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Network Development Master
Plan
Improving Indonesia's Inter-Urban Connectivity
Over the Next 20 Years

Volume 2: Implementation
Framework

INDONESIA INFRASTRUCTURE INITIATIVE

Network Development
Master Plan
Volume 2:
Implementation
Framework

CONSULTANT REPORT

INDONESIA INFRASTRUCTURE INITIATIVE

This document has been published by the Indonesia Infrastructure Initiative (IndII), an
Australian Government-supported project designed to promote economic growth in
Indonesia by enhancing the relevance, quality and quantum of infrastructure
investment.

The views expressed in this report do not necessarily reflect the views of the Australia
Indonesia Partnership or the Australian Government. Please direct any comments or
questions to IndII at enquiries@indii.co.id.

ACKNOWLEDGEMENTS

This report has been prepared by Aurecon and Cardno who have been engaged under
the Indonesia Infrastructure Initiative (IndII), a project managed by SMEC on behalf of
the Australian Government, as part of Activity T208.05 and T209.3.

Any errors of fact or interpretation are solely those of the authors.

Jakarta, 14 December 2016

© IndII 2016

All original intellectual property contained within this document is the property of the Indonesia
Infrastructure Initiative (IndII). It can be used freely without attribution by consultants and IndII partners in
preparing IndII documents, reports, designs and plans; it can also be used freely by other agencies or
organisations, provided attribution is given.

Every attempt has been made to ensure that referenced documents within this publication have been
correctly attributed. However, IndII would value being advised of any corrections required, or advice
concerning source documents and/or updated data.

..........................2 Private Sector Financing Strategy ..............................................................5............ 8 3...........................................................1 Introduction ..............3 Budget Gap..................................................4 Principle 4: Role Clarity ............2........ 1 1.................. 30 3.. 27 3.............TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ............. 32 3........4.2 Summary Of Volume 1 ..................3................................3 Private Sector Role In The Financing Of Expressways ............................... 38 4.....................3................ VIII CHAPTER 1: INTRODUCTION AND CONTEXT .... 37 4.................................................................. 37 4.............. 3 1.................2 Note on Allocation of Expressways to SOEs ............................... 7 CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN ..............................................................................................1 Expressway Investment (Unconstrained) – Key Assumptions ........ 17 3.....1 Delivery and Financing Options ...................... 37 4...........2 Principle 2: Equal Treatment of Expressway Users ........ 6 2................... 1 1............................................... 5 2............................................................ 39 i .........................................................1 Principle 1: Expressways are a Distinct Category of Road .... V SUMMARY AND RECOMMENDED ACTIONS ................5.................. 8 3............2.....................1 Calculating the Network Development Master Plan Spending Envelope........2 Investment in Other Arterials (Unconstrained) .................5 Constrained Financing Plan ................. 1 1............... 36 CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS ....... 6 2........................... 16 3...................................... 27 3. 33 3... 9 3..................................4................1 Expressway Financing Plan .2 Role of the Toll Regulatory Agency ................3 Financing Other National Roads ......................1 Role of Directorate General of Highways .4 Identification Of Implementation Actions.......5 Principle 5: Autonomy with Accountability ..................... 5 2...... 6 2......................... 8 3.4 Government Role In The Financing Of National Roads ............................................1 Structure Of Network Development Master Plan ........ 4 CHAPTER 2: POLICY FRAMEWORK FOR IMPLEMENTING EXPRESSWAYS ...............................................................................2 Expressway Roll-Out ..........2.........................................4...................................5.........3 Purpose Of Volume 2 .........2 Overview Of Roles And Responsibilities .. 32 3...........2..... 25 3..................2 Estimated Unconstrained Investment ................... 13 3..................................................3 Principle 3: Portfolio Financing ........ 30 3..................1 Introduction ..............

........................................... 48 4................... 51 4.....................3 Expressway Service Standards .................................5 IMPLEMENTING EXPRESSWAYS: REFORM OF THE TOLL REGULATORY AGENCY 48 4....5...............................1 Pre-Land Acquisition Preparation ..................5..........3 PLANNING OF CONNECTIVITY AND CAPACITY ............... 48 4............ 59 ii ..... 52 4..4..4............................................... 40 4..4.............4 Toll Regulatory Agency Powers of Enforcement..... 49 4.6 Unlocking Institutional Potential ...........3 Land Banking .................................... 57 CHAPTER 5: REGULATORY MEASURES ....................4 PROJECT PREPARATION .................................2 Quality Assurance and Independent Quality Controller Consultant Reform ...............................................................................3............. 43 4...... 44 4........4................................6 Assimilation of Expressway Section ....2 Land Acquisition ......................................................4..............................3...........................................1 Organisational Restructuring . 45 4..............5 Financial Self-Sufficiency ..............4.....................5........4 Treatment of Major Projects ...1 Enhanced Approach to Planning ................... 44 4.............. 43 4..............2 Organisational Implications .....................5 Improved Asset Management Through Road Asset Management System ...5.......................5................... 42 4............... 4......5.......... 41 4.... 54 4. 53 4......................................................

