institutional context for applying this tariff adjustment mechanism.
- Regional differences sliould be taken into account in the CPI calculation as well as the user saving reference ceiling. Bureau of Statistics publishes monthly consumer price indices for the 27 provincial capitals, anci these sliould be used as a reference for regional CPI adjustment. This woulcl reduce the dominance of Jakarta in the index, which would otherwise tencl to distort increases.
. Because wholesale price indices on public works road and bridge construction have gone up less on average than consumer prices over tlie last
vears, 7.1 % compared with 8.1 % since 1993, routine and periodic niainteiianw expense would not be expected to increase at the same rate as general inflation. The B E index could be used for this coniponent of operating cost.
- operating and niaintenancc costs are a small percentage of total costs and price indices could arguablv rcflcct onl\r the increases in that component. Comparing these two elements o f local costs, operating and inaintenancc, including periodic maintenance and toll equipment renewal against totcll invcstincnt, on a present value o r capital r c c o \ u ~ ' basis, on-going, iion-tist*~i opcrating and niaintenancc costs iiiiikc u p ahout XI'% of tiic total cost. I l o w ~ ~ ~ ~ ~ ~ r , short anci inecliuni term debt can be considered a \rariable cost as well iimi b\. this argument should be partially indexed.
111 suniniarv, factors anci user saving upper bounds would take the following form:
New Taritt (Tr) = Old Tariff * (1+ a* [CPlr(iiew)-CPIr(ol~t)j/CPir(olJ)
this proposed tariff adjustment formula with its compensation
where: a CPlr
= proportion of lion-fixed operation costs to total costs, = regional consumcr price index
Subject to:
N e w Tariff < [Vehicle operating cost savings bv corridor and time of day + Passenger tinie savings bv region]
To handle cases where tariff adjustments would exceed the user saving guideline, a monitoring process and institutional mechanism is needed. This could continue to be carried out within the Ministry of Public Works (Subdirectorat Jalan Tol) with Jasa Marga participation, or alternatively, lodged with a Tariff Review Board outside the line ministrv .
6.2 Institutional and Procedural Options Alternative institutional processes for toll-setting and adjustment have been sct out for consideration. These options include the following:
Option I: Continue the present institutional system of determining the opening tariffs, but simplify subsequent adjustments using the index formula discussed above and delegating authority to the Minister of Public Works;
Option 11: President decides standard tariff adjustment formula for periodic tariff adjustment and delegates approval over subsequent adjustments to
. .
Minister of Public Works; Review and monitoring mechanism within Ministry of Public Works;
Option 111: President decides standard tariff adjustment formula for periodic tariff adjustment and delegates approval over subsequent adjustments to Minister of Public Works; review and nlonitoring mechanism placed with Tariff Review Board outside line Ministry of Public Works, but reports to Minister of Public Works.
The institutional options proposed for consideration should be compared on tlw b asis : . o f three criteria:
Simplification and standardization of procedures for tariff setting 'ind
Rcduction of risk premiums with more sccurit\. of acliieving toll tariffs ill; S L , ~
out i n Authorization Agreements; Increased predictability of tariff adljustmcnts to cover operating, maintcn~incc~, anci debt service costs.
adjustment;
Should tlie Government ciecide to procccci step-by-step in rcmodcling the, institutional meclianism for tariff setting anci adjustnient, the options o u t l incd above could be consicicred for transition steps.
7. Conclusions and Recommendations For Risk Mitigation and Tariff Adiustment Measures to iniprove the agreement tranicwork and regulatorv structure to remove elements of uncertainty which are within Government control includi, the following: i) Make a consistent policy which limits investor exposure on land acquisition
cost overruns; ii) Strengthen the long term planning function within Bina Mare1 tor
development of integrated urban ancl intercitv toll road svstems, anci make available updated, comprehensive masterplans to guide land use and land transport development;
iii) Incorporate in the tariff adjustment formula a mechanism which predictabl\. reflects cost increases and institutionalizes a process for tariff review and adjustment
iv) Simplify the tariff adjustment mechanism and delegate power to adjust rates to tlie Minister of Public Works
Within this framework of general recommendations, several issues must be addressed. These issues include both broader sectoral ancl macro-economic concerns for medium and longer term planning as well as practical approachcs for dealing with the current generation of BOT toll road projects.
I '
7.1 Sector Concerns Sectoral concerns raised bv ADD include the need to increase transport efficient\.. Private sector provision of toll roads represents a means of ensuring cost recoverv from users as well as r i i i instruiiicnt for funding improvements of thc trunk network which wou ld otherwise not be possiblc with limited domestic funds o r soft international loans. A commercial approach to network iniprovciiicnt in lieavil\~ traidcd corridors allows inore rapid dcvclopmcnt tli'in would otherwise occur and raises iiiorc tuii~is f r o m those users ablc to par than would be available f r o m road L I S C ~ charges 'iiid taxes. Tolls arc also '111 cfficicmt charge and redistributive tee on Taritt C,itcgorv I , higher income automotiilc users wlio, pirticularlv in congested urb'in ~rciis, Ii'ive sufficicntlv high tinit , values to be insensitive to toll tarifts.
Tliere are liowcvcr some caveats to this strict commercial view ot r o a d development. Strong arguments exist for not abandoning tlie pliilosopli\. of Law Number 13, in pirticular Articles 1.3 and 14 (see Appendix l), which states that toll roads arc an alternativc to the p b l i c non-toll network, and must hcs maintained as a choice to users bctwccn destinations and to serve local riccess requirements. Bv their nature, high-standard toll roads must have a limitcd number of interchanges and access points. Sccondlv, toll tariffs act a s r i n
adclitioiial charge on niovemcnt of goocis a n d people and the increased transport cost will reduce tlie zone of infl~icncc and number of beneficiaries potentiall\, affected by road clevelopmcnt. This will limit clcvclopment more than non- limited access highways. The public benefits ot roacl development are reduced in two ways; those users wlio are tolled-off either do not make intencled trips or acid to the congestion on the public road. Increased transport costs are reflected in passenger and freight tariffs and the economic return is recluced as shown in the Ciawi-Sukabumi case study
This creates the need for a balanced network development plan. On one hand, private investors must have assurance that a parallel, competitive high staiiciarcl public freeway will not be constructed in tlie future to erode their revenue base. On tlie other hand, local public roads must not be allowed to deteriorate to such a level that local corridor users become captive to tlie toll road concession.
7.2 Toll Rate Adiustment Mechanisms As discussed above, toll tariff acliustment needs to be institutionalized with a predictable and transparent formula and a simplified, streamlined procedure for administering. The current generation of BOT toll road projects has been tendered and bid within tlie context of a proposed formula which reflects inflation as measured by the national consumer price inde? (CPI). In this
context, bidders have proposed base and opening tariffs, anci these proposals becoiiie part o f the Authorization Agreements.
Howc\,er, there are several arguments that the CPI indexing approach o\'cr- rewards the concessionaire, in that in an\^ of the costs incurred b \ r the investor 'IK,
fixed in the mecliuiii and longer term. Operating and maintenance costs n i ~ l k c u p less than half the annual costs, the major share o f costs being clebt scr\.icc. The ADB supports the position that the indexing should be weighted o r discounted to reflect onlv that portion of costs which increases with inflation.
Determining the variable portion of costs depends however on the timc hori;ron taken. Given that tariff re\'ciiucs should cover debt service costs by the order ot 1.3 to 1.5 times? reliance upon the present domestic debt niarkct tor financing iiieans heavy reliance on medium-term financing i n the order of 5 years. Hence, over the medium term, a portion of debt scr\.icc anci the cost of capital 1wcoiiic.s variable.
This then raises the question of off-shore financing with lower rates and longer maturities available. For reasons of iiiacro-economic and balance of payments stability as well as the long term cic\~clopniecit of the domestic capital iiiarkct, local financing should be encouraged to the maximum extent. N o unneccssar\' inducements should therefore be given to foreign borrowing. This then argucs against inclusion of a foreign exchange acijustniciit factor in the tariff indexing formula. Another reason raised bv the Govcrnmcnt for not further considering '1
devaluation trigger in the adjustment is that Rupiah management policy anci its gradual depreciation are alreadv reflected in domestic inflation rates, and adding a foreign exchange factor in the forniula woulcl be double-counting.
Restricting then the adjustment formula to domestic price movement, economic scenarios can be drawn for various cases to determine the proper form of indexing. In an environment reminiscent o f Brazil or Mexico in tlie past ciec.idc3, inflation accompanied by economic stagnation or shrinkage could lead to a diminishing pool of customers able to afford tolls. On the other hand, much of the success of the Jakarta urban toll roads can be attributed to per capita incomes (and value of time) expanding two or more percentage points ahead of inflation.
Concerns with full CPI indexing also include the fact that high consumer inflation in heavily weighted items such as food stuffs, housing, and clotliing has limited relation to non-labour components of toll road costs. Escalating tariffs could also lead to the perception of wind-fall profits by concessionaires and
See Appendix 9.8. I. describing tlie Omnibus Ayee inen t for Nova Scotia Highway 104 wliicli stipulates coverage of I .2: I for the initial three years. and I .; tlirreafter.
public backlasi1, I t is I1oteci tl1ougIi that wit11 profit taxation am1 revenue sIlari11g with Jasa M a p , part of these gains can be CaptUWd back.
Regional cp~’s \ . ~ ~ ~ U I C I reflect inore accurately labour costs, than \.2wuld tlw higher, Jakarta-clominatec11 iiational CPI; Public works indices used in Iiigliu~ay contracts woul~l also be lnorc appropriate for routine and periodic iiiaiiitenancL> components of toll road operation.
Helice there are several rerisons to consider applying indexing to onl\f ‘I p r t 0 1 the annual cost stream of toll roads. This policy however should be dela!rcil until the next generation o f BOT toll roads arc tendered. Imposing a discounted C1’1 formula on investors w1i0 have rcsponcleci to the proposed full CPI index formula and may have proceeded through the signing of Authorization Agrecnients woulcl open a legal and financial tangle. Applying the CPI adjustment to the variable portion of costs woulci affect cash flows anticipated b\, investors. To coinpensate and rcco\w their anticipated returns, opening taritts would have to be renegotiated with the ol+xtive of making the present vduc o i the revc‘iiuc stream the same as under the assumption of full CPI indexing.
Raising opening year tariffs would then decrease diversion ancl reduce the iiurnlwr of beneficiaries and users froni the very beginning. For cxamplc, discounting the CPI impact on tariffs by 0.9 or 0.8 would mean point reductions in real financial returns of 0.8% to 1.6%. This woulci mean a demalid from investors for compensating opening tariff increases by factors of 1.06 and 1 .I1 respectively. This woulci reduce opening traffic bv the order of 0.9% and 2% and economic returns 0.3 to 1%. If a narrower view of variable costs is taken wit11 <i
discount factor of 0.5 applied, the opening tariff demanded by investors woul‘i increase by a factor of 1.3. I n the case of the Ciawi-Sukabumi project, the adjusted economic return woulcl drop to below 20% from the base case 24%). From a marketing ancl development strategy point of view, lower rates from opening would encourage an ed ie r , larger customer base, as well as gain better public acceptance. Most critical however in the current generation of projects is the prospect of further negotiation delays and investor dissatisfactioli. Hence this proposal for partial indexing should be delayed for later implementation with a subsequent generation of tenders. The application of indexing 011 k’artial costs should be examined further together with the question of time values using consumer stated preference surveys.
TABLE OF CONTENT
1. 1NTRODUCTION AND OVERVIEW .............................................................................. I
2 REVIEW O F TRAFFIC VOLUME, COMPOSITION Si TOLL REVENUE ............... 2
2.1 Traffic trends by signilicant origiii/destination pairs & vehicle types ....................... 2.2 Es-post Coniparisons with li.nsibility study li)rccasts ..................................................... 8 2.3 Summary & Conclusions ..........
3.1. Current Rate and Past Rate Acijustiiicnt 3.2 Impact of 1 ariff Increases 011 I ra l l ic ............................................. 3.3 Demand Elasticities and Diversion Analysis ......................
........................................................... I I
3. TOLL TAll lFF AND DIVERSION IMPACTS ............................................................ I I
........................................................... I I ......... 18
................................ 21
4. KEVIEW OF VOC’S ,TIME SAVINGS : COMI’AKISON WITH TOLL I<AlE LEVEL .................................................................................................................................... 26
. . . . . , . ._
4.1 Resiilts of Field Surveys on Toll niid Alternativc Roads ....
4.3 Review of Time Saving ............... 4.4 Comparison of Tariff Vs. VOC Savings ........................................ 4.5 Conclusion on VOC Saving
5. I Comparison of Investment Costs for Different ~l‘oll Roads .......................... 5.2 Maintenance Costs. ....... ...................... ............ 5.3 Comparison of Tariff & Maintenance Vehicle Type: Cikampek Toll Road Example ... ............................................. ............ .... 34
6. PROJECTED GROSS AND NET IlEVENUES FOR CASE STUDY TOLL IlOAOS46
4.2 Review of VOC .......... .................................................. ................................................................... 31
..................................... .: 8
5. CAPITAL, OPERATING AND MAINTENANCE COSTS ......................................... 39
Cost Responsibility By
7. CIAWI-SUKABUMI TOLL ROAD I’KOJECT CASE STUDY .................................. 48
7.1 Background .................................................................................................................... 48
7.3 Impact Upon Econoiiiic Returns of BOT Toll Road lmplernentati 7.4 Financial Evaluation of the Ciawi-Sukabumi Toll Road Project .................................. 55 7.5 Foreign Exchange Impacts ....................................................... 58 7.6. Impact of Different Toll Tariff Policies On Financial Returns .................................... 63
8. REVIEW OF RISK ALLOCATION AND MITIGATION FRAMEWORK .............. 64
7.2 Economic Analysis of Prqject As A Non-Toll Road ............
8.1 Background: Present Concession Framework: ................................................ 8.2 Current Framework for Allocation of Risk ......... ...... 8.3 Regulatory Context ........................................................................ 74
9. TOLL TARIFF SETTING AND AD.IUSTMENT MECHANISMS ............................ 75
9.2 Current System. ..................................................................................... 76 9.3 Legal Framework and Philosophy. ...... ......................................... 76 9.4 BOT Toll Roads and Joint Ventures ....................................................... ......... 7 1 9.5 User Savings and Tariff Setting ................................................................... 7 s 9.6 Tarilf' Policy Precedents and Ad.justmcnt Mechanisms ................................................ SO 9.7 Jasa Marga Proposals F o r A Tarill' Acljiisliiiciit I:oriiiiila .......... ................... s I 9.8 Conclusions and Ohserwtioiis 011 '1'011 'I'ari11'A~i~~tistmeiit For11 9.9 Alternative Institutional Arrangeiiicnts F o r Processing 'l'oll Tariff I'ropos~iIs i\nd
Tariff Adj ustiiiriits ................... .......................... 9.10 Summary ................................... ...... .........
9.1 Background ..... ......................................................................
10. CONCLUSIONS AND IWCOMMENDATIONS FOR IUSK MITICATION AND TARIFF ADJUSTMENT ...................................................................................................... XX
APPENDICES:
Appendix 1 Appendix 2.1
Appendix 4.1
Appendix 4.2 Appendix 4.3 Appendix 7.2 Appendix 7.4 Appendix 9.1 Appendix 9.8.1 : Nova Scotia, Highway 104, Toll Structure
: Law # 13, 7980 on Roads : Annual Trend on Traffic and Revenue on Case Study Toll Ro,icIs,
: Percentage o f Toll Tariff to VOC Savings under Variow V O T
: PCI VOC Moclel : Newly Revised VOC Moclel : Ciawi - Sukabuini Econoinic Analysis Table : Ciawi - Sukabuini Financial Analysis Table : International and Experience in Toll Tariff Setting and Adjustmcnt
1987- 1995
Assumptions
1. INTRODUCTION AND OVERVIEW
The Asian Development Bank commissioned this Highway Toll stud\. i n inid- March, 1997. The Executing Agency for the stuciv has been the Directorate General of Highways which along with PT Jasa Marga (Persero) has kwo\rictcci overall guidance to the consultants in their work. Jasa Marga pro\rideci extcnsivc office ancl logistical support. Through the liaison committee chaired b v the Research Bureau with active participation bv Investnwnt De\dopment Di\-ision, as well as Iiwcstment Analysis, Toll Collection, and L c p l Ditrisions, the st'lft of Jasa Marga have been a vital s ~ u r c e of inforination and polic\r insight.
The objective of the study has been to assist the Government and Jasa Marga i n reviewing the current toll setting forinula and to recommcnci a revised toll setting methodology. This included development of a toll tariff adjustment formula to ensure full cost recovery a i d transpirencv, anci prwiclc adcquatc incentives to attract private sector investment.
The Government of Inclonesia anci Jasa Marga have Iiad alinost 20 \'ears of experience with toll roads, starting with the opening of the Jagorawi Toll Road in 1978. In that time, uncler the organization of Jasa Marga, seven toll roads '1id
two bridges totaling 324.2km have been constructed a n d operated. Since .I Wi, two tvpes of partnerships with outsicle coinyanies through both statc entcrpisc~s and private consortium have been encouraged Widening avenues of participation enables a larger toll road prograinme to be undertaken and inobilizes private domestic ancl foreign capital for investment in the highcr volume links of the road system.
These public/private partnerships have been organized as "Build, Transfer, Operate" (BTO) and " Build, Operate, Transfer" (BOT) types of structure. As ot January, 1997,4 sections of toll road and the Tallo Lama Bridge (Ujung Panclang) amounting to 140.3kin had been coiistructed and were being operated under BOT arrangements. Another 10 sections amounting to 193kin are currently under construction, two of these, Palimanan- Cirebon and Seinarang Seksi C organizcd under modified turn-key (BTO) arrangement.
By the end of May, 1997, 31 projects were under consideration or starting impleinentation. Jasa Marga had signed Authorization Agreements Ivitli 6 operators, and was in the process of negotiating agreements with 7 inore potential partners. The other 17 under investinent process had been selected but had not proceeded to the next stage of negotiation.
These projects represent a wide range of toll road projects, from urban to interurban toll facilities. The urban network links include four proposals in the Jakarta urban area and would amount to 60.4kin. I i ~ ~ l ~ ~ l e d in proposals are projects to complete links in the metropolitan ring road and connector s\rstem a:,
well as adcl a combination road-rail transit corridor in the north-south axis o f the city.
The interurban proposals amount to 905km of new toll road, of wliich 246.4 are in West Java, ??6’.9kiii in Central Java, and 2S0.3km in East Java. A few projects invited in the May, 1995 list havc bccn postponcct because of low traffic expectations and lack o f bidder interest. These incluctcd the Medan-Binjai stretch and Labuan-Cilegon-Bojonagara sections. Four previousl\, offered sections in tlw Solo-Mojokerto corridor were also scaled back troii i 700k111 to 3S kin., anci the Aloha-Waru-Tanjung Pcrak proposal has been reduced to 14.7km instead of tlw originally planned 31.6km.
2 REVIEW OF TRAFFIC VOLUME, COMPOSITION &TOLL REVENUE
The case studies represent a cross section of toll roads in Java selected h\, consultation with Jasa Marga in the carlv stage of the study. These comprise t o u r jasa Marga ancl four private joint \witurc tinancect toll roads, covering urban ‘ l i d
interurban toll roads with mature and/or dc\dopiiig traffic levels, as s l i o w i i below.
I’rivatr Joint Vcnturc
National statistics tell that traffic has grown 3 to 5 times in tlie last two decades. TIie annual growth of vehicle ownership is in tlie range of 5 - 8 % for the average province, ancl is higher in big cities. Car ownership levels are still at a very initial stage at about 18 per 1000 persons nationally but this statistic is rather skewed towards more developed areas. For example in 1995 DKI Jakarta’s figure was 150 per 1000 persons, Java ,21, and Sumatera was 12 per 1000, all of which are still far away from tlie international saturated level. With tlie plienoineiia of the national car in recent years ancl trends towards cheaper car prices in tlie future, the growth of car ownership is expected to be higher in tlie near future.
With regards to toll roads PT. Jasa Marga through tlie Division of Toll Collection records the amount of traffic exiting and entering toll road sections as well as the revenue over time. Questions on average daily traffic, monthly and/or yearl\, variations of traffic am1 of re\renue can be exainined tliorouglily for any purpose. For examples from monthly report of Jakarta-Cikainpek toll road , over tlie period of 1991 to 1996 overall link average dailir traffic (ADT) increased by 32%)
annuallv for Class I, while Class HA increased a t 20% ancl, for Class 118 126"6. Here, tlie 11B category represents mostly freight carriers which grew dramaticall\. on certain links of tlie toll road, in this case towards tlic Cikampek end where a d ry port and industrial estates arc located.
For all \diicle classes the Pd. Gccic Timur-Bekasi Barat link which is close* to Jakarta is found to be the busiest amongst the nine links available on the toll road. This can be explained ti\, the land use intensitv along that section, niostl\r residential estates, which generates ancl attracts iiiorc traffic compared to other sections.
Moreover, over tlie period of 1991 to 1996 o \wa l l link traffic composition was in tlie range of 62% to 93% for Class I , 5% to 2X?;3 f o r Class I IA and 1% to ~ I O ? ; ~ tor Class IIB. Tlie share of Class IIA and IIB is getting larger on the links approaching Cikaiiipck area, indicating h i i d use changes arc still uncicr wav in tlie region.
The trends for tlie remaining case studies arc summarized in Table 2.1. I t can be seen that tlie growth of the link flow is iiiorc stable on mature toll r o d s , espc%iallv for Class I traffic. Tlie traffic growth range stabilitv f o r Class I I I3 vehicles is less, ancl tends to grow very rapidlv when the toll road is located iic'~r an industrial estate or dry port, for examples in this case, are Jakarta-Cikampck and Taiigerang Barat-Merak toll roads.
The average link traffic coinpositions arc within tlic range 80% to 88% for Class I , 9%-14'% for Class IIA and, 2% to 1 7 % for Class I I B for all case studies.
Traffic trends ancl re\wiues can be examined b\r tlie iiuiiiber of aiiiiu'>l
transactions counted at tlie exit gates. Figures 2.7 ad 2.2 depict tlie aiiiiual traffic trend ancl tlie corresponding revenues on all case studies toll roads. The growth statistics are also summarized in Table 2.2, at least up to 1995, as 1996 statistics is being audited when the study is carried out. For more detail tlie raw data on this is attached in Appendix 2.1.
Over tlie period of 1989-1995, 1990-1995 ancl 1991-1995, amongst tlie interurban case studies toll roads, Jakarta-Cikampek traffic grow, respectively, at 44%, 26% aiid 22.5%. The other interurban case study toll road wliicli has growth rate closer to Jakarta - Cikainpek is Dupak-Kebomas. These two toll roads were identified as having mature traffic in tlie case studies. Others with developing traffic show' a lower traffic growth over tlie period investigated. For instance, Padalarang-Cileunyi and Tangeraiig Barat- Merak interurban toll roads grew at 18% and 6%, respectively.
Tlie urban toll roads of Cawang -Tomang and Cawang -Tg. Priok grew at 16% and 23% over tlie period of 1991-1995. The other urban toll road under case studies that has historical traffic data is Jatingaleli-Krapyak, while Pd. Piiiang -
Kp. Rambutan has just been operatcd only since 1996. On the Jatiiigalch - Krapyak toll road traffic grew at 17% O\W the period of 1989-1995.
80
70
60
- ,,j 50 IT W ' 40 C 0
.c 30
20
10
._ - - - ... x
1987 1988 1989 1990 1991 1992 1993 1994 1995
Figurc 2.1 Annual Traffic Trends
160
140
120
= 100
80
- 60 5% 40
20
0
[L
0 ._ - ._
1987 1988 1989 1990 1991 1992 1993 1994 1995 - Caw ang-Tomng +Caw ang-Tg. Riok + Jatingaleh - Krapyak
. . .o.. . Jakarta-Clkanpek . . . x . . . Padalarang -Cileunyi + W.Rnang - Kp.Rambulan Dupak-Keboms __ Tangerang Earat-Merak
I Figure 2.2 Annual Revenue
Higliiiiq Toll Stud!, - A D 5 1997 4
Table 2.1 Annual Link ADT Growth and Composition
IIA Toll Road
IIB
Cawang-Tg. Prick Jatingaleh - Krapyakb) Jakarta-Cikampek Padalarang -Cileunyi Pd.Pinang - Kp.Rarnbutan Dupak-Kebomas
Class I Period
1989-1 996 1991-1 995 1992-1996
1IA ADT Growth(%)
n.a. n.a. n.a. 29
32, (22-42) 25, (17-35)
n.a.
n.a. 4
20, (11-56) 24. (17-30)
n.a.
llB n.a. n.a. 1 la)
126, (44-418) 68, (42-84)
n.a. 43, (25-62) 42, (17-108)
1995-1996 1992-1996 lote: i'igures in the fable represent: mean, (range)
a) Period of 1992-1996
24, (6-35) 26, (7.88)
15, (9-25) 90, (38,286)
Traffic Comoosition (%I Class I
n.a. n.a. 60a)
80, (62-93) 88, (85-92)
n.a. 80, (73-83) 80, (55-88)
15, (5-28) 5,(1-10) 10, (7-13) 2, (1-3)
9, (6-12) 11, (9-14) 14, (8-33) 6, (2-1 1)
b, One section only
Table 2.2 Annual Traffic (Transaction) & Revenue
Cawang-Tomang Cawang-Tomang Cawang-Tg. Priok Jatingaleh - Krapyak Jakarta-Cikarnpek Padalarang -Cileunyi Pd.Pinang - Kp.Rambutan Dupak-Kebomas
1988-1995 45,865.009 78,890.838 1991 -1 995 57,365,934 11 1,682,342 1991-1995 18,876,070 37,440,886 1989-1995 251 4,444 1,270,583 1988-1 995 39,447,437 67,371,662 1992-1 995 11,917,583 15,583,838
n a n a
27 16 23 17
44, 22.5' 18
n.a.
67 25 26 23
72, 31' 15
n.a. '1994-1995 6,753,013 6,480,428 40 112 1990-1995 12,676,749 36,817,408 6 56
Note * F o r period 1991-1995
5
Trends on annual revenues follow the traffic levels. However any historical trends on revenues should be carefully considered as they are influenced bv the tariff increases over time. The elasticity of demand due to tariff changes are the subject of discussion in Section 3 later. In this section, w e outline the trends on rc\'cnucs, regardless of the tariff levels. As can be seen from Figure 2.2, revenue incrcmcs more rapidly over time on all toll roads, though traffic levels on few sections slo\,vl\. increasccl o r even flattened o f f for soine periods, particularlv for the T'iiigc*i-'iiig Barat - Merak toll roacl.
Some revenue statistics for the case studies toll roads arc sunimarixed in l-iihlc. 2.2, showing the average annual re\vnuc in Rp. and its growth rate over tlic p*rioci investigated. Some contrasts were evidenced amongst the toll roads, a fem, with low annual traffic growth may have a significant increase on revenue. This excm~ilifies the significant effect of tariff increases on revenue, such as on Tangcrang B'irat - Merak.
With regards to urban toll road, tor example, over the period of 199~1 to I')% revenues froin Cawang-Tomang were three times the Cawang - Tg. Priok toll road, though the two have almost the sanie revenue growth rate, i.e. 25% to 26'itn. -l'he traffic on Cawang-Tomang is inore saturated than on Cawang-Tg. Priok, as c'in be seen from the annual traffic growth rate in Table 2.2. Cawang - Tg.Priok is I3OT- financed, while Cawang-Tomang is Jasa Marga-financed and had been operating earlier. The two sections haw now been merged uncicr one operator sincc 1990 \\,it11 75%:25% Joint Venture : PT. Jasa Marga revenue sharing, with a concession ( 1 1 111o1'c than 30 year.
2.1 Traffic trends bv significant origin/destination pairs & vehicle types
Traffic by origin/clestinatioi.l was analvzeci from annual traffic reports provided ti\. Jasa Marga. To see the historical trends, however, a fixed gate-to-gate o r origin/destination setting is needed throughout the year, with preferabl\, a long distance toll road in order to look at the vehicle types distribution. Also, this can only be clone for a toll road that was built in one stage, with no further extensicin. In this case Jakarta-Cikampek is a good example for illustration, ancl serves quite long distance trips. Another long distance toll road such as Tangerang Barat-Mcrak unfortunately has been gradual extended since 1988, ancl finished in 1996 u p to the Merak toll gate. Therefore it was not taken as an example.
Figures 2.3 show trends of traffic bv destination on Jakarta-Cikampek toll r o a d For Jakarta-Cikampek direction traffic from Pd.Gede Tiinur (PGT) to Cikarang grew more rapidly than other 0 - D for all over the period at 1991-1995. Class 1 traffic grew at 102%, class IIA at 15% and 135% for class IIB. Annual average growth re
6
39.84% for class 1, 6.42% for class HA and 60.42% for class IIB. Annual gro\\.th of ffic for every 0 - D are summarised in Table 2.3.
Jakarta-Cikampek Direction
14000
12000
10000 - i f 8000 I - 2 6000
4000
2000
0
.Class I. 1991 OClass I, 1995
OClass IIA. 1991 DClass IIA. 1995
OClass IIB. 1991 OClass llB. 1995
Ci ka m pe k J a ka rta Direction
5000
4000
- $ 3000 > k 0
- a 2000
1000
0
.Class I, 1991 OClass I, 1995
OClass IIA. 1991 OClass IIA. 1995
OClass 116. 1991 OClass llB. 1995
or 2: :a 5
* 1 _ m P F : 5 .E O u au"
L P 1 Y 2 0 , x m m c a 0 "
E 'L m n m 10
1 3 -
g ; - 5 $ $ E .= ::
om" Origin-Destination a 1 9 u
Figure 2.3 Trends of Traffic by Destination on Jakarta-Cikampek Toll Road
7
Table 2.3 Annual Daily Traffic Growth
I From-To Aiiiiual Growth (%) Class I * Class 1IA Class I IB
PGT-Bekasi Barat 37.60 -5.26 12.21 PGT-Bckasi Timur 4'1.35 4.64 10.71 PGT-Cibi tung 21 .99 4.26 11.1.: PGT-Ci ka ra IIC 102.63 14.77 135.23
lakarta-Cikamoek Direction 1991-1995
PGT-Karawang Barat 26.51 11.93
PPGT-Ci kampck 26.42 13.29 Averace 39.84 6-42
PGT-Karawang Timur 14.40 1.34
~ ~ ~ ~~~
87.50 90.63 73.00 61) ;-I
From Cikampek to Jakarta on the other hand, traffic class I and IIA grew rapicilv on Cikampek-Karawang Barat 0-D, while class IIB grew on Cikampek-Karawang Timur. From Table 2.3, it can be sccn that class IIA (buses) may have a declining growth on some 0 - D routes. This is perhaps because most buses changed their normal routes to alternative routes.
2.2 In many previous toll road feasibility studies, it was assumed that future traffic can be estimated from the GDP growth per capita and the car ownership levels. For simple interurban road networks, where at most two alternative road are available, iiicluding the toll road, an empirical PCI style diversion curve approach was
Ex-post Comparisons with feasibility study forecasts
8
frequentlv used in past feasibilitv studies', from which future traffic levels were estimated. More discussion on diversion a n d / ~ r road assignment studies will be described in Section 3 below. Past traffic forecasts sometimes significantly de\.iate from tlie actual figures, and for illustration it is interesting to compare the tr'itfic forecasts niacie prior to construction with the actual traffic obser\vci during the operation o f the toll roads. Three toll roads arc taken as examples for this purposes: Jagorawi, Jakarta-Cikampek and Jakarta-Tangerang, all of which are interurban toll roads.
Figure 2.5 depicts forecasts ancl actual traffic \zolume on the three toll roads. C 3 w the period observed, traffic volume on Jagorawi toll road grew bv 12% annucillv, 28% on Jakarta-Cikampek and 23% on Jakarta-Tangerang. Tlie forecasts niii\' have had good estimates for the initial periods, such as on Jagorawi, but deviatc ‘inti uncierestiniate the traffic 5 to 6 years after. On Jakarta-Cikanipek, tlie initial period traffic was overestiniatecl significantl\r, although later the actual growth was higher than the forecast. The sanie thing happens on Jakarta-Merak, where forecastwas quite match with the actual traffic in the initial war, and later tends to under estimate tlie actual traffic.
Tlie cliscrepancv between forecast ancl actual traffic is caused b\r a number of factors. This is a matter of the accuracy of tlie transport model, the quality of data and tlie forecasting techniques employed in tlie studies to capture the future trends of socioeconomic variables explaining toll road traffic behavior. Tlie fact that tlic actual traffic tends to grow along tlie expected levels i n the beginning ancl deviates sonic years later above the forecast levels would be a good subject for an ex-post evaluation. This kind of study is generally lacking in any part of the globe. Land-use control issues perhaps are a very important aspect behind this. Practice in Indonesia has unfortunately been to put too much faith on the inaster plan style for both regions and cities. Many revisions cannot be avoided soon after master plans are finalized, since land use controls are difficult to enforce.
The model estiiiiate the proportion of trips using the toll road (P) based on the formulae: P=K/((l.O+(a*(C/T)"b), where C/T the ratio of toll cost to travel time difference, a & b are empirically derived from other choice set studies, and K is the upper diversion threshold. Tlie formulae is also used to study the impact of tariff increases on traffic.
Ave
rage
Wei
ghte
d A
DT
--
L-
NN
WW
b
Ln
ov
lo
Ln
o
xooooooo
00
00
0~
~
000000000
1985
G 1986
w
1987
1988
n 2 E c
1989
? P
1990
n R
R z
1991
2 K c 1994
0,
*
1992
1993
c
Ave
rage
Wei
ghte
d A
DT
-N
WP
O1
0
00
00
0
00
00
0
00
00
0
00
00
0
lgE8
c-'
1989 p
I
c
m
X
W
1990
3 1991
0
3 X
W
0 m X
1992
1993
1994
Ave
rage
Wei
ghte
d AD
T
-N
"P
VI
(D
0
00
00
0
00
00
00
0
00
00
0
00
00
00
0
1983
7
1
1984
1985
1986
1987
1988
1989
1991
1992
1993
1994
.
2.3 Summary & Conclusions Traffic volumes on toll roads and the alternative free road varies depending on the intensity of the land use surrounding the road corridor. Toll roads located near a city tend to have a peak hour spreading anci congestion phenomenon. I f the toll road is rather congested tlic situation on tlic alternative tree road is bound to bc morc congestcci.
For interurban toll roads, the situation now in Indonesia shows that \,arious inciustries prefer to place their factories, warehouses, housing anci super blocks on the adjacent land along the toll road. With the availability o f an intcrcliange to exit a n ~ i / o r enter the tol l road, the industries gain good accessibilit\, especially for their distribution system in addition to having inore open space and clicapcr land away from the city. With no strict land use control, as experienced by manv cic\~eloping countries, tlie ribbon de\&qxiient along the interurban toll road has resulted in severe access problems to get into the tit!,, with the link flow getting larger m c l larger as the city is approached. Thc c a w of Jakarta-Cikaiiipck is a good cx'iniplc. Increased commuting on the Jagorawi toll road leading to saturation in tie'ih h o u r s is another example, not foreseen at the planning stage to occur so early.
The foregoing analysis tells how uncertaintv may affect a traffic forecast. With the current practice on toll road investment, the risk on traffic forecast rests o11 the investor side. In order to maintain revenue targets over tlie time horizon, in\x>stors have to have a n accurate estimate of thc level of traffic. Since traffic fluctuates as the road network anci land usc iicvelopment changes, i n the future at least within the current growing physical planning anci weak land use control practice, i t is not cC1sy to provide a good estimate of traffic, as shown in the above analvsis. More extensive sensitivity analyses on revenue as traffic cliangcs would still be good practice in the future, as well as the clevelopment of more robust traffic forecasting techniques.
3.
3.1. Current toll tariffs in Indonesia range quite widely in terms of charge per km. Lowest rates are set on interurban toll roads in lower traffic, developing areas. Table 3.1 summarises toll rate per kni for several interurban-urban toll roads. Exainples for light vehicle tariffs include Tangerang Barat-Merak (Rp. 153/ kin) and Semarang (Jatiiigaleh-Krapyak Rp. 59/kili). The next tier of interurban toll roads are more developed and bear a n intermediate rate on longer distance or tl-rough traffic ranging between RP. 86/km for tlie Paclaleunyi Toll Road, Rp. W/km on the Cikampek, and RP. 8O/ kni on the Jagorawi. These longer distance exainples are drawn from Toll facilities organized by Jasa Marga. Shorter trips, particularli, in urban areas tend to cost more. On the Cikampek toll road, the 6 kin. trip from Pci.
TOLL TARIFF AND DIVERSION IMPACTS
Current Rate and Past Rate Adiustment
Gecie Tiiiiur to Bekasi Berat costs R p . 25O/km.; a 16 km trip out to Cibitung would drop to Rp. 156.3/km. For different class of vehicles the rule of thumb is tariff for Class IIA is 1.5 times Class 1's tariff, and twice for Class IIB.
Privately organized toll facilities tend to h a w higher tariffs. Examples include the Tangerang Barat-Merak toll road with tariffs for longer distance trips on tlw pri\ ,atc section bevond Balajara Barat to Ciujung (20.6 km) and to Mcrak (59.6 km) cli,irgcd a t Rp.l-15.6 and l42.6/km rcspectivcl\r. On the Jasa Marga portion of the ro'id trom Kebuii jeruk to Tangerang Barat, tariffs arc lower f o r the 23.2 kiii jouriicv, . lOi.S/ k m for light vehicles. Similar contrasts can be found in Surabaya where the Jasa Marga stretch between Waru and Sidoarjo of 11 km is cliargcci at 90.l/km. For the similar length Tandes-Kcbomas 12 km stretch under private organization, the tariff is I<P. 248/km. Part of this facility is operated as an open svsteni and tariffs arc' not directly comparable. For instancc to travel the -1.3 km from Tandcs to D u p k costs Rp. 116.3/kni.
Urban toll roads in congested areas tend as should be cxpcctcci to charge liighcr tariffs. On the Jakarta inner ring road svstcm, assuming a trip length of 12 km, taritfs for this open system arc R p . 250/km for light vehicles. On the Dr. Ir. SeJi\wtmo 'id Cengkareng facilities with tariffs of R p . 4000 and 2000, tolls could range between r\p. 250 to 500/km clepencling on trip length. The highest cost sections also inclucic. the southern arc of the Outer Ring Road which is privately operated. An 8.8 km trik7 between Poiiciok Pinaiig to Lenten;: Agung costs R p . 284/klli. For the entire 1-1,s km's open since late 1996, tiic tariff f r o m Ponciok Pinang to Kp. Raml>ut,ln is currently Rp. 270/klii., but for 1.8 kiii between Fatiiiawati and Pondok Pin,lng, the charge for light vehicles is Rp. 1000 or Rp. 556/kiii.
1 US$ = R p 2,400
12
3.1.1 Toll Tariffs and Inflation For several of tlie toll roads organized and operated by Jasa Marga there Iias been no acljustment of tariffs for sonic years. The last tariff increase on the Jagorawi, Cikampek, Jakarta-Tangerang Barat, Scniarang, and Pacialeunyi toll roads was in 1Y92. Consumer price index increase in average 8.3 in the last 5 years. O \ w the years the CPI increase plotted in Figure 3.1. With inflation as measurccl 131. the Consumer Price Index, the real \~a lue o f thc tariffs lias fallen to 63% of its 1992 \.'llue in constant terms.
Increase in toll rate (Rp/km) vary from place to $~cc. Jasa Mar31 financed tol l r o d s seem to have a rather stable rate in last 4 \uirs, while Joint Venture's rate increase quite significantly in tlie last two years especially on Tomang-CaM,ang-Tg. Piok, 'ind Pcl. Pinang-Kp. Ranibutan, see Figures 3.2 and 3.3,
1980 1981 1982 1983 1884 1985 1986 1987 1988 1989 1890 1991 1992 1893 1994 1995 1996
YEAR
Figure 3.1 Increase of CPI
13
12c
1oc
8c
E 5 GO z
40
Toll Ratelkm - Jasa Marga
DlalmgaCh-Krapyak
1 19-30 1991 1992 ,993
Yea.
1994 1995 19% ,997
Figure 3.2 Toll Ratefim - Jasa Marga
Toll Ralelkm .Joint Venture
300 0 Tomang-Cawang-Tg Priok
OPd Pioang-Kp Rambulan
1990 1991 1992 1995
Figure 3.3 Toll Ratefim -Joint Venture
19% 199i
14
in the case of tlie Kebun Jeruk- Tangerang Barat section o f Toll road, the avcragc tariff weighted by vehicle class was Rp. 92/k111 i n 1988. Using this as a base \'ear, tlie 1996 tariff would be equivalent to Rp. 39.5/kni in 1988 constant ternis, e\-cii after the average increase in the order of 30% in 1992. Siniilarlv tor the Jakarta- Ci!anipck toll road, the 1996 tariff in constant 1988 terms aiiiounted to R p . 36.8/km comp,ired to the 1988 level of RP. 83/km. In 1992, the class-weiglitcci tariff was incrcascd by one third to Rp. llO.-L/km; by 1996 this would represent RP. 69.8/km in l"? KP. terms.
This decline of toll tariffs in constant R p . terms coupled with the incrcasc. i n rcal income per capita explains much of the traffic increase seen on the toll road network. Corresponcliiigly, the income effect for car users has been iiiorc dramatic, leading to high growth rates for this class.
The response o f traffic to toll tariffs is often iiiaskcd by the rate of traffic gro\vth; economies with lower growth rates are less likcl!, to experience the upward shifts of travel demand curves as car passenger time values increase in real terms faster than toll rates increases.
I n developing economies, traffic growth is dominantly a function of eccinomic growth. Elasticities of traffic with respect to GDP growth are generally high, \\.itli values in the order o f 1.2 to 2 (Inctoncsia and Mexico) and from 1.5 to 2.2 (Mala\% ancl Thailand). For that population of customers disposed to take advantage* of significant time savings, the price sensitivity to tariff increases is relativelv low, with price elasticities for automobile traffic is in the order of -0.1 to -0.2.
On the other hand, an economic crisis and downturn in activitv can Iia\ac a iiiorc chilling effect on traffic than toll increases. The 1983 economic downturn in the Indonesian economy appeared to have as great or greater an impact on traffic in the Jagorawi corridor as the June 1983 tariff increases of 100 and 150 percent.'
3.1.2 Toll Tariffs: International Comparisons Table 3.2 shows some international rates. Indonesian toll tariffs tend to be higher in comparison with international tariffs, with few exceptions, short distance tariffs on tlie Jagorawi, Jakarta Merak, ancl Cikainpek tend to be -higher than rates in Chile, Philippines, Thailand, and the U.S. Longer distance tariffs on the Padaleunvi, Jagorawi, and Cikampek would be comparable to Manila South Toll Road rates as well as several of the US intercity toll roads. Through traffic, longer distance tariffs on the Padaleunyi and Belmera are comparable with some rates in Brazil and in the US., the latter exampled by the New Jersey turnpike. It should be noted that nianv
Technical Report No. 7, Technical Assistance and Training I n Toll Road Management for Pt. Jdsa Marga (Pel-sero), New Jersey Turnpike Authority & Louis Bergel- International, IIIC., April, 1981
Htgimay Toll S t i d ! , - ADB 1947 15
of tlie US . toll roads are older, mature facilities which were built or reconstructed with cheaper money. In several cases these were subsidized with revenue bonds which enjoyed treatment as tax shelters.
As tor urban toll roads, only the expeiisive Pcrito Moreno and 25 dc Ma\ro in Buc*nos Aires at $US 0.20/km coinpire with Ccngkarcmg or the some o f the southern sections of the JORR. Depending upon the t r ip length on tlic inner ring road, CaMraiig-Tomang-Tg. Priok, costs/ kiii would be geiierallv comparable with peak hour rates on tlie SRYl BOT projcct i n Southern California. Off-peak rates on this new toll road in Orange County, California are halt or less than tariffs on the Jakarta urban syste111.
16
able 3.2 Toll Tariffs : International Comparisons Toll rateslkm (US$)
Bus - Car -
gentina (urban, 1994) (a)
azil (interurban, 1993) (b)
Perito Moreno 8 25 de Mayo
Rodovia dos Bandeirantes
Rodovia dos lmigrantes
Rodovia dos Trabalhadores
,ile (interurban. 1992) (b)
Route 5
exico (c)
iilippines (d)
iailand (urban. 15 I (e) .t Stage Expressway, Bangkok
iited States (1991/92) (0 New Jersey Turnpike
Pennsylvania Turnpike
Indiana Toll road
Delaware Turnpike
WEst Virginia Turnpike
East-West tollway, Illinois
North-South tollway, Illinois
alifornia (1991) (g)
0 200
0.022
0.018
0.044
weekday weekend weekday weekend weekdav weekend
0.059 0.067 0017 0.034 0037 0.044
0.077 (per axle) 0.051
0.038
0.014
0.024
0.024
0.018
0.055
0.026
0,017
0.036
& m
3 to 5 axle vehicles , 0.021
0.124 0.062
0.077 (per axle)
ixles
0.042
2 8 3 axle single units
0.042 0.068
Orange County SR91 BOT project (congestion pricing scheme)
'estern Europe
tercity (1989) (h) 0.013 0.02 0.02
etherlands: Randstad (Ams1erda.Rotterdam.the Hague,Utrecht) road pricing scheme
Cost per entrylpassage w o f f - p e a k 1.65 0.16
oruay: Stockholm Toll Ring (Dennis ackage. 1991)
cost per entry. ring road 2.53 n/a 7.59
K: Cambridge, England (PAMELA Project as 'oposed for midPO's implementation ) $0.36/congestion unit, defined in terms of pre-specified
speed, delays, stops, say 3 minuteslkm
17
Table 3.2 (continued) sources.
(a) Louis Berger International
(b) Louis Berger International
(c) FOA 8 Associados. (1995 @ 6N.Pesos6US ) avg rates new 4-lane toll roads, 1987. Banobras study
0.022 0 042
rates from 1984 to 1988 generally followed the Consumer Price Index rates were raised in 1988189. ranging from SO 14 to .0321km for autos. 0 341 for buses and 0 0873 for trucks.
(d) Proposed tariffs. Manila South Tollway BOT Project. Louis Berger International, 1993 (e) ALM Resources Ltd.
(f) Toll Financing. Dan Cupper. Editor, Researched by Wilbur Smith Assoc. for lnterational Bridoe. Tunnel. and
0 05
- Turnpike Association (g) Timothy Hau. "Congestion Charging Mechanisms for Roads." World Bank Working Paper, WPS 1071 Dec 1992
(h) World Bank Symposium. 1989. Earmarking 8 Road Funds
3.2 Toll road user response toward changes o n tariffs levied can be studied at least from two general approaches. Firstly, route choice decisions macle b!~ usei-s '1s t,iritfs change can be directly observed using time series or cross-sectional ciat'i ga thcrcct from before and after a new tariff is implementecl. This gives an estimate of demand elasticity from changes in tariff levels. In turn, an empirical model can also be developed if a range of tariff levels can be tested in the toll road system. A ditacrsion curve is one example, but can be used at most for binary case choice.
Secondly, a behavioral route choice response can also be investigated using a network analysis tool. This will be more appropriate if the number of alternative routes are numerous; in this case, the first approach can no longer be used.
The network based models are frequently used for toll road appraisal, not onlv to give a rougli estimate of link flows and/or costs for economic evaluation, but also to study tlie likely change of route choice distribution upon introduction of a set of new tariffs.
Impact of Tariff Increases on Traffic
The history of tariff increases is well documented. This coupled with the availability of monthly traffic record provided by Jasa Marga was used as a source of data in examining tlie impact of tariff increases on traffic. As cleinancl elasticities will be discussed in the next section, this section concentrates on tariff impacts on iiiontlilv traffic trends on the toll road.
c
For example, Figure 3.4 depicts the iiiipct o f tariff increase on several toll r o d s . With tlic introduction of new tariff, traffic tended to decline a few months after and then tended to catch up with the previous trend. The same phenomena can be observed on othcr toll roads when a n e w tariff has been introduced. This can be explained by observing that travelers perceive the increased tariff as significant in the beginning, and t ry to change their routing behavior. However after ‘1 5 to 6 month period, the traffic trend reco\wrs and follows the previous trend l ie torc~ the n e w tariff was introduccci.
19
Monthly ADT. Cawang-Tj.Priok 3500 - 3000 . . . . . :. . . . . L.. . . . . . . . .:. . . . . I
.c 2500 . . . . . :. . . ... I . _ _ . :. . . . . e
- I- ,000 ..... :. ... .: .... : ..... :.- n -1994 ; ~ a
500 . d ' 9 9 5 :. _... 1 ..... :.. -7998 : : 1ltlC 96
500
2 400
$ 300
(Y >
2 ,o 200 3 - - 0 E 100 e
0
L
TandesKebomas
-1995 : . . - ,996 . . I . . . . . . . . '. . . . . I . .
, No tariff increase
Jatingale h-Kra pya k Ja karta-Cika mpe k 200 3000 1
' -1991 r
I- ' 500 I Tariff increase in July '92
0 1
- 1991 - 1992
+ 1993
Figure 3.6 Impact of tariff increase on traffic (Vehicle Class I)
20
3.3
3.3.1 Demand Elasticities Given the impact of tariff increases discussed earlier, i t is rather tricky to find an estimate of elasticity. Traffic tends to increase over time, aiid the time reference within which to choose a before and after situation will determine the elasticitv level.
Demand Elasticities and Diversion Analysis
Vehicle Type
Class I Class I1
In later studies Dwijono (1997).’ observed both arc elasticities ancl shrinkage ratios on Jakarta-Cikampek. Arc elasticities and shrinkage ratios werc LletcrmincJ h s e c i on traffic and toll rate changes from 1988 to 1993. The shrinkage ratio, Es, is ~iefinecl as the ratio of the proportional change in quantitv anci proportional change in price:
Distance < 20 kin 20-40 kin >40 k m
-0.35 -0.24 -0.4 -0.29 -0.17 -0.3
Es=( (@2-Ql)/@l)/((P2-P1)/ Pl)
aiicl the arc elasticity , Earc= (log Q2-log Ql)/(log P2- log P1)
Both measures were applied to different periods of analysis, one to four months after toll increases, ancl to Class 1 ancl 2 traffic. Using average daily traffic flow (monthly), the arc elasticity results after four months had mean values of -0.43 and - 0.40 for class 1 ancl 2 traffic respectively. The shrinkage ratio method indicated mean values after four months of -0.32 anci -0.26 respectivelv. Interesting shrinkage ratio results also came from the distance coiiiparisoii. For the same four month response period, medium distance, 20-40 km trips showed greater elasticity values than shorter (<2Okm) or loliger (>40klii) trips.
Previous studies had indicated that demand for shorter trips is usually more elastic than for long distance trips. However in the case of the Jakarta - Cikampek toll road, fewer alternative routes were available for this medium trip length and customers were more dependent or captive to the toll road. For the West Java interurban toll roads the range was from -0.32 to 0.37 (+/- 0.11 Tangerang) for Class 1 ancl from - 0.26 (+/-0.14 Cikampek) , -0.35 (Jagorawi) to -0.33 (+/-0.2 Tangerang) for Class 2. The study also pointed out that the shrinkage ratio elasticity results were in general
Dwijono, D (1997). Toll Elasticities oil the Jakarta-Cikampek Toll Road, paper presented a t IRF World Meeting, Toronto
agreement with the "Curtin"' general rule of tliumb," that is 0.32 for Cars and 0.26 for Class 2 (trucks).
To find out the elasticities of clemand for the case studies toll roads some exercises were conducted during tlic stud\, using tiionthlv ADT of the longest 0 - D trips on each toll road as the quantity, and taking 2 months before the tariff introduced and 4 months after as the time reference. It was found that the elasticity varies bv vehicle type and by toll road. Table 3.4 summarises the shrinkage ratios and arc elasticities gathered from the exercise.
Table 3.4 Shrinkage Ratio and Arc Elasticities
VEHICLE CLASS I
' Curtin, J.F. (1968). Effect on Transit Riding, Highway Research Record 213: 8-18
H I ~ I I I I V ~ T d l Sttidy - AD5 1997 22
Table 3.4 (continued)
VEHICLE CLASS IIA I Openinq . . I Year
Urban Toll Roads I
1 Cawang-Tomang
1 j Kb Jerui-Tangerang Brt i I Kb Jeruk-Cw unq
, Jatingaleh-Krapyak
I Dec.'94 11 j Tandes-Keboomas I
I
-2.16
VEHICLE CLASS IIB I Opening I Shrinkage Ratio" I Arc Elasticitties II I Year I (1 IUrban Toll Roads I I I
1 Cawang-Tomang July'92 Oct.'95
2 Cawang-Tanjung Priok July'92 Oct.'95
3 Pd.Pinang-KnRambutan SeDt '95
-2.i2
4.91 . .
Intercity Toll Roads
4 Jakarta-Cikampek Sept.'88 July'92
Pd.Gd.Timur-Cikampek 0.32 I I I
5 IJakarta-Merak I July'92 I Dec.'94 I Kb.Jeruk-Tangerang 611. I I I
I L L Note :Class 118 vehicle has been introduced since July '92, excep, Jakarta-Cikampek in May 1991.
Vehicle class IIA is more elastic than class IIB, and class I is the least affected bv tariff increase.
Tlie foregoing analysis shows that toll road demand elasticity is inelastic, and in sc)Ine circumstances it could even be liiglily inelastic. Although elasticit\, ma\' inciicate user response towards tariff increase in the short term, the use of eListicit\. analysis for a longer terni forecasting is rather limited.
The section on diversion analysis is devoted below to discuss the effect ot taritf increase on the longer terni demand level.
3.3.2 Diversion of traffic due to change in supply attribute such as time o r tariff can he studied using a ciiversioii curve or road network assignment model. Prior to using anv o f these models to diversion 'analvsis, it is desireable to carr\' out model calibration anci validation. Unfortunately, this is rarely done, as data ilia\' sometimes be very limited and costly to collect.
In attempt to calibrate a diversion curve mociel Vanciebona & Hasanudciin ('IWh)' analvzed the effects of toll increases anci network connectivity on traffic diversion and utilization of the Jakarta urban system. Points raised i n this analysis included tlie effects of congestion on alternative arterials and the relatively high proportion of users captive to the tollwav because of tlie lack of competitive "free" altcrnati\w, The 1992 substantial increase in tolls produced onlv a small reduction in the tollwav share of traffic.
Diversion Analysis and Traffic Assignment
An attraction factor method was applied of tlie form P=l/(l+a'(Ct/Ca)"b', where P is the probability of choosing the tollway and Ct and Ca are perceived costs of selecting tollway and arterial respectively. This type of model was also proposed by Sweroacl in their 1990 studies. Estimations were better (higher R-squared values) when operating costs were ignored anci only travel time saved and toll clicirges taken into account. A high range of R-squared values was encountered showing tlie difficulty in generalizing the applicability of attraction factor inodels.
A price demand elasticity model of the mixed log-linear form P=(KTAa) eA(bT), where T is the toll charged and K, a, and b are parameters; these were determined by Hasanudin in his 1994 paper. Trucks and buses showed a better fit with this model than the logit and attraction factor models.
j Vandebona, U., Hasanuddin (1996). Traffic diversion models for toll road facilities: case study of Jakrta., Proc. of CODATU VII, New Dellii.
This paper further reinforced the view that urban route selection mainly relics on tlie trade-offs between toll imposed and the possible travel time savings. Subject to the caveats on estimating cieinanci elasticities, models based on this approach provided the best Iiiatch with field data for buses and trucks. Also apparent in the fiiidings was the greater sensitivitv to toll rates for short trips; for longer sections, level of service factors were most important i n rout<> choices.
Several feasibility studies tor proposed new toll roads have used the "PCI" (PCicitic Consultants International) diversion moctcl de\doped on the basis of 1989 suri 'cy~s in the Jakarta-Surabava corridors. Relving on out-of-pocket user cost and time savings this model is of the form: P= K/((1.0+ (a*(C/T)Ab] where P is the proportion of trips using the toll road. C/T is the ratio of toll cost to t r a \ d time difference between lion-toll and toll road routing. In the 1990 Bt)gor- Banclung feasibility stud\, carried out b \ r JICA, a vehicle trip ciistribution iiicidcl \\''is used which estimatccl attraction/gcneration of trips as a function of population 'ind eiiiployment by zone, invcrscl\~ proportioiial t o the distance between zoIies, m.it l i parameters cletermined b \ ~ iiiultiple regression. Future traffic projections w e r c ~ then based on forecast growth in vehicle ownership. Traffic was assigned to links using an algorithm which searched out the shortest route, calculated time traveled a d then applied a diversion ratio curve to arrive at vehicle trips between zones.
Travel time difference, T, is expressed in minutes.
Parameters, a and bp b\, vehicle t \ y tor the Bogor -Bandung study were cietermiiicd as follows :
Vehicle type <l b passenger car 2.855E-5 2.27684 Ligth truck 5.870E-4 1.74818 Heavy truck 6.078E-5 2.34860
K is tlie upper diversion thresholcl. 111 the Bandung study, K was set at unity, implying a 100% diversion which would not happen in reality. For the Solo-Yogja study6 K was set at 91%, but the source or logic was not given. Parameters a nncl b used in the Solo-Yogja toll road study were 2.401 * 10A-5 aiid 2.0874 respectively - apparently for all vehicle types.
In the 1995 Solo-Yoga study, traffic assignments were made with the TRANPLAN model incorporating this diversion relationship and the resulting diversion calculation suggested that a 20 minute time saving would produce a 35% diversion to tlie toll road with an aggregate toll cost of Rp4000 (1994 RP).
'' Solo-Yogyakarta Toll Road Project, Planning and Feasibility Analysis, March 1995, BIEC International in association with PT Bitia K ~ y i (Persero), PT Seecons, and Pacific Consultants International
For the purposes of estimating future toll levels and perceived costs, the Solo-Yogja consultants assumed that absolute toll rates would increase by 8%/vear on average in current terms, or 3.5 to 4.5% i n constant terms. With iiicomes (GPP/capita) forecast to grow at between -i and 6% / w a r , the consultants assumed that motorist's perception of out-of-pocket toll pavmcnts would deflate by 0.5 to 1.0%/ w a r . This assumption seeins to implv that user costs would only be perceived in terins of the increased value of time savings while fuel o r other operating cost components i n the user calculus would remain constant. This is perhaps valid for Class 1, priv,itc* cars, and Class 2, express &I intercit\. buses, but coulci be questioned for truck tr'ittic where vehicle utilization and operating costs arc bv operatcw as significant.
The heart of diversion analvsis is tlie traffic modelling and forecasting. Using a diversion curve approach to assess a longer term effect of supply's attribute change on clemand level is viable for a simple network with only two alternatives. l ' l ic~ oi i lv reservation, if anv, on using the technique is that the bchavioural consistency iiiCiv be sacrificed, especiallv when an economic benefit is to be compared between 'with ,Ind without' project. That is to sav the solutions obtained are not necessarily coinparable with the equilibrium routing principle. When the network becomes inore complex, tlie network based diversion model is more appropriate.
The level of diversion resulted from all models depends on tlie network (supply) and ciemancl condition when i t is being assessed. The level of tariff is represented in the inociel through the network attribute, to which the assigninelit iiioclel will find the solution for tlie routing principle assumed in tlie iiiodel.
perceived
4. REVIEW OF VOC'S ,TIME SAVINGS : COMPARISON WITH TOLL RATE LEVEL
4.1 Fields surveys were carried on the second week of May 1997 for 10 days for all case study toll roads. This is primarily conducted in order to obtain more reasonable data input for VOC savings calculations. Data surveyed included distance, travel time and speeds. Table 4.1 summarizes the survey results. It is worth noting that the surveys coincided with tlie campaign period for 1997 general election. It was necessary to carefully choose an appropriate time period to obtain a representative sample, e.g. by doing the survey earlier in tlie morning.
Results of Field Surveys on Toll and Alternative Roads
26
4.2 Review of VOC
Table 4.1 Field Survey Results
Studies Iiiclonesian conditions had bcen initiated as part of tlie need to develop a moclel for economic evaluation o f road niaintenance programmes. Several models have been developed, tor cxamplc, GENMERRI in tlie 80's and RUCM' in 1992. The RUCM was partially derived from tlie World Bank HDM-I11 vehicle operating cost model (VOCM), which then superseded the VOC model of GFNMERRI. The vehicle operating cost model was developed as part of an effort to establish an Inter-urban Road Maintenance Management Systems (IRMS) for local use in Indonesia.
on vehicle operating cost (VOC) for
I n general, vehicle operating cost comprises fuel consumption, lubricants, t\,res, maintenance labour ancl parts, depreciation ancl interest components. I n estiniating these costs, tlie above mentioned VOC models focus primarily upon road surface irregularity (roughness) as tlie determinant factor of cost changes.
Hoff & Overgaard (1992). Road user cost model. Second technical advisory services on planning and programming to Directorate General of Highways, Government of Indonesia
Hi,ylwm/ Toll Sfmhy - A D R 199; 27
The specifications for VOC models varv according to the purpose of model development. The use of tlie model decides tlie levels of detail of mociel specification. This mav range from very simple to medium and complicated models, taking into account various variables that may explain cost changes. The specification of VOC models for maintenance programming purposes falls into a group o f complicated mociels, in which much data is required too be satisfxtoril\f applied in the screening level analysis.
According to the legal basis for toll tariff setting, the section of Law no. 1.3, I‘JSOS regarding toll roads, the toll rate plus tlic vehicle operating cost on tlic toll r o ~ d shall not be higher than tlie VOC which users expericnce on the alternati\,c tree road. If VOC savings which users gain froni trawling o n a toll road are used tor a guide i n tlie cieterniination of toll rate, i t is desireable to cievelop a quite siiiiplc. VOC mociel such that the data collection and further updating of tlie toll rates can be done without too much time and resources. However tlic model should be cxtcnsivel\~ calibrated based on field data, which for VOC means not ever\’ cost component can be fully calibrated quicklv. The most obvious component is fuel, given user perceptions and relative consumption rates. Other parameters may take more time to observe changes and cost differences.
To study VOC on toll roads, PT. Jasa Marga, has been using a model c h d o p c c f in 1979 by Pacific Consultants International for a guide in setting toll rates. The model was cievelopeci as part of a feasibility studv carried out for intra-urban toll r o < ~ ~ l s in Jakarta. The detail procedure is attached i n Appendix 4.2. I n the mociel each VOC component is assumed to be best explained by the average running speed of the veliicles. Irregularity of road surfaces, geometrics, and traffic conditions are not explicitly taken into account i n factoring cost changes.
Currently, Jasa Marga has commissioned a consultant to review tlie PCI model and now a modified model of VOC for toll roads is under review, tlie document of which liass been released’. Tlx fuel consumption cost component is empirically de\:elopeci using representative veliicles commonly using the toll roads by taking into account traffic, road geometrics, and roughness effects. Other cost components are partially adopted from an extensive review made on existing VOC models. The detail procedure is attached in Appendix 4.3.
To illustrate the difference between the models Figures 4.1 and 4.2 depict the amount of each vehicle operating cost component on two inter-citv toll roads
8 The VOC components stated in the law also include the time value, apart from other conlnlon V O C compoiien ts.
(1996). The calculation of vehicle operating cost. Final Report, Foundation for Research & Industrial Affiliation - ITB. (in Bahasa Indonesia) IT. Jasa Marga
calculated based on the PCI and the newly revised moclel. Also shown in thc tigurcs are the time values based on Jasa Marga's VOT. The corresponding VOC's for the free (non-toll) roads are also shown in the figures, based 011 speed obtained from thc field surveys.
I 30 000
25 oon
20 000
- n - 15000 VI 0 0
E
ta ow
5 000
0
Figure 4.1 Vehicle Operating Cost ( Jakarta-Cikampek Inter-city toll road)
25 000
20 000
- 15000 n
+ In 0 v m o o 0
5 000
0
Figure 4.2 Vehicle Operating Cost ( Ciawi-Sukabumi)
The basic differences between the two models lie in the fuel, lubricant (oil) and interest and time value components; other components remain the same as in previous PCI model. Furthermore, in the new model interest cost was assumed to be the same, whether or not users choose to travel via the toll road.
29
User savings are gained from the difference between the toll road cost compwients and those of the non-toll road costs. Fuel savings from the two models were not significantly different. The difference in interest cost savings is significant between tlie two models, since interest cost was assumed to be the same for toll ancl iioii-t~dl conditions in the newly developed model.
Lubricant consumption was found to be greater on the toll r o a d in the IICCV niodc4, given the selected toll road sample and speed Ic\ds. Tlic model for lubric'int i n tlie new iiioclel was adapted from the GENMERRI iiiociel which contains a roughness correction.
Figure -4.3 ancl 4.4 coinpare tlie contribution of each saving component to the total VOC saving including time betwccn the PCI ancl newly developed VOC i i iodc-1 on Jakarta-Cikampek ancl Ciawi-Sukabumi toll roads tor vehicle Class 1. llic c'ilcuLition is based on tlie reccnt Jasa Marga value of time.
The difference between the two VOC iiioclel lies in tlie interest component. 'The newly developed model assumes that travellers will experience a marginal interest saving, whether or not they travel via tlie toll road, whereas in the PCI tliere exists a significant interest saving if travellers choose to travel via a toll road. Using Tlic I'CI VOC model tlie amount of interest saving is 3 times the fuel saving for Jaharta- Cikaiiipck toll road, am1 2.6 tiiiies for Ciawi-Sukabuiiii.
80
70
60
50 - U 40 0) OJ c 5 30
0 2 a 20
10
0
-10
m FmI 7
VOC component
Figure 4.3 Contribution of Each Saving Component to the Total VOC Saving on Jakarta-Cikampek Toll Road
30
DPCl
ONewModd
VOC component
Figure 4.4 Contribution of Each Saving Component to the Total VOC Saving on Ciawi-Sukabumi
4.3 Review of Time Saving With regards to value of tiiuc (vot), currcntl\r PT. Jasa Marga uses Rp. 12,2X7/hour for class I, Rp. 18,534 /hour f o r class IIA and R p . 13,768 for class IIB, regardless of the location of toll road. Tlic values wcrc derived bv assuming vehicle utilization as the source of time saving, not the occupant's. This is in accordance with the original PCI VOC model. I n past toll road feasibility studies, Iiowcver, various value of tinics were assumed and derived either from an income approach or empirical traffic diversion forinulae.
Table 4.1 summarises several values of time assumed in past toll road studies for business travel (working time).
Table 4.1 Value of Times
.3 1
For example an income approach is used for Thc Northern Extension ot South-\Vest Arc of Jakarta Interurban Toll Road by PCI (1Y89), while JICA(lY91) in Surab'iya- Mojokerto used a diversion curve based calibration to have a proxy of value o f time.
The use of an equilibrium assignment model to derive the value of tinie in congested Bangkok toll road network was demonstrated bv Motoinura & Laoha-unya"'. The values of time derived from this model arc consicicrablv higher than those derived from income data. Using a cli\usion curve to derive the value of time can '1s ~ ~ ~ 1 1 bc made as JlCA did in the Suraba\,'i-Mojokerto studv. Such a diversion curve ~ " 1 1 1 be constructed from a stochastic based assignment with assumed driver perception of cost of travel. Howe\wr, for a congested ncttvork it is better to model driver behavior based on the cqu il ibri uiii assu ni p ti on.
Many costs and benefits of transport projects, tor example, time savings, pain and grief from accidents, anci environmental effects do not have a inarkct price. In this case, a variety of approaches have been used to attenipt to establish what those affected would be willing to pa\' for the benefits gained.
Approaches for value of time saving could be based from resource o r behavioural values. The income method falls into the resource value approach, while other transport choice behaviour mcthoils fall into the behavioural value approach. Beliavioural approaches attempt to establish an explanatory function that includes travel time anci costs as variables of trip making behaviour.
A preferred approach has been to try to discover what travellers are willing to pav to save time, either Lx 'revealed preference' o r by 'stated preference' methods1 1.
Unfortunately, there has not been anv empirical value of time derived for Indonesia conditions.
For the present study, various value of time are used in order to see how different VOT assumption affect the VOC savings. Toll rates are then compared to the VOC savings to indicate tariff as percentage of VOC saving (including time).
Figure 4.5 depicts the sensitivity of VOC saving towards time value assumption. A range of value of time from Rp. 2,000 to Rp. 16,000 was tested, and compared with the total VOC saving. It can be seen time savings over the VOT assumption account for 20% to 70% in the PCI model and 36% to 88% in the new model.
"' Motoinura, Y., Laoha-unya, S. , Derivation of value of time and traffic demand curves in Bangkok, Transportation Research Record 7395. 'I For example using stated preference in 1988 prices Dept. of Transport in UK introduced resource values of time of 705.3 pence/hour for working time and 207.5 pence/hour for non-working tiine. (100 pence = Rp. 4000,-)
30000
25000
- 20000
E d F 15000 ._ >
: 10000
5000
0
30000
25000
I 20000 d a: p 15000 ._ > : 10000
5000
0
30000
25000
- 20000
E d
F 15000 ._ > : 10000
5000
0
r
2000 4000 6000 8000 10000 12000 14000 16000 Value of Time (Rp.lhourlveh.)