. Rp Billion............................... 11 Table 3-5: Expressway Investment (Unconstrained.......................................................... 10 Table 3-4: Expressway Construction Unit Rates 2020 Onwards (Rp Billion/km.................................. 1 Table 1-2: Network Development Master Plan Expressway and Other National Arterial Roads Programs by Island (km) ..................... Real 2016) . Real 2016) ................... 12 Table 3-7: Duration of Arterial Project Activities .................................. Rp Billion............... 14 Table 3-9: Summary of Other Arterial Investment Required by Island (Unconstrained................................................................ Amendments and Retractions .................. 33 Table 3-15: Expressway Projects Delivery Schedule and Anticipated Financing Model .............................. 31 Table 3-14: Estimated Expressway Program Cost (Constrained if Applicable.......................................................................... 23 Table 3-12: Calculation of Expressway Envelope (Rp Trillion...................... 34 Table 4-1: Toll Regulatory Agency Summary Responsibilities . 15 Table 3-10: Options for Surplus Build-Operate-Transfer Bid Parameters and Timing........................................................................................................................ 27 Table 3-13: Budget Envelope Versus Expenditure Requirements for Expressways (Rp Billion............................................................. 50 Table 5-1: Legal Instruments ................... Real 2016 Values)...................................................................................... 14 Table 3-8: Other Arterial Construction Unit Rates by Island (Rp Billion/km......................... 60 Table 5-2: National Plan Regulatory and Legal Requirements Not Covered in Volume 2 ..................................... 66 iii ............ 12 Table 3-6: Summary of Expressway Investment Required by Island (Unconstrained.....................LIST OF TABLES Table 1-1: Network Development Master Plan Expressways and Other National Arterial Roads Interventions 2015–2034 (km) .............. 21 Table 3-11: Summary of Financing Models .................................................................................. Real 2016 Values) ........ Real 2016 Values) ........................ 10 Table 3-3: RENSTRA Construction Unit Rates 2015–2019 (Rp Billion/km...... 2 Table 3-1: Duration of Expressway Project Activities . 9 Table 3-2: Typical Expressway Preparation Unit Rates (Real 2016 Value)......................................................................................................................................... Rp Billion......... 2016 Values – Unconstrained)................................ Rp Billion....New Instruments... Real 2016 Values – Excluding Contingency Risk) ............ Real 2016 Values – Excluding Contingency Risk) ....... Real 2016 Values – Excluding Contingency Risk) ..................................................................................................................................................................................................................................

............................................................... 20 Figure 3-4: Framework for Selecting from Delivery and Financing Model Options . 26 Figure 3-5: Determining the Network Development Master Plan Expenditure Envelope (Assumptions Shown for 2020+) ......................................................................... 29 Figure 3-6: Projected Spending Envelope for Expressways (Rp Billion................................. 37 Figure 4-2: Asset Quality the Result of Project Life Cycle Approach .............................. 13 Figure 3-2: Other Arterial Investment Required by Island .......................... 16 Figure 3-3: Tariffs on Upcoming Toll Roads............ Real 2016) ...................... 51 iv ........... 5 Figure 3-1: Expressway Investment Required by Island ....... 31 Figure 4-1: Major Phases in Roads Project Cycle and Institutional Responsibilities................... Real 2016).............................................. April 2014 ..LIST OF FIGURES Figure 2-1: Policy Principle Set ...................................................................... 30 Figure 3-7: Government Budget Envelope Versus Government Expenditure Requirements for Expressways (Rp Billion............

Badan Usaha Milik Negara Capex Capital Expenditures COD Commercial Operation Date CMEA Coordinating Ministry of Economic Affairs DED Detailed Engineering Design DGH Directorate General of Highways EW Expressways FBC Final Business Case GCA Government Contracting Agency GDP Gross Domestic Product GoI Government of Indonesia GR Government Regulation v .ABBREVIATIONS AND ACRONYMS AMDAL Environmental Impact Assessment AP Availability Payment APBN State Budget ATP Ability to Pay Bappenas National Planning Agency BINTEK DGH Division that sets technical standards and techniques BLT Build-Lease-Transfer BLU Public Service Unit BOT Build-Operate-Transfer BPJT Toll Regulatory Agency BPN National Land Agency BUMN State-Owned Enterprises.

Kementerian Pekerjaan Umum dan Perumahan Rakyat RAMS Road Asset Management System RENSTRA National Plan ROW Right of Way RUJPJJN National Roads Master Plan vi .IDR Indonesian Rupiah IIGF Indonesia Infrastructure Guarantee Fund IndII Indonesia Infrastructure Initiative Km Kilometre KPPIP Committee for Infrastructure Prioritisation LLF Limited Liability Fund LMAN National Asset Management Agency MoF Ministry of Finance MoT Ministry of Transportation MPPU Major Projects Preparation Unit NDMP Network Development Master Plan NR National Roads NRFPG National Roads Forward Planning Group OBC Outline Business Case O&M Operations and Maintenance PBMC Performance-Based Maintenance Contract PMI Independent Quality Controller Consultant PMO Project Management Office PPP Public Private Partnership PUPR Ministry of Public Works and Public Housing.