Ja karta-Cikam pe k
n n
2000 4000 6000 8000 10000 12000 14000 16000 Value of Time (Rp.lhour1veh.J
Cia w i-Su ka bum i
L 2000 kt 4000 ll 6000 8000 10000 12000 14000 16000
Value of Time (Rp.lhourlveh.)
Figure 4.5 Contribution of the Time Saving to Total VOC Saving
HI$I~IWI/ 7bii Sfi(di/ - ADB 1Y91 33
Using UK’s value of time and income as a base line, a proxy of value of tiinc tor Incionesia can be exercised as follow.
U K : (a) VOT (business) : 705 (peiice/hr/person) (b) VOT per veli. Class 1 (2.5 occupaiic\r) : 70,530 (Rp/ hr/ veh) (c) 1llcome/year/ person : USS;17,600
(assuming poundstr. 11,00O/vc,ir)
Indonesia : (d) IIlcome/~ear/ person : US$ 1200
= 0.0682 (c) = 0.07 (1.)
(e ) VOT per \re11 Class I . . . . .
Jasa Marga : Rp.12,287 = 0.1742 (b)
Feasibility Studies
Proxv VOT : R p . 5000 = 0.07 (b)
IHCM : R p . 3281 = 0.0465 (b)
(JlCA, PCI) : R p . 7076 = 0.1003 (b)
I t can be verified that recent Jasa Marga practice of using VOT equals R p . 12,2S7/hr for vehicle Class I appears to be rather high. In thc light of value of tiiiic studies, a proxy VOT would be in the range of R p . 5000 to Rp. 7000/hr for vehicle Class I .
4.4 Using current basic price o f automotive components as input for the calculation, Table 4.2 summarizes tariff as percentage of VOC savings uilcler various value of t h e . Includecl in tlie table is Ciawi-Sukabumi. This required an initial tariff assumption, so that the calculation of percentage of tariff can be made. Dctailcd calculation are attached in Appendix 4.1.
Figure 4.6 and 4.7 depict tariff as pcrccntagc of V O C savings, using rcspcctivcl\. recent Jasa Marga's VOT assumption (Rp. 12,287/hr) and a moderate value. ot timc of Rp. 7,076/hr.
Tariff for urban toll roads are higher than that of interurban toll road. I n all case studies toll roads tariff are well below 70% VOC saving under Jasa Marga's VOT assumption. Using VOT equals Rp. 7,076/ 111- most urban toll roads have tariff aho\~c tlie 70% saving ceilings.
Comparison of Tariff Vs. VOC Savings
Tariff as %VOC Saving
140
0 F U Model - New Model . . . . . . . 70%
s 67.92 70.58 69.48
70 . . _ . _ _ _ _ _ _ . . . . . . . . . .
.I '5 p ir
Location
0
Figure 4.6 Tariff as '%I VOC Saving Using JM's VOT Value (Rp.12,287/hr)
35
Tariff as %VOC Saving - PCI Nbdel -New Nbdel ....... 70% 140
105.99 96.71 100.17 98.09
8
........... ...........
Location
Figure 4.7 Tariff as '%IVOC Saving Using VOT (Rp. 7076/hr)
Table 4.2 Tariff as '%#-age of VOC saving using several value of time assumption Vehicle class I
36
Table 4.2 (continued) Vehicle class IIA
Table 4.2 (continued) Vehicle class llB
Jasa Marga current practice seems to use a rather high value of time (Rp 12,287/hr for Class I). Using this value, tariffs as a percentage of VOC savings were found in the range of 17% to 56"; in interurban toll roads and, 9% to 55% for urban toll roads. Most urban toll roads have tariff above 52% of VOC saving, except Jatingaleh-
Krapyak in which 9% was found. For interurban toll roads, Dupak-Kebomas has a highest tariff (56%), whereas Jakarta-Cikampek being the lowest, i.e. 17% relative to VOC savings.
Using IHCM (1995) assumed value of time, which is about a quarter of Jasa M i i r p ’ s , the tariffs as percentages of VOC savings arc now double all the pre\%ws mentioned tariff. For example, for Class I tariff as ‘X, VOC saving on Jakarta-Cikainpck Lxurmcs more or less 33%, Tangcrang Barat-Mcrak tariff change to 108% VOC sa\,ings, ‘ I n d so on.
Using the newly devclopeci nioclel to obtain the tariff as percentage of VOC saving, i t was fouiiJ that the ratios o f new model : PCI tariff is about 1.7 times if IHCM value of time was used and 1.3 tinics i f Jasa Marga’s value of time was used. For example, using IHCM’s VOT tariff on Pci. Pinang-Kp. Rambutan is 99.7% VOC saving under PCI mociel, and this change to 167% under the iiew mociel. Using J‘wa Marga’s VOT this become 54.9% under PCI iiioclcl and 70.6% under tlie iicw i i i o d c +
T _’ . aiiff for vehicles Class IIA and l l B seem to be lower compared to tarrif Class I . All tariff Class 11 vehicles are well below 100% VOC saving. The most expensive vehicle Class II tariff were on Cawang-Tomang and I’d. Pinang-Kp. Rambutan toll roacis.
4.5 Conclusion on VOC Saving The foregoing analysis shows that the VOC and time value matters arc vet to be settled. Several VOC models have been developed in tlie past ranging troni a simple model based only on vehicle average speed to a complicated niociel taking into account the irregularity of tlie road surface, traffic condition and road geometry. The original PCI model is a simple model, in which each cost coinponelit is best explained by average running speed. Otlier existing VOC models, such as HDM 111 based model are laborious to be used for tariff calculation, as the model specification is rather complicated and data hungry.
In the future it is recommended to use a rather moderate model specification. One alternative is to use the newly revised model previously discusseci.
Regarding the time value, it is strongly recommended to carry out an extensive stated preference study to derive a proxy of value of time, not only for a toll road routing choice, but also for other trip making choice behavior.
In the medium term, the VOC savings ceiling will still be as viable guideline for tariff setting and adjustment. However, in the long term when total urban road network, toll and non-toll, becomes more congested - partly due to the continuing growth trend of car ownership plus failure to implement the land use master plan
and control, it is most likely that relative VOC savings will become smaller. I f urban toll and non-toll roads become equally congested tariffs will have to be raised to toll- off traffic and restore levels of service. This prospect o f congestion charging will necessitate a re-interpretation of the VOC saving ceiling.
In the medium term this can be resolved by re-interpreting the VOC costing methodology and the tariff adjustment formulae mcchaiiism. In the longer run , '311
indexed tariff adjustment formulae could also iivxease tariffs beyond the 100% of VOC ceiling. This situation is particularly truc tor toll road in urban area wl~erc~ r o d network perhrmaiicc would likcl\r be more congested in the future, espcciall\. i t 110 emphasis on urban transport strategv to favor public transport service put in place. If this happens, as may also occur clepeiiciiiig on VOC costing methodology, the legal framework governing the toll road operation will have to be re-interpreted.
5. CAPITAL, OPERATING AND MAINTENANCE COSTS
5.1 Examining initial construction costs for toll roads, initial investment costs for intercity toll roads have increased by several multiples since the Jagorawi was first built in 1978. The cost of this first toll road was 43.2 billion Rp in 1978, or about 1 billion/km. The first section of the Semarang toll road from Jatingaleh to Srondol opened in 1983 ancl cost somewhat less, 4.73 billion o r 0.75 billion R p / kin. Somc- of the lower cost of this can be attributed to the open toll system which required less investment in toll plazas and access restriction. The cost of gates and c x I UI '1 1ment remained comparable with other toll roads in terms of the 2.7% share of total cost. The next section, Jatingaleh -Krapyak opened in 1987 ancl cost 1.75 billion Rp/ kin. Cost of gates ancl toll macliinery was less, 1.6% of total cost, again because of the open system ancl sharing of the gate at Jatingaleli.
The Cikainpek toll road opened in 19C9, costing 313 billion or 4.3 billion Rp/km. Widening of the toll road from Cikampek to Cibitung has cost another 57 billion rp. and also necessitated expansion of toll plazas. Including another 41.4 billion in pavement overlay since 1993, total capital investment in the Cikampek has amounted to 355 billion Rp. Cost of toll gates and equipment systems, including renovations and improvements amounted to 2% of the total cost over this time o r 7.2 billion Rp.
Coinparison of Investment Costs for Different Toll Roads
The Banclung bypass, Padalarang- Cileunyi was built two years later and cost slightly more per km., 4.7 Rp. billion or a total cost of 223 billion Rp. Cost of toll gates ancl equipment, including new installations in 1995/96 amounted to 3.7 billion or 2.8% of total investment.
39
For urban systems in Jakarta, costs are substantially higher. Including sections of the Inner Ring Road, Harbour, and North-South connector, construction costs have been in tlie order of 13 to 32 billion/km. According to the joint venture partner, PT Citra Marga Nusapliala Persacla, costs of toll facilities and equipiieiit has ainountecl to 15% to 20 % of total investment cost. While no information was iiiacle available on toll gate and equipment costs for the south section of tlie Jakarta Outcr King Road, the plan amount of 546.7 billion for 15km would work out to 37 billioii/km.
Using the consumer price index annual inflation rates, 1997 base costs Iia\~c bccw cstiiiiatcd for the case study toll roads. The Seiiiarang bvpass sections rcniiiili thc lowest cost, averaging 3.4 billion/kni. At current prices, tlie Cikampc,k ,ind Paclaleunyi toll roads cost 8 and 7.5 billion/ k m to construct rcspectivel\r. TI><\ ncbxt iiiost expensive is tlie Tangerang Barat-Mcrak, estimated in 1997 ternis to cost 13.1 billion/ km.
Table 5.1.1
Construction 8 Improvement Costs: Case Study Toll Roads
(bill. Rp)
Toll Roads 8 Sections
Jakarta-CikamDek
Padalarang-Cileunyi
Semaranq (a)
Krapyak-Jatingaleh
Jatingaleh-Srondol
Surabaya (bJ Dupak-Kebomas 8
ext. to Manyar l/S
Tanqeranq Earat- Merak
Tangerang Earat - Cilegon Et
Jakarta Urban System
Cawang-Tomang
Cawang-Tg.Priok (c)
Tg Priok-AncoI Tm - Pluit (Hbr Rd) ( c )
Est. In". in '97 CPI Inflation RP.
Initial lnvestmenl Year Conslruction cost Land 8 Improvernents/Rehabilil Rp.bill. ation
km's Operator total per km. Opened Roadway per km. Toll ROW Type ofwk. cost Yr Total per constr. impr. facilities km
72 Jasa Marga 312.8
47.5 Jasa Marga 222.7
14.3 Jasa Marga 20.3
8 6.3
PT. Margabumi
20.7 Matrarava 204.2
PT.Marga
69 Mandalasakti 651.2
16 Jasa Marga 267.8
17 PT.Citra Marga 223.0
Nusaphala Persada
PT.Citra Marga
14 Nusaphala Persada 455.0
Higliwav Toll Study - ADB 1997
~~ ~ ~ ~__
4.3 1989 256.5 579.0 8.0 1.851
4.7 1991 355.1 7.5 1.594
49.3 3.4 - 1.4
1987 14.02 1.75 Rehab Slope 1.63 1992 32.0 2.126 1.333 1983 4.73 0 75 Widen 3.02 1995 17.3 2922 1.157
93/94
9 9 96
9.4 92/95
16.7 1989
13.1 89/90
32.5 95/96
1726 8 3 1 4 2 174 35kmoverlay 1 1 9 1997 2371 11 5 1263 1 (6cm)
220 12.9 3
450 32.1 5
902.3 13.1 1.386
4956 31 0 1851
3893 2 2 9 1746
4869 3 4 8 1 0 7
41
Table 5.1.1 (Continued)
JORR S: Pd. Pinang-
Kg, Rambutan (d) (secksi S) 14.83 Nurindo Eakti 546.7
Total Project: Seksi S 8 E l :
Ruas Pondok Pinang- Jagorawi-Cikunir (e)
PT. Marga
1237.7
Seksi S 14.25 539.2
Seksi €1 12.5 698.5
Sources Jasa Marga Main Office except where noted
(a) Jasa Marga Semarang Branch Office
(b) PT Margabumi Matraraya
(c) PT Citra Marga Nusaphala Persada
(d) Summary reports on joint ventures & Pelita VI program estimates Jasa Marga
(e) Jasa Marga Investment Division
36.9 95/96 5849 39.4 107
constr.
453 37.8 94-96 330.1 23.16 6.8 202.3 note: does not include vehicle cost @ 1.02 bill. or int. during COn5tr.. 53.3
55.9 95-98 529.8 42.42 28 4 140.3 note does not include vehicles @ 3 bill or IDC. 129.6
Highwav Toll Study - ADB 1997 4 I a
5.2 Maintenance Costs Based on analvsis of the cietailccl 1995 and 1996 ]asa Marga Branch niaintenancc and
I
direct operating costs, two reprcscntati\w Jasa Marga cases chosen, the Cik'inipck and Paclaleunyi cost in tlic order of 155 million and 130 million Rp./\.c>'>r to maintain. This includes the cost of routine maintenance at 45 million/km/\.r plus annualized cost of periodic ovcrla\~s in the order of 90 to 110 million per kni. The Dupak-Keboiiias section of tlic Suraba\~,i toll road is estimated to run tiiorc cxpensi\w than ADT niight indicate hccausc of the 11ca\~ truck traffic carried 011 this road.
While routine maintenance and o\,crla\: cost data for tlie Tangerang-Merak tol l road is only fragmentary, a higher niaintcnance cost in relation to ADT has also hui estimated for this road, in the order of 150 iiiillion/kiii/vr.. Although the facility is fairly new, evidence of cracking and concrete slab deterioration is already cvidcnt on sections that were opeiicd onlv i n 1993 and 1995. Shoulders also are dctcrioratc'd and moisture is probabl\r reaching into sub-lavers.
For Jakarta urban toll roads, routine maintcnancc costs are higher becausc of the high traffic load and the higher cost of services. Including periodic maintcnancc, annual costs are estimated to be in tlic order of 450 to 500 million Rp. /kin,
Operating costs for toll roads van ' both as a function of traffic and road length. Costs include those of collecting tolls, maintaining toll plazas anci booths, as ~ ~ l l as such aciclitional costs such as plaza lighting, direct admi~iistration, anci data processing. Estimates have been based on Jasa Marga branch operating cost data and information supplied by PT Citra Marga Nusaphala Persacia (Harbour Road and Cawang-Tg. Priok) and PT Marga Buiiii Matraraya (Surabaya). Costs run in tlie range of 4 to 7.5 inillion Rp/km/C)OO ADT for interurban roads such as Cikampek a i d Padaleunyi, as well as the Surabava Dupak-Kebomas section which is under private operation. This range is broadly comparable to the estimated operating cost of the Ciawi-Sukabumi project, discussed further i n Chapter 7.
Sernarang unit costs are higher than might be expected given tlie open system but is perhaps staffed higher coinpared to tlie short length and the lower traffic. Tangerang Barat- Merak operating costs have been estimated b a d on the operator's annual report on jont venture operations. Costs appear cornparatiid\, high at 14.6 million Rp/kin/000 ADT, but this may include some indirct overheads excluded in tlie direct operating costs examined for other toll roads.
Table 5.2.1 Roadway Maintenace B Toll Operation costs (mill Rp)
Roadway rnaint cost Direct Operational Costs Toll road Lengt 1995 1996 1995 AADT 1997 Est. Roadway maint costlkmlyr 1997 Est. Direct OP.
h Costs mill Rplkm /000ADT/vr.
/km 8%/yr /km maint. /km 000 /000AADT & periodic * routine 8. periodic (Excl. roadway maint.) total millRp total millRp total excl. rd. millRp mill Rp/km mill.Rplkrn/yr.
esc. (8%esc/ 83.4 Total 1.166 ='97 esc
Jkta-Cikampek 81 3123 39 3373.1 42 19033 15910 196 53 3.7 45.0 108 153.4 4.3
(a)
Padaleunyi (a) 46.8 1766 38 1907.3 41 9180 7414 158 27.5 5.8 44.0 89.2 133.3 6.7
Surabaya (b) 1996
1995
1995
Dupak-Kebomas 16.4 n/a 325 20 1936 1611 98 15.2 6.5 21.4 100.1 121.5 7.5
Semarang (c) 14.3 284 20 306.72 21 2497 2213 155 14.2 10.9 23.2 70 92.7 12.7
Tans. Bt.-Merak 34 903 27 975.2 29 7714 6811 200 16.0 12.5 40.3 116.8 157.0 14.6 - (d) (Ciujung. 1993194)
Ciawi-Sukabumi 53.5 (e)
(2005 base yr. estimate by Bukaka, costs const.'97) 9264 173 37.1 4.7 50.6 83.4 134.0 5.4
@I .2 * intercity Jakarta Urban Toll roads Cawans- 30.3 9325 308 10071 332 15740 6415 212 134.9 1.6 359.0 100.08 459.0 1.8 Toman& Cengkareng (9
Cawang-Tg.Priok 17 5038 296 4945 291 11997 6959 409 65 6.3 314.2 100.08 414.2 7.3
(9) Table 5.2.1 (Continued)
JORR S: Pd. Pinang- Kg. Rambutan (h) 13.1
under consl. (avg. Cawang) 1823 1057 81 24 3.4 336.6 100.08 436.6 3.9
43
* periodic maintenance cost (Rp.mill 417 Ikrn) annualized over 5-yr. cycle at a Rp mill. 83.4/km/yr (4-lane) from Bukaka est.. where ADT<25.000. 7-yr cycle assumed except for Tang-Merak 8 Surabaya Heavy traffic. pvm't or sub-base conditions include escalation factors, ie., 1.2 (urban) 8 1.1 to 1.4 for Cikampek, Merak. Surabaya
(a) Jasa Marga annual report 8 Accounting Department (b) Jasa Marga Branch Office records 8 PT Margabumi Matraraya (c) Jasa Marga Accounting Dept. 8 Branch Oftice records (d) Jasa marga Accounting Dept. 8 1995 summaru report on Joint venture operations (e) PT Bukaka Marga Utarna (r) Jas Marga Annual Report, AADT based on avg. Cawang flow to Jagorawi 8 Tomang (9) PT Citra Marga Nusaphala Persada, ADT based on Jasa Marga chart. Cabang Cawang-Tj. Priok (h) Jasa Maarga summary report on joint ventures with maintenace assumed at same share as Cawang-Tj.Priok, AADt from JM chart, Cabang P. Pinang-L. Agung, Mar-Aug., 1996
66.7 mill Rplkmlyr also estimated for Sernarang case, based on 9.5 km overlay in 1994
4321
5.3 Comparison of Tariff & Maintenance Cost Responsibilitv By Vehicle Type: Cikampek Toll Road Example A comparison of roadway maintenance costs and toll tariffs per km. Iias been carried out for the case of the Cikampek toll road. Routine maintenaiice costs have been estimated at 3.37 billion R p for 1996 or 45 niillion R p / kin. Periodic maintenance cost has been taken a t 108.4 i n i l l i o n / km/vr (also shown in Table 6.2.2) and otltcr maintenance costs such as spot i l~l t l r~~\~e~l le~l ts , urgent maintcnancc., ~ n d maintenance of structures estimate based on average expenditures for all jas‘i Mclrgil branches for other roadwav- related maintenance.
These costs were then allocated to the three cost assignmcnt categories, vehiclc4ans, equivalent stanclarcl axle-knis (ESA-kin’s), and passenger-car units-km’s (PCU-kms). These allocations were based on attributions derived in preizious road cost allocation studies for World Bank and Directorate of Land Transport. Avcrage ESA’s by vehicle type are taken from Axle load surveys carried out for the l-leav~~ Loaclecl Road Improvement Project (HLRIP) b \ v PCI in 1995 but mav not reflect the full extent of over-loacling, particularlv for medium ,-axle trucks which are ch,irgcd as Class 1IA on toll roads.
Because much of the maintenance cost varies by vehicle-kin, and light Categorv I vehicles predominate in the traffic flow, this group has the highest cost share. Based on an average toll tariff of 100.8 R p / kin, maintenance cost shares for light vehicles amount to about 5% of toll tariff. For Category IIA medium-sized vehicles, the maintenance cost share of tariff at 170.5 Rp/vehicle varies between 4% for buses to over 11% for 2-axle trucks. For over-loacled trucks which exceed the average I iLRIP estimate of 2.08 equivalent stanclarcl axle load, the ratio of cost share to tariff woulcl exceed that of heavy trucks which impose a maintenance cost in the order of 17% of the toll tariff of 201.6 Rp/km.
The conclusions of this maintenance cost allocation analysis are that toll tariffs adequately cover by seve:-al inultiples the maintenance cost shares imposed by vehicles. Category I vehicles make up most of the flow and hence bear a large fleet share because of the traffic volumes. For this group, maintenance cost responsibility amounts to about 5% of tariff paid. With respect to heavy vehicles, the ratio of vehicle maintenance cost responsibility to tariff is much higher, but still remains below 20% on average. Given this, however, instances of gross overloading and accompanying pavement wear and damage occur for individual trucks, particularly in the medium, 2-axle truck group. Enforcement of vehicle weight regulations is the only practical solution for this problem. For other cases where accelerated pavement deterioration is occurring such as the segments of the Surabava Toll road which serves heavy port traffic, underdesign of pavement is more the problem.
44
Table 5.3.1
Traffic Estimates and Charqinq Units: Inter-Urban Toll Roads (Cikampek Case Studyl
Vehicle type Volumelday veh-kms/yr % per veh. ESA-kms 1996 Vehicle -kms Equivalent axles
(thous) mill. share (a) mill.
Pass car equivalents per veh PCE-kms (b) mill
cars utility veh. med. bus med. truck Hvy truck Lg. bus
40.8 14.9 68% 0.0026 0.04 12.0 4.4 20% 0.0027 0.01 0.4 0.1 1 % 0.092 0.01 4.5 1.7 8% 2.079 3.44 1.9 0.7 3% 4.410 3.03 0.8 0.3 1 % 0.155 0.05
Total (c) 60.4 22.0 100% 6.6
(a)Equivalent standard axle (ESA) values taken from Table 3.6, (West 8 Central Java) Final Engineering Report. Heavy Loaded Road Improvement Project, January 1995, Pacific Consultants International Report gives avg. for lg. buses, but super coach 2-axle units likely higher (b) PCU factors taken from Final Engineering Report. HLRl Project. January, 1995.PCI (c) Vehicleslday based on JM volumeldistance formula: (daily volume each direction by section x section distance)lsum of section distances (Ref: Cost Recovery for Roads in Developing Countries. Ian Heggie 8 Vincy Fon. World Bank. 1991)
Table 5.3.2 Road Maintenance Cost Allocation: Cikampek Toll Road (1996 million Rp)
(Infl. factor 95-96: 1.08 Allocation of Costs According to
Total cost Costlkmlvr veh.-km's ESA-km's PCU-km's 1996 81
(a) Routine maint. (b) 3373.06 41.64 37.478 4.164 Periodic maint. (c) 108.42 54.210 32.526 21.684 Spot Impr. (d) 5.00 2.500 2.500 Urgent (e) 0.48 0.483 Bridges (f) 2.56 0.769 0.769 1.025 Total Road Maintenance 158.11 95.440 39.959 22.709
Toll Facilities
Allocation of 1996 Estimated Maintenance Costs (excl. toll facilities1 Charge units (million) 22.05 6.579 Rp./veh-km 4.3291 Rp./ESA-km 6.0738 Rp/PCU-km
1 14.9 1 2 5.3
2 0.3 2 5 4.1
3 2.1 2.5 0.7
27.4
27.360
0.8300
Table 5.3.2 (continued)
(Reference: Heavy Loaded Road Improvement Project. PCI. 1995; Watanada. T 8 W. D. Paterson et al. Highway Design 8 Maintenance Standards Series. WB. 1987 Road Cost Allocation: Road User Charge Study, (Perhubungan Darat) (Halcrow fox, Nathan, Biec & Associates. 1983) (a)Maintenace costs from Table A6.1 (Annex) (b) 90% related to veh-km's; remainder lo heavy vehicles (c) 50% related to veh-km's. 30% to heavy veh.. remainder to carriageway width (pcu's) (d) 50% related to veh-km's and ESA's respectively (e) 100% related to veh-km's (0 30% related to veh-km, 8 ESAs, remainder to PCU's
Table 5.3.3 Routine 8 Periodic Cost Allocation by Vehicle Type Compared With Toll Tariff
cars
Costlveh. mill. kmlyr Annual user cost share
w veh-km byveh,tvpe (mill.Rp) %
5.17 14.9 77.060 49% utility veh. 5.34 4.4 23.374 15% med. bus 6.55 0.1 0.959 1% med. truck 19.03 1.7 31.503 20% Hvy truck 33.60 0.7 23.077 15% Lg. bus 7.35 03 2.1351%
Total 22 158.108 100%
Toll Tariff Comparison
Tariff Costmarif f
Rdkm % 100.8 5.1% 100.8 5.3% 170.5 3.8% 170.5 11.2% 201.6 16.7% 170.5 4.3%
6. PROlECTED GROSS AND NET REVENUES FOR CASE STUDY TOLL ROADS
Based on maintenance and operating costs developed in Chapter 5 and the prospects for further traffic development, corridor congestion and growth trends discussed in Chapter 2 and in the Interim Report, projections have been made of gross and net revenues for the case study interurban toll roads.
For Jakarta -Cikampek, traffic growth rates have declined since the 23% registered in 1994 to a level of 14% to 15%. With the maturing of this facility it is forecast that traffic would grow at 13% to the end of the decade, then decline to 12%. By 2005, a medium growth forecast would indicate growth in the 9% range, declining to 8 % by 2010. Gross revenues based on trends for Cikainpek and Jagorawi would incrcase at about 5% to 1.5% faster than ADT.
Jakarta Cikampek (72.5 km) Traffic 8 Revenue: Medium Estimate
For the Paclalcunyi toll road, recent traffic grou4i has slowed from the rates of over 20 '%) in 1994 ancl iminecliately after opening. Traffic growth is forecast to slow to 16% up to 2000, and up to 2005, grow at 15%. Afterwards, growth would continue in the order of 11 76 to 12 %, declining to 7% to 8% bv 2010. Gross revenues woulcl 0 crow about 0.75 to 1.5% faster than ADI' g i \ w the future prospect of more liea\,\r traffic diverting to the toll road.
Padalarang-Cileunyi
For other case study interurban toll roads, growth estimates depend upon maturity of development. In the case of Dupak-Kebomas, further dramatic grow in the order of 20% is expected until 2000. By 2005 this is expected to decline to 17% ancl then to 12% by 2010. For the case of Jatingaleh-Krap\.ak, growth is expected to be more moderate, following the order of 8% seen in recent years. This is expectecl to continue to 2000, and decline to 7% thereafter. More rapid development in the
Seiiiarang area and connection with the Trans-]a\ra Toll network could increase the econoinic pace and traffic however.
For the Tangerang Barat-Merak toll road, the continued push of cie\dopmcnt west of Jakarta a id development of the por t and industry in the Mcrak area coulc l be cxpccteci to maintain traffic groivtli in the order of .l5% to 2000. F r o m then unt i l 2010, growth is expected to continue a t a 12% r'itc.
7. CIAWI-SUKABUMI TOLL ROAD PROlECT CASE STUDY
7.1 Background A nuiiibcr of studies have been carricci out on the Bogor-Bandung road corridor starting with the 1990 JICA study, anci most recently 1996/97 reviews of the Ciawi - Sukabumi Toll Road by Rcncicl Palmer & lritton ILtci. (RPT) for tlic lead investor, PI Bukaka Marga Utama and bv Mitrapacific Consulinclo International (MCI) for the Asian Dcvelopiiient Bank. The RPT review was largely a financial anali'sis with traffic and revenue projections based on the in\,cstor-proposeci level of tariffs. The MCI review submitted March, 1997, also carried out traffic forecasts as well 'is an economic analysis of tlie project.
Both of these most recent studies reported favourable rates of return. The [<PI review reported a financial internal ratc of return of 21% for tlic base case m d a return on equity of 26%. The MCI analysis found a n economic internal ratc of return of 28% for the base case. This chapter draws some comparisons of traffic forecasts and examines in iiiore detail the economic and fiiiaiicial returns of this project. In particular, the economic analysis compares economic returns on tlie project as a noii-toll public road and as a BOT toll road.
7.1.1 JICA 1990 Feasibility Study I n 1990, a feasibility study on the Bogor-Bandung road development project was carried out under the auspices of JICA. The studv concluded that construction of a new road from Ciawi at the elid of the Jagorawi toll road through Cibaclek, Sukabumi and Cianjur was feasible. It was planned that this new toll road ~ w ~ l d extend to Citatah, connecting with the planned new Cikampek-Padalarang toll road. The distance between Jakarta and Padalarang, (13 kin. from Bandung) bv this route would be 176 kin after construction of the new highway. Based on traffic estimates the study recommeiidecl staged construction, with an initial 2-lane, controlled access toll road between Ciawi and Sukabumi by 1998. This 2-lane facility would be extended to Citatah by 2005, anci the initial Ciawi-Sukaburni section would be expanded 'to 4 lanes by 2010. Cost in constant 1989 Rp. for the first phase between Ciawi and Sukabumi was estimated a t 241.2 billion (including land acquisition and !
resettlement costs of 15.6 billion Rp. The third phase acidition of two aciditional lanes was estimated to cost an additional 190 billion Rp. To construct a 4-lanc toll road between Ciawi ancl Sukabumi was estiinated to total 430.8 billion R p . (US$ 246.2 iiiillion at the 1989 1750 Rp . : $ rate). Using a 3% escalation rate 011 US5 costs ancl a current rate of 2400 Rp./US$, this would represent ri 1997 cost ot 748 L ~ i l l i o n Rp. , (720 billion Rp. excluding land acquisition). Using the Lilomcstic c(msu~ncr price index ( 0 1 ) as an escalation factor, thc 1YY7 estimate would ha\^ h c c w 797 billion Rp . or 768 billion Rp. excluding land.
The Bukaka cost estimate for design and construction in constant 1W7 l<p. (excluding inflation, VAT, interest during construction, and other financing costs) amounts to 340 billion Rp. , less tlian the earlier JlCA estimate. Land costs on the other hand reflect mucli more inflation, 88 billion in constant 1997 Rp., coinpired with 30 billion Rp. if the 1989 estimate wcrc inflated by tlic CPI. Construction cost estimates for the Bukaka proposal arc discussed in iiiorc detail below in scction 7.1.3.
Tlic 1990 JlCA studv also recoiiiiiiciidcd a nuinber of spot iiiiprweiiieiits on the Puncak Pass road between Ciawi and Cianjur to case iiiiiiiecliatc traffic problcins. These spot impro\~ements includeci widening and intersection iinproveimmts, construction o f climbing lanes, pa\,iiig of slioulcicrs, and a number of measures to improve safety. While this route is shorter to Cianjur, 50.3 kni compared to 80.5 kin via Sukabumi, the terrain is more difticult and probleiiis of slope stahlit\, more acute. Watershed protection and regional planning concerns also dictatc that growth be ciirecteci towards the southern Cibaclak-Sukabumi corridor, awa\' fro111 tlie northern Puncak slopes.
The JICA study assumed that the Cikaiiipek-Pa~alaralig toll road would also be built ancl took the effect of this alternative corridor into account in network traffic assignments. This alternative route from Jakarta through Cikampek to Bandung is approximately 40 kin. shorter than tlie Bogor-Sukabumi-Ciaiijur route.
7.1.2 Traffic Estimates Tlie 1990 JICA stuclv found froiii their traffic surveys carried out in 1989 that corridor traffic was in tlie order of 9500 vehicles per day between Ciawi and Sukabumi, declining to slightly more than 4000 ADT on the Sukabumi-Ciaiijur stretch. Tlie JICA study forecast average annual growth in the order of 3.6% per year for traffic, reaching by the year 2010 ADT's of around 20,000 for tlie study section.
I n traffic studies carried out in cooperation with PT Bina Karya in 1996, the RPT consultants recorded average daily traffic in tlie order of 20,000 vehicles per clay between Ciawi ancl Cibaclak and over 17000 per day between Cibaclak and
Sukabumi. Comparing this with JICA 1989 survevs, traffic had grow^ at a n a\'ercige anliual rate of 10.4% and 9 % on the two stretches of road respectivelv. Bina M q a counts in 1994 and 1995 had also indicated higher growth rates in the micl-'90's, 13.5 % pel' year.
Traffic growth estimates for tlie RPT projections were based on estimates froin other recent studies, with growth rates assumed to lie between that on arterial roads in West Java, annual rates of 6.5%, and in the Jabotabek area with 15-20 ' ' it ,innudl growth. Also quoted were estimates made bv U K Transport Research L'1bor~torv for the Cikaiiipek-Pacialarang toll R o a d Stud\, at 6.8% tor passenger trattic ~ n c i 7.2% for freight traffic as well as PT Jasa Marga network analysis studies which Iiaw taken an annual rate of 7%. According to tlic RPT text, growth rates used were .lO'j%,
9% , ancl 8% per year for 1996-2010 periocls rcspcctivelg for the Ciawi-Cicurug, Cicurug-Cibadak, and Cibadak-Sukabumi sections and 6% per year tor the period 2011-2023 for all sections. To arrive at tlic \'ear 2000 base, Categorv 1 trattic wris increased from 1996 by 11.2%, 14.7% and 7% per vcar for the three road sc7ctions. For the period 2000 to 2010, 8.4% annual growth was assumed for all \'eliiclc categories for all scwtions.
In comparison, the MCI stud!, applied a network modeling approach usccl bv I T 1 in other Java road studies. Zonal vcliicle trips were calculated using a regression moclel with GRDP and population as inclcpcnclent variables. These trips wei~c then distributed using a gravity model ancl assigned to tlie network using an cquililviuiii moclel. Diversion between tolled and non-tolled roads was simulated using tlie moclel with the same diversion curves used by RPT which were previouslv gii 'c i i i n the TRIP" study. These curves were in turn adopted from JlCA studies and sur\'cvs on the Jagorawi, Jakarta -Cikampek, ancl Jakarta -Merak toll roads in 1988.
Comparing RPT ancl MCI traffic forecasts for total traffic assigned to tlie toll road, estimates for the Ciawi-Cicurug were fairly close, RPT estimates for total traffic being 4% higher than MCI fc,r the year 2001, but 8 to 12% lower than MCI for tlie Cicurug-Cibadak and Cibaclak-Sukabumi stretches. For the 2010 projection, RPT's estimates are 19% higher again for the first section, but for the sections beyond Cicurug, 5% and 11% lower than MCI estimates. Average annual growth rates for all sections applied by MCI are in the order of 10-11% for tariff class I ancl 11 up to year 2010, and then decline bv one percentage point for the years 2010-2015, and by the same amount again 2015-2020.
l 2 Update of Toll Road Investment Programme, Final report, April, 1990, IT Jasa Marga Persero (IURD Loan) by Sweroad in association with INDEC & Associates.
Traffic Growth Parameters & Forecasts: Mitrapacific Consulindo International
- 1990 1995 West Java (const. 1983 RP)
GRDP (bill Rp) 15.64 22.98
GRDP/capita (000 Rp) 442 582.8 Avg. %chg/yr 8.0%
Avg. %chg/yr 5.7%
DKI Jakarta GRDPIcapita (000 Rp) 1661.9 2270.3 Avg. %chg/yr 6.4%
Avg. %chg/yr 90-95
cars 3.4% buses 6.9% trucks 2.5%
West Java Vehicle fleet arowth -
Total Java Traffic Growth (MCI trip generation analysis) 000 Trip ends 1150 Avg. %chg/yr 6.3%
2020
34.75 52.12 76.52 163.87 8.6% 8.4% 8.0% 7.9% 800.1 1101.2 1497.2 2809.5 6.5% 6.6% 6.3% 6.5%
3186.3 4513.7 6352.5 12936.7 7.0% 7.2% 7.1% 7 5%
MCI Proiected 2000-2010
9.8% 9.2% 5.2% 3.5% 4.8% 6.2%
2005
1530 2020 5.9% 5.7%
The RPT study built up the separate cleiiients of traffic forecast to use tlic new toll road. This potential toll road traffic would consist of diversion from the existing corridor road, diversion from the Puncak route, and generated traffic assui i i ld to develop as a result of increased accessibility and growth in the route miic of influence. Diversion from the existing corridor road was based on volumc/capicitv and speed-flow relationships developed in the TRIP study and for the Iiidonesia Highway Capacity Manuall? (IHCM) by Sweroad. With increasing traffic and congestion, travel time savings would become more significant on tlie toll road and diversion would increase as a result. In the early years after opening, diversion of Gol. I vehicles to the toll road would range from 50% on the Ciawi-Cicurug section to 46% for the Cicurug-Cibadak section. By 2005, this diversion was forecast to increase to 57% on the first section, 54% on the second section, and 51% on tlie third stretch, from Cibadak to Sukabumi. By 2020, this diversion would have increascci to 75% of corridor traffic for the first two sections. For Gol. I1 heavy vehicles, the diversion curve applied was much flatter, assuming more of a concave shape, not rising until total corridor traffic exceeds 40,000 ADT. Not until after 2005 would diversion climb above 25% to 30% according to this model. By 2010, diversion of the
Indonesia Highway Capacity Manual, BINKCIT, E’eb. 1997, Sweroad in Association !<it11 1’1 liina Karya (Persel-o)
Gol. 11 group would have climbecl to 33% to 46%, with higher rates on tlic tirst section from Ciawi.
The same diversion moclel was applied to forecast diversion from the Puiic'lk route bv RPT. Travel time savings t o Cianjur were assumed to amount to 60 minutc-s via a new toll road over tlie Puncak route, eve11 though tlic Puncak route is 30 k m shorter. Bv 2005, RPT calculated the time saving to be 95 minutes and b\. 2010, 1-1-1 minutes. Based on this ancl the 63% share of survevecl Puiicak traffic 11eadcd to Ciaiijur and beyond, RPT forecast more than 10,000 ADI' to divert lx 201 0, increasing to almost 18,000 ADT b\, 2020. The Cikatiit~e,ck-Pa~~'llaran:: toll i.oxi ~ ~ o u l c l also compete for this traffic.
The estimate of generated traffic brought about bv increased accessibilit\., economic activity, and release of latent ileiiiand has been assumed bv RPT to be rehti\,elv high, 25% from opening ycar, increasing to 30% of normal growth traffic b\. 2005. These estimates were based on prospects for development in the Sukabumi region, including the Pelabuhan Ratu clevclopment and increased automobile ownershiti with the lower-taxed national car on tlie market.
While ~ the MCI study briefly discussed generated traffic, no estimate ot its magnitude or mention of its share in the total toll road traffic has been given i i i tlic report. Redistributed trips were in theory considered in the trip distrihutioii model employed by MCI. The study does state that induced traffic woulcl likelv not appcar inimecliately with opening of the new toll road but woulcl clevelop after a few vears of operation.
7.1.3 Cost Estimates Bukaka has estimated the construction cost for the toll road project to amount to 429.8 billion Rp. The RPT review gives a total of 430 billion Rp. in 19% prices, excluding supervision, land costs, finance charges, administration ancl VAT (PPN) taxes. The TBV/Biiia Karya 1995 study estimate a construction cost of 498 billion Rp., 16% more than the RPT Bukaka estimate. The RPT cited several areas of potential cost saving; these included more efficient and standard designs for bridges and box culverts, economies in earthworks, reduction in the initial thickness of pavement to be compensated for with a heavier structural overlavs later a s heavy traffic builds.
7.2 The economic costs of the Ciawi-Sukabumi project as a non-tolled highwav include the cost components of design, supervision, and construction, net of taxes, plus the cost of land acquisition. Construction costs have been reduced to account for the additional costs of a toll facility. These elements include toll barriers, service areas, administrative offices, and toll apron lighting, fencing, signage, ancl ;arkin::. A
Economic Analysis of Project As A Non-Toll Road
closed toll system also requires an estimated 10% additional cost in the provision of interchanges, access ancl exit ramps. Also excluded is the capital and maintenance cost for toll collection equipment as wel l as aciditional persomiel costs f o r collc,ction and administration. Routine and periodic maiiiteiiance costs for the ro'ild\v'i\. ‘ire
estimated to remain the wi l e as with a toll road although soinc reduction i n p \ u i apron areas would be achiwcd.
On the benefit side, \diiclc operating cost s'i\,ings havc been counted tor tlic reduction in distance with the new route between Ciawi-Sukabumi (4 k m t o r trips passing the entire length) and tor sa\ings in reduced congestion cicl,i\.s \\,it11 increased operating speccis. Passenger time savings tor cars and buses Ii'i\,c uscd the trwel time cstiinates based on a \wagc speeds of 80 kph and 60 k p h for Lol. 1 and II \~ehicles respectively. Economic time values 'ire as applied bv MCI, using the jlCA methociologv as in the Cikampek-Cirebon 1990 stud\..
Because of the greater trawl distance ancl \vIiiclc operating cost on thc Ci'iwi- Sukabumi route for potential Puncak diversion, savings consist only of tinie, and these are marginal. A more conservative view of generated traffic has been t'i ken because of the high growth rates already contained in the normal growth projection. This element is estimated at 25% of normal traffic at its highest, but following customary practice, only half the benefits which accrue to normal traffic arc counted for generated traffic.
Diversion to the new highway without tolls is based on the \,oluiiie/capacit\,, speed flow relationships from the IHCM. The number of trips diverting to the new highway is however Local trips were assumed to remain largely on the old road.
The result of examining the project as a non-toll facility with its lower capital cost would be an economic internal rate of return (EIRR) of 29.8%. WIien domestic costs and time savings benefits are adjusted applying the staticlard conversion factor of 0.943 to domestic non-traded components ancl 75% valuation of lion-skilled labour, the effect is to increase the EIRR to 30.7%.
limited by the number of through trips.
(Economic Costs and Bencfits Adjusted for Non-Traded Domestic Componcnts) Sensitivity Analysis: Ciawi-Sukabumi Road Proiect
Proiect Scenario Parameter IRR -
Base Value Variation Prolect
Economic Analysis As Public Non-Toll Road Works cost 372 1 30 7% 8 generated traffic +lo% 28 9% @ 25% of base traffic -10% 32 7%
Traffic Volume +lo% 32.5% -10% 28 7%
Combined increased cost & decreased volume -10% 27.1%
7.3 Construction and operation o f the Ciawi-Sukabumi highway as a toll facilitv has the economic impact of increasing construction anci operation costs and reducing utilization because of the impact of tolls upon ciiversioii. Construction as a toll road means increased costs for toll collection anci administration facilities as m’cII a s provision of toll plazas, additional lane allowance on entrance anci exit ramps, lighting and fencing at toll collection areas. This has the effect of increasing the adjusted economic cost from 372.1 billion Rp. to 415.6 billion. It has been assumed that area and cost for land acquisition would remain the same as for a iion-toll facility.
Impact Upon Economic Returns of BOT Toll Road Implementation
The effect of tolls upon traffic diversion has been estimated based on the same IHCM -based diversion curves used by RPT in the 1996 analvsis. Results are consistent with diversion observed for the intercitv case studies examined in Chapter 5. As traffic increases in the corridor, service levels (volume/capacity ) deteriorate, travel time iiicreases and congestion worsens. Starting with opening diversion of 47% ancl 25% for Gol. I and Gol. I1 categories, by 2005, diversion has increasecl to 55% and 27% respectively. By 2010, diversion has reached 63% and 38%, and reaches the maximum assumed diversion of 75% and 65% before 2020.
The base case economic return (adjusted for domestic costs) for the project organized as a BOT toll road is 24.1%. Increasing costs by 10% would lower the EIRR to 22.8%; a cost reduction of 10% would increase the EIRR to 25.7%. Varying traffic r~olume by plus and minus 10% has the effect of raising aiicl lowering the EIRR bv 1.6 percentage points. A combined scenario of costs increased bv 10% ancl traffic reduced by 10% would reduce the EIRR to 21.3 %.
54
A n increase in toll levels reduces traffic ancl consequently the volume of user benefits, which in turn reduces potential generated traffic. A 25% increase in tolls would decrease diversion from the existing road, to 35% and 16% shares for Class I and Class I1 traffic after opening. By 2010, diversion shares would only lx 55% and 27% respectively for these two traffic groups. This would have the impact of reducing the economic return to below 20%.
Conversely, decreasing the tariff level would increase diversion and the number of users benefiting from the new facilitv. Diversion has been estimated to amount to 58% and 35% after opening for thc two user groups. By 2005, these shares could cliiiib to 65% and 39% of corridor traffic. The maximum diversion of 75% and 70% would be reached before 2020. The ElWW in this case would be 26.6%. This lower toll scenario was also combined with an assumed higher response b!, gmcr,i ted traffic, the same assumption used by RPT, that is induced traffic climbing to 3(l% of normal growth traffic bv 2005. The effect of this woulil be to increase the Ell<[< to 26.9%. The effect of these sensitivitv tests is summarixcd below
(Aifjirstcrf Ecoiioriiic Costs Cf Tiriir 51wiiigs)
Proiect Scenario Parameter Base Value
Economic Analysis As BOT Toll Road Works cost 415.6
Traffic Volume
Combined increased cost & decreased volume
Toll Levels
8 generated traffic increase to 30% of base traffic by 2005 Toll Levels
Variation
+lo% -10%
+lo% -1 0%
- 1 0%
+25% -25%
-25%
IRR -
24.1 % 22.8% 25.7%
25.7% 22.5%
21.3%
19.9% 26.6%
26.9%
7.4 Costs, toll tariff schedules, and the structuring of financing for the financial analysis have been based on the estimates and proposals prepared by PT Bukaka Marga Utama. On a current Rp. basis, total costs of the project include an assumed 8% inflation during construction. These with financing costs amount to 808.5 billion Rp. Excluding interest during construction, the estimated cost would be 668.5 billion Rp. Basic construction works cost excluding supervision at 3%, toll equipment, VAT , ancl land acquisition has been estimated by Bukaka at 429.8 billion Rp.
Financial Evaluation of the Ciawi-Sukabumi Toll Road Project
55
For tlie current Rp. analvsis using nominal interest rates, Bukaka’s planned financial structure was followed with a debt to equit\r ratio of 75 : 25 ancl debt k ing split between local and foreign sources on a 60 : 40 basis . Interest costs for local loans have been assumed at 20%; offsliorc loans have been assumed to cost 11 “0. a convertible bond issue with an interest rate of 12% lias also been inclucicd with planned issue in 2001. According to the Bukaka financial moclcl, tlie total l o c ~ l loan amount including the domestic portion of interest during construction (IDC) \VOLIILI total 405.2 billion Rp. TIie offshore loan amount plus the foreign component of IDC would total 235.5 billion R p .
Toll tariffs have been forecast to increase by 16.5% every two years with a n opwing \war 2000 level in Rp./kni o f 172, 257, and 34.1 for Gol. I , Gol. IIA a n d IIB respectively. Otlier income from concessions lias been estimated at 5% of tariff revenue. Revenue sliaring with joint venture partner PT Jasa Marga would st,irt in 2006 a t 5% of gross revenues. In w a r 2014, this increases to 14% and continucs unt i l the end of the concession period in 2024.
Using the Bukaka financial nioctel, several sensitivity tests were carried o u t to determine the impact on the nominal financial rate o f return from variations in key parameters; Applying the basic cost streams against traffic flows and tariffs assunieci by RPT/Bukaka, that is with generated traffic starting at 25 % of normal traffic in opening year and increasing to 30% hv 2005, the base financial internal rate of return (FIRR) on tlie project would be 20.9% o \ ~ r tlie concession period. With tlic Bukaka financial structure as proposed, the return on equity would be 26.3‘L.
A 10% increase in the base construction cost of 429.8 billion current Rp. would reduce the project FIRR to 20.2% ancl equity FIRR to 25%. Conversely, a 10% decrease in the base construction cost would increase these FIRR’s to 21.7% and 27.9% respectively. Traffic volume changes by plus or minus 10% shift tlie FIRR’s for tlie project to 22.1% or 19.7%. tlie iinpact on tlie return on equity would be to raise the FIRR to 28% or reduce it to 24%. A combination of a 10% increase in construction cost and a 10% reduction in traffic reduces the FIRR‘s to 17.6% and 22.8% respectively. If generated traffic developecl in a more conservative fashion, assuming only 10% induced traffic on opening and building to 20 % of nornial by 2005, the nominal FIRR‘s are reduced to 17.6% and 20.3 % on total project and equitv respectively.
An increase in interest rates for domestic and offshore loans by one percentage point has tlie impact of reducing the nominal FIRR on tlie total project finance bv 0.1% and on equity, by 0.5%. Reducing interest costs would have a symmetrical effect, and a reduction in interest costs by 10% (2 percentage points) would improve tlie nominal FIRR’s on project and equity to 21.1% and 27.3% respectively.
56
I
Other tests included increases in land costs; a 20% increase in this component (base estimate 100.6 billion Rp.) would reduce project and equity FIRRs to 20.5% and 25.6 %, This scenario was also tested with an extension of the concession period by five years to 2028. The impact would be to increase the nominal FIRR on the total project finance by 0.6% to 21.5% and on equitv FIRR, the impact is an incrcase of 0.4% to 26.7%. The results of thcsc sensitivitv tests on the FIRR are summarized be1 ow:
Table 7.4.1 Financial Analvsis (Current Rp., Bukaka Financial Model, Nominal Interest Rates:
Proiect Scenario Parameter Base Value Variation Financial Analysis as BOT Toll Road (b l
Total Investment cost (c) 808.5 Construction 429.8 works cost
+lo% - 10%
Traffic Volume -10%
Generated traffic 10% to 14% of base, 2000-2004 20% after
Combined increased cost & decreased volume
Interest rate on Long Term Debt (local & offshore)
+5% -5% -10%
Increased land +lo% cost
+20%
5-yr. extension to concession with increased land cost +lo%
(b) Generated traffic assumed at 25% of diverted traffic in 2000, increasing to 30% by 2005 (c) includes construction cost, supervision, VAT, land acquisition, project overheads, interest during construction, and bank service charges for loans and guarantees
20.9%
20.2% 21.7%
19.7%
17.6%
19.0%
20.8% 21.0% 21.1%
20.7%
20.5%
21.8% 21.5%
26.3%
25.0% 27.9%
24.1%
20.3%
22.8%
25.8% 26.8% 27.3%
25.9%
25.6%
27.0% 26.7%
Higirrra!/ Toil Stud!, -AD6 I997
A further financial analysis was carried out using real interest rates and constant 1996 costs and revenues. Following ADB procedure, price contingencic.; and interest during construction was excluded as were depreciation and debt scwice cash flows. With a 1996 RQ. cost o f 555.8 billion RQ., the financial internal rCitc of return i n real ternis woulcl be 14Y:,. A 10% increase in costs would reciucc this to 13%; combining this with a 10% reduction in traffic would vielci an FIRR of 11.7'%,. Results of this test are shown belo\\.:
Table 7.4.2 Financial Analysis (Constant 1996 Bill. Rp.1
Investment Cost 553.8 Para me tecr Variation
+lO% -10%
Traffic Volume -1 OM Combined increased cost & decreased volume
12.9 <%, 11.7%
7.5 Foreign Exchange Impacts Foreign exchange costs are entailed tor all highway investments; toll roads bccause of their requirement for specialized collection and processing equipment reyuirc additional investment with a high foreign component as well. Even though raw materials are sourced locallv, foreign exchange costs are involved in extraction <ind processing. Machinery for construction is either imported as complete picccs or assembled locally with many imported components. This is the case for both dump trucks and toil collection equipment although the value-added locallv mav \'arv between 15% to 40% of the cost. Similarly for fuel, cement, and steel which are manufactured domestically, the plant and equipment to produce and deliver these basic goods has a high foreign component.
I n the 1990 JICA Feasibility Study on the Bogor-Bandung Project estimates were made of the foreign exchange share for raw materials and inputs in construction. These ranged from 100% for asphalt which is imported entirely to 40% for electricity which is produced with perhaps local coal at power generating stations with imported generators. A number of processed inputs such as fuel, cement, crushed stone, and steel were estimated to have 60% foreign currency shares in their delivered cost.
For the purposes of tlie Ciawi-Sukabumi project analvsis, construction costs have bee11 analyzed according to foreign : local shares cierivcci for tlie 1996 Feasibility Study of the Cirebon-Batang Toll r o a d carried out for Ministry of Public ~ ’ o r k s a i d tlie World Bank (DHV Consultants in association with PT Biiia K a r ~ a m d PT Hasfarni Dian Konsultan). Based on these shares anci the breakdown of construction costs by activity prepared b\. Bukaka, it has been determined that foreign cxchange costs woulcl coiiipose 53% of construction costs. Including project supervision ‘iiid o\lerlicacls, design anci final engineering, and purchase of toll collection equipiiicnt, foreign exchange costs would increase to a 55% share of total expeiiciiturc.
Given tlie financing mix proposed b \ r Bukaka, a quarter of the interest cost during construction would be foreign. Based on the 1990 JlCA estimates quoted ahwe, routine a n c i periodic maintenance costs have 50% and 76% foreign exchange sIi.ii-cs. Operation of the toll road is more labour intensive and toreign exchange costs ‘ire only 20% of tlie total of this item, but the replacement of toll equipiiient on the anticipated 8, 5, and 3 \’ear c \dcs is foreign exchange intensive, an estimated 82% eveii with local asseinbl\? anci installation. Taking periodic pawiiieiit o\~crIavs and toll equipment replaceiiient on a n annualized basis, operations costs cstimcitcd to total 15.3 billion Rp./\?r. would have a 5.5 billion R p . or Xi‘%, foreign exchange coiiiponent. The breakdown construction contract and cost item is sIio\\m in Table 7.5.7.
59
Table 7.5.1
Toll Road Construction & Operation: Foreiqn Exchanqe Shares by Component
Contract Item
Mobilization Clear & grub Earth wks Sodding Culverts Bridges Interchanges Grade separations Select subgrade Drainage Related constr. Subbase Asphalt treated base course (ATB) Binder 8 wearing course Roadside furnishings Throughway toll barriers Parking 8 svc. areas Branch office Landscaping Subtotal: construction
Foreiqn Exchane % share (a)
85% 65% 78% 12% 44% 44% 44% 44% 55% 26% 51% 75% 42% 42% 13% 45% 47% 45% 8% 53% -
Misc. & general 51%
Design & final engineering 70% Supervision @ 3% of constr. cost 50%
Toll collection equipment 82%
Project overheads 65% Total: construction & supervision 55%
Interest during constr. (IDC) (g) Local 75% Foreign 25%
Maintenance & Operations/yr Routine roadway maintenance 50% Periodic Maintenance 76% Operations 20% Equipment replacement 82% Total annual operations cost 36%
Bukaka cost estimate (bill. Rp.]
(b) 2.2 3.3 106.5 2.6 13.2 91.1 30 27.1 1.9 7.6
(C) 1.6 16 45.9 17.9
(d) 13.3 (C) 20.4 (C) 14.4 (C) 1.7
- 1.3 418.0
- For g&
1 9 2 1 82 9 0 3 5 8 40 3 13 2 11 9 1 0 2 0 0 8 12 0 19 3 7 5 1 7 9 2 6 8 0 8 0 1 219 6 -
(C) 11.8 6.0 12.9 6.4
(e) 11.4 8.0
(f) 21.4 17.5
18.9 12.3 494.4 269.9
139.9 104.7 35.2 35.2
(9) (e) 2.9 1.4 (el 0.1 0.1
9.8 2.0 2.6 2.1 15.3 5.5
Table 7.5.1 (Continued)
(a) O h Shares from Feasibility Study of Cirebon-Batang Toll Road, (Public WorksNVorld Bank)
DHV Consultants in assoc with PT Bina Karya & PT Hasfarm Dian Konsultan, May, 1996 except where noted below
(b) Includes general item from Bukaka construction cost estimate
(c) Based on JICA estimates for Jkta ORR project.
Phase I Report, October, 1988, Pacific Consultants International & Nippon Koei Co. Ltd
in ASSOC with PT SEECONS,
PT Nusantara Survey. PT Geode Pataka Alam
(d) Includes misc. fencing, guard rails. markings, signals, signage
(e) Based on Chapter 8 estimates and allocations, Feasibility Study on
Bogor-Bandung Road Project. JICA. Final Report. November. 1990
(fj Based on discussions with Jasa Marga 8 Bukaka. with some local assembly of foreign components
(g) Bukaka Cash flow projection. May. 1997
Examining foreign shares of equity investment and debt borrowings, tlic mix as mcntioned above woulcl be 60 : 40 cloiiiestic equity to offshore and the sanic ratio for clomestic and off sliorc debt. According to the 1997 Executivc Summary prepared by PT Bukaka Marga Utania describing the project, total investment would amount to US$ 345 million or 828 billion Rp (@ 2400 Rp/$). Of this total, 528.8 million would represent offshore equity and $109 million in offshore loans. I t a s assumed land acquisition proceeds in 1997 and construction starts on sclicciulc in 1998, the peak expenditure and inflow of foreign excliange would occur in 1999 with 104.8 billion Rp. This would be composed of 23.4 billion Rp. in equity and 81.1 billion in offshore debt. The peak outflow of foreign exchange occurs in the last year of foreign debt and IDC yay-back. According to the Bukaka financial plan, this would occur in 2006 and be composed of 82.1 billion Rp. of loans and 14.4 t>illion IDC. The inflow and outflow of foreign funds is shown in Table 7.5.2.
Table 7.5.2, Foreiqn Exchanqe Flows (bill. Rp.)
CREDIT POSITION ~ - - - - - ~ _ _ _ _ - - - - 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Loan Disbursmentf(Repayment)
Local Investment Loan 0.0 9.3 63.3 105.5 99.0 -46.0 -4.5 -9.1 -13.6 -15.9 -20.4 -80.9 -86.8 Local IDC 0.0 1.2 10.6 32.1 60.9 -24.2 -1.6 -3.2 -4.7 -5.5 -7.1 -58.4 0.0 Offshore Investment 0.0 6.2 42.2 70.3 66.0 -2.7 -3.6 -7.1 -35.7 -53.6 -82.1 0.0 0.0
Loan Offshore IDC 0.0 0.4 3.7 11.0 20.0 -3.2 -0.6 -1.3 -6.3 -9.4 -14.4 0.0 0.0
Total Equity inflow 168 100% 0.6 27.8 35.2 58.6 32.4 13.2 0.0 0.0 0.0 Domestic 101 60% 0.4 16.7 21.1 35.2 19.4 7.9 Offshore 67 40% 0.3 11.1 14.1 23.4 13.0 5.3
Net Foreign Exchange Flow: (Excluding future dividend equity)
Source: Bukaka Financial 1997)
0.3 17.7 60.0 104.8 99.0 -0.6 -4.2 -8.4 -42.0 -63.0 -96.6 0.0 0.0
throw-off on foreign
Model (May,
62
7.6. In the previous section 7.3, the impact upon ecoiioiiiic benefits to the economy was examiiiecl for higher and lower tariff levels. for the financial analysis, further tests were conducted to cietcriiiiiic the impact on traffic and revenues from clianges in
Based on the TRlP Upctate/lHCM diversic)n c u r w s used b \ r RPT, a ciccrcasc in tariffs ti\, 25% wouILi increase Categorv I traffic bv 20 to 25% and Catcgor\. I 1 traffic b\. 'irouiici 15%. This would increase benefits to the economv, raising the ElRR to 25.7'1;, from the base toll case return of 23.6%. From the private investor point of vie\\,, the iiiipact woulci be negative with lower toll road revenues, ciecreasing the FlrZrZ for the project to 18% from 21% . Return on equity would similarly decline to 21 '% from 26%.
Impact of Different Toll Tariff Policies O n Financial Returns
t aiitf .'. levels plus and minus 25% of the tariffs proposed bv Bukaka.
Increasing tariffs by 25% would decrease diversion to the toll road, reducing tr'iftic by 12 to 15 %, or perhaps as much as 20%, taking the more elastic part 0 1 the diversion curve. This would have the iinpact of reducing the ElRR to the econoiiiv to below 2076, but increase iiivestnr returns on the project to the order of 23%. Return on equity would increase to the order of 30% with tliese higher tariff Ie\~c*Is.
Table 7.6.1 Tariff Adiustment Sensitivity Analysis: Ciawi-Sukabumi Toll Road Proiect
Financial Analysis as BOT Toll Road
Parameter Base Case
Traffic response
EcJLutJ 20.9% 26.3%
Toll rate decreased by 25% 25% 15% 17.9% 21.2%
Toll rale increased by 25% -15% -12% 23.5% 31.1% -20% -20% 22.5% 29.2%
Given this situation where tlie iinpositioii of higher tariffs has tlie effect of tolling - off traffic and reducing the benefits to the ecoiioiiiy of potential transport savings, but perceived congestion relief and time savings remain high enough to still produce increasing toll revenues, the main reference point for BOT tariff setting becomes the financial return to the investor. Tariff-traffic sensitivity tests indicate that the proposed tariffs are still substantially below tlie investor revenue- maximizing level. If revenue maximizing became the tariff-setting criteria, ecoiioiiiic benefits would be even more reduced with the EIRR to the economy falling far below 20%.
From the investor’s point of view, the financial return to the project must AS a mininium exceed the cost of capital. Based on tlie Bukaka financial plan with 60 : 40 domestic : offshore debt at current interest rates of 20% and 11% respectivelv, the weighted nominal average cost of debt is i n the order of 17% when commitmc~nt fees and charges are included. The forecast project rate of return i n current terms ‘it 20.9% vielcis a margin of 4 percentage p i n t s o\’er this. A slower cie\dopmcnt of generated traffic, not reaching 20% of normal growth traffic until fivc vears <ittc>r opening would reduce the FIRR in current tcrnis to 17.6%, or i n constant, real t<mns, to the order of 11 %.
Return on investor equity, the other benchmark for financial fcasibilit\r, i i i u s t a t least be comparable with returns available in other sectors of comparable risk. A margin of 5 percentage points over a 5 to 10-vcar average clomestic, nominal cost of capital at 20-21% could be taken as a reasonable long term hurclle current rate of return. The forecast nominal 26% return on ccpitv for tlie financial base c‘isc tits within this zone of investor Iiurclle rates and is lower than what might bcb a c l i i c ~ \ u i in other sectors.
A combination of adverse outcomes i n the project such as ci 10% cost cnw-ruii combined with 10% less traffic than anticipated would .reduce real returns to the project to 11.7%. Given the cost of capital ancl the risks on costs and revenues, the tariff levels as proposecl represent a reasonable comproiiiise i n the trade-off between economic returns to the national economy and returns to private investnicnt
8.
8.1 Backzround Present Concession Framework Tlie 1980 Law #13 establishecl tlie framework for designation and operation of toll roads, standards of service, and set an upper limit on the toll tariffs to be charged. Tlie 1990 Government Regulation . # 8, Regarciinp . Toll Roads assigned part o r all of the authority to Jasa Marga to organize toll roads and provided for organizing in cooperation with other parties. Jasa Marga has accumulated almost 20 \rears o f experience in the design, construction and operation of toll roads. From this Jasa Marga has evolved procedures ancl a framework for entering into BTO ancl BOT joint ventures with other public and private companies for financing improvements and implementing new toll road ventures.
REVIEW OF RISK ALLOCATION AND MITIGATION FRAMEWORK
The latest program of toll road investments planned for initiation in Repelita VI amounted to over 1100 km. of new construction. In 1995/96,9 toll roads composed of 19 separate project sections were proposed for competitive bid and joint venture organization. Another 16 sections (15 road projects) were under negotiation as part
of a direct appointment process. As of Ma\> 1997, 32 projects were active in these two groups. Six projects of the total coulcl be considered to have advanced into impleinentatioii or reached a signed Authorization Agreement.
As discussed in the Inception Report for this studv, project risk elements incluclc. not only traffic flows, revenues, and construction cost over-runs, but also cicla\. costs. In addition to revenue concerns and the lack of guarantees on toll tariff Ic~\~cIs ‘It
project inception, a major current concern atiecting cost and construction &h\. is lancl acquisition. In this chapter, the over,ill cn\rironmcnt ot risk is ciiscusscJ JS \\rcll a s these specific concerns. General issues arc summarized in Table 8.7
Table 8.1 Toll Road Risk Assessment, Coveraqe and Allocation
Type of Possible Event Controling Parties Risk
Commercial: Proiect related Concept Sponsor
costs Sponsor
Project supplies
Market general
Competitors
Commitment
Supplier
none (thousands of potential users)
various
Gov't
Sponsor
Contractorloperator Sponsorlcontractoi
Pre-completion Risks Change orders GovernmentISponsor
Delays due to Proj. Company fault Sponsor Force Majeure event none Delayed site GovernmenVSponsor possession Contractor fault Contractor
Inefficient Sponsorlcontractor implementation
Failure to complete Sponsorlcontractoi
Exposure 8 Protection Project Lender CompanyIConsortium
Independent reviews
Fixed price. certain-date turnkey liquidated damages for non-performance
Quality of design. thoroughness of site iiivestigations Tested technology 8 contractors experence Contracts for wnstr , supply
supply contracts
Independent surveys to verify demand forecasts
Quality of service, rates, Gov. franchise 8 planning agreements
Equity commitments. quality of fofward planning 8 commitment to Infrastructure Master Plan
Equity comitmenl. technical 8 credit strength Contractual commitment to cost over-runs 8 operating criteria
Experience 8 performance, financial strength Contractual arrangements:ie.. penalties. bonuses,
transparency arms-length from sponsors, iiisurance
Exposure depends on Contract provisions
Exposed partly exposed (insurance) partly exposed (insurance) Exposedlbuy-out provision
Liquidated damages (% of contract price) exposed
Foreclosure on assets liquidated damages
JM pays debt service from revenues, but does not assume loans
Table 8.1 (continued)
Type of Possible Event Controling Parties Project Lender Risk CompanylConsortium
ExDOSUre & Protection
Post-Completion Risks Force Majeure
due to Gov't Government Buy-out mechanism other none insurance
Technical defects Contractorisuppliers Performance guarantees, liquidated damages
Operationslmaint. contractorlsponsor exposedlcontractor damages
Commercial: Economic environment Currencylinterest rate risk Government (partial)
Inflation Government (partial)
Country risk i) Foreign exchange Government (partial)
ii) Political
iii) Legal Risk
iv) Force Majeure
Government (partial) or none
Government
none
Non-commercial: project specific Regulatory Government
Expropriation Government
Stcte Enterprise Obligations Government
Hedging. sponsor guarantees use of local financing
Gov't agreement to link tariff to debt service costs
Gov't agreement linking tariffs to inflation index
Guarantee of exch. availability Revenues paid to offshore escrow account
Insurance. buy-out clauses
International arbitration. contractual law
insurance
Concession agreement conditions
Previous record. concession terms inclusion of local lenders, partners 8 sponsors, insurance
Contracts, Guarantees of performance
Note: Because of the structure of the Joint Venture, Jasa Marga assumes Several roles, including that of sponsor. State client and ultimate operator on behalf of the Government at the end of the concession period.
8.2 The parties in the allocation of risk include the Government, Jasa Marga, atid the project sponsors. The key concern of the private sponsors is the expected return on their equity iiwestineiit. Depending upon the riskiness of the investment and the constraints of debt, expected rates of return on total project cost vary between 17%
Current Framework for Allocation of Risk
and 30%.1' Higher risks inean higher investor expectations 011 the rate of return; reduction of risk and allocation of risk to those parties best able to control and manage these risks is the major determinant in reducing the risk preiniums demanciecl by financing entities. This then will translate into the required minimuin toll tariff for financial feasibilit\r- and ultimatcl\, the economic returns of the project to tlie national econoinv.
As discussed previouslv, toll roads are niorc risky \'cnturcs than soine othcr t!'iws of BOT invcstments given the licav!' front-end invcstiiient anci early years of nc~pitivc cash flow. Financial coinmitnwnts arc maclc in advance of traffic anc i re\'ciiuc streams being assured. Often, only far into the concession period will traffic huilcl to sufficiently cover operating, maiiitcnancc ancl debt service costs. Achicvinf rii i
adequate return and recouping the investment may take as long as 15 tci 20 \ '~ '~ i r s . During this time span man\' unforeseen cvents and several series of economic ~ n c i political cycles can occur.
Major elements o f risk in BOT toll road projects include project clevelopnent, land acquisition, construction cost, rcvcnues (as a function of traffic volunie and toll tariff), and fund repatriation (currency fluctuation, exchange controls, off-shore debt service, ancl repatriation of profit.) The broader aspects of political risk is to a Lirge degree out of the control of the parties involved in tlie agreeinent. These are not discussed here beyond noting that Inclonesia's record of prudent fiscal iiianagcment coupled with strong economic growth provides a inore reassuring environment than many other countries competing for off-shore BOT funds.