SOE State-Owned Enterprise SPM Minimum Toll Road Service Standards TM Transport Model VGF Viability Gap Funding WTP Willingness to Pay vii .

this Volume provides recommended targeted policy actions for the financing and funding. In summary. and (ii) a “constrained” or optimised financing plan that takes into account private sector delivery and GoI affordability constraints. Two sets of financial estimates are provided: (i) an “unconstrained” investment cost for the total NDMP. GoI will need to fund approximately 24 percent of this 20-year investment cost with the remainder of the costs to be met from the private sector and financing leveraged by State-Owned Enterprises (SOEs). This situation may change as the investment program in later years is confirmed and if pre-feasibility studies confirm any potential for more private sector involvement. If long-term budget assumptions are used. program and implementation framework to deliver 4. Included in this Volume is information on a suggested financing plan to deliver the expressway component of the proposed NDMP.5 trillion (real terms. over the proposed 20-year program it is estimated that Rp 666. The five key policy principles underpinning the recommended actions are:  Principle 1: Expressways are a Distinct Road Category  Principle 2: Equal Treatment of Expressway Users  Principle 3: Portfolio Financing of New Expressway Roads  Principle 4: Role Clarity within GoI for Expressway Road Development  Principle 5: Autonomy with Accountability The actions have the following three phases of implementation: viii . To implement the proposed NDMP. but with affordability constraints in the current committed program from 2015–2019. The successful delivery of the NDMP to implement a strategic backbone of expressway roads connected to the rest of the national road network will require refinements in the way that the Government of Indonesia (GoI) finances and funds projects. 2016 values) will be required to deliver the proposed expressway program.SUMMARY AND RECOMMENDED ACTIONS The Network Development Master Plan (NDMP) advocates a planning. Note that there is a shift in the cost burden to GoI towards the end of the proposed 20-year program in 2030–34 when a greater share of State Budget (APBN) funding is required. then the initial affordability analysis for GoI’s share appears to be achievable over the period 2020–2034. and clarification of roles and responsibilities to its road planning and delivery agencies. institutional and regulatory processes that will be required to deliver the schedule of projects over the next 20 years.782km of new expressways and other significant national arterial road interventions to improve Indonesia’s inter-urban road connectivity between 2015 and 2034. particularly for expressways.

2 A more definitive analysis of user benefit. and which may be expected to require further policy debate. A2. A5. ability to pay and willingness to Medium Term pay should be carried out so that a tighter band of reference toll rates can be determined. by 2024). The recommended actions are listed below and are cross-referenced to the relevant section of this Volume 2. A6. Create the legal framework for bidders to submit surplus-generating proposals in their expressway bids (subject to the creation of a suitable Medium Term institutional framework to manage such surpluses so that these are reinvested in the expressway system). In the medium term.  Later: actions that require a fundamental shift in policy. A3. A6.3 Private Sector Role in the Financing of Expressways A1. however.  Medium-term: actions which require legal sanction above that which the Minister can provide.e. The aim should be to carry out these actions by the end of the next RENSTRA period (i. this form of contracting should be subject to a Immediate proper evaluation not just being seen as a replacement for VGF or similar existing funding arrangements. Action and Context Timing CHAPTER 3: FINANCING THE NETWORK DEVELOPMENT MASTER PLAN 3. Medium Term A6. A legal framework should be created for the Toll Regulatory Agency (BPJT) to attach a toll collection agreement on any expressway project Immediate that would otherwise not have been tolled.1 Tolls should be able to be applied on all expressways (even if those roads Medium Term are not Build-Operate-Transfer [BOT] or VGF concessions). This approach Later would see GoI assume an “outputs” focus rather than concentrating on managing inputs. A national expressway toll strategy should be prepared. These can therefore be executed within the current (2015–2019) National Plan (RENSTRA) period. Care should be taken to not overuse AP concessions and in so doing Immediate create an unmanageable compound financial obligation in future years. ix . most if not all of the benefits of Viability Gap Funding (VGF) can be obtained by applying purely financial VGF. while some would roll over into the 2020–2024 period. Some of these could be attended to in the current RENSTRA period. Availability payment (AP) schemes are useful and effective in appropriate circumstances. Immediate: actions with no obvious constraints to quick implementation. A4.

personal responsibility to manage a project and Immediate steer it through the stage gates. i. execute and regulate expressways.4 Project Preparation x . A11.1 There should be a clear. Action and Context Timing A6.3 Toll rate discounts and premiums should be partially indexed to reflect the Medium Term actual effect of inflation on the concessionaire’s costs.4 The toll rates applied on future expressway concessions. Best practice approach to managing a project’s progress is to submit all projects to a proper stage gate process. one coordinating area should be Medium Term responsible for planning. including for Medium Term concessions that are re-bid at the end of their terms.3 Planning of Connectivity and Capacity A12. Even though some expressways may not be directly financed from toll Medium Term revenue. dividing them into stages or Immediate phases. all expressways will be tolled under the principle of equal treatment of expressway users. separated by “gates” where a project is assessed and approved (or turned back) to proceed to the next stage. Immediate Coordinating Ministry of Economic Affairs/Committee for Infrastructure Prioritisation (CMEA/KPPIP) and other interested entities to ensure regular interaction. Bappenas. A6. 4.5 Existing concessions should be systematically migrated to the reference Medium Term tariff band. Unsolicited toll projects should be analysed in the same manner as other Immediate roads projects before being handed over to BPJT for implementation. and to also execute the policy when approved. To avoid any doubt about responsibility. The obligation to recommend a toll policy. A8. preparation and investment decisions for all expressways projects. A7. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. A10. within the contractual frameworks of those concessions.2 Overview of Roles and Responsibilities A8. early enough in the planning cycle. should fall within the band of reference toll rates. should vest with BPJT which should be structured and Medium Term resourced appropriately.e. A9. A6. and should formalise a consultation procedure with Ministry of Transportation. 4. The Directorate General of Highways (DGH) should be recognised as mandated centre of excellence for roads planning. with another functional area in GoI (possibly BPJT) given responsibility to procure.

Action and Context Timing A13. A20. i. GoI should review the current approach of procuring land on an as needed basis. the current funds and future allocations to BPJT Public Service Unit (BLU) should Immediate ideally remain available for the purchasing of expressway land. A19. A15. The responsibility for major projects should in principle be centralised and Later not devolved to the lower. DGH will continue rolling out and further developing a Road Asset Immediate Management System (RAMS) to include all asset types as a priority. national arterial projects. previously responsible to execute land acquisition. in the form of Immediate a formal “order” placed by DGH with BPJT. A14. A16. The MPPU will be responsible for procuring and executing major. there should be a defined hand-over of an expressway project from the planning/preparation to the delivery phase. a verification procedure to confirm that any GoI financial support is available before signing the Immediate concession. Given the commercial skills required Medium Term and the need to respond proactively to land requests as they arise during construction. An “ownership” function responsible for land bank assets should be established in either DGH or BPJT. this function may be best suited for BPJT. 4. To ensure the continuation of the land purchase program.e. DGH and BPJT should come to specific agreement with the National Land Agency (BPN). DGH will be supported by means of a dedicated Major Projects Preparation Unit (MPPU) which would be responsible for preparing both Immediate expressway and other major arterial projects. A21. DGH will approach development partners to financially support the Immediate creation and operation of the MPPU. No unresolved land Immediate acqusition should still legally be more than a couple of months outstanding. non- Immediate expressway. A18.1 DGH undertakes that there will in future be a minimum level of land acqusition by GoI before awarding a concession. In the future.5 Improved Asset Management A22. local balai level. A17. A21. A21. and implement proper land banking where rights of way are Immediate acquired well in advance of (decades before) construction.2 BPJT should implement an affordability check. and the Immediate National Asset Management Agency (LMAN) to ensure the seamless transfer of ongoing and pending land purchase arrangements. 4.4.5 Implementing Expressways: Reform of Toll Regulatory Agency xi .

A25. terminate the concession. A23. BPJT should implement the required management tools. A28. A27. designs Immediate and records will be asserted in the concession agreements. The performance frameworks for expressways provided under different Immediate delivery models should be harmonised.1 The right of PMIs to access construction sites and inspect plans.3 Best practice industry-wide methods of developing the contract management and quality assurance industry should be identified and Immediate applied in the near future. Amend the legal framework for toll concessions to enable BPJT to Medium Term penalise a concessionaire for non-performance. and also to reduce the Immediate requirement for subjective interpretation and audit of a concessionaire’s performance. In the future. Action and Context Timing A23.3 A periodic toll regulatory fee should be charged to all expressway Medium Term concessionaires.1 A PMI administration fee should be levied on expressway Medium Term concessionaires. A23. Immediate A23. A26. A Project Management Office (PMO) should be established in BPJT to support developing the final business case (FBC) and delivering projects. To support the portfolio financing approach.1 The future consolidated performance framework should be oriented to outcome levels of service and make use of proven technologies so that the tracking of service becomes real-time. A28. The funding of BPJT’s activities should shift from the general APBN Medium Term towards the expressway user as the direct beneficiary of BPJT’s services. A25. A28. and in extreme cases. with the necessary predictive capability. xii . where commercially possible.2 PMIs should be paid market-related fees and rates.2 BPJT’s cost of preparing and procuring an expressway project should be Medium Term charged through as a procurement fee to the winning bidder. including an expressway system financial Immediate model. The cost of overseeing the creation and operation of expressways should Medium Term be recovered from expressway concessionaires and charged through to the users of expressways. A24. A28. to be utilised by BPJT to remunerate PMIs who are contracted by the agency directly. with Immediate PMIs directly contracted to and paid by BPJT. A29. Immediate including providing oversight of and support to PMIs. the current relationship between the Independent Quality Controller Consultant (PMI) and concessionaire should be divided.

for approval of the Minister. xiii . Action and Context Timing A30. A32. for approval of the Minister. reflecting its Immediate enhanced expressway network management role. A set of regulations should be developed to give effect to the dormant legal powers of the BPJT BLU. A31. then BPJT should prepare a working plan and budget. especially to unlock its ability to generate Medium Term a revenue stream. Should GoI decide to implement a National Road Agency function using BPJT. Also. including for the Immediate appointment of private professional advisors. and including a resource and revenue plan. BPJT should prepare procurement rules.