,,
In the most recent generation of planned BOT projects, tlie tendering process was opened to domestic and international investors. Standard bid forms anci a svstematic review and evaluation process were useci to increase confidence that the selection process was conducted in a fair and even-handed manner. As mentioned above, between December 1995 and June 1996, bids on 19 sections totaling 767 kilonieters were due on six different dates to spread the load of preparation dnd evaluation.
Although the amount of data and the depth of feasibility and design information varied widely among projects, Jasa Marga made the bidders responsible for analysis and verification in the preparation of their bid. More extensive preparatory analysis of design alternatives and studies into construction costs and traffic would have made the bidding and evaluation process smoother and easier. Costs estimates and bid elements varied widely as a result. Selection of winning bidders was based on a number of criteria. These included the earliest opening \-ear, construction cost, concession period, proposed toll tariffs, and discounted revenue sharing to Jasa Marga. The weighting of engineering criteria in the selection in
Indonesia Road Sector Shtdy, March, 1996, World Bank
terms of adequacy of drainage, pavement strength or structural design is not clear, but prequalification of bidders was intcnclecl to establish the competence o f the firms involved.
The evaluation ancl extensive rounds of negotiation have taken much effort and time on the part of both Jasa Marga staff and investors with so manv packages to be consicierecl. While part of the elapsed 18 months since tlic start of this procc*ss can be attributed to biclclers putting together consortia and financing packag:css, the ilela!fs in reaching the final stage of signing Authorization Agreements h a w bccn considerable.
Stanclard elements of Force Majcurc arc adclressecl ii i tlie proforma tcnilcr Jocuiiicnts and Authorization Agreements. As noted below and in contrast to sonic governments which self-insure at a lower cost, in tlie most recent generation of open bidding, investors were asked to carry their own insurance on such risks. 111 the event of default during project preparation o r after construction by either p t r t \ , in the joint venture, Jasa Marga undertakes to make loan payments out 0 1 toll revenues, but would not assume loans or debt obligations.
8.2.1 Project Preparation The 1990 Government Reda t ion #8 RegardinK Toll Roads (Article 41 & 42) stipulated that prefeasibilitv ancl land clearance expenses were to be borne ti\, tlic Government. Feasibilitv, engineering, and final design expenses were to lw lxirnc by Jasa Marga or by Jasa Marga in cooperation with the investor. Since construction cost risks are borne bv tlie investor (and the contractor in case of fixed sun1 contracts), due diligence on the part of the investor and financial backers wo~ilcl dictate that tliorough back-up investigations be carried out to assure themselves of the best accuracy of construction cost and design. It is also in the interest of ]asa Marga and the Government through the Ministry of Public Works to ensure that designs are sound and evaluated by 3rd party expertise. This should be clone in a manner as comparably thorough as should construction ancl maintenalice supervision on the part of the ultimate owner of the asset.
Quality control provisions in Authorization Agreements for this latest, competitive round will hopefully be more rigorously applied than in the preceding generation of direct appointment /non-tender awards. Diligence in monitoring qualitv and supervision of construction by Jasa Marga is in their best interest, both as joint venture partner ancl ultimate operator of the asset. The Government as owner must also take responsibility for ensuring qualitv.
8.2.2 Land Acquisition Although as mentioned above, Government Regulation #8 stipulated that land acquisition was the responsibility of Government, right of way is no longer
provided by Government because of budget constraints.'j While the Government initially provided land for toll road projects, this policy changed for the 1995 generation of tenders with investors being given the responsibility for funding land acquisition up to 15% to 20 % of construction cost. This policy was again altered in February, 1997 to extend investor rcsponsibilitv beyond this liiiiit. While prescnt policy is not clear, there apparentlv exists the possibilitv that over-runs Lwvond tlw 20% benchmark mav bc shared i n some fashion with the state enterprise pdrtnc'r, Jasa Marga.
Since the land purchase and negotiations with property owners is carried out h\. the Governmentl(,, without any control or participation by the in\wtor be\wnd th,it of observer status, it woulcl be preferable that costs were borne bv the Govc.rnmcut. Ideally, following the cievelopineiit of a toll road/public road masterplan the Ministrv of Public Works, rights of way would be mapped out , and propcrtv acquired well in advance of bidding and speculative plienomen,i. Gi\sen Goveriiment eminent ciomain powers, values could be frozen and prop>rtics purcliasecl based on current tax assessment values in these corridors. Instcad, property acquisition in many cases does not start until bids are finalized o r Agreements of Association signed. Insiders have then had an opportunity to purchase tracts a i d the process of land price escalation is alreadv well ad\-;iiiccd. The investor and the partner, Jasa Marga, hence incur an open-ended liabilitv which in turn affects financing arrangements and the rate of return calculus. This has the potential of raising contingencies of such a magnitude as to make the original bid
l 5 Article 41, Gov. Regulation No. 8/1990, land procurenlent is tlie obligation ot the governinail , inJ
ovonersliip remains with tlie government; hence tlie investor cannot use this asset as coll~itwil. I h c to government limited funds, land acquisition costs provided by the investor and acquisition wsts including accrued interest during tlie period are part of tlie investment costs borne by the iiivcstor. The investor has to make available funds for land acquisition, but may appoint a represcntativc to observe the acquisition process. For the Sukabumi-Cianjur project, tlie original tender document provisions and conrlitions (Ikwisions of September, 1995) stipulated tliat an irrevocable bank guarantee of 19% of construction costs be submitted to Jasa Marga. In these conditioiis, Jasa Marga would have been responsible tor nny shortfall of funds if land acquisition exceeded the estimate. If tlie land cost were to have been less, the investor would only be responsible for funding tlie actual cost of land acquisition, b u t the difference would be paid to Jasa Marga out of net revenue over some part of tlie operation period
A delay in tlie delivery of all or part of tlie land would be an event (as would force majeure) allowing the investor to propose an extension of the Authorization Period.
In the case of proposed toll roads which are located in less developed arras, the amount of bank guarantee to cover land acquisition cost appears flexible, in the case of the Medan Binjai road, 16% of capital cost (from a previous 24%?). (March 13, 1996 addendum to Tender Document). this ,1lso appears to have beeti the case in tlie Seiiiarang-Solo tender as well.
l 6 KEPPRESS #55, 1993 sets out land acquisition procedures and Government committee structure.
obsolete, necessitating fresh negotiation cycles, anci prolonging the gestation period for the investment.
Besides the optimum approach of resolving land acquisition costs prior to award of concession, other alternatives are available. One policy pursued bv Chile is the sharing of land acquisition cost over-runs betwwn Government and concessioiiiiire o n a respective 80%/20% basis. If land acquisition and clearance become ‘1 C-JL~SC of dela!., tlie Chilean Govcrnnwnt extends the concession period tor a n cqui\’,ilcmt, compensatory period. I t appears t l u t this pattern has been adopted to soinct ~ l c y , r c c ~ b\v Jasa Marga.
Another alternative w o u l ~ l be for Jasa Mare1 to pay tor land purcliasc from refinancing proceeds of their existing toll road s\’stem and count this towarcis equitv contribution and increased revenuc-sharing arrangements. This however C~LI ICI complicate public share offering plans now on-going. Another option, einplo\td in the United States, namely California and in states around the District of Columtiia, has been to gain participatory contributions for toll road land requirements t r c i m adjacent property clevelopers. This sometimes takes the form of Land clcinatioii. In other worcls, those who benefit from high capacity inotorwavs ancl interchanges ,ilsn help to py.
I n the event of delay in cielivcrv of all o r pa r t of the land, as well as with delays caused by change in the scope o f work or events of force majeure, extension of the Authorization (concession) period mav be proposed bv the investor. Such extensions appear to be negotiable items as are tlie hanctliiig of land cost over-runs. However, aclditional extensions on a 25 o r 30 year concession period offer a soft and distant form of compensation for front-end delay costs. Normally with circumstances more uncler control of the Government or implementing agency, these delay costs would be borne by tliem iiicludiiig costs of idle equipment ancl personnel as well as interest on loans during construction for the idle period.
8.2.3 Construction Cost Risk The risks in construction costs are mainly those of over-runs anci are borne by the investor and/or the contractor as part of a fixed sum contract. These can be reduced through adequate prefeasibilitv, pre-design and competent final design to reduce to the minimum cliange or variation orders. Execution of works by qualified contractors under good supervision is the principle security available.
Unforeseen geotechnical conditions and other risks such as weather which are beyond contractor control are covered bv standard clauses or stand-by financial measures. These as well as insurance premiums against force majeure have been made the responsibility of the investor as standard contract elements ancl included as an insurance expense item. Since premiums for such insurance tend to be large,
usuallv it is cheaper however for tlie Government to self-insure against tliesc risks. With the BOT investor insuring against these risks, costs are higher and m u s t eveiituallv be reflected in the toll tariff. Delays wliich occur froin Government action or inaction should also be covei.cd with adequate compensation for such breaches. For this new generation of projects, these delays as well a s costs of changes in the scope of work which arc instructed bv the Government are t o be reimbursed out o f reductions in toll revenue sharing to Jasa Marga and/or extensions in the concession period.
8.2.4 Traffic Estimates TIie bidder is responsible for traffic estimates, including base year traffic and subsequent growth rates. Prelimiiiar\, feasibilitv studies have been carried out to soine degree on most corridors b\' Biiia Marga. Generallv inore coiiiprelieiisivc and detailed preparatorv feasibility studies bv sponsoring agencies have led to better quality a i d inore competitive bidding. It remains, however, the proper respoiisibility of the bidder to carr!. out their ow'n analysis of traffic potential and diversion. While some countries such a s Malaizsia and Mexico in the earlier Ic5,iriiing stages of BOT toll roads offered traffic guarantecs, later generations of 601' projects have largely left this risk to the investor to be addressed as part of due diligence procedures.
Provided the investor carries out their own traffic analysis in a competent manner, the major risk which remains under government control is the future provision of coiiipeting high stanciarci roads. As raised previously, prograinining r o a d investment within the context of an overall masterplan which is open and available to all bidders is the most cost-effective approach for attracting competitive bids and increasing security of traffic attraction. Formulation of a masterplan would also encourage inore coherent land use plaiining which in turn affects future traffic genera tioii.
8.2.5 Toll Tariff Risk This element of risk is discussed in tlie following Chapter , but it is important to address this within the context of overall risk management aiicl allocation. Toll tariff risk has two elements; these are comprised of firstly, the initial opening tariff and secondly the mechaiiisin and policy for future adjustments. The concern of investors is that adjustments will not keep pace with debt service, operating, maintenance, and periodic mainteiiance costs, particularly in an atmosphere of escalating prices, deteriorating exchange rates, and significant portions of off-shore debt to repay.
Under current practice, the opening toll tariff is not officially accepted until the road is essentially complete. Jasa Marga can assure best efforts in processing the proposed rate through officials channels up to the President's desk, but until tlie
KEPPRES is signed, tlie risk is with the investor. Tlie contract with Jasa Marga in the Authorization Agreement contains a proposed formula for bi-annual tariff esc'lla tion based on tlie coiisumer price index. However, risk remains that adjustments mav not be approved in a future aclministration. This uncertainty perhaps reduced the number of potential biclilers, and for those accepting the risk, led to higher premiums to cover tlic perceived risk.
8.2.6 Foreign Exchange Risk Tlie issue of alleviating investor risk for inflation and currencv depreciation through incorporating escalation factors in tariff tormulcis is aildrcssed in the next c1iaptc.r 011
toll tariffs. Mentioncd here 'ire the broader p l i c r implications for lnctoncsi,i in private funding of infrastructure.
Because Indonesia lias maintainecl an open capital account for man\' . . vcars, guarantees on foreign exchange transfers have not been an issue, and currencv controls or limits on repatriation of profits have not been a concern. With a carefully followed "managed float" exchange rate policr, Bank Indonesia lias Iiclcl a fairlv steady "real" excliange rate with respect to the countrv's trading partners since tlic devaluation in 1986. Interests rates for domestic loans have eased in recent \ ~ a r s , and domestic inflation measured bv tlie Consumer Price Index lias also declined from more than 8 % in 1995 to 6.5 % in 1996. Tlie Minister of Finance announccct in March of this \Tear that the inflation outlook for the current fiscal year was in the order of 6%. However, maintaining high growth, low inflation performance is difficult, even without the implications of increased integration with external capital markets.
With the high cost of domestic financing and the practical and policy limits of domestic funding capacity for infrastructure, at least part of tlie financing package for the toll roads currently under investment process would come from off-shore. External sourcing of funds also has limits, both for sliort-to-medium term flows inward, and the longer term debt service claims outward. The current account and balance of payments will continue to be a constraint on foreign debt obligations for the foreseeable future. It is difficult to see how the entire portfolio of projects currently in investment process, amounting to more than US$3 billion, can be financed during the next five years and still fit - no matter how split- within tlie Central Banks respective domestic and foreign infrastructure funding envelopes. Even with an implied 25% to 50% to be sourced from off-shore, the chore of sterilizing the inflationary impact of funds injected into tlie economy during the coiistruction phase will be significant. A later, more worrisome task will follow with the demand for foreign exchange debt service as grace periods for off-sliore debt expire.
73
8.3 Revulatorv Context The necessity to develop and update the master plan for the public and toll r m c l network has been mentioned earlier. The long term management polic\r anc i regulator\! overview of toll roads will also require tlie cievelopnient of polic\. for longer term administration of tariffs. As mentioned i n the tarift chapter, as toll roads mature and investors enter their periods of "enjoyment," public pressure could be expected to build to cap tariff rates if tlicrc is a perception of "cxccss" profits. This is a long term risk to the investor who expects rewards for bearing a negative cash flow through tlie early . . \ ~ a r s of the investment, but it would be prudent to address this early in the process. This aspect of monitoring and c>vcrsight is acliiressecl in the following chapter on tariff setting anci adjustment.
Measures to improve the agreement framework and rcgulatory structure to r e n i o \ ~ elements of unccrtaintu which are within Governmcnt control include the follo\<ing:
i)
i i)
i i i)
iv)
9
Make a consistent policy which limits investor exposure on h n c i acquisition cost overruns; Strengthen tlie long term planning function for ~levelopmcnt of integratecl urban and intercity toll road systems, and make av,iilable updated, compreliensive masterplans to guide land use and land transport clevelopmcii t; Incorporate in the tariff adjustment tormula a mechanism wliicli reflccts cost increases and provides some devaluation protection for coverage of off-shore debt service during the cie\dopmental pliase of investmcnt. Simplify the tariff adjustment mechanism anci delegate power to adjust rates to the Minister of Public Works (See Chapter 9 on Tariff Setting & Adjustment). Strengthen the role of the Ministry of Public Works (Bina Marga) as the Government body charged with balanced network clevelopment including the following aspects: a) Updating of tlie masterplan for toll road and alternative non-toll
road networks to ensure balanced network development in keeping with the spirit of the 1980 Law On Roads and Government Regulation ## 8, 1990 (Article I G. 2, r e g d i i i g b n l m m f
Strengthen implementation of the masterplan to ensure that the service balance between toll road and public lion-toll alternit' ives is established and maintained.
de71elop,llrllt)
b)
The inter-urban toll road network should serve longer distance, through traffic, but the primary public highway system and local access network should continue to be maintained according to Bina Marga's current policy of maintenance and betterment
programming. Adherence to the inasterplan should ensure that neither a service inonopoly is allowed to clevelop on the part of the toll system, or con\~ersely, parallel, high-capacity non-toll inotorwavs precipitously undercut the toll customcr base.
9. TOLL TARIFF SETTING AND ADIUSTMENT MECHANISMS
9.1 Background The nature of toll road investment makes this particular form of BOT vcnturcs iiiorc difficult to structure ancl finance than other forins of infrastructure o r utilitics. Toll road investment costs are concentrated a t the beginning of the project, pa\'-hack perioLis are generally long, and revenues arc\ nwrc ciifficuit to predict t Imi for ot~icr types o f BOT investments. Unlike a power plant serving one bulk customer, toll road usage is tlie product of thousands of individual customer decisions with tlie attendant wide varietv o f tr ip purpiscs and willingness to pav. For these reasons, re\~eiiuc-maxiiiiiziiig tariffs and higher vielcls on equity are sought by invcsstors; rates of return tend to be higher than for other types of BOT projects in cwder to attract investors.
However, as pointed out by Bina Marga officials, payment of a road toll is '1 cash transaction immediately felt in the pocket. I n contrast, telephone and electrical bills have the perceptual aclvantage of a Lielaved impact on the consuiner. I - I C ~ I I C C governments and tlieir constituencies must be expected to continue to exert a n interest in the tariff setting and acljustnient process.
As also discussed in Chapter 9, tariff setting and adjustment mechanisms are also tlie first concern of concessionaires ancl their bankers. The setting of tariffs is intimately connected with the structure ancl cost of financing. The cost preiniunis set on risk or offsetting measures, mitigation ancl comfort to lenders become ilicorporated in the tariff and rate of return calculus.
The cornerstone of a sound BOT policy is tlie establishment of a predictable svstein for setting and adjusting toll tariffs. The most successful approach to this system is the incorporation in the bidding procedure and authorization agreement of a formula which resolves uncertainty on tariffs and hence increases investor confidence on revenues. This resolution can be met through a tariff adjustment mechanism with cost indexing.
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9.2 Current Svstem Uncler tlie original 1980 legislation and later implementing regulations,I: the ciesignation of a road section as a toll road and toll tariffs by type of vehicle are cieterminecl by the President a t the proposal of the Minister of Public Works. A toll road can only be officiallv designated when it is cssentiall\~ complete and tolls cannot be stipulated until this formality is carried out. As presently aciniinistcwd, this process requires a new Presidential Dccrcc (KEPPRES) everv tinac a rate is tiled, including opening of new interchanges on existing toll roads where 110 clicln:;c in vchicle/km rates inav be entailed.
A lengthy and bureaucratic process is entailed to niove the tariff setting and adjustment proposal up to the President’s desk. Starting with the investor submitting the proposal to Jasa Mar91 for review, i t is then passed to the Ministn- o f Public Works. Here i t is reviewed in detail a3ain bv the Subdirectorat Jalan To1 for conformance with BKOK guiilelincs. The proposal is then submitted to the Ministcr of Public Works for approval. It then is passed up to the Cabinet Sccrct‘iri‘it for review, and if approved, will be submitted to tlic President for decision.
A detailed comparison of user costs for the toll and non-toll alternative is carried out bv both Jasa Marga ancl Bina Marga. This comparison takes into account vehicle operating cost savings ( including time) or BKBOK over the entire length of the particular toll road i n question and checks the level of tolls against toll road user savings.
9.3 Legal Framework and Philosophv When Law Number 13 of 1980 On Roads was enacted, one of the purposes o t the legislation was to define the role of tlie road network system in serving balanced interregional and national development. The Law defined the Iiicrarchv ancl classification of roads according to their purpose and provided a framework in which long term planning, construction ancl maintenance of roads woulcl be carried out. The Law also provided for the organization of toll roads ancl the delegation of competence to a State Corporation of Toll Roads (Jasa Marga).
At the time of tlie enactment of this law, earnings from oil exports were higher and soft loans froin multilateral and country assistance programmes were more plentiful. In more recent years the many competing demands for State funds for development and the decrease in multilateral funds available has increased the need to attract private investment for toll roads. From this has followed a policv for BOT development and joint operation of toll roads. In Government Regulation Number 8, 1990 Regarding Toll Roads, Article 38 provided for Jasa Marga organizing toll
l i “Law # 13 of 1980 On Roads” governing the administration of the road network system , and Government Regulation #8,1990 Regarding Toll Roads.
roads in cooperation with clomestic ancl foreign companies. Devclopleot, maintenance ancl operation however still remain the ultimate responsibility o t the State Agency, Jasa Marga.
9.4 As meiitionecl above, there h a w been several stages in the clcvclopmcnt ot toll rocid financing in Inclonesia. (197s - 19S3), toll r o d s IVLW
financed by state funds and foreign loans. This carried into thc second st‘>gc, ( l W 3 - 1990) with “two-step” loans supplcnicntcJ ti\, bonds issued by J‘lsa M a r g i . l h i , tirst mechanism involved soft foreign loans to the Government o f Indonesia being rc4ent to Jasa Marga. Although foreign and multilateral loans for Jasa M a r p projects continued into the 1990‘s, starting in 19x7, Jasa Marga has been building toll rocids in co-operation anci joint venture with the private sector b y using BTO and 130T svsteins. This has since cievclopcd from direct appointment of in\utors ti\. thc Minister of Public Works to a competitive biciciing process started in April, I‘FJ5. In the more recent invitations to tender anci subsequent joint venture ‘igrccmcnts, modified terms have incluclcci such changes as revenue-sharing, anci the financing of land acquisition by the investor as part of the total investment cost.
Tender documents issued by Jasa Marpi in the 1995 bidding rounds stated that initial toll tariffs must be proposed by investor with reference to otlicr toll roads. Guidelines also included the maximum tariff limit of 70% of BKBOK. The g<meral guidelines suggested that f o r classifying tariffs bv vehicle t\rpe, Categon I I A (medium, 2-axle vehicles) tariffs should be about 1.5 times Categon, 1 (light vehicles) and Category IIB (heavy, >2 axles), about 2 times Categorv 1.
Tender documents also provided that potential investors could propose a tariff adjustment formula incorporating consumer price indexing, with tariff acijustmcnt applications allowed every two or three years. Jasa Marga as joint venture partner as well as the authorized State agency for organizing toll roads woul~l undertake to process tlie tariff applications through the government regulatorv a d appro\:al process, but cannot promise beyond its best efforts when or if applications might be approved.
BOT Toll Roads and loint Ventures
During the initial stage,
The investor proposal for opening tariffs on a new toll road can onlv be processed when a “Development Report” on tlie road is submitted, the readiness of tlie toll road has been checked by Jasa Marga, and tlie facility is determined to be operational. After review by various departments within Jasa Marga involving Research, Planning, Investment, Collection Management, Implementation, and Legal Departments, a concept memorandum is forwarded to tlie Minister of Public Works. This is reviewed internally with Bina Marga, more specifically, the
77
Subclirectorate of Toll Roads. This then follows the same process as proposdls tor tariff adjustment to the Presiclent's desk for a p p r ~ ~ a l .
Hence, beyond pledges of best efforts, toll road BOT projects have no biiiding agreement on tariffs until the facilih, has been constructed and the PrcsiJcnt has approved the application. Similarly, there is no guarantee that future applic.,ltions for tariff adjustments \\,ill be apprcrvcd on a sirstematic o r regular basis. As discussed previouslv financing for projects must be arranged in A tramc~cvcrrh u,hich cannot guarantee a tariff which will necessarilv cover debt service costs. 'I'his element o f uncertaint\r and risk must then be included as a n implicit preniium c r n the cost of financing, particularlv for offshore funds.
9.5 The concept of user savings embodiccl in the 1980 Law On Roads prcn,icics a reference point and an upper bound for toll tariff-setting. If savings which uscrs gain from traveling on a toll road are used tor a guide i n the cleterniin,~tion of toll rate, it is desirable to develop a simple VOC model such that the data collection ,Ind further updating can be done without too much time and resources. Hotvetx~ tlic model sliould be extensi\.el\r calibrated based on field data, which for VOC means not every cost component can be fully calibrated quickly.
To study VOC on toll roads, PT. Jasa Marga, has been using a inoclel developed in 1979 by Pacific Consultant International as a guide in setting toll rates. The model was developed as part of a feasibilitv stud\, carried o u t for intra-urban toll r o d s i n Jakarta. In the model each VOC component is assumed to be best explained b\. the average running speed of the vehicles. Irregularity of road surfaces, geometrics, ,ind traffic conditions are not explicitly taken into account in factoring cost changes.
To provide a more appropriate model for calculating vehicle operating cost savings, Jasa Marga commissioned a consultant to review the PCI model and a modified model of VOC for toll roads has been releasedts. The fuel consumption cost component is empirically cievelopeci using representative vehicles cominonl!. using the toll roads by taking into account traffic, road geometrics, and roughness effects. Other cost components are partially adopted from an extensive review made on existing VOC models. The comparison between the two models has been discussed previously in Chapter 4.
Another aspect of user savings is the value of time for passengers and private vehicle drivers. There is a lack of empirical value of time studies conducted for Indonesia conditions. As discussed in Chapter 4, past feasibility studies on toll
User Savings and Tariff Setting
PT. Jasa Marga (1996). The calculation of vehicle operating cost. Final Report, Foulidation tor Research & Industrial Affiliation - ITB. (in Bahasa Indonesia)
Highrun!, Toll St!t+ - AD8 1997 78
roads have assumed a wide range for values of time, derived frc)lii different assumptioiis. Techniques such as stated preference are now developed and accepted for deriving a value of time. Unfortunately, there has not been an\' empirical \f,llue of time derived for Indonesian conditions.
Knowledge ancl experience on VOC modeling has been developing in both lass Marga and Biiia Marga, but the specification of models used by Bina Marga such as the RUCMI" for maintenance maiiagcmcnt planning and programming S C ~ Y '
different purpose. A standard model should be adopted for use in evaluating tdritl proposals. This sliould allow simplificci application for both urban and intcr-urban road analvsis. new mocicl ilcvclopcd for Jasa Marga would satish. this purpose. Similarly a standard approach for the valuation of user time needs to be developed including an adjustment for regional coiiciitions. The time value of R p 3,281 /hr/veli for Categor\r I vehicles developed for highway life cvcle anrllvsit; in the Indonesian Highwa\r Capacitv Manual (IHCM) appears too low in relation to to wage levels. The income approach as used for the Jakarta Intra-Urban Toll R o d stud\, (Northern Extention of the Southwest Arc) yields a value in the orcicr of Rp hoo(ito 8000, wliicli may be more reasonable.
The
Within the philosoph\r of Law Number 13, develop a sct of aclmiiiistrative guicielines which will further interpret user savings for urban and interurban toll roads. Increasingly as traffic builds in certain corridors, congestion atid clelay costs will preclominate in the user savings function against which tariffs are compared. Particularly for urban toll road systems, congestion cliarging by time of clay should be introduced with lower rates for night and off-peak users. Lower tariffs for night-time use of interurban toll roads slioulci also be considered for trucks and buses which are prcsentlv tolled-off several stretches of the toll road system. This wsould encourage better utilization of the toll road assets and reduce heavy traffic on the non-tolled public network.
Consideration shoulcl also be given to expanding tariff categories and revision of tariffs for Category IIA and IIB vehicles. Weigh-in-motion measuring ancl charging equipment should be installed in the future with tariff schedules which reflect axle loads. This should encourage more trucks and large buses with tandem axles and/or empty back-hauls, but penalize over-loaded trucks, particularlv two-axle units.
it is necessary to
There are a number of implications of tliese tariff proposals for incentive off-peak tariffs and peak-premium tariffs (congestion charging). One implication will be to make toll collection more complex and necessitate updating of tariff display,
Hoff & Overgaard (1992). Road user cost model. Second technical advisory services on pldniiing and prograinming to Directorate General of Highways, Government of Indonesia
Ht~Imw, To11 Stt(dy - ADii 199; 79
collection, ancl monitoring equipment. Another aspect is the need to make the user- savings guicleline for tariff setting reflect relative travel costs by time period. However, under the present framework ancl procedures for determining tariff adjustments, this woulcl bc~omc an even more complcx and time consuming process. With over a thousand kilometers of toll roads in operation anci scvclal multiples of the present number of toll sections anci interchanges to be in opc~rclticm bv 2001, the meclianism of approval will have to be simplified. The burdcw o f decisions over tariff setting and adjustments will also havc to be ilelcgatcd in some maniicr.
9.6 Tariff Policv Precedents and Adjustment Mechanisms As in sc\wral countries, Incloncsia has adopted automatic tariff adjustment formulas for other utilities such as electricity and telecoiiiiiiuiiicatioii~. These formulas take into account changes in the cost of inputs and the weight of local and foreign debt servicc costs. For instance, factors in the rate adjustment for the electricit\' tariff include changes in the cost of fuel, cost of wholesale power purchasc, ilomcstic inflation, anci the USS to Rp exchange rate. These factors arc weighted i n the tormula bv coefficients reflecting the annual share in component cost.?" For thc telecomiiiuiiicatioiis tariff formula, a weighted formula incorporating factors for line and message unit (long distance and local) costs is used. For both power and telecoiiimuiiicatioiis tariffs, approval authoritv rests with the responsible minister.
The first BOT project in Indonesia incorporating a cioiiiestic inflation anci exchange rate adjustment niechanisni for automatic tariff adjustment was the Paiton Power Plant. A similar type of formula was proposed for the Cikainpek-Padalaranf 'Toll Road project by the concessionaire. The toll tariff adjustment proposed was a function of the domestic inflation rate, the depreciation in the Rp to USS exchange rate applied to the foreign equity and loan portion of total investment, and a delay factor expressed in terms of months elapsed since the last tariff adjustment.?l This proposed formula was proposed in the bid clocumcnt, but has never been accepted bv Jasa Marga or the Government.
Such an adjustment formula linking tariff increases to exchange rate fluctuations anci the share of foreign investment (outstanding loans, bonds, and equitv share of
The percent change in electrical tariff = f(A *dF + B* dP + C' dl + D* dErJ where A, R, C, 1) are annual coefficients weighting the relative cost components with dF being the ?; change i n cost fuel, dP, the % change in the cost of purchased power, dL, the rate of domestic inflation, and dEr, the average US$:Rp rate.
TI. = Tp * { Ir/Ip +[[ (Rr -Rp)/Ry] * Fc] + (0.025 * 11/12 J where Ir, Ip are inflation indices at time of revision and past tariff setting, R is the exchange rate, Rp to US$, Fc is the foreign equity and offshore loan portion to total investment, and 11 is the number of nionths elapsed since the last adjustnlent.
The new toll rate (TI) would equal the previous toll rate (Tp) times a function f(CP1, Rp, time) or
total) llas been examined and considered in discussions with private investors. Aclding this excliange rate factor to tlie tariff adjustment formula would have the effect of adcling 0.5 to 1 additional percentage points to annual a\lcrage tariff escalation during the first 10 years of operation. This is based o n a t\ppical financing package of a 60 : 40 mix of domestic to foreign in\wstlnent, 20% equity participation, and retirement over 8-10 \wars of foreign loans. At recent rates of R p . depreciation of 3 % to 5%, this woulcl mean by the eighth year a tariff 10% to 12% higher than under the formula proposed bv Jasa Marga using onlv tlie cioinestic CPI as an adjustment mechanism. The main concern from Governmcnt and user Lx)iiit o f view is that under conditions of stagnant economic growth but increased inflation, user savings woul~l not increase in pice with tariffs. This could push tariff increases wcll beyond the user savings ceiling, and lead to tolling o f f of more tr'ittic, particularly for inter-urban toll roads and Class l l traffic.
Tests applying a pessimistic case scenario, that is a repeat of the 1986 43 ' X clevaluation coinciding with a peak vear for outstanding foreign loans, indicated a 16 % increase on that particular year's tariff compared with 8% annual increases based on clomestic consuiner price indexing at the 1990's average annual ratc.
From the point of view of private investors and management of risk, addition of this foreign excliange adjustment factor to the rate adjustment tormula would otter additional security to offshore investors. However, as discussed in the section on risk allocation and management, the two major investment risks are those on tlie cost and delays in property acquisition and assurance of Governmental approval of opening toll tariffs and their timely adjustment in line with maintenance and operating costs.
Further and as raised by ADB, a long term policy objective is to encourage development of a domestic boiicl market. This would encourage matching of domestic debt with local currency revenues and broaden the market for debt issues. 1ncludi:ig a foreign exchange adjustment and protection mechanism would encourage seeking off-shore financing and not contribute as inucli to deepening or broadening of the domestic financial market. An additional concern is the effect on the balance of payments, future claim on the current account, and the accumulation of foreign currency obligations in the future.
9.7 Jasa Marga has studied this question of toll tariff setting and considered wavs to make the process of tariff adjustment more simple and mechanical. I n accordance with the 1980 Law On Roads and 1990 Regulation #8, Jasa Marga has suggested that the initial tariffs for new toll roads or links be determined by tlie President together with his determination of a rate adjustment formula for subsequent adjustments. This initial stage would be implementecl by Presidential Decree as is the current
Tasa Marga Proposals For A Tariff Adjustment Formula
practice; subsequent adjustments woulcl be determined by the approved adjustment formula under the authority of the Minister of Public Works. The period bctwccn adjustments would be cletermineci by the Minister of Public Works in consultation with the Presiclent.
The periodic acljustment mechanisni considered b\r Jasa Marga would be bas~d on the percent change i n the Consumer Price Index (CPI). Subject to the new tarifl not exceeding thc percent change in tlie CPI as illustrated below:
New Tariff (Tb) = Old Tariff * (1 +[CPI(tiew)-CPl(~~ld)]/CPl(ol~l))
70% of \diiclc operating cost saving (BKBOK), i t would rcflcct
9.8 The CPI - indexed tariff acijustnient formula with its 70% BKBOK (including time savings) limit has been proposed by Jasa Marga as a guide to potential investors in the 1995 tender documents and instructions to bidders, subject to determination I , according to prevailing laws and regulations." The proposed adjustment tormula is also contained as a "right to propose" every two years in the Authorization Agreements (Article 14) which arc signed between Jasa Marga and toll road investors. A certain element of unccrtaintv will persist until the toll road is grantd its Determination of Operation and approval of opening tariff. The plccigc of best efforts of Jasa Marga to push through tariff adjustment proposals in the fraiiicivork of the Authorization Agreenient is an intencled but limited form of comfort.
The user savings upper limit is set in Law Number 13. However, based on the analysis in Chapter 4, the PCI inociel and certain approaches to time value inav be overstating tlie user savings compared to results from the new VOC model developed for Jasa Marga. Some tariffs appear to be 80% to over 100% of user savings. Hence, pending resolution of this question and refining of the user savings measurement methodology, the 70% guideline should perhaps be set aside.
The two year period between tariff adjustments set out in Jasa Marga Authorization Agreements represents a good practical compromise between a one year and a three year cycle This frequency of acljustments allows smaller increments of change and a more gradual user adjustment than would a three year or longer cycle of adjustment. On the other hand, annual changes would mean more frequent but smaller changes. The shorter frequency however would be more costly in terms of public information, printing new toll tickets, adjusting collection equipment and changing sign boards. With new sections expected to open annually over the next five to six years, the occurrence of tariff changes will become fairly randomly spaced over time if an automatic formula approach is adopted.
Conclusions and Observations on Toll Tariff Adiustnient Formulas
82
Baseci on the above'analysis and c~iscussions with various interests, the formukl and guiclelines contained in the Authorization Agreement represetit an approach which is already familiar to investors. A number of proposals to modify this formula in terms of a framework for calculation and procedures for implementing have been consicierecl. Tliesc are set out klow. Finall\# a number of options arc offered tor ways to formalize the formula approach and provide a11 institutional context for applving this tariff adjustment mcclianism.