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and an accelerated and expanded program of equitable regional growth. Volume 1 identifies that over the past two decades.391 national road at 7m carriageway NETWORK DEVELOPMENT MASTER PLAN . the Indonesian road system will not be able to support national development aspirations.621 862 4. In addition.782 Widen existing to 7m or construct new 7m . It sets out the planning issues.593 1. lack of investment and a fragmented and incremental approach to national road planning and delivery has led to a significant lag and substantial shortfall in both the performance and capacity of the main road network. a national economic growth rate in excess of 5 percent per annum.2 SUMMARY OF VOLUME 1 Volume 1 of the NDMP provides the planning framework for improving Indonesia’s inter- urban road connectivity over the next 20 years.VOLUME 2: IMPLEMENTATION 1 FRAMEWORK .1 STRUCTURE OF NETWORK DEVELOPMENT MASTER PLAN This report is Volume 2 of the inter-urban roads Network Development Master Plan (NDMP). The NDMP is made up of three Volumes:  Volume 0: Executive Summary  Volume 1: Planning the Inter-Urban Network  Volume 2: Implementation Framework (this volume). CHAPTER 1: INTRODUCTION AND CONTEXT CHAPTER 1: INTRODUCTION AND CONTEXT 1. Without the expansion of the main road network. especially inter-regional connectivity. objectives and procedures. 1. The proposed network development plan (including current Directorate General of Highways [DGH] National Plan [RENSTRA] commitments) is summarised in Table 1-1 (below). Table 1-1: Network Development Master Plan Expressways and Other National Arterial Roads Interventions 2015–2034 (km) Program 2015–19 2020–24 2025–29 2030–34 Total Expressway New Expressway 904 1. 803 1.395 1.995 4. and advocates a pipeline of prioritised expressway and other arterial road projects that comprise the road network expansion program to provide connectivity and mobility between key centres.

. . 105 595 310 1. . For other national arterial roads. More detailed information on the proposed network development plan by island is provided in Table 1-2 (below). 230 992 347 1. . and widening existing roads to dual carriageways (“2x2”). 170 69 239 2x2 .002 In total 4.VOLUME 2: IMPLEMENTATION FRAMEWORK .731 7m . or some 60 percent of the total expressway program) will be constructed in Sumatera. . 36 percent) constructed in Java. 84 84 Java New Roads . interventions will be in the form of widening of existing roads to 7m-wide carriageways or constructing new roads with 7m carriageways (“7m” in Table 1-1).428 4. 48 .010 Expressway 225 897 847 842 2. Program 2015–19 2020–24 2025–29 2030–34 Total Re-align existing NR national road to dual . 360 211 571 NETWORK DEVELOPMENT MASTER 2 PLAN .731km. with nearly all of the remainder (1. 21 21 2x2 .920km of new expressways (82 percent of the total expressway program) opening by the end of 2029. re-aligning existing roads to dual carriageway standard (New Roads).376 3. The delivery of the expressway program increases in size progressively up to the 2025– 29 period.569 carriageway TOTALS 904 2. 37 85 Expressway 40 . . 170 90 260 carriageway Widen existing 2x2 national road to dual .782km of new expressways are planned for the period 2015–2034. This detailed table shows that most new expressways (2. 1. Table 1-2: Network Development Master Plan Expressway and Other National Arterial Roads Programs by Island (km) Island Program 2015–19 2020–24 2025–29 2030–34 Total Expressway 539 458 734 . .811 7m . 40 20 100 Sulawesi 7m .811km. with 3. 115 214 329 Sumatera New Roads .294 11. .

Volume 2 also identifies the quantum of funding required for the NDMP projects and the range of financing and funding instruments that should be considered to lessen the financial burden on GoI. institutional and regulatory processes that will be required to deliver the schedule of road infrastructure projects in the NDMP. . 99 . . Specific actions are formulated to provide a GoI policy framework for the financial. .g. . ¹ The term “fund” refers to the source that pays for the project. . 40 .1 discusses this distinction further. . NETWORK DEVELOPMENT MASTER PLAN . . - 2x2 . . - 2x2 . the purpose of Volume 2 is to inform and recommend targeted policy actions to implement the NDMP. . . In this regard. 99 Bali New Roads . a toll tariff. .g. . . . . 63 397 . 40 7m . . - Expressway 99 . e. “Finance” refers to an activity that makes it possible to postpone paying for the project. . 43 204 590 837 Kalimantan New Roads . 760 815 895 2. prepares and procures projects and a major shift in how it assigns roles and responsibilities to its road planning and delivery agencies. . . .VOLUME 2: IMPLEMENTATION 3 FRAMEWORK . 99 7m . . e.3. . - 2x2 . 460 Expressway . a loan. - 7m . .3 PURPOSE OF VOLUME 2 The successful delivery of the NDMP by 2034 will require refinements in the way the Government of Indonesia (GoI) funds1. GoI typically funds a project by paying a contractor to build it. - 1. - 2x2 .470 Other Islands New Roads . 15 . or by providing a subsidy to a concessionaire – even if GoI obtained the funds by borrowings from the general government borrowings The concessionaire typically finances the project by taking out a loan on a project finance basis Section 3. 15 Expressway . . CHAPTER 1: INTRODUCTION AND CONTEXT Island Program 2015–19 2020–24 2025–29 2030–34 Total New Roads . .