Because of tlic danger that a consuilier price indexed formula could incrciwe rdtcs faster tlian increases i n user savings, i t is necessary to consider some adjustnlcnt factors to tlie basic formula. Some additional considcratio~is for adjusting the basic CPI formula include:
as wdl as the user saving reference ceiling. Bureau of Statistics publishes inonthl\~ consumer pricc indices for tlic 27 provincial capitals, and these shoulcl be used '1s a reference for regional CPI adjustment. This would reduce tlie ciotninancc ot JaLir ta in the index, which would otherwise tend to distort increases. For example, ccwtral and West Java have consistently had consumer price inflation 1% to 4% less than Jakarta since 1990.
- Regional differences could be taken into account in tlie CPl calcul'ilion
- Because wholesale pricc indices on public works road and bridge construction have gone up less on average tlian consumer prices over the last wars, 7.1% compared with 8.1 % routine and periodic maintenance expense woulcl not be expected to increase at the same rate as general inflation. The BPS index could be used for this component of operating cost.
Comparison of Price indices for Consumer Goods and Wholesale Price Indices For Public Works On Roads
since 2993,
Avq. % chq./yr 1990-'96 1993-'96
Consumer Price Index 8.4% 8.1%
Public Works: Roads 8 bridges 7.2% 7.1%
- Operating and maintenance costs are a small percentage of total costs and price indices could arguably only reflect the increases in variable components. Comparing these two elements of local costs, operating and maintenance, including periodic maintenance and toll equipment renewal against total investment, on a present value or capital recovery basis, on-going, non-fixed costs make up about 20% of the total cost. Local debt service costs however are largely fixed for only the short and mediuiii term and should by this argument be partially indexed. Short
anti meciium term debt would make-up a second factor for inclusion depending upon maturities and temporal sensitiLrity.
- In addition to tlie above variable/ total cost factor there is the consideration to reduce inflationary Eeedback effects on gooJs transport. This also serves to protect consumer and user interests which ma\' not share to thc SJ I I~C '
degree in the increase in per capita incomcs. Hence an "alplla" factor could be applied to reduce the full CPI impact on tariff revision. Following the cx,1mplc. ot some European concession toll formulas, this tactor would be set at a l c \v l hcttwcen 0.5 and 0.9, in other words, the CPI impact would be reduced b!~ between 3 1 % ciild
90%. It is intended that this "alpha" factor would obtain onlv on interurban toll facilities, since in tlie future, off-peak tariffs M ~ O U I L ~ address the same group on urban toll svsten1s.
Adjustment would under normal circumst,inccs bc carried o u t ever\' two years. 111
summary, this proposed tariff adjustmcnt formula with its compensation factors and user saving upper bounds would take the following form:
New Tariff (Tr) = Old Tariff * {l + a* [CPlr(iie~~)-CPIr(olc~))/CPIr(ol~~)~
Where a = proportion of non-fixed costs to total costs, and CPIr is the appropriate regional consumer price index;
Subject to:
New Tariff < [Vehicle operating cost savings bv corridor and time of clay + Passenger time savings by region]
To handle cases where tariff adjustments would exceed the user savings guideline, a monitoring process and institutional tnechanism is required. As discussed in the following Extion, this could be carried out within tlie Ministry of Public Works (Subdirectorat Jalan Tol) with Jasa Marga participation, or alternativelv, lo~lgecl with a Tariff Review Board outside the line ministry . This unit could also provide an institutional mechanism for handling proposals from investors under Article 14.2 of the Authorization Agreement, that is "Proposals for Extraordinary Adjustment of Toll Tariff" which takes into account events, for example Force Majeure, which may have a material impact on the Business Plan of the investor.
As discussed in Appendix 9.1 to this chapter (International Experience In To11 Tariff Setting and Adjustment), rate of return regulation of utilities and toll roads is generally not favoured for a variety of administrative and practical reasons An alternative guideline for monitoring would be the Corridor Traffic/Revenue re1ic.w
process applied in in some countries for BOT toll roads. (Sew Appendix 9.1 for a ciescription of tlie review process for Nova Scotia Highwav 104 example.)
In this latter process, an over-sight committee perioclicallv reviews traffic le \ds and growth in comparison with investor projections and business plans. I f traffic has fallen far below expectations, and cash flow is insufficient to meet debt service and operational obligations, this committee would assist i n renegotiating terms of tariff and concession to forestall default. Convcrsclv, i t traffic anci rcvenuc's cxcc,.cd business plan projections bv wide margins, tariff escalation according to the. index forlnula coulcl be postponecl or suspended in tlie public interest. AItc*rii'itiw institutional forms for review and monitoring are discussed further below' in tlw elabnration of options for tariff adjustment mechanisms.
9.9 Alternative Institutional Arrangements For Processing Toll Tariff Proposals And Tariff Adiustments I n addition to tlie 464 kin. of toll roads presently i n operation, another 43 sections arc presently under construction or investment process, I f on average, tlicsc ‘ire
each opened in three stages, 135 Presiclciitial Decrees will have to be signed tor just the new generation of toll roads coming on stream over the next four to five \u i r s . Requiring every tariff filing and adjustment to pass across tlie President's desk will no longer be practical given tlie other burdens of office.
Given the situation outlined above of an urban ancl interurban toll road network which will grow several-fold in extent and sets of toll tariffs which will exp inc i even more in complexity, some alternative institutional processes for toll-setting anci adjustment are set out for consideration below. The institutional options proposed for consideration can be compared on the basis of three criteria:
adjustment;
as set out in Authorization Agreements;
maintenance, and debt service costs.
- Simplification ancl standardization of procedures tor tariff setting and
Reduction of risk premiums with inore security of achieving toll tariffs
Increased predictability of tariff adjustments to cover operating,
-
-
tariffs, but simplify subsequent adiustments using the index formula discussed above and delegating authority to the Minister of Public Works:
A. Methodologv and Procedure for Tariff Setting for New BOT Toll Roads i) Opening tariffs and inflation adjustment formula as agreed by Bid evaluation committee, and approved by Minister of Public Works as part of investment process and set out in Authorization Agreements;
ii) approval chain and is ciecicied by President together with adjustment formula; iii) by tlie Minister of Public Works
B. Iiiiiilenientation Process & Institutional Consideratinns i) Decision ancl approval for subscqucnt periodic tariff adjustments clc~.le+~tcd b v the President to the Minister of Public Works ii) Decision rendered after staff consultation with Cabinet SccrctarLit, Ministr!. of Finance, Bappenas, Ministry of Communication (Land Transport Directorates) iii) Technical staff within Public Works (Subclircctoratc of Toll Roads) ‘ind Marpi responsible for
-updating ancl refining BKBOK model -Calculating index forniula
Together with Determination o f Operation, opening tariff passes tl1rougli
Result of tlie tariff calculatioli according to the decreed formula is clctermined
iv) Review mechanism within Public Works with interagency/ministi.rial committee to inonitor tariffs and corridor traffic volume and growth.
Option 11: President decides standard tariff adjustment formula for periodic tariff adjustment and delegates approval over subsequent adjustments to Minister of Public Works; Review and monitoring mechanism within Ministry of Public Works
A. Metliociologv and Procedure for Tariff Settin): for New BOT Toll Roads i) Opening tariffs ancl inflation adjustment formula as agreed bv Bid ev~ilucitioii coininittee, anci approved by Minister of Public Works as part of investiiient process anci set out in Authorization Agreements; ii) President decides tariff adjustment formula for periodic tariff ailjustment, ancl delegates approval over subsequent adjustinents to Minister of Public Works. iii) Result of tlie tariff calculation according to the decreed formula is cietcriiiinecl by tlie Minister of Public Works
B. i) by tlie President to tlie Minister of Public Works ii) of Finance, Bappenas, Ministry of Coniinunication (Land Transport Directorate) iii) Marga responsible for
Implementation Process & Institutional Considerations Decision and approval for subsequent periodic tariff acljustiiients delcgatecl
Decision rendered after staff consultation with Cabinet Secretariat, Ministry
Technical staff within Public Works (Subdirectorate of Toll Roads) and Jasa
-updating and refining BKBOK model -Calculating index formula
iv) Review mechanism witliin Public Works with interageiicv/ministerial committee to monitor tariffs and corridor traffic volume ancl growth.
86
Powers to designate toll road linkages ancl set tariffs would be deleg,llccl b\. the President to the Minister of Public Works, \Tit11 final approval on iic)n-rou tine acljustinents made in consultation with Ministerial committee incluciin:; C"il~inet Sturetariat.
Option 111: President decides standard tariff adjustment formula for periodic tariff adjustment and delegates approval over subsequent adjustments to Minister of Public Works; review and monitoring mechanism placed with Tariff Ileview Board outside line Ministry of Public Works, but reports to Minister of Public Works.
A. Methoclologv anci Procedure for Tariff Setting and Adjustment i) Opening tariffs and inflation adjustment formula as agreed tw Bid cvalu'ition coininittee, anci approved bv Minister of Public \Vorks a s par t of inwstincnt prcuxss and set o u t in Authorization Agreements; ii) President decides tariff adjustnient formula for periodic tariff actjustmcnt, anct delegates approval ww subsequent adjustments to Minister of Public Works.
iii) bv the Minister of Public Works
B. linpleinentation Process & Institutional Considerations i) Decision and approval for subsequent periodic tariff acljustinents delepi ted by the President to the Minister of Public Works ii) Final approval on non-routine adjustments rendered in consultation with inter-ministerial committee (Cabinet Secretariat, Ministry of Finance, Bappcnas, Ministry of Communication (Land Transport Directorate)
iii) Marga responsible for
Result of the tariff calculation according to the decreed formula is dctcmiincd
Technical staff within Public Works (Subdirectorate of Toll Roads) ancl Jasa
-updating and refining BKBOK reference inoclel -Calculating index formula
iv) Review mechanism, tariff anct corridor traffic/revenue monitoring fuiiction placed within Tariff Review Board established outside Bina Marga, but reporting to Minister of' Public Works. Technical staff back-up could be provided bv Bilia Marga and Jasa Marga.
The Tariff Review Board could consist of representatives of Ministry of Public Works, other Ministries and Agencies such as Finance, Communications (Directorate of Land Transport), Cabinet Secretariat, Bappenas, Jasa Marga, as well as invited representation from user groups such as Yayasan Lembaga Konsumen
TOLL TARIFF SETTING AND ADJUSTMENT Existing System
Investor
Proposed opening tariff & adj. formula set-out in Authorization Agreement & Approved by Minister of
Public Works
I
pro posa I Proposal Tariff Setting Tariff Adjustment
1 JM Review JM Review
Review Review Approval by Min. of PW Approval by Min. of PW
1 Cabinet Secretariat
1 Cabinet Secretariat
I
i President
1 1
President
1 KEPPRES KEPPRES Toll Tariff Tariff Adjustment
TOLL TARIFF SETTING AND ADJUSTMENT Option I
Investor
Proposed opening tariff & adj. formula set-out in Authorization Agreement & Approved by Minister of
Public Works
Proposal Tariff Setting
1 JM Review
1 Public Works Review
Approval by Min. of PW I Cabinet Secretariat
1 President
+ Proposal
Tariff Adjustment
1 JM Review
Public Wo I ks Review Approval by Min. of PW
1 extraordinary o r routine?
1 Interminist&iallAaency Committee consultation
review & monitoring
1 - review 8, PWlJW tech. st -updatehefine BKBOK -calculation index formula
KEPPRES - Opening Toll Tariff - Formula (specific toll road): for future Tariff Adjustment
- Framework for review & monitoring - Delegation of Authoruty to
-Approve Formula calculation Min. Of Public Wks to
& future adjustments
TOLL TARIFF SETTING AND ADJUSTMENT Option II
Investor
Proposed opening tariff 8 adj. formula set-out in Authorization Agreement 8 Approved by Minister of
Public Works
4 (First cycle before KEPPRES)
1 Proposal Tariff Setting
with Standard Tariff Adjustment formula
JMRe I iew
1 PublicWorks Review Approval by Min. of PW
1 Cabinet Secretariat
1 President
4 [Subsequent Toll Road Ooeninqs 8 tariff cycles)
I
JM/Public Works: Review Proposal Reviewlcheck Proposal Tariff Adjustment - opening Tariff -application of Standard Tariff Adjustment formula 1
JM Review
1 1
Public Works Review Approval by Min. of PW
1 Approval by Min. of PW
Extraordinary or routine?
Interministerial/Aqenc + __ji PW tech staff
onsultation custodian BKBOK calculation index formula Monitor tariffs Monitor “revenue corridor traffic volume 8 growth
1 Cabinet Secretariat
1 KEPPRES -Standard Formula: for Tariff Adjustment -Framework for review 8 monitoring -Delegation of Authority to Min. Of Public Wks to -Approve opening tariff -Approve Formula calculation 8 future adjustments
TOLL TARIFF SETTING AND ADJUSTMENT Option 111
Investor
Proposed opening tariff & ad]. formula set-out in Authorization Agreement &Approved by Minister of
Public Works
I + (First cycle before KEPPRESI
1 Prooosal Tariff Setting
with Standard Tariff Adjustment formula
JMRev I w
1 Public V?orks Review Approval by Min. of PW
1 Cabinet Secretariat
1 1
President
KEPPRES - Standard Formula: Tariff Adjustment -Framework for review 8 monitoring -Delegation of Authority to Min. Of Public Wks to -Approve opening tariff -Approve Formula calculation & future adjustments
+ (Subsequent Toll Road openinqs &tariff cvcles)
I + Proposal
+ JM/Public Works: Review Reviewlcheck Proposal Tariff Adjustment - opening Tariff -application of Standard Tariff Adiustment formula JM Review
1 1
Public Works Review 1
Aooroval by Min. of PW Approval by Min. of PW
1 Extraordiriarv or routine?
d TRB supported by JW/PW tech staff InterministeriaWAaency Consultation with TRB custodian BKBOK
calculation index formula Monitor tariffs Monitor "revenue corridor" traffic volume 8 growth
1 Cabinet Secretariat
Indonesia, and inclustrv groups including truck, bus, and taxi companies operator associations.
9.10 Summary The obiective is to establish a rcpAatory framework ancl guidelines which
'llld
\vill .. ., simplifv tariff review ancl processing. Routine tariff adjustments should be sc.ttlcd mechanically by formula and routine tests. The State Executive would cic%\'otc attention to exceptions and tariff filings outside the normal adjustment process. The choice of option should also resolve the issue of approval of pr~p~se 'c l opwing tariffs. This coulcl largely be accomplished upon signing of the Authori/.,ition Agreement for BOT projects. Since the Minister of Public Works must appro\.c the Concession License a i d Authorization Agreement, tariff proposals could lv y,i\,cn Go\rernment approval in principle in the same step, subject to successful cotnplc~tioii of the facilitv and its official clesignation on opening.
10. AND TARIFF ADTUSTMENT
CONCLUSIONS AND RECOMMENDATIONS FOR RISK MITIGATION
Measures to improve the agreement framework and regulatory structure to r e~no \~c elements of uncertaintv which are within Government control include the following:
Make a consistent polic\r which limits investor exposure on land acquisition cost overruns;
Strengthen the long term planning function within Bina Mar31 tor clevelopment of integrated urban ancl intercity toll road systems, and make a\,ailable updated, comprehensive masterplans to guide land use and land transport
iii) Incorporate in the tariff adjustment formula a mechanism which predictably reflects cost increases and institutionalizes a process for tariff review and adjustment
Simplify the tariff adjustment mechanism and delegate power to adjust rates to the Minister of Public Works
i)
ii)
development;
iv)
Within this framework of general recommendations, several issues must be addressed. These issues include both broader sectoral and macro-ecoiioniic concerns for medium and longer term planning as well as practical approaches for dealing with the current generation of BOT toll road projects.
Sectoral concerns raised by ADB include the need to increase transport efficiency. Private sector provision of toll roads represents a means of ensuring cost recovery from users as well as an instrument for funding improvements of the trunk network which would otherwise not be possible with limited domestic funds or soft
international loarrs. A commercial approach to network imprc>\’etnent in lica\rily traveled corridors allows more rapid cievelopment than wouIci otlierwise occur and raises more fun& from those users able to pay than would be available f r o m r o d user charges and taxes. Tolls arc also an efficient charge and redistributiw t c ~ on
urba~i areas, have sufficiently high time values to Lie inscnsiti\.c to toll taritts.
There are however some caveats to this strict commercial vie\\. of r ( d Jevelopiiient. Strong arguincnts exist for not abancioning the pliilosph!~ ot ldt>w Number 13, in particular Articles 13 and 14 (see Appciiclix l), which states th‘it toll roads are an alternative to tlie public non-toll network, ancl must Lie i n a i n t a i n c d <IS a choice to users between destinations a i d to scnv local access requirements. l i v tlicir nature, high-standard toll roads must ha\^ a limited number of interchanges ‘ind access points. Secondly, toll tariffs act as a n additional charge 011 m~n~cmctit of goods ancl people and the increased transport cost will reduce tlie zone of influence ancl number of beneficiaries potentiallv affected bv road cievelopmcnt. This will limit developnient more than non-limited access highways. The public benefits of road clevelopment are reduced in two wa!’s; those users wlio are tolleci-oft cithcr d o not make intended trips or add to the congestion on tlie public road. Incrcmeci transport costs are reflected in passenger anci freight tariffs and tlic economic rcsturii is reduced as shown in the Ciawi-Sukabumi case study.
This creates the need for a balanced network clevelopment plan. On oiic Iuiid, private investors must have assurance tliat a parallel, competitive high standard public freeway will not be constructed in tlie future to erode tlieir revenue base. 0 1 1
the other hand, local public roads must not be allowed to deteriorate to such a l c \d tliat local corridor users become captive to tlie toll road concession.
Toll Rate Adiustment Mechanisms AS discussed above, toll tariff adjustment needs to be institutionalized with a predictable and transparent formula anci a simplified, streamlinecl procedure for aclministering. The current generation of BOT toll road projects has been tendered and bid within tlie context of a proposed formula wliich reflects inflation as measured by tlie national consumer price index (CPI) I n this context, bidders have proposed base and opening tariffs, and these proposals become part of the Authorization Agreement.
However, there are several arguments that the CPI indexing approach over-rewards the concessionaire, in tliat many of tlie costs incurred by tlie investor are fixed in the medium and longer term. Operating and maintenance costs make up Iess than half the annual costs, tlie major share of costs being debt service. The ADB supports the position that the iiidexing should be weighted or discounted to reflect that portion of costs which increases with inflation.
T a1 _‘ Iff Category I, IiigIier income automobile users wlio, particularlv in coliscstcci
Deterlnining tlie variable portion of costs clepe~lds however on the time horizon taken. Given that tariff revenues should cover debt service costs by tlie order of 1.3 to 1.5 tiiiies,?? reliance upon the present domestic debt market for finalicing iiieans heavy reliance on medium-term financing in the order of 5 years. Hence, ewer the Iileciium term, a portion of debt ser\Zice and the cost of capital beconies variablc.
This then raises tlic question of off-shore financing with lower rates and longer maturities available. For reasons of macro-economic and balance of pavmcvits stabilitv as well as the long term cicvclopnient o f the domcstic capital market, local financing slioulcl be encouraged to tlie iiiaximum extent. No unnecessary inducements should therefore be given to foreign borrowing. This then argues against inclusion of a foreign exchange adjustment factor in the tariff indexing formula. Another reason raised by tlie Government for not further consicicring a devaluation trigger in the adjustment is that Rupiah management policy and its gradual depreciation arc alrcadv reflected in cioiiicstic inflation rates, and adding a foreign exchange factor in the formula wouicl be ciou~lc-couiiting.
Restricting then tlie adjustiiient formula to domestic CPI movement, econoiiiic scenarios can be drawn for various cases to cieterinine the proper form of indexing. In an eiiviroimient reminiscent of Brazil or Mexico in the past clecacle, inflation accompanied by economic stagnation o r shrinkage could lead to a diminishing p o l of customers able to afford tolls. On the other hand, much of tlie success of the Jakarta urban toll roads can be attributed to per capita incomes (and value of tiii-ie) expanding two or more percentage points ahead of inflation.
Concerns with full CPI indexing also include the fact that high consumer iiifla tion in heavily weighteci items such as food stuffs, housing, and clothing has limited relation to non-labour coinponents of toll road costs. Escalating tariffs could also lead to the perception of wind-fall profits by concessionaires and public backlash. I t is noted though that with profit taxation and revenue sliaring with Jasa Marga, part of these gains can be captured back.
Regional CPI's would reflect more accurately labour costs, than would the higher, Jakarta-dominated national CPI; Public works indices used in highway contracts would also be more appropriate for routine and periodic maintenance components of toll road operation.
Hence there are several reasons to consider applying indexing to only a part o f the aiinual cost stream of toll roads. This policy however should be clelaveci until the
12 See Appendix 9.8.1, describing the Onunibus Agreement for Nova Scotia Highway 104 which stipulates coverage of 1 . 2 1 for the initial three years, and 1.3 thereafter.
Hi$7wy Tdi Sfid!, - A D 6 IYY; 90
.
llext generation of BOT toll roads are tendered. Imposing a discounted CPI formula on investors who have responded to the proposed full CPI index formula and may I ~ a v e proceeded through the signing of Authorizatioll Agreements would open a legal anti filiallcial taligle. Applying the CPI adjustment to the variable pWtiOi1 Of
cc)StS woulj affect cash flows anticipated by investors. To compensate aiid I'CCOVCT
their anticipatecl returns, opening tariffs would have to be renegotiatcci witli the objective of making the present value of the rc'veiiuc stream the saiiw as under the assumption of full CPI indexing.
Raising opening year tariffs would then decrcasc diversion and reduce the number of beneficiaries and users froin the ver'v kginning as shown in Table 10.1. For example, discounting the CPI impact on tariffs by 0.9 or 0.8 would mean point reductions in real financial returns of 0.8% to 1.6%. This would mean a dcniand from investors for compensating opciiing tariff increases of 1 .(I6 and 1 .I 1 respectively. This would reduce opening traffic by the order o f O.Y% and 2% and economic returns 0.3 to 1%. If a narrower view of variable costs is taken with a discount factor of 0.5 applied, the opening tariff demanded bv investors would increase by a factor o f 1.3. In the case of the Ciawi-Sukabumi project, the adjusted economic return woulcl drop to below 20% from the base case 24%.
Table 10.1 Impact Of Alternative Inflation Adiustment Factors On Financial Returns and Openinq Tariffs
Alternative CPI Adjustment/Discount ("Alpha" ) Factor Applications Base Case Full CPI Counted CPI Discounted
Alpha = 1 .o 0.9 0.8 0.5
Parameter Avg. tariff escalation/yr
Financial Return Current RD, Project IRR Equity IRR
Constant RD. Project IRR
Before tax After tax
Compensating Opening Tariff Factor to increase Yr. 2000 tariffs to restore FlRR to Investor Expectation
8.0% 7.2% 6.4% 4.0%
20.9% 20.1% 19.2% 16.5% 26.3% 25.2% 23.7% 14.5%
15.9% 15.1% 14.3% 11.6% 14.0% 13.2% 12.2% 9.5%
91
Table 10.1 (Continued)
Opening Tariff Multiplier
Impact on Traffic Diversion to Toll Road % decrease in Toll Road Utilization
1 .o 1.06 1.11 1.31
-0.9% -1.7% -21.1%
Impact on Economic Rate of Return Resulting ElRR 24.1 % 23.9% 23.2% 19.7%
Frcm a marketing and dcvclopment strategy p i n t of view, lower rates f r o m opetiing woulcl encourage an earlier anci larger customer base, as well as gain better public acceptance. Most critical Iiowever in the current generation of projects is the prospect of further negotiation cielays anci iiivestor dissatisfaction. Tlic current generation o f BOT toll road projects is taking a leiigtliv tinic to reach the Authorization Agreement stage, with appreiitlv onlv six sections ou t o f thirt\'-one projects in this package being signed as of Mav, 1997. Reacliing the point of actuall\, starting works can often take longer.
While perhaps not ideal from a theoretical view of indexing, tlie current formula set out in the Authorization Agreements constitutes a legal undertaking and should be respected as such. Froiii a practical point of view, this element should be left intact, bu t be subject to further review in tlie future as experience on interurban toll roacl traffic outside the Jabotabek region increases. As pointed out in the discussion of the Ciawi-Sukabumi case study, achieving tlie growth rates and targets of generated traffic may be problematic were econoiiiic growth to slow in the region. Hence the proposal to apply CPI indexing to only a portion of the annual costs should be clelayecl until the next generation of BOT projects. This should be exatninecl further together with the question of time values and consumer stated preference surve)rs.
92
Appendices
APPENDIX 1
LAW OF THE REPUBLIC OF INDONESIA
NUMBER 13 OF THE YEAR 1980
ON R O A M
PT JAQAMARQA CPERSEROI
CONTENTS
I. PREAMBLE 2. CliAITERI : 3. Cl.lAPTER II : ROAD NETWORK .................. 4
Part One : . The Role of Roads ... Part two : - Classification nf Roads
according to their Rvlcs 5 4. CHAMER Ill : ROAD PARTS ......................... (r
5 . CHAFER IV COMPETENCE ....................... 6
DEVELOPMENT ..................... 7 Part Onc : . Classification of Roads according
: AUTHORITY AND
6. CH,\PTER V : COMPETENCE 01: ROAD
to Competence of Rvad Developmenl ..__ I
Part Two : - Competence uf heparalion of
long-tcrm General Plans. Me&um-\erm Plans and prognms. ond Competence of Crealion of Mainknancc ........ 7
ROADS ................................... 10 L
Part One : - Toll-mads ............................. 10 Part Iwo : - Conditions lor Toll-roads .. Part Three : - Competence of organization o l
Part Four :
7, CIMMER VI : QUGhN1ZATlON O F I O L L
Tvll-mads ...... II
~ Use orToll-roads ....
8. CHAPIERVli : PROHIBITED ACTIONS ........ I2
9 r H A m R W U : PENALPROVISIONS ........... I3 i ......... 10. CHAPTER IX : TRANSITIONAL . PROVlSION .......................... :. 14
I 1. CHAPTER X . : CONCLUSIONAL . PROVISION ............................. 14
ELIJCDATION : GENERAL ............................... 15 ARTICLE BY ARTICLE .......... . I9
LAW OFTHE REPUDLIC OF INDONESISIA NUMDER 13 OFTHE YEAR 1980
ON
R O A D S
BY THE GRACE OF GOD ALivIIGHTY THE PRESIDENT OFTHE REPUBLIC
OF INDONESIA,
Considering : a. that roads as one of the communica- tion infrastructur substantially constitute a major element in the endeavour to elevate the life of the nation to a higher plane and to pro- mote the sense of oneness and tho unity of the people towards the national aim based upon the Pancasila, as laid down in the preamble to the Constitution of 1945
b. that roads play an important part, particularly in relation with the realization of B balanced interregional development and an even distribution of the results of develop- ment, as also in relation with the \
Stabilization of the notional defence and security in the framework of the mani- fest achievement of the aims of national development;
c. 11131 in order to make roads fulfil their role properly. the Government has the right and the responsibility of road de- velopment;
d. that to ensure the fulfilment of the role of the road and the conceptional and
I
. : , : ; : : . ..: 1 comprehensive occomplish~nent r d lhe
' development it is necessary to rcgulate all matters related to roads by Law:
I . Article 5 paragraph (I).article 20 para- graph ( I ) and article 33 of thc Constitution of 1945:
. " )
In view of :
r.,':.!"
.>! '!I .~?:2:LawNumber5oftIte yem196l1ontlte Basic Regulaliotl on Agrarian Priciples (official Gazette of 1960. Nunlher 104. .Supplement tb the Official Cazettc .''
. ! ~ . . . . No. 2043); . ,. . * I .
,
3. .Law Number 20 of [he year 1961 on Cancellation of Rights to Lnnd and 10 Inanimate Objects Existing Thcreon (Official Gazette No. 288 of 1961. Supplement to the Ollicinl Gazettc No. 2224 );
4. Law Number 3 of the year 1965 on Highway TrrOflic and Trnsporta<ion (Official Gazette No. 25 of 1965. Supplement to the Official Gazette No. 2742);
. .
. '
F
I
5. LAW Number 5 of the year 1974 on . . , Principles of Regional Government .. .(Official Gazette No. 38 of 1974,
. . . , . I 1 "", " ' Supplement to the official Gazette No. 3037):
. . , ,
. . . i / t
i . . , . . . . . . , . . .
, . . * , , .
' , , . , ! , . ... . ,, ..
WITH THE APPROVAL
REPRESENTATIVES OFTHE' REPUBLIC OF INDONESIA
H A S D E C I D E D :
OF THE HOUSE OF PEAOPLES'
TI) enact : T H E L A W O N ' R O A D S
CIIAPTER I
GENERAL PROVISIONS
Article I
In !his Law referred to with :
a.
I).
the State. the Slate d t h c Rcpublic of Indonesia.
tlic Cwqrnnrent- the State Apparaturc of the Unity State 111 [he IZcpublic of Indonesia.
the Minister = the Minister responsible development of the road.
d. the Regional Governments = the Regional Heads and the Regional Council Representative.
r o a d s = a unit or land-communication infrastructure in any form whatsoever covering all the roadpans. in. cluding conswclions and accesories required for traffic ' needs,
1. public roads = roads destined for general traffic.
g special roads =mads other than referred to under 1, 11. toll roads= public roads for the use of which a toll charge
is imposed.
i. toll = a certain amount of money paid for the use of toll roads.
j. road development= activities in the handling of matters related to the network of roads, including determining and concretizing of the targets of road development.
c.
c.
2 3
. .
. .
! . .!
, {
i
!
!
CHAPTER I1
ROAD NETWORK Part O n e
The Role of Roads
Article 2.
( I ) Roads play an importnnt role in the economic. political and sociocultural sectors and in the sector of security and delence and roads are also used in the endeavour to achieve the greatest possible prosperity for the people.
(2) Roads play an important part in the promotinn of all Unit of Development Regions in the endeavour to reach
‘an ever more. spreading level of development between the regions.
(3) Roads from a unit ofthe road network system that binds and connects the centres of growth with the territory ly- ing in the influence sphere of their services in hierarchi- cal relationship.
Article 3.
Part lko Classification of Roads accordlng to their Roles
Article 4.
( I ) Roods serving in pirticular transports characterized by long-distance routes, high speed average and having an efficiently limited number of accesses. are called Arte-
(2) Roads serving collecting & distributing transports characterized by medium-distance routes. medium speed average, and having a limited number of accesses. are called Collector Roads.
(3) Roads serving local transports characterized by short- distance routes low speed average. and having an u n - limited number of accesses. are called Local Roads.
r i a w s c
(4) The implementation ofthe provisions in paragraphs ( I ) , ( 2 ) and (3). are further stipulated by Government Regu. lation.
( I ) The road network system playing a role in the distribu- tive services for the development of all regions at no- tional level, with all junctions of distributive services growing into cities. forms a primary road network sys- tem.
(2) The road network system playing a role in the distribu- tive services to the people in the cities, forms a second- ary road network system.
(3 ) The implementation of the provisions in paragraphs ( I ) and (2) are further stipulated by Government Regula- tion.
4 5
CHAPTER 111 ROAD PARTS
Article 5.
( I ) The mad-parts consis1 of the roed-way area. tllc right- of-way area and the road control area.
( 2 ) The road-way area consists of the road-hed, the road- side gutten and the safely thresholds.
(3) The right-of-way areaconsists of the road-way area and a certain strip outside the road-way area.
[4) The road-control area constitu~es of a strip of land nut- side the right-of-way area, subjected to the control of the road administrator.
(5 ) The implementailon of the provisions in paragraphs t I ), (2). (3) and (4) are further stipulated by Government Regulation.
CHAPTER IV AUTHORITY AND COMPETENCE
Article 6.
( I ) The authority over the roads rests with the State.
(2) ‘lile authority of the State as referred to in paragraph ( I ) gives the Government the competence of road development.
Article 7.
(I) The compe\ence of the Government referred to i n article 6 paragraph (2) may be delegated or transferred to government agencies both at central nnd at regional level.
( 2 ) The competence referred to in paragraph ( I ) may be transferred either to legal entities or lo individuals, with due observance of the public interests.
(3) The conditions and procedures of delegation and/or transfer as referrccl to in paragraphs ( I ) and (2) a n fur- ther stipulated by Government Regulation.
CHAPTER V COMPETENCE OF ROAD DEVELOPMENT
Part One Clmilication of Roads according to Competence
of Road Development
Article 8.
( I ) Public roads, which me developed by the Minister. are classified as National Roads.
(2) Public roads. which are developed by the Regional Government, are classified iu Regional Roads.
(3) Special roads. not developed according to the provisions in paragraphs ( I ) and (2). are referred to in accordance with the : - agencey.
~ legal entity. - individual L
concerned with their development.
(4) The implementation of the provisions in paragraphs (I). (2) and (3) is further stipulated by Government Regulation.
Part Two competence of Preparation of Long-ten General
Platu. Medium-term PI- and Rogrurrr, and Compctence of Creation and Maintenance,
6
/ 2 . . . . . . , .
I
.
. .
I
i
i
L
j i
I
Ariidi 9. . .
( 1 ) Road development 3s referred to in article 6 paragnph (2) includes preparation of long-tern1 general plans, medium-term plan, programming, creation and meinte- nance.
(2) Creation as referred to in paragraph ( I ) covers technical planning, construction, acceptance. hand-over and takc- over.
Article 10.
(1) 'The, competence of ppa ra t ion of a long-term general plans for primary road networks rests with the Govern- ment
(2) The competence of prepscatton of a long-term general plans for secondary road nc' vorks is transfer red to the Regional Governments ordLidgated toofficials or agen- cies both at central and regional level.
(3) The competence of preparation of a longterm general. plans for a network of special roads may be transferred to:
- Regional Governments.
- legal entities, or
- individuals,
or delegated to officials or agencies both at central and at regional levet.
(4) The implementation of the provisions in paragraphs (I). (2) and (3) is further stipulated by Government Regulation.
Article 11.
(1) The competence of the preparation of medium-term plan and programming of therealization of networks of m e -
8
rial roads. collectorronds and local roads linked up with a primary road network rests with the Ooyernment
12) The competence of the preparation of medium-term plun and programming of the realization of arterial ronds, collector roads and local roads linked-up with a setwork of secondary roads i s transferred to the Regional Gov- ernments or delegated to officials or agencies either at central or at regional level.
(3) Tlie competence of preparation of ntediuni-term plan and programming of the realization of special roads may he transferred to :
- Regional Governments.