while some would roll over into the 2020–2024 period. Some of these could be attended to in the current RENSTRA period. actions have been recommended to successfully implement the NDMP.4 IDENTIFICATION OF IMPLEMENTATION ACTIONS Throughout Volume 2. NETWORK DEVELOPMENT MASTER 4 PLAN . Legally. DGH and/or Toll Regulatory Agency [BPJT]) or even external (Ministry of Finance [MoF]. such as a Presidential Regulation or even a Law. Later: actions that require a fundamental shift in policy. or at least instruments that do not require more than a Ministry of Public Works and Public Housing (PUPR) Ministerial Regulation. Such actions may have to be formalised in appropriate legal instruments. this Volume 2 outlines three procedural areas of implementation (financial. forming a précis of Volume 2.e. The NDMP should not assume business as usual. and which may be expected to encounter internal (PUPR. governed by a set of five integrated policy principles to guide and accelerate the execution of the NDMP. Actions are date-stamped for implementation with three phases of implementation suggested: Immediate: actions with no obvious constraints to quick implementation. and the NDMP provides an opportunity to make the case for change where required. by 2024). and regulatory). Medium-term: actions which require legal sanction above that which the Minister can provide. The 20-year duration of the NDMP is a timeframe that challenges GoI to critically assess the current implementation framework for delivery. The aim should be to carry out these actions by the end of the next RENSTRA period (i. but lay the foundation for the long-term sustainability of the higher- order roads network. mostly requiring a change in how expressways and other major road projects are managed. In this context.VOLUME 2: IMPLEMENTATION FRAMEWORK . These can therefore be executed within the current (2015–2019) RENSTRA period. Volume 2 is therefore organised under the following four broad headings to provide a new way forward for implementation:  Policy Framework for Implementing the NDMP  Financing and Funding the NDMP  Institutional and Organisational Requirements  Regulatory Requirements 1. Bappenas. The actions to give effect to the new policy direction to deliver the NDMP are listed at the outset of this document. House of Representatives) policy debate. institutional/organisational. and therefore provide the motivation for most of the legal amendments and additions included in Chapter 5. these are all actions that can be sanctioned by existing legal instruments.

providing seamless connectivity between major economic growth areas and urban centres. NETWORK DEVELOPMENT MASTER PLAN . The proposed approach. They will be developed at the highest domestic design standard. as set out in NDMP Volume 1.1 PRINCIPLE 1: EXPRESSWAYS ARE A DISTINCT CATEGORY OF ROAD In the current approach to the definition of roads. high-performance road network.VOLUME 2: IMPLEMENTATION 5 FRAMEWORK . CHAPTER 2: POLICY FRAMEWORK FOR IMPLEMENTING EXPRESSWAY CHAPTER 2: POLICY FRAMEWORK FOR IMPLEMENTING EXPRESSWAYS This chapter describes the policy background and proposed framework for implementing the expressway elements of NDMP. However. Figure 2-1: Policy Principle Set Expressways a Portfolio Autonomy distinct road financing of with class expressways accountability Equal treatment of Role clarity expressway users 2. it is generally acknowledged that the present arterial system is inadequate: it does not provide sufficient connectivity (direct links between key centres) or mobility (high speed transit). Expressways will be integrated with lower order roads. contiguous. These principles are designed to work together to form a “package” of policies that support the implementation of the proposed investment in national roads. will therefore be to develop an expressway network serving as the strategic “backbone” for the other arterials and lower order roads. There are five key principles that drive the overarching policy framework (see Figure 2-1 below). but will be a visibly unique. arterial roads connect the most important centres of activity. The expressways will serve a main arterial function focusing on national economic integration.

2 PRINCIPLE 2: EQUAL TREATMENT OF EXPRESSWAY USERS Expressways are specifically aimed at supporting the economy by improving transport efficiency and reducing logistics costs. it is expected that users will be charged directly and fully for the service. 2. which reduces risk and increases attractiveness for major investors such as global pension funds. Expressways should therefore generally be positioned as Public Private Partnerships (PPPs). it is anticipated that cost responsibility will be shared among users. 2. But the costs and benefits of the expressway system arise from it being an integrated network. This approach will allow GoI to focus its resources on priority national roads that require targeted government support. supporting the aim of financial sustainability at the network level and reducing recourse to State Budget (APBN) funding. Good pricing practice requires that the user who causes a cost also be responsible to pay for it. and only it. a portfolio financing approach creates the opportunity to introduce network-level financing. This will promote a “network development” approach compared to the current system where the financial implications of expressway roads are assessed based on the performance of the individual road. Treating projects as part of a single portfolio diversifies financial risk. upper (backbone) layer in the NETWORK DEVELOPMENT MASTER 6 PLAN .3 PRINCIPLE 3: PORTFOLIO FINANCING The equal treatment principle will give rise to the mature. which means that an expressway user’s obligation should also be seen from a network perspective. They are designed to provide the same high level of service to road users wherever expressways are located. debt instruments (bonds. loans. as the expressway network grows into a single system. Ideally therefore.4 PRINCIPLE 4: ROLE CLARITY The development of roads goes through two broad phases: planning and implementation. while emergent parts that are economically viable in the long term could be in deficit financially due to low demand in the early years. reflecting the network nature of the expressway system. But the one-network approach implies that surpluses and deficits should be bundled.e. Since expressways are not social services funded from indirect taxes. etc. offset and financed as one portfolio.) for expressways as a group and not just for an individual expressway project. and the range of PPP financing options should be expanded to ensure that appropriate financing solutions are available for different circumstances. high-demand links of the expressway network generating financial surpluses. Additionally. Expressway users should have a similar obligation to contribute to the cost of developing and operating expressways. Although expressways form the discrete. 2.VOLUME 2: IMPLEMENTATION FRAMEWORK . With equal service expectations comes equal responsibility. i.

however. arterials. However. in the future. high-order expressway system. including substantial. the agency would be subject to more demanding performance and governance obligations. Such an agency would have more employment. Once a project has an individual identity. focusing on the priority. Since the topic is public roads. land availability (which is an obligation for which government has now assumed responsibility). The result should be a more efficient road sector and reduced whole life roads expenditure. financing and performance management skills required to manage the expressway system are not typically found in the public sector. as well as its implementation and oversight ability for the non-expressway roads (which will remain its obligation). “identity” implies a sufficiently prepared project. Accordingly. In Indonesia. In the case of BPJT. procurement and financial flexibility to the normal conditions and constraints of the public service to provide access to the expertise required to deliver a major investment program. In exchange for these privileges. CHAPTER 2: POLICY FRAMEWORK FOR IMPLEMENTING EXPRESSWAY hierarchy of roads. In anticipation of converting to an agency. if not complete.5 PRINCIPLE 5: AUTONOMY WITH ACCOUNTABILITY International evidence increasingly supports the management of the national roads sector by means of a more independent agency of government. Applying the equal treatment principle. this unit should probably be located in government. the establishment of a best practice “National Roads Agency” should also be the objective. DGH should improve its planning and project preparation capability for all national roads. but rather justify having a specialist agency of government.VOLUME 2: IMPLEMENTATION 7 FRAMEWORK . The structuring. for example. Expressway projects are usually physically more complex than lower order roads. 2. it is already a semi-independent badan providing some of the specialist management skills required for the expressway network. it should be implemented by the party best equipped to manage the requirements of that project. BPJT therefore provides an existing legal vehicle to start the institutional reform. expressways will increasingly be provided under other PPP schemes as well. NETWORK DEVELOPMENT MASTER PLAN . converting the whole of DGH into such an agency in the short term requires a process of consultation and acceptance of new policy which will take time to implement. sub-arterials and urban roads. But they are above all more complex commercially since they are often tolled. they exchange traffic with the lower layers comprising. The respective roles and interactions need to be assessed concurrently to achieve the best overall result. as demonstrated in NDMP Volume 1. road planning should be an integrated exercise carried out by one coordinating body/functional unit. In Indonesia today.

1 INTRODUCTION This chapter provides the proposed funding and financing strategy to deliver the NDMP. Considering the sum of expressway and non-expressway commitments. GoI will remain responsible for funding the required investment. This “unconstrained” investment program may need to be adjusted to reflect affordability limits set by the national budget. that is. NETWORK DEVELOPMENT MASTER 8 PLAN . this costing of the proposed investment program assumes that the required investment is not yet constrained by any affordability considerations.e. it is presented on an “unconstrained” or “needs” basis. For expressways. the investment will be shared between the private sector (based on the financial viability of projects) and GoI (based on what it can afford). unconstrained by delivery and financing capacity of the various government and private parties. economically justifiable program. There is also much potential to introduce network-based financing to complement financing solutions for individual projects. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN 3. including initial development costs. its share of the expressway program and the full cost of the non-expressway program. This section outlines investment costs for the proposed NDMP. Note again. the full. It is anticipated that private participation delivery options will evolve towards a suite that covers all public private risk sharing permutations seamlessly. For non-expressway national roads. it therefore needs to be confirmed that GoI can indeed afford its commitment to the NDMP. 3. This chapter therefore concludes (see Section 0) by summarising the investment required to deliver the expressway component of the NDMP assuming investment costs are shared with the private sector and affordability constraints apply to GoI. that is. including the ideal scheduling of investments based on strategic considerations and to respond to growing demand.2 ESTIMATED UNCONSTRAINED INVESTMENT Volume 1 presented the justification of the expressway and other national roads in the network development program. i.VOLUME 2: IMPLEMENTATION FRAMEWORK . It summarises the required investment in capacity improvements on an “unconstrained” basis.

preparation and land acquisition will enable projects to proceed without delay when the time comes for implementation.2. the main time risk has been land acquisition. The 2012 Land Law now limits the timeframe for acquisition to between one and two years (depending on objections). This “seed” investment is essential to ensure the construction of projects can happen on time to relieve current congestion and provide new capacity for future demand. This is to ensure that there are two dry seasons during construction. This approach also avoids the typical single-year contract end-of-year rush to complete projects during the December rainy season. 3.1 Expressway Scheduling Once included in the National Roads Master Plan (RUJPJJN). To enable BPJT to deliver on the expressway program. Early. it is crucial that all or nearly all the land be acquired before DGH transfers a project to it. namely the first year for earthworks and the second year for paving. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN 3.VOLUME 2: IMPLEMENTATION 9 FRAMEWORK .1 Expressway Investment (Unconstrained) – Key Assumptions 3. as shown in Table 3-1 (below).1.2 Expressway Preparation Importantly. NETWORK DEVELOPMENT MASTER PLAN . To date.2. high-quality planning. all construction has been assumed to take at least two years. resulting in poor quality construction. Table 3-1: Duration of Expressway Project Activities Duration (years) Milestone Activity ≤ 50 km > 50 km Planning Document 2 Land Acquired 2 Final Business Case and Procurement 1 Construction 2 3 For projects with a road length of less than 50km. and makes it the responsibility of GoI.2. early investment in project preparation and land acquisition is critical to ensuring the pipeline of projects can be delivered on time.1. the development of expressway projects follows a standard sequence of activities. Projects with a road length of greater than 50km are assumed to have construction duration of at least three years. Preparation for projects to be constructed in the next RENSTRA period (2020–2024) therefore needs to start as soon as possible.