~ lcgal entities.
- individuals,
or delepaledlo officials or agencies either at central and at regional level.
(4) The implementation of the provisions in paragraphs 1 I ). I?) and (3) is further stipulated by Government Regula- tion.
Article 12.
(I ) The competence of technical planning and,conntructirin 3nd that of maintenance of anerial roads. ccillector roads .and IiicaI roads linked-up with a network of primary
legal entities or delegated to officials or agencies either at central or at regional level.
12) The competence of technical plonningand construction and that of the maintenance of arterial roads, collector roads and local roads linked-up with b network of scc- otidnry roads are transferred to Regional Governments or delegated to officials or agencies either at central in at regional level.
(3) Tlie competence technical planning and construction and the coiiipetence of the maintenance of special roads are
roads may be transferred to Regional Governments or L
9
delegated'to officials or to agencies at either central or regioiial instance, or transferred to:
legal entities,
- individuals.
(4) The competenceof acceptnnce hand-over and take-ovcr of arterial mads. collector roads and local roads linked up with a network of primary roads rests with the Gov- ernment.
( 5 ) Vie competence of acceptance hand-nuer and take-over of arterial mads, secondary roads and local roads linked up with a network of secondary roads is transferred to the Regional Governments
(6) The implementation of the provision i n paragraphs ( I ) . (2). (3). (4) and ( 5 ) is further stipulated by Government Regulation.
CHAPTER VI ORGANIZATION OF TOLL-ROADS
Part One Toll-mads
Article 13.
The o w n h h i p and right of organizing toll-roads rests with the Government.
Article 14. ' ,
At a proposal of the Minister, the President determines a road-section 85 a toll-road.
Arficle 15.
Atoll-road is an alternative to an existing public highway.
I
Parto Two Conditions for Toll-roads
Article 16.
( I ) A toll-road shall be of higher specification than the ex-
(21 Atoll-road shall offer a higher reliability to the users
(3) The lmplementation of the provisions in paragraphs ( I ) .
isling public highway.
than the existing public highway.
and (2) is further stipulated by Government Regulation.
Part Three Compelence of Organization of Toll-roads
Article 17.
( I ) On the basis of the right to organize toll-roads as referred to in article 13. the Government delegates its competence to a State Corporation of toll-mads
( 2 ) The Toll-road State Corporation referred to in paragraph ( I ) is established according to the statutory regulations in force.
(3) The delegation ofcompetence to organize toll-mads does not release the Government from its responsibility for
delegated.
(4) The implementation of the provisions in paragraphs (I) (2) and (3) is further stipulated by Government Regulation.
the roads. the organization of Which has been so i
Part Four Use of Toll-mads
Article 18.
(I) Toll-roads are destined only for road users with motor vehicles against toll payment. '
10 I I
(2) The types of motorvehicles and the amounts of toll charge referred to in paragraph ( I ) are determined by Presidential Decision.
(3) Use of toll-roads other than referred to in paragraph (1) may be made possible with the approval of the President.
,
Article 19.
( I ) Toll-road users arc obligated to comply with the statu- .tory regulntions.on Highway Traffic and Transports. statutory regulations on Roads and other statutory regu- lation.
(2) TheToll-road State Corporation is obligated to compen- sate lwscs incurred by loll-road users as a consequence of defaults in the organization of the toll-roads.
(3) The implementation of the provisions in paragraphs (1) and (2) is further stipulated by Government Regulation.
CHAPTER VII PROHIBITED ACTIONS
Article 20.
( I ) If is prohibited to commit actions within the right-of- way area and the cpnaol areaof any roads that may cause an impediment to the role of such roads.
. . i
(2) It is prohibited to execute any competences of road de- velopment not in compliance with the statutory regula- tions in force.
(3) It is prohibited to operate any section of any road as toll road without Presidential Decisioni
(4) It is prohibit& to enter toll roads, except for ,011 road users and officers in charge of the toll-roads
_~. ..> I”
12
CIfAPTER V l l l PENAL PROVISIONS
Article 21.
( I ) Whosocver violates the provisions i n artlcle 20 paragraphs ( 1 ) and (2) is liable to imprisonment for maximally 3 (three) months or a fine of maximally Rp. 150.000.-(one hundred and fifty thousand rupiah,).
(2) Whosoever violates the provision in anicle 20 paragrapll (4) is liable to imprisonment for maximally 7 (seven) days ora fine of maximally Rp. I5.000,- (fifteen thou- sand rupiahs).
(3) Whosoever violates the provision in anicle 2Oparagraph (3) is liable to imprisonment for maximally 15 (fifteen) years or a fine of maximally Rp. 50.COO.W,- (fifty million rupiahs)
(4) Any propeny of the convicted person derived from or intentionally used to commit the offence referred to in paragraph (3) may be confiscated.
( 5 ) The penal offence referred to in paragraph ( I ) or para- graph (2) constitutes a violation.
(6) The penal offence referred to in paragraph (3) consti- lutes a crime.
L
Article 22.
By Government Regulation may, as an implementation of this Law. be provided for threats of penalty of maximally 3 (three) months imprisonment or of fines of maximally Rp. 150.000.(one hundred and fifty thou- sand rupiahs).
13
. ' CHAPTERIX TRANSITIONAL PROVISION
Article 23.
Existent statutory regulations not conirary to the provisions of this Law are declared still effective until amendecl or re- arranged on the basis of this Law.
CHAPTER X CONCLUSIONAL PROVISION
Article 24. B 9 This Law becomes effective as of the date of its pmnulpn-
lion. In order that the public may take cognizance. hercof. instruction is given to promulgate this Law by nnnouncc- ment in the Official Cazette of the Republic of Indonesia.
Decided in Jakarta on the 29th of Desember 19RO.
THE PRESIDENTOFTHE REPUBLIC OF INDONESIA.
sgd.
SOEHARTO
Promulgated in Jakarta 1 I
, on the 29th of Desember 1980. THE MINISTEWSTATE SECRETARY OF THE REPUBLIC OF INDONESIA.
sgd.
SUDHARMONO SH
OFFICIALGAZETlEOFTHEREPUBLlC OF INDONE- SIAOFTHE YEAR 1980 NUMBER 83.
14
. . -
ELUCIDATION O F
LAW OFTHE REPUDLIC OF INDONESIA NUhlllER 13 OFTHE YEAR 1980
CONCERNING ROADS
G E N E R A L
I. R o a d s. as one of the communication infrnsstructures. constitute essencialy a major element in the endeavour to elevate the people's living-standard and to promote the sense ofoneness and unity of the nation towards the achievement of the National Aims as intended to he re- alized through a sequence of comprehensive. well-di- rected. integrated and continuous development plans.
Within such framework, roads play an important role in realizing the targets of national development. such as evenly spreading of development and development re- sults towards the creation of socinl justice for all PO- ple, considerable economic growth and sound and dy- namic national stability. and in the long run the creation of B strong foundation for growth and development by own efforts towards an Indonesian society that is pro- gressive and just and prosperous bnsed upon the princi-
2. The growth and development of a national society and Stale in panicular as also the growth and development of mankind in general, clearly require a rol of transpor- lation services that supports the continuance of endeavors of such society, and of mankind in general. Of the proc- esses of the life of man towards the achievement of his aims, his accumulative activities in undertaking are cat- egorized ar the most important process, because they produce what is identical to his principal aim. Thenfor is needed a development in man's life whict is made possible when there is a pattern of efficiency in all acitivities of his undertakings.
ples of the Pancasils philosophy. L
15
people and pmducts will come into being., The flow of goods is only made possible by distributive services, namely the inseparably integrated services of trade and transportation. Starting from the location of the nnttiral sources and ending with the last consumers. '
3. The scattered locations of both the natural sources and the last consumers demand that B pattern of efficiency
' shall be followed in connecting the two. which is de- picted by the forming of junctions of distributive serv- ices. From the economic point of view, it is these junc- tions ofdistributive services that constitute the lootholds for the growth and development of cities.
In such connection, each city will play a role in render; ing services to the territory-lying in its sphere of influ- ence and they are all interconnected in a ceniin Iiiernr- chical order. All cities together with their resp. "hinterlands" will form with.the city of the highest hier- archical order, in the influence sphere of which they all are. a territorial unit depicting an Unit Economic Re- gion. In this situation. man's whole life. including eco- nomic-, political- and socia-cultural life and defence and security. must bc completely grasped in the mecha- nism of development. In such concept. a territory of which the development is controlled by the mechanism of development on the basis of the rules in economic life, with due regard to political-, sociocultural- and security-defence matters. represents Unit Development Region. which will further be made the basis in formu- lating territorial development endeavours.
In line with the understanding of the interconnection of cities in hierarchical relationship, the road network will substantially show a certain structure. In such structure. the respective parts of the road network will play their particular roles in accordance with the hierarchy within the Unit Development Region concerned.
As depictied above..the status of roads as one of the communication infrastructures is quite clear, as they tie all cities together in hierarchical relationship and form a
16
. . .... .-. , I -
4. Therehy we are aware that a balanced level 01 develop- ment between the regions is of considerable importance to guartinlee the targeted equalization o f growth as an endeavour in concrelizing various development objec- tives. The development level of a region ( i s . a territory within adtninisirative limits) will be influenced by the Unit Development Unit involved.
Going out from thc symptom that social systcms have the tendency to refuse the applicability of the law of balance (as obvious from the symptom of evcr sharpen- ing differences in the levels of regional development by an uncontrolled course of the processes). so the devel- opment of all Uni t Development Region should in principle i-e controlled. when achievement of a balanced development is desired between the regions. Tne efforts of controlling constitute substantially one of the balanc- ing steps in territorial development that may be laken either directly or indirectly. For instance. by way of qiving an opportunity to seven1 Unit Devclopmenc Re- gion Of the small and economically weak category to group together and so become larger and stronger.
5. The process of grouping will bring an implication to the build-up of the supporting distribution system. Concur- rently with the understanding of territorial structure. the process of grouping is execuled by increasing the mar- keting service capacity of one of'lhe hierarchically high- est ranking cities.
In the distribution system. the mad networksystem holds and important part. because the increase of marketing services is none other than the increjse of the density of distributive service. which demands expansion of the communication infrastructure. such as the network ot roads.
In the framework of proper functioning of road network pans for the purpose of promotingthe economic growth in the hinterland. which constitutes an important
17
element for Ihe realization o f the spreading of dcvelop- men1 and development results. i t is necessary to huild roads of the specification "expressway". particularly ill alre@y highly developed regions. With due regard to thesense of fairness. the road building ns shove referred toshall beaccomplished by the conswctiun of toll-roads.
I n the life ofanation, the position and the role of a r o d network system as above emphasised that funclanien- tally a road network involves a vitnl nccessily o f the masses'and controls the formation of a regional Dcvcl- opment Structure at National Level, especially such as involves the realization of balanced development be- tween the regions and the stabilization of the national security and defence in the framework of concretizing the target of national development towards a just and prosperous Indonesian society based on the Pancasila.
The.above elucidation shows the specific relevance - i.e. thedirect relation - existing between the role of roads and ths Regional Development Slructure. sothat thelink- age oithe concept "spreading.of development" with the said structure is' now quite clear. and also the aim thereof- which i s specific. too-namely a halanced development between the regions, Thus: the realization and the expansion ofregional development and tlie bal- anced spreading thereoi and of the h i t s of develop- ment between the regions. Considering the above set out. i t is only proper that the Slate shall have the control o f the road networks
7. The Government as the authority holder ofthe State hd- ministration has the right of road development. As such is h e case, each endeavour of road development must be founded upon a spirit it of servitude to the Nation and the State.
Road development as pnrt of the development o f com- munication infrastructures involves both the elements People and Government, so that the regulation thereof is directed to both the People and the Governmenf. I n such connection, a consensus i s required on the indentification o f the main targets in road development.
6.
18
Because the Government essentially discharges duties. that according to reasonable criteria cannot be hdndlcd hy tl ie people themselves. so there for i n atranging lor thercgulation there ofshall notonly becovc~dthepr in- cipal material constituting tlie identification of the main targets i n road development. but also emphasis on the rights and responsibilities of both the Government and the people and directions on the further regulation.
With reference to the above set forth. the arrangenicnt of the matters on roads must be immediately stabilized in the form of a Law conserning the principal material of the identification of the targets in road development. the stipulation of the rights and responsibilities and di- rections on the funher regulation.
8.
ARTICLE DY ARTICLE
Article 1.
The definitions o f the terms in this article serve to pro- vide for uniformity i n the understanding of this Law's contents and of the implementary regulations thereof.
Letter a Sufficiently clear
Referred to with Government is the Government as referred to in Law Number 5 of the year 1974 od the Principles on the Regional Government.
Sufficiently clear
Refemd to with Regional Government is the Re- gional Government as n f e m d to in Law Number 5 of the Year 1974 on the Principles on Regional Government.
Referred to with Roads i s the land communication
Letter b
Letter c
Letter d
Letter e
19
infr&tructurcdestined for the traffic of vehicles. peo- ple and animals. Not included in this understanding are rail-roads, for instance railways. truck railroads and cable-ways. Referred to with thesentence pan"in iny form what- soever" is hat the concept of road is not limited to the conventional form of a road (on the land sur- face) but includes roads spanning a large river, lake or sea. below the land surface and under water ltun- nels), and above the land surface (Ily-over). Included in road complementary constructions are construc- tions that cannot be separated front the road. such as bridges, pontons, overpasses underpasses. park- ing lots, c u l v e r ~ , buttresses and gutters/ sewers. In- cluded in road accessories are among others road beacons. traffic beacons. road signs. safety railings. right-of-way railings and right-of-way stakes.
Letter f
Letter g
Sufficiently clear.
Referred to with Special Roads are the roads that are not destined for public traffic. such as irrigation inspection roads. oil or gas pipe inspection roads. plantation roads, mine roads, forest-or wood mads. private housing estate roads, roads required for State securityldefence purposes. When a section of a special road pursuant to statu- tory regulations in force or by the proprietor IS
opened to public traffic. then to such road section and such traffic the statutory regulations on Roads and on Highway Traffic and Transponation s h d l apply
Letter h
Letter i Sufficiently clear
Sufficiently cleat
20
. .. . . .- ~.
Letter 1 l l i e determination of targcts includes the designine of 3 long-term general plan. a medium-term plan and a program of the realization of the targets. The realizaticrn of the targets includes the activities in technical planning. construction and maintenance.
Article 2 Sufficiently clear.
Article 3 Paragraph ( I )
Referred to with cities in this paragraph are those in connections with the road network, not the under- standing of cities in Government administration. Refened to with junction of distrihlive services is the junction as created by the application of effi- ciency palterns to the flow of goods or people, and becoming a foothold for the growth and develop- ment of a city pursuant to economic considerations. Primary road networks arc closely connected to the structure of Regional Development at,National Level. which according to Ihe elc.
Secondary road networks are closely connected to the structure of Regional Development of Cities. which according to the role of he i r services consist ofArtery Roads, Collector Roads and L ofal Roads. ' Primary Artery Roads and Primary Collector Reads remain thorough fares although they into cities.
Paragraph (2)
Paragraph (3) ! sufflciently Clear
Article 4 Paragraph (1)
Sufficiently Clear
Paragraph (2) sufficiently Clear i
Paragraph 13) Sufliciently clear
~aragraph(4)
Article 5
sufficiently Clear
Paragraph ( I )
Paragraph (2)
sufliciently Clear
the roadway area is an area used for the contruction of a road. coniisting of the roadbed. the roadside guttecdsewen and the safety threshold (sill). The madbed comprises the traffic Iane(s) with or wilhoutkaKcdentarcation strip or marking and the road ghoulden. 'the safely thrcsholdlsill lies in the outermost part of the roadway area and serves to protect the road construction.
the right-of-way'arca is bounded by the boundary marksof the right-of-way. A certain strip of land oulside the roadway area but in the right-of-way area is meant to meet the condi- tion of safCry space fw the UK of the road, amonq others fortlie purpose of widening the roadway at J
Paragraph (3)
. , icttcr time. 1
Paragraph (4) the Road Control Area is a swip of land lyng outside the Right-of-way Area, the use of which strip is un- der the control of the road engineer. for the putposc of guarding against obsawtion to the motordrives' sight and to the road constluction. in the case that the space of the right-of-way is inadequate.
Sufliciently clear, Paragraph (5)
Article 6 Sufliciently clear.
22
Article 7 In general. thecompetenceofroadenginccring rests with the Government, bur next iherctd. as there are particularities in the sectors of irrigation, estates. mining, forestry. pons. defence and security, and oth- ers. so in the execution of.road development it is . necessary to duty observe the statutory regulations
I
I in the respective sectors. ! ! Delegation andlor transfer of the cornpetencc a rc-
fened'to in this Article means that the right and au- thority to execute the engineering are turned over to the agencies concerned. rile transfer of competence to a legal entity or an individual is done with due regard to the interests . and the prosperity of the society in the surrounding area. However, in doing so, for the reason that the engineering and management of the roods consti- tute the burden of the legal entity and individual as the transfer, the Government will not negleci its interests.
Article 8
Pragraph ( I ) Public roads classified as National Roads, are called National roads.
Public roads classified as Regional Roads : ~
Paragraph (2) ' developed by a Provincial Government are called Provincial roads developed by a Subpmvincisl Government are called SubprovinciaVMunicipal Roads: developed by a Village Government are called Village Roads;
~
~
Paragraph (3) Special Roads engineered by an Agency/ Legal Entity are a.0. called irrigation roads. estate (plan- tation) roads. mining roads. forestry roads, private housing complex roads, porllharbor roads, and oth- ers. I
---+.Tr.l.~. . , . ... .. ~ ___.~
23
1'
i
Paragraph (4) Sufficiently clear.
Article 9.
Paragraph ( I ) Road engineering essentially comprises the dermination and the realization of the targets. Included in ihe determination of targets are the ac- tivities in designing long-term schemes, designing of inedium-term plans and programming of the re- alization of the'plans. included in the realization of targets arethe activities in creation and maintenance.
The concept of creation is not limited to the techni- cal designing and conslruction alone, but also in- cludes acceptance. delivery and take -over. An example of acceptance and delivery is, for in- stance, when the Government accepts the delivery of a Special Road from a legal entitylagency and then declares it to be a Public Road.
Paragraph (2 )
Article 10
' Paragraph ( I )
Paragraph (2)
Suf ficien tly cl$ar.
Sufficiently clear.
Sufficiently clear.
: Sufficiently clear.
Paragraph (3)
Paragraph (4)
Article 11.
Paragraph ( I )
Paragraph (2)
Sufficiently clear.
24
Sufficiently clear.
Sufficiently clear.
! Sufficiently clear.
!
Paragraph (3)
Paragraph (4)
Article 12.
Paragraph ( I )
Paragraph (2)
Paragraph (3)
Paragraph (4)
Paragraph ( 5 )
Paragraph (6)
Sufficiently clear.
Sufficiently clear.
Sufficiently clear.
Sufficiently clejr.
Sufficiently clear.
Sufficiently clear.
Article 13.
In view of the fact that a toll-road constitutes a part of the network of public mads closely connected with the necessities of life of the great masses, it is only propCr that tlie right of ownership and the right of development of toll-roads are in the hands of the Government.
Tlie administration of toll-roads COVCK all activities in materializing the aims of their development and the ac- tivities of he i r operation.
Such operational activities include the collection of toll- charges, tlie regulation of the use of the toll-roads. the taking of precautionary measures and other activities in accordance with the purpose and objectives of the toll-
25
road undertaking.
The proposal from the Minister to :termihe a road w c - tion as toll-road shrll be hased tipon a mcdiuiii-tcriii general planning and rheGovernircnt progrntn ti( irrnt- ing a network ofmads. The construction 01 tlic t a d 1 r d shallbeexecutedwithoulimposin~abuiilen on tltcStntc.
toll-road addcd with the tol l -c l ime nitist he st i l l I w c r
Article 14.
budget and the costs of operating a mritorvehiclc on tlic
I
than the casts of aperaring a mnturveldcle on tlic cxi5t- ing public highway.
Article 15.
Referred to with "an nlternative" is. i l i a t bcsidcs tlic 1011- road. there must be another tlioroughfare with ilte mmc place of origin and the same place oldestiiiation. so that the road users wi l l be at liberty to choose rvliether or not to use the toll-road. I n the event that the alternative puh- lic highway is not properly functioning the toll-road wil l automatically became apublic lhoroughfare without toll- charge.
Article 16.
Paragraph (I) Referred lo wilh "higher specification"of toll-roods are the specification of free ways such as: a. having no intersections on the same level as other
roads; b. having no direct accesses, except for controlled
direct accesses: c. the costs of operating a motorvehicle on the toll-
road added with the toll-charge i s s t i l l lower than the costs of operating a motorvehicle on the ex- isting alternative public highway. l%e operation casts af amatorvehicle include among others the costs of fuel, lubrication. wear and tear and i time-value.
Paragraph (2)
26
i j i i
I I i I
1'
Referred to with "higherreliability" i s Constant serv- iceability and safety.
Sufficiently clear. Paragraph (3)
Article 17.
Paragraph ( 1 ) In view of the fact that a toll-road is a public road ~
he. open to public traffic - and has particular char- acteristics. it i s only proper that the operation o f toll- roads is executed by a State Corporate B d y . Referred to with State Corporate Body i s what i s referred to as such in Law Number 9 of the year 1969 concerning the Forms of Slate Enterprises. The particularity referred to above finds its cause in the fact that the object of the enterprise constitutes o f roads. for the use of which a tollsharge is im- posed.'however the purpose is here the levelling of the regional developmenu towards realization of a balanced development between the regions, and evenly distributed.rasulls of development, besides h e stabilization of the defence and security of Na- tion and Slate.
Sufficiently clear. Paragraph (2)
Pangraph (3) Sufficiently clear.
Sufficiently clear. 'Pmgraph(4) .
'.
Article 18.
Paragraph ( 1 )
Paragraph (2)
Paragraph (3)
Sufficiently clear.
Sufficiently clear
27
Article 23. .
The purpose of this provision is to prevent r( fniv vnctiunt in road matters.
Article 24,
Sufficiently clear.
30
Referred to with"use other than referred to in para- graph (I) '' includes, among others, the activities carried out for the national interest, delencc and se- curity activities on the loll-road, so that the toll-road cannot be used tor normal motomzed traffic. The approval of the President will be issued 31 the proposal of CRc Minister.
ArticIe 19.
Paragraph ( I )
P m g w h (2 )
Sufficiently clear.
This matter has the purpose to give toll-mad users the right to claim for and obtain compensation from cheToll-Road Operating State Corporation lor !asses pmvenly caused by defaults of the said Toll-road Corporation in administering the toll-road.
Sufficiently clear Paragraph (3)
Article 20
Paraw& (1) Obstruction of the road 's role may be caused by misplaced use of Ihe road for instance, runningljog- ging on the road, bicycling, or using the road as a place for roller-skating. skate - b.oard riding on a toll-road. or placing large stonedrocka, dumptng sand, causing all SON of obstacles in the roadway area of public roads.
Paragraph (2)
Paragraph (3)
Sufficiently clear.
Organizing any road section as a toll-road shall be by Presidential decision on the basis of a proposal from the Minister. so that organizing any road sec. tion as a loll-road without Presidential Decision con- stitutes a contravention of this Law,
i
Paragraph (4) The reference of "entering a uAl-road" i? limited to pedrstrians who do not impede the role of thc r o d and do not cause damage to the toll-road.
Article 21.
Paragraph f I )
Paragraph (2)
Paragraph (3j
Sumciently clear.
Sufficiently clear.
The provisions in this' article an meant to give a legal ground for criminal proceedings in road operatiorfuse and constitute supplement to the pro- visions in the Penal Code, Chapter VII Article I92 and 193.
Sufficiently clex.
Sufficiently clear.
This pcnni act is evaluated as a criminal offence br- cause the consequences of such act may endanger the public safety or the safety of either people or goods.
Paragraph (41
Paragraph ( 5 )
Paragraph (6)
.
1
Article 22.
To ensure the besl possible execulion of Ihe regulations or measures which constitute the implementation of chis Law, i t is necessary 10 lay down penal sanctions as con- tained in this article. Tttc penal sanctions only concern matters Laving the character of trespasses.
29
Appendix 2.1
.̂...
Tangerang Barat-Merak 1
Annual Growth
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Vehicle speed on the toll road and alternative road IS taken from survey data Time Value, Category I, Rp 3.281.25 lhourlveh.
Indonesia Highway Capacity Manual (IHCM)
- ~
Appendix 4.1
No.
Percentage of the Toll Tariff to the VOC Savings (with time value)
Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model New Model Location PCI Model New Model Toll Tariff Tariff/km Non-To1 Non-To1
To1 (km) To1 (kph) (kph) Savinqs Savings (km)
I I I I I I I I I I I I I Vehicle speed on the toll road and alternatlve road IS taken from survey data Time Value, Category I, Rp 12,287 /hour/veh
Jasa Marga, recent practise
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category I, Rp 1,341 lhourlveh
PCI (orlginal, 1979)
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category I, Rp 7,076 Ihourlveh
Jakarta lntra Urban Toll Road, Northern Extention of South-west Arc, 1989
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
I I I I I I I I I I I I I Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category I, Rp 8.880 Ihourlveh.
Surabaya-Mojokerto (JICA, 1391 )
Appendix 4.1
No.
Percentage of the Toll Tariff to the VOC Savings (with time value)
Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model New Model Location PCI Model New Model Toll Tariff Tariff/km Non-To1 Non-To1 To1 (km) To1 (kph)
(kph) Savinqs Savinqs (km)
1 I I I I I I I I I I I Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category IiA, Rp 18,212 Ihourlveh
I
Indonesia Highway Capacity manual (IHCM)
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category HA, Rp 3,827 /hour/veh.
PCI (original.1979)
Appendix 4.1
No. Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model New Model Location PCI Model New Model Toll Tariff Tarifflkm Non-To1 Non-To1
To1 (kph) (kph) Savinqs Savinqs (km)
To1 (km)
I I I I I I I I I I J Vehicle speed on the toll road and alternative road IS taken from survey data Time Value, Category HA, Rp 18,534 /hour/veh
Jasa Marga. recent practise
Appendix 4.1
Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model New Model No. Location PCI Model New Model Toll Tariff Tariff/km Non-To1 Non-To1
To1 (km) To1 (kph) ‘kph) Savinqs Savinqs (km)
t
Percentage of the Toll Tariff to the VOC Savings (with time value)
1u uawi-uanjur, witn non-toll : a. Alternative I via Sukabumi 80.5 84.6 67 27 48,301.35 31,710.69 16,020 199.00 33.17 50.52 b. Alternative II via Puncak 80.5 49.9 67 27 6,949.40 -840.70 16,020 199.00 230.52 -1905.49
I I I I I I i I I I I I I Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category IIA, Rp 14,670 /hour/veh.
Jakarta lntra Urban Toll Road, Northern Extention of South-west Arc , 1989
~~~
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
I I I I I I I I I I I I I Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category IIA, Rp 7,960 /hour/veh.
Surabaya-Mojoketio (JICA, 1991)
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
I 1 I I I I I I I I Vehicle speed on the tall road and alternative road is taken from survey data Time Value, Category 116, Rp 4,971.2 /hour/veh.
Indonesia Highway Capacity Manual (IHCM)
-~
Appendix 4.1
No.
Percentage of the Toll Tariff to the VOC Savings (with time value)
Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model New Model Location PCI Model New Model Toll Tariff Tarifflkrn Non-To1 Non-To1
To1 (km) To1 (kph) (kph) Savinqs Savinas (km)
Time Value, Category 116, Rp 18,534 /hour/veh
Jasa Marga. recent practise
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Time Value, Category IlB, Rp 3.152 lhourlveh
PCI (origmal. 1979)
_-- -_
Appendix 4.1
No. Link Distance Travel Speed Tariff as % VOC Saving
voc voc PCI Model hiew Model Location PCI Model New Model Toll Tariff Tariff/km Non-To1 Non-To1 To1 (km) To1 (kph)
('ph) Savinqs Savinqs (km)
I I 1 I I I I I Vehicle speed on the toll road and alternative road is taken from survey data Time Value, Category IlE, Rp 3,659 /hour/veh
I I I I
Jakarta lntra Urban Toll Road, Northern Extention of South-west Arc., 1989
Appendix 4.1
Percentage of the Toll Tariff to the VOC Savings (with time value)
Time Value, Category 116, Rp 7.980 Ihourlveh.
Surabaya-Mojokerto (JICA, 1991)
Appendix 4.2
PCI VEHICLE OPERATING COST MODEL
I. PCI Model (Toll Road)
Equation of Fuel Consumption : Car : Y - Bus : Y - Truck : Y -
0.04376 S2 - 4.94078 S + 207.04840 0.14461 S2 - 16.10285 S + 636.50343 0.13485 S2 - 15.12463 S + 592.60931
- - -
Y - - Fuel consumption (litre11 000km) S - - Running speed (kph)
Equation of Engine Oil Consumption : Car : Y - Bus : Y - Truck : Y -
0.00029 S2 - 0.03134 S + 1.69613 0.00131 S2 - 0.15257 S + 8.30869
- -
0.00118 S2 - 0.13770 S + 7.54073 - Y - - Oil engine consumption (litrell000km)
Equation of Tyre Wear : Car : Y - Bus : Y - Truck : Y -
Y -
0.0008848 S + 0.0045333 0.0012356 S + 0.0065667 0.0015553 S + 0.0059333 Wear of one tyre per 1000 krn
- - - -
Equation of Maintenance Cost : Maintenance Cost on Parts :
0.0000064 S + 0.0005567 0.0000332 S + 0.0020891 0.0000191 S + 0.0015400 Maintenance parts, equated as depreciable
value of the vehicle, per 1000 km
0.00362 S + 036267 0.0231 1 S + 1.97733 0.01511 S + 1.21200 Hours of labour per 1000 km
- Car : Y - Bus : Y - Truck : Y -
Y -
- - -
Maintenance Hours of Labour : - Car : Y -
Bus : Y - Truck : Y -
Y -
- -
-
Equation of Depreciation : ll(2.5 S + 125) 1/(9.0 S + 450) l l(6.0 S + 300) Depreciation per 1000 km, equated as the 'A
- Car : Y - Bus : Y - Truck : Y -
Y -
- - - depreciable value of the vehicle
Equation of Interest : Car : Y - 150/(500 S) -
150/(2571.42857 S) Bus : Y - Truck : Y - - 150/(1714.28571 S)
Y - - Interest per 1000 km, equated as the % depreciable
-
value of the vehicle
Equation of Insurance : Car : Y - - 38/(500 S) Bus : Y - - 6/(2571.42857 S) Truck : Y - - 61/(1714.28571 S)
Insurance per 1000 km, equated as the new value of - Y - the vehicle
Equation of Travelling Time : Car : Y - .
Bus : Y - Truck : Y -
- 1000 / s 1000 / s
- -
Y - - Travelling time per 1000 km
Average Number of Crew per Vehicle Car : Driver 1 Bus : Driver 1
Truck : Driver 1 Conducter 1.7
Asistant 1
Overhead Car : - Bus : 10% of above sub total Truck : 10% of above sub total
II. PCI Model (Non-Toll Road)
Equation of Fuel Consumption : Car : Y - Bus : Y - Truck : Y -
0.05693 52 - 6.42593 S + 269.18567 0.21692 S2 - 24.15490 S + 954.78624 0.21557 S2 - 24.17699 S + 947.80862
- - -
Y - - Fuel consumption (litre/lOOOkm) S - - Running speed (kph)
Equation of Engine Oil Consumption : Car : Y - Bus : Y - Truck : Y -
0.00037 S2 - 0.04070 S + 2.20405 0.00209 S2 - 0.24413 S + 13.29445 0.00186 S2 - 0.22035 S + 12.06486
- - -
Y - - Oil engine consumption (litre/lOOOkm)
Other items such as, equation for tyre wear, maintenance cost, depreciation, interest, insurance, travelling time, and overhead are same as tollway.
Appendix 4.3
Correction due to (-) gradient (kk)
Correction due to (+) gradient (kk)
Correction due to traffic (ki)
NEW VEHICLE OPERATING COST MODEL
< -5% - 0,337 - 0,158 -5% 5 g < 0%
0% 5 g < 5%
0 5 v/c < 0,6 0,6 s vlc < 0,8
0,400 2 5% 0,820
0,050 0.185
vlc 2 0.8 0.253
Fuel Consumption
Correction due to road roughness (kr)
There is a basic relationship between fuel consumption and speed out of road geometry, roughness and traffic condition. The kind of consumption is the basic fuel consumption, which is defined as fuel consumption on free flow condition, flat gradient (0%) and road roughness relatively not affect the fuel consumption. The basic fuel consumption model can be explained as follows.
< 3 mlkm 0,035
Fuel consumption = basic fuel ( I+( kk + kl + kr )) ...................... (1)
where : basic fuel in liter/l OOOkm kk = correction due to gradient kl = correction due to traffic conditions kr = correction due to road roughness
From our empirical modeling it has been found that the relationship between basic fuel and speed, v (kph), can be expressed as :
Basic fuel for Category I = 0,0284 v2 - 3,0644 v + 141.68 ._. . . . . . (2)
Figure 1 shows the relationship between the basic fuel consumption and speed
For other vehicle categories, their basic fuel consumption are found from separate experiments. Their basic relationships relative to the basic fuel consumption of vehicle category I are given below.
Basic fuel Category IIA = 2.26533 ' Basic fuel Category I, and Basic fuel Category llB = 2.90805 Basic fuel Category I
Table 3 summarized the correction value for each of the category
IZ0
0.0060
100 I
0.0049
y = 0 0Z84x2 - 3 0644x + 141 68
R’ = 0 8089 t - E x
0 x 80
\ ’.
10 20 30 40 50 60 70 80 90 100 Speed (kph)
Figure 1 Basic Fuel Curve for Vehicle Category I
Lubricant (Toll and Non-Toll)
The model has been adapted from GENMERRI, a VOC model developed for road maintenance and programming. Table 4 shows the basic lubricant consumption in literlkm against speed (kph). The values are subject to corrections due to road roughness conditions, given in Table 5 .
Table 4 Basic Lubricant Consumption (literlkm)
Speed (kmlhr) 10 - 20 20 - 30 30 - 40 40 - 50 50 - 60 60 - 70 70 - 80 80 - 90 90 - 100 100 - 110
Category I 0.0032 0.0030 0.0028 0.0027 0.0027 0.0029 0.0031 0.0033 0.0035 0.0038
0.0057 0.0055 0.0054 0.0054 0.0055 0.0057 0.0060 0.0064 0.0070
0.0046 0.0044 0.0043 0.0043 0.0044 0.0046 0.0049 0.0053 0.0059
Table 5 Correction Factors for Lubricant Consumption for All Vehicle Category
Roughness Correction Factor
2 3 rnlkm 1.50 < 3 mlkm 1 .oo
Tyre
The equation has been adapted from PCI model. as summarized in Appendix 4.2
Vehicle Maintenance Cost
Maintenance cost comprises spare parts and wages for the maintenance labor. This also adopted from the PCI model as given i n Appendix 4.2.
Depreciation
Depreciation is expressed given by the PCI model.
Interest
The modcl for interest is adopted from the HDM 111 model. where interest i n veh-hm. INT. is expressed as a fraction ofthe proce of brand n e ~ vehicle:
IN'I'=AINT/AKM
where: AINT = 0.01 (AINVD) AlNV =
AKM = avcrage annual mileage expressed i n hni anntial interest of vehicle ( I%)
It is assumed that the interest would have a marginal effect 011 choice between traveling on toll or non-toll road. Whether or not traveling via toll road the interest would be the wine. therefore no saving obtained from interest component.
InsLlrilnce
Insurance is expressed given b y thc I'CI model
Value oftinie
'There is no hard evidence on valtic of time for lndoensia. IT1 sttidy and Jasa Margo recciit practice nssumed tliat vehicle utilization time savings is the basis for valuation. Mliicli i s perhaps not that common.
Here user's time saving is asstimed as a soiirce for valite of time determination. Value5 of time used i n previous feasibility studies were adjusted to retlect inflation and regional
variation. Regional variation can be approximated tising regional ininimtini wage laic index supplied by BPS.
APPENDIX 7 2
Table A 7.2.1 Ciawi - SUkabumi:ECOnOmiC Analysis as Non-toll Road' (Costs and Benefits Adiusted for non-traded components1 TraMc growth Scenario Economic Analysis as non-toll road (additional const~uction.maintenance 8 operation costs 01 road as toll faciily excluded) Generated Tramc assumed at 25% of normal traffic 8 50% of savings benefits counted Normal growth traffic based on RPT Oct. '96 estimate Of Total corridor lraflic share lbill R0.I
RPT Forecast on total corridor;
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
,- , . Normal Traffic Growth:
Year Project Mainl. 8 OC Savings Time Savings Puncak Costs operation. Total Total Total Total Diversion
(a) 0 5
33 9 79 4
133 0 99 5 25 8
10 1 9 5
41 3 9 5
38 9
71 1 9 7
10 1 9 4
0.7 2.0 2.5 2.5 2.6 2.6 2.6 2.7 2.8 2.8 3.2 3.2 3.3 3.8 3.9 4.7 4.8 4.9 5 0 5 1 5.2 5 3 5.4 5.5 5.6 5.7 5.8 5.9 5.9 6.0 6.1
17.6 34.5 66.5 73.6 81.9 91.5
101.9 113.3 125.5 140.6 156.0 168.4 183.4 197.3 214.6 232.7 249.6 265.4 280.8 296.8 314.2 332.4 351.7 372.1 393.7 416.5 440.6 466 2 493.2 521.8 552.1
10.4 0.0 22.2 0.0 40.2 0.0 44.4 0.0 49.4 0.0 55.2 0.1 61.5 0.1 68.2 0.1 75.5 0.1 84.5 0.1 93.6 0.1
101 1 0.1 110.0 0.1 1183 0.1 128.7 0.1 139.4 0.1 149.4 0.1 158 8 0.2 168.0 0.2 177.6 0 2 188.1 0.2 199 0 0.2 210 5 0 2 222 7 0 2 235 6 0 2 249 2 0 2 263 7 0 3 279 0 0 3 295 1 0 3 312 3 0 3 330 4 0 3
28.0 56.7
106.8 118.0 131.3 146.7 163.5 181.6 201.1 225.2 249.7 269.6 293.5 315.8 343.4 372.2 399.2 424.4 448.9 474 6 502.5 531.6 562.4 595.1 629.5 665 9 704.5 745.4 788 6 834 4 882 8
0.03 0.03 0.03 0.03 0.04 0.04 0.04 0.05 0.05 0.05 0.06 0.06 0.06 0.07 0.07 0.07 0.08 0.08 0.09 0.09 0.10 0.11 0.11 0.12 0.00 0.00 0.00 0.00 0.00
Gen. Traffic Benefils (b)
3.5 7.1
13.3 14.8 16.4 18.3 20.4 22.7 25.1 28.1 31.2 33.7 36.7 39.5 42.9 46.5 49.9 53.0 56.1 59 3 62.8 66.4 70.3 74 4 78.7 83.2 88.1 93.2 98.6
104.3 110.3
ElRR (to 2023)= ElRR (to 2030);
'Prolect Economic costs In Conslant 1996 Rp adjusted lo border prtces with SCF for "on-traded components Overlays starting in 2005 and additional lanes in future years as per Bukaka plan shown !n cost stream (a1 Bukaka May'97 estimate In constant'96 Rp (bl (25% of normal IraHic with 50% of benefits counted
Net Benefit Stream
-0 5 -33 9 -79 4
-1330 -68 8 36 0
1177 130 3 145 2 152 3 171 7 201 7 223 5 250 6 236 6 290 6 326 9 312 6 382 5 342 9 434 7 472 6 500 1 528 9 550 1 583 5 627 5 664 1 702 7 743 6 786 8 832 7 881 3 932 7 987 0
30 7% 30 8%
APPENDIX 7.4
Table A 7.4.1 Ciawi - Sukabumi:Finanacial analysis as Toll Road Traffic growth Scenario RPT Forecast
Normal growth traffic based on RPT estimate of Total corridor traffic share Total Cost (bill Rp, Constant, 1996) 555.8
Income Net Year Project Maint. & Operating Cash Flow costs operation Revenue Before Tx Cash flow
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
0.6 38.6
148.8 187.1 145.8 35.4
11.3 10.6
45.8 10.6
43.2
79.0 10.7
11.2 10.5
FlRR (2023)= FlRR (2030)=
(a)
5.1 10.0 12.4 12.6 14.6 15.2 13.3 18.9 19.4 16.1 17.1 15.5 15.8 17.1 19.7 27.7 25.7 20.8 21.2 23.4 24.0 22.4 22.5 28.7 23.5 23.9 25.5 26.1 25.3 26.4 28.6
0 0 0 0
19.1 50.9 75.9 78.3 96.0 99.3
118.1 120.6 144.7 148.7 175.8 175.7 203.6 203.3 236.8 236.7 276.3 276.1 321.3 314.1 357.0 346.7 387.1 369.5 352.7 336.7 321.4 306.8 292.9 279.6 266.9
0 -38.6
-148.8 -187.1 -131.9
5.5 63.6 65.7 81.4 72.9 94.2
101.8 125.3 132.6 112.9 149.7 187.8 143.0 217.1 130.0 239.8 255.3 300.1 290.7 321.8 313.9 364.6 340.8 329.2 312.8 295.9 280.8 267.6 253.2 238.3
15.9% 16.5%
0.00 0.00 0.00 0.00 1.03 0.00 0.00 0.09 7.94 8.60
16.77 23.46 33.24 35.81 39.90 40.82 46.79 45.51 54.13 46.39 58.34 63.35 75.88 73.61 82.02 80.22 94.56 88.21 82.28 76.75 71.59 66.78 62.30 58.11
-0.6 -38.6
-148.8 -187.1 -131.9
4.5 63.6 65.7 81.3 65.0 85.6 85.0
101.8 99.3 77.1
109.8 147.0 96.2
171.6 75.9
193.4 197.0 236.8 214.8 248.2 231.9 2843 246.2 241.0 230.5 219.2 209.2 200.8 190.9 180.2
14.0% 14.7%
'Project Financial costs in constant 1996 Rp. excludes price contingency & interest during construction Depreciation and financingldebt service cash flow excluded Overlays starting in 2005 and additional lanes in future years as per Bukaka plan shown in cost stream (a) Bukaka/RPT Feb.'97 estimate in constant '96 Rp., includes toll equipment replacement & upgrading
Table A7.4.2
Toll Road Operatinq 8 maintenance costs (bill. Rp)
- Yr Adi. factor Bukaka Financial economic @ Bukaka Financial economic @ Routine Maint. 8 Operatinq Costs Toll equipment replacement
I inn.@ inc. infl (base:199 inc. infl (base:199
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
8 % 1 1.080 2 1.166 3 1.260 4 1.360 5 1.469 6 1.587 7 1.714 8 1.851 9 1.999
10 2.159 11 2.332 12 2.518 13 2.720 14 2.937 15 3.172 16 3.426 17 3.700 18 3.996 19 4.316 20 4.661 21 5.034 22 5.437 23 5.871 24 6.341 25 6.848 26 7.396 27 7.988 28 8.627 29 9.317 30 10.063 31 10.868 32 11.737 33 12.676 34 13.690
-
7.0 14.7 19.3 21.2 23.3 25.7 28.2 31.0 34.2 37.6 44.0 48.4 53.3 63.1 69.4 85.6 94.1
103.5 113.9 125.3 137.8 151.6 166.7 183.4 201.7 221.9 244.1 268.5 295.4 324.9 357.4
5.1 10.0 12.2 12.4 12.6 12.9 13.1 13.3 13.6 13.8 15.0 15.3 15.6 17.1 17.4 19.8 20.2 20.6 21.0 21.3 21.7 22.1 22.5 23.0 23.4 23.8 24.3 24.7 25.2 25.6 26.1
0.9
4.6 9.0
10.9 11.1 11.3 11.6 11.8 12.0 12.2 12.4 13.5 13.7 14.0 15.3 15.6 17.9 18.2 18.5 18.9 19.2 19.6 19.9 20.3 20.7 21.0 21.4 21.8 22.2 22.6 23.1 23.5
0.3 0.4 3.8 4.6 0.5 13
14.6 6.2 6.1 0.7 0.7
0 9.2
33.9 25.9
1.1 1.2
12.2 14.6 1.5
0 46.2
1.1 1.2
12.2 14.6
1.5 9.2
33.9
0.2 0.2 2.1 2.3 0.2 5.6 5.8 2.3 2.1 0.2 0.2 0.0 2.3 7.9 5.6 0.2 0.2 2.1 2.3 0.2 0.0 5.8 0.1 0.1 1.2 1.3 0.1 0.7 2.5
0.9
0.2 0.2 1.8 2.1 0.2 5.0 5.2 2.1 1.9 0.2 0.2 0.0 2 1 7.1 5.0 0.2 0.2 1.9 2.1 0.2 0.0 5.2 0.1 0.1 1.1 1 2 0.1 0.7 2.2
Note: Bukaka assumes 10% inflation on OBM costs, with constant costs in real terms; OBM assumed to increase with trafftc
Table A7.4.3
Cash Flow Proiection II. rp.)
Toll Revenue Jasa Marqa Current R Const.'96 Rev. Share
% Bill.Rp infl.@ 8%
1.080 1.166 1.260 1.360 1.469 1.587 1.714 1.851 1.999 2.159 2.332 2.518 2.720 2.937 3.172 3.426 3.700 3.996 4.316 4.661 5.034 5.437 5.871 6.341 6.848 7.396 7.988 8.627 9.317
10.063 10.868 11.737 12.676 13.690
r 2023)
- (bill)
25.97 74.86 120.5 134.2 177.7 198.6
255 281.3 364.3 404.3 516.4 557.5 697.5 752.1 946.3
1021.5 1287.8 1389.7 1746.7 1844.2 2264.1 2374.7 2863.1 2951.7 3043.0 3137.2 3234.3 3334.4 3437.6 3543.9 3653.6
1.03
19.1 50.9 75.9 78.3 96.0 99.3
118.1 5% 5.91 120.6 5% 6.03 144.7 5% 7.23 148.7 5% 7.43 175.8 5% 8.79 175.7 5% 8.79 203.6 14% 28.50 203.3 14% 28.46 236.8 14% 33.15 236.7 14% 33.14 276.3 14% 38.68 276.1 14% 38.65 321.3 14% 44.98 314.1 14% 43.97 357.0 14% 49.99 346.7 14% 48.54 387.1 14% 54.19 369.5 14% 51.73 352.7 14% 49.38
321.4 14% 45.00 306.8 14% 42.95 292.9 14% 41.00 279.6 14% 39.14 266.9 14% 37.36
336.7 14% 47.14
Income Tax
Current R Const.'96 (30% EBT)
0.16 14.7 17.2 36.2 54.7 83.7 97.4
117.2 129.5 160.3 168.4 216.3 200.2 271.9 318.9 412.5 432.2 520.1 549.4 699.4 704.6 709.8 715.1 720.4 725.8 731.2 736.6 742.1
1.0074
0.00 0.00 0.09 7.94 8.60
16.77 23.46 33.24 35.81 39.90 40.82 46.79 45.51 54.13 46.39 58.34 63.35 75.88 73.61 82.02 80.22 94.56 88.21 82.28 76.75 71.59 66.78 62.30 58.11 54.21
I
., Total Cost (bill Rp. Constant. 500 2
Table A 7.4.4b Ciawi - Sukabumi:Finanacial analysis as Toll Road With costs reduced 10% Traffic growth Scenario RPT Forecast Normal orowth traffic based on RPT estimate of total corridor traffic share
. . Year Project Maint. 8 Operatin Cash Flo Income
Costs operation. Revenue Before Ta Tax (a)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201 1 2012 2013 2014 2015 2016 201 7 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
0.6 34.7
133.9 168.4 131.2 31.9
11.3 10.6
45.8 10.6
43.2
79.0 10.7
11.2 10.5
FlRR (2023)= FlRR (2030)=
5.1 10.0 12.4 12.6 14.6 15.2 13.3 18.9 19.4 16.1 17.1 15.5 15.8 17.1 19.7 27.7 25.7 20.8 21.2 23.4 24.0 22.4 22.5 28.7 23.5 23.9 25.5 26.1 25.3 26.4 28.6
0 0 0 0
19.1 50.9 75.9 78.3 96.0 99.3
118.1 120.6 144.7 148.7 175.8 175.7 203.6 203.3 236.8 236.7 276.3 276.1 321.3 314.1 357.0 346.7 387.1 369.5 352.7 336.7 321.4 306.8 292.9 279.6 266.9
0 -34.7
-133.9 -168.4 -117.3
9.1 63.6 65.7 81.4 72.9 94.2
101.8 125.3 132.6 112.9 149.7 187.8 143.0 217.1 130.0 239.8 255.3 300.1 290.7 321.8 313.9 364.6 340.8 329.2 312.8 295.9 280.8 267.6 253.2 238.3
17.1% 17.7%
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 7.9 8.6
16.8 23.5 33.2 35.8 39.9 40.8 46.8 45.5 54.1 46.4 58.3 63.4 75.9 73.6 82.0 80.2 94.6 88.2 82.3 76.8 71.6 66.8 62.3 58.1
Net Cash flow
-0.6 -34.7
-133.9 -168.4 -117.3
9.0 63.6 65.7 81.3 65.0 85.6 85.0
101.8 99.3 77.1
109.8 147.0 96.2
171.6 75.9
193.4 197.0 236.8 214.8 248.2 231.9 284.3 246.2 241.0 230.5 219.2 209.2 200.8 190.9 180.2
15.2% 15.8%
'Project Financial costs in constant 1996 Rp. excludes price contingency 8 interest during construction Depreciation and financingldebt service cash flow excluded Overlays starting in 2005 and additional lanes in future years as per Bukaka plan shown in cost stream (a) Bukaka May.97 estimate in constant '96 Rp., includes toll equipment replacement 8 upgrading
Table A7.4.5 Ciawi Sukabumi: Cost Estimate (Bukaka estimate deflated to 1996 constant Rp.)
(Constant 1996 mill. Rp) infl. index 1 2 3 4 5
Construction Cost Estimates: 1996 1997 1998 1999 a 2001
DeSian 10062.5 4477.8 5584.7
- 1.0 1.08 1.166 1.260 1.360 1.469 Construction cash flow (1997 mill. Rp) 1996 Fin. costs
Total 3401 81.5 4477.8 54226.7 131364.2 118845.5 31267.4
44% 56% Construction 3301 19.0 48642.0 131364.2 118845.5 31267.4
Ciawi-Cicurug 95518.6 48642.0 46876.6
Cicurug-Cibadak 83719.3 63974.1 19745.1 76% 24%
Cibadak-W. Sukabumi 64598.3 20513.4 41153.6 2931.3 32% 64%
(%) 51 % 49%
WSukabumi-E. Sukabumi 86282.9 57946.8 28336.1 Constr. incl. Proj. Supervision 340022.6 0 50101.2 135305.1 122410.9 32205.4 Subtotal: design & constr. 350085.0 4477.8 55685.9 135305.1 122410.9 32205.4
Toll &other equipment 16345.1 8486.9 7858.2 VAT @ 10% of total cost 36643.0 447.8 5568.6 14379.2 13026.9 3220.5
Total Constr. & Equip. costs 403073.1 4925.6 61254.5 158171.1 143296 0 35425.9
Land Acquisition 86413.6 27948.1 34504.5 23961.0
Project Overheads 18368.0 632 5736 5000 5000 2500 Fin. Costs (Bk.fees @ 3 75% of 24026 0 24026
Bank guarantee for land Ac 24026.6 0 24026 0
Total Proiect Cost excl IDC 556407 4 632 38610 0 148811 0 187132 4 145796 0 35425 9
APPENDIX 9.1
INTERNATIONAL EXPERIENCE IN TOLL TARIFF SETTING AND ADTUSTMENT
In many countries, the approval of tariff increases often becomes a political matter with public pressure and elected representatives opposing increases and objecting to fees which are obvious and immediately impact users. Rate adjustments in Thailand are based on a pre-determined formula incorporating the consumer price index. The Thai Parliament however sets rates on all toll roads. Rate roll-backs in Thailand and Philippines led to collapsed or stalled agreements with operating entities and were a factor in governments having to offer more comfort to investors in subsequent agreements.
111 the more recent generation of BOT toll road concession agreements, - several in countries such as Chile, Argentina, and Mexico with recent memories of severe price inflation, indexed tariff formulas have become more common features in pricing formulas. In Argentina, 1993 regulatory changes to encourage more active concessionaire bidding linked tariffs to US$ exchange rates aiicl inflation. The toll tariff can also be adjusted upwards to compensate for higher than anticipated land acquisition costs.
In Chile, concession agreements similarly incorporate construction cost .’ escalation and cost of living indices. Government approval is required iii both countries for subsequent tariff increases once roads are in operation. This approval process requires a review of maintenance and operating cost increases as well as a test of toll revenue coverage of debt service burdens.
In Mexico, recent concession and tariff policies reflect the troubled history of earlier ventures in the 1980’s, and again in 1994/95 when optimistic traffic estimates and investor/contractor eiithusiasm fell victim to economic downturns. Economic crisis forced concessionaires and their bankers into jeopardy and restructuring. Tariffs adjustments on new concession agreements are pegged to construction price indices and for the foreign portion of debt, US$ exchange rates. Annual or bi-annual economy-wide compacts however are intended as over-riding guidelines on general price, tariff, and wage increases.
Government Guarantees I n the early stages of BOT contracts, several governments have offerecl guarantees to investors in terms of tariffs, opening year traffic and traffic growth With the increasing volume of private investment, fading memories of toll corporation defaults, and acceptance by investors of toll roads as potentially
lucrative investments in high growth economies, these patterns of guarantees drc becoming less prevalent. I n the mid to later 1980’s stages of the Nortl~-Soutli Expressway programme, Malaysia offered guarantees on tariff levels and traffic volume but in more recent programmes, the government has ceased offering such guarantees, there being sufficient competition among investors. Opening up the market to contractors less intimatelv involved with the ruling coalition has also contributed to a more transparent approach less tinged with favoritism.
I n this process of moving towards a more open and competitive tendering svstem, more risks have been accepted by the investor and financing costs have probably been lower as a result. Under present policy, the government pledges to review tariffs every two years and render prompt ciecisions on requests for tariff increases. While government decisions on increases are not necessarily of the magnitude requested by concessionaires, agreements cammonlv contain r\
coiisumer price index component.
In the Philippines, toll roads have been treated for regulatcry purposes as a public utility with the Toll Regulatorv Board (TRB) having responsibility over toll tariffs. The TRB has traditionally applied two tests, a “reasonable” rate of return on equity to investors, and the impact of increases in debt service, maintenance and operating costs occasioned through inflation or depreciation of the peso. Tolls are to be adjusted according to official government indices as defined through bidding documents and incorporated in the contract.
In the Philippine BOT law of 1990, the concessionaire is authorized to collect ”reasonable” tolls, but the TRB must approve the” fairness and equity” of the charges. Under the Philippine BOT law, the rate of return criterion can also be used to adjust toll tariffs to cornyensate the contractor for undue delays, caused for example by land clearance. This act also provided that tolls should be collected for only a fixed term, not to exceed 50 years.
To attract foreign funds and more competitive bids on recent toll road projects, predetermined rate formulas are set out in concession bids and agreements. For the Manila South Tollway, concession bids considered formulas with several components. These components include indexing to consumer prices, foreign exchange rates and international reference rates such as the London Interbank Borrowing Rate (LIBOR). The weighting of these latter two components would then vary over the concession period according to the foreign exchange share of debt outstanding and adequate coverage of debt service.
Because of the thinness of the domestic long term funds market, domestic loans were prominent only in the shorter term elements of the financing package. This sourcing of funds hence has an impact on not only the cost of capital but
also the means for securing coverage of foreign currency debt repayment. To secure more foreign fund participation in financing packages, the government extended assurances that foreign payments would be protected by a foreign/local currency adjustment factor in addition to inflation indexing in the toll tariff rate formula.
Determining ”Reasonable Rates of Return” Setting rates on the return on capital investecl was a traditional i i iethd ot regulating utility and railwav tariffs in North America in pre-cleregulation davs. While superficially attractive as a means of curbing “excessive ” profits, this approach had two major drawbacks. Firstly, determining an appropriate rate base means extensive involvement by the regulatory body into the affairs of the operator in monitoring the efficient use of capital, the correct valuation of the capital base, and the appropriateness of expenses and credits. I n turn management has less incentive to control costs, and often a pattern has developed of investing in uneconomic excess capacity to inflate the rate base.
To service this regulatory mandate has often required the build-up of an extensive review and approval system ancl an accompanying bureaucratic structure to carryout the sometimes elaborate procedures of tariff adjustment review and approval. Common questions to be addressed in the more extensive forms of rate of return regulation, particularly in the transportation industrv include the following:
- what is the proper capital base on which the “reasonable” rate of return (ROR) is to be calculated?
- what is the current and embedded cost of capital, equity and debt, to be considered in the ROR?
- are new capital expenditures justified in terms of timing, cost, ancl scale? - are maintenance and operating expenses justified and reasonable?
This extensive blanket of regulatory review which grew up in inany countries in early to mid- century has fallen out of favour in the last two decades because the accoinpanying burden of regulatory bureaucracy was found to lead tcl ballooning administration costs on the part of both regulator and inclustrr. Further a i d more damaging in rapidly changing economies was the stifling of innovation and the rigidificatioii of organizational and operational structures. Managerial incentives to control costs withered ancl tariffs in many cases becaluc higher because of the inefficient cost structures they were based 011. The end effect in many cases was the “capture” of regulators by the utility being regulated and increased opportunities for corruption or “sweetheart” treatment.
Mature and Secure Revenue Streams As the toll road investment matures, traffic and revenue streams will build a n d the concessionaire enters the "period of eiijoyment. " Investors start receiving returns on equity, and higher cost debt has been paicl off or restructured to inore attractive terms. With the emergence out of the initial period of .uncertaint!s, revenues then give secure and comfortable margins of debt service coverage.
It is this period, usually in the second decade of a successful investment when public ancl governmental concerns over excessive profits and "asset milking" arc likely to rise. Looking ahead to this golden horizon, government regulators c;ln build into concession agreements a review ancl reassessment mechanism to moderate or cap escalation formulas originally contracted. Foreign exchange adjustment factors in the tariff setting formula shouId decline in weight as debt is retired. Operating and routine maintenance costs should also decline in proportion to revenues as the investment matures. Sharing of profits is provided through Jasa Marga joint venture agreements, both through diviclencis "'".,
and in more recent agreements, an increasing share of revenues after 10 years with the build-up in traffic. As discussed previously with rate of return limits, limiting or taxing away profit off-take can lead to either inefficient operations, or "empire-building" to soak up the cash throw-off. Notable examples of the latter include real estate ventures and office buildings funded by more than one bridge and tunnel operating authority in the U.S.
This review device should be also be tied to the remaining life of the concession, and the rehabilitation and reconstruction expenditures anticipated to renew the economic life of the asset. To be avoided are restrictive legislation or regulatory strictures on tariffs which may jeopardize the floating of new bond issues to finance needed rehabilitation. This was a another problem encountered in the financing of aging segments of toll roads in the US. during the 1970's.
APPENDIX 9.8.1
June 26, I997
Mr. Ion A. Johnson Transport Economlrt ALM Rasources Ltd. P. 0, Box 8OY 6808 Paocoe Road Sooke, 6C VQS IN0
Dear Mr. Johnson:
structure for Highway 104 in Nova Scctia.
between the Provlnw and the Highway 104 Coi'poration which oullines the toll adjustnmnt rnechonism.
The initial toll for the highway has been set at $3.00 per oar and $2.00 per wle per truck, These rates were determined through a "Stated Preference Survey". In this survey approximately 75% of cBr drivers etated they would be willing to pay the $3.00 and silghtly o w 50% of trucks the $2.00/erxle rate. The survey indicated slightly high revenues could be achlaved with B higher toll but with the coritroversy surrounding tolling the lower toll with a higher acceptance level was chosan.
Govnrnment provided Q $55,000,000 subsidy to the project; the remaining $66,000,000 was raiod througli toll revenue bonds. The financial model developed for the rspeyment of the bonds takes into acoount tho roads anticipated revenue, costs (rnalnternance, to\\ collaction, bond repayment, etc.) and projected traffic growth. The toll inorlase as llsted in section 5.l(b)(li) of the Omnibus Agregrnent are the toll increased and the dates on which thoy will'occur. These increases are in line with the anticipated Inflation rate. The rnechan!sm for increasing toll or foregoing an Increase should the revenue or costs VGIY from the model are as given in the Omnibus Agreement.
I 801 writing In responae to your latter to Mr. Dori Stonehouse regcwrding the tall
I have included a copy of tho relevant section of the Omnibus Agrebment
.... 12
* 32 -
49, Bond and Notc Einanclag Documetlts Approved
The Province hereby approvsa of the Corporation entering into, executing, delivering and perfonnidg 1s obligations under ewh oftbr Senior Bond Indenture, Junior Bond Indenture, Note Indenture, Undenwiting Agreement, Consmiction Trust Agreement. Insurance Tmst Agreement, and Mejor Maintenance Reserve Fund Agreement. The Province ackmwledgea receipt of notice of the assignment to Montreal Trust Company of Canada, Montreal Trust Coit\pany and The R-M ‘l’rust Co&any of thdProviace’s obllgations under this Omnibus Agreement and agrees that each of such trustees shall be entitled to exercise each and wery right of the Cnrporalian hereunder BS if it wcre a pmty hereto.
50. Initial Tall Rutos
Pursuant to Section lO(3) of the Highway 104 Wesfern Alfgnrnrnf Act, the Corporation hereby sets thc initial Toll k t e s for the operation bn the Wcslern Alignment of the following classes of vehicles:
(a) Trucks, Ruses, Sdlaol Buses, Farm Tractors, ‘rruck Tractors, Trailers, Sami- trailers, Pale Trailers, ury Vehicle not nrentioncd in (b) or (c):
SZ.00 per arlr
Passenger c a m Taxicabs, vms other thnn those with oommtrcirclal licences, (b) motorcy clea:
$3.00 par vohfcle
Recreation vc21lcles, motohomes (regardless of number of axles), ~ v e l trailer (c) and pusenger car GOmbhatiOnS, travel trailer and two d e truck combinations:
$4.00 par vehicle
Ihc Province acknowledges that this Onmibus Agreement is an agreement pursuant to the Act for the puqmses of Secthn lO(3) oftbe Act.
- -. -.
- 33 - Tenns with initial capitals used in this Section 50 that are not defined in Schedule "A" have rhe meaning attributed to them by the Mufor Vehicle Act (Nova Scotia) 8s now in effect.
s 1. nil Kate Adjustment
After h c Date of Acceptance, the CorpoMtion $hall calculate t!mDebt Strrice Coverage Ratio no less fi'equently than qwterly. Such calculation shall be delivered to the Bondholders' Represeiitative no later than 30 days after the elid of each calendar quarter.
(a)
. 34 *
(b) The Toll RHtcs for each class of vehicle shall bc increased 8s follows:
(1) &!&t2aU~& On Janiiary 1 in each calendar year, beginning with the second calendar yenr dler the Projected Completion Date, the Toll Rate for each c l w of vehicle shall be increased by tha percentage inorewe, if any, in the Concumer Price Index dwing the period from the later of October 1, 1998 or the October 1st immediately preceding the last toll adjustment under this Sc'Ftton, to the September 30th immediately preceding the data of UIC detemination, provided that such increase amounts to at \ a t 25yt.
If the application of the foregoing formula would produce an iporcase grcrrkr than 25$ but lcss than 506, the increase shall be 256; if the applic#tion of such fonnul~ would produce an increme of tmre than SO$ but lcss than 756, the increase shall be 506, and so on.
(ii) &f- Whehcr or not here is any increase under ParafCraph (i), the Toll Rate in respect of erch class of vehiales shall be increwd by the following amounts:
On January 1,2001 - 506; 011 1,2004 - 256; 011 J ~ I U W Y 1,2006 - SO$: On January 1,2012 - 25$; On January 1,2017 - 508; On January 1,2022 - 506.
Notwithstanding the preceding sentence, if tlic Debt Service Coverage Ratio Is greater than 2.3:1 in December of any year to and includiig 2004, or i~ W t e r than 1.9:l in any year thereafter, and thc Noteholder's Rapreaentative so directs, the Carporallon will not ~ C E R E C tho 1'011 Rate h the next followlng year.
(iii) J $ " U & W , Each year aAer the dotorinination of the Annual Corporation Budget, the Corpuration shall formast tall revenues for the enwing yew (tawng account of any Incroaaer resulting &om the operation of Pwgraphs (f) and (ii)) and shall compare such forowst with thr ne@ for fun& to pay the amounts required by such Annual Corporation Budgot, to make rwuired
- 3 5 -
payments to the Major Maiatcnance Reserve Fund and the Debt Service Reserve Account, to PRY inahring Bonds and Notes and to achieve the Pro Forma Debt Service Coverage Ratio: to the extent that forecasted toll revenuw, aAor exploring all reasonable options to reduce cxpc~ises~, we ineuMcient la provide all required funds, the Toll Rate for each class of motor vehicle shall be increased by such amount as may be necessary to ensure that U w c is no deficit and to ensure that the Pro Forma Debt Service Coverage Mi0 is ut leakt 1.2: 1 during the b t 36 months after the Date of Acceptance md 1.3: I at any time thareafter; all such increases shall be in units of 25 cents or integral multiples of 25 cents and if needed, any such iiicrease shall be rounded up to the next h l g i ~ ~ multiple of 25 cents.
(iv) -~ervlce_CoveroPe_Ralio- If the Debt Service Coverage Ratio is less than 1.2: 1 at any time dwhg the fitst 36 months following the Date of Acceptance or less than 1.3: 1 at any time thereafter, then a1 any time within 12 months after receiving the Corporation's calculation of the Debt Service Coveragc Ratio, the Bondholders' Representative may, in its discretion, dmct the Corporation It) increase the Toll Rates to an amount estimated by thc Bondholders' Representative to achieve such Debt Swlco Coverage Ratio. The Corporation shall comply with such dirwtion not later than the first day of the month which begins at least 30 days after the receipt of tha direction er 011 suoh Later date as thb Bondholders' Representative may direct. The dlrmtion may, but need not, provide far tbe implementation of the Toll Rate increase on a day on which a Toll Rate increase might otherwise takc p l w pursuant to thitr Saction 5 1. Any such direction shall provide that tho Toll Rates for each class of motor vehicle shall bc iricnaaed by a;\ equal amount. The Bondholders' Representative may not rrive more than one direction pursuant to this Subsection (iv) in any 12 month period. Prior to glvlng such a direction, the Bondholders' Rc,presciktativo slrnll mok the recommendation of UI Independent mfic consultaut with wspect to the appropriate increase in Toll Rates and my JirWion given by the Bondholders' Representative shall be consistent with such rccommcndation, bur need not follow suoh muommendstion precisely. 'he cost of such indopandent traffic consultant shall be borne by the Corporation.
- 36 - (c) If the 'roll Rates haw been increucd pursuant to Subsection (iv) and within
12 month6 thereafitherc is H decline in the traffic on the road for any class of motor vehicles or a decline 11 h e toll revenues derived therefrom, the Bondholders' hpresentative may, 111 its discretion, direct the Cor&mtlol; to decreeso the Toll Rate for one or more classes of vehicle. The Corporation shall comply with such direction on the ficst day of the first month which begins at least 30 days after the rcceipt of such direction or on such later date iu the Bandholdad Representative niay direct. The Bondholders' Kepresenutivo shall only direct that one or mare Toll Rates be decreased if an independent traffic cansultanc retained by it advises that suoh a decrease will help maximize the revenues derived froom tolls. The cost of such independent hafflo consultant shall be borne by the Cwporation.
(d) Notwithstanding any other provisions contained in this Part NU, if there is a change in provincial low, regulation or ordinance or if any rule or order is issrrcd by any agency or instrumentality of the Province which has the direct result of incrwing t$e Operating Expenses of the Corporation to an amwmt in excess of 110% of the Opcratiilg Expenses in tlrc current Annual Coyoratfo? Budget, the Bondholders' Representative may, ifi addlilon to any other riglit to r q u h an adjustmcnl of Toll Rates, direct that the Corporation increase h e 'I'd! Rates to the O X I C I ~ ~ iiecessary to recover such increase in cmts and the Corporfition shall comply with suclr request on the first day of the month wlrioh begins at lewt 30 d ~ y s after the reccipt of the direction.
52. .Toll Collection
The Corporation shall collect either from the driver thereof In cash or by way of charging a pre-establlshcd account using transponden or other devices, the appropriate toll depending upon the clans ofvehicle as set out in Section 50, at the time such vehicle pmses through the toll colleotfon fficilities. The Corporation's toll collection activities in oach calendar year shall m e t ot emeed the relevant Operations Performance Criteria.
53. Enforcement of Laws
The Province will enforce laws and rcgulattions for the collection of tolls and LO cii~uro t!wt e f f d v r on attd after thc Date of Acceptance
Da I: s w 9 . 1