A base unit rate was determined for each type of intervention (“2x2 Reduced”. reflecting a mix of planning-level rates and rates obtained from non-solicited or competitive bidding. to provide for differences in geography and soil conditions. Sulawesi. These rates were updated in September 2016.3 Expressway Construction Unit Rates For the 2015–2019 period. “2x2” – see below). Base unit rates for Sumatera. expressway investments were costed at the same levels as provided in the current RENSTRA. Real 2016 Values) Average Unit Island Rate Sumatera 91 Trans Java 48 Non-Trans Java 85 Sulawesi 122 Kalimantan 41 From 2020 onwards. Table 3-2: Typical Expressway Preparation Unit Rates (Real 2016 Value) Activity Basis Rate Preparation % of Construction Costs 3. the expressway program was costed based on unit rates estimated from recent toll road construction outturn costs in Java. as obtained from BPJT for the RENSTRA projects it is developing in the period 2015–2019. which is a 2x2 reduced configuration (“2x2R”).VOLUME 2: IMPLEMENTATION FRAMEWORK . but excluding land cost and VAT. Table 3-3: RENSTRA Construction Unit Rates 2015–2019 (Rp Billion/km. all these projects are configured as two carriageways with two lanes each (i. supervision and audit.5% Land Average Cost per m2 Rp 150. including design and supervision.000 Note: Based upon typical international fees for planning through to schematic design. Except for one project2.1. “2x2” and “2x3” – refer to Volume 1 and the Note below Table 3-4). 3. Kalimantan and Bali are expressed as a factor of estimated unit rates for Java. a further 2 Kisaran . as well as project preparation. The unit rates shown are for construction. These unit rates include design. NETWORK DEVELOPMENT MASTER 10 PLAN .e. Rates for individual projects may be higher or lower based upon project complexity. At this point in the calculation. The unit rates vary noticeably. and shown in Table 3-3 (below).2.Tebing Tinggi in Sumatera. but exclude VAT.

Transport Analysis Guidelines [TAG] UNIT A1. and “2x2 Reduced” refers to a 2x2 with some reduced design elements (especially hard strips rather than paved shoulders) 3.e.684km) is already included in 3 Project risk contingency of approximately 29 percent added. “2x3” is two carriageways with three lanes each (six lanes in total). page 13). “+2x1” refers to adding one lane to each of two carriageways (i.VOLUME 2: IMPLEMENTATION 11 FRAMEWORK . It is important that pre-feasibility studies be undertaken on projects from 2020 onwards to refine the accuracy of the construction cost estimates.2 Scheme Costs.782km). but is included later on when the affordability of the program is tested.1. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN provision as a risk (cost-overrun) contingency3 is not yet added. Table 3-4: Expressway Construction Unit Rates 2020 Onwards (Rp Billion/km. NETWORK DEVELOPMENT MASTER PLAN . about one third (1. based on international guidelines for estimate project risk contingencies for major transport and road projects (see UK Department for Transport [November 2014]. Real 2016 Values – Excluding Contingency Risk) Island Intervention Unit Rate 2x2 89 2x3 105 Java +2 x 1 16 +2 x 2 61 2 x 2 Reduced 95 Sumatera 2x2 103 2 x 2 Reduced 91 Sulawesi 2x2 98 2 x 2 Reduced 91 Kalimantan 2x2 98 2 x 2 Reduced 86 Bali 2x2 94 Note: “2x2” refers to two carriageways with two lanes each (four lanes in total). to convert a 2x2 into a 2x3). Table 8. “+2x2” refers to adding two additional lanes per carriageway (eight lanes in total). Motorway Projects.4 Summary of Expressway Investment Required (Unconstrained) In terms of the development scope identified in the summary table in Section 1.2.2 of the total expressway length (4.

400 5. .863 Island Sub-Total 50. Real 2016 Values – Excluding Contingency Risk) Program 2015–19 2020–24 2025–29 2030–34 Total DGH Committed 113.VOLUME 2: IMPLEMENTATION FRAMEWORK .731 NETWORK DEVELOPMENT MASTER 12 PLAN . 215.226 Total 131. 143. 180. 9.671 Island Sub-Total 3.369 210. 71.720 147. Rp Billion.685 Sulawesi DGH Committed 3.685 53. .054 21.916 184.835 29.272 .766 Java DGH Committed 55.804 In terms of the value of the total investment of Rp 605.2 trillion (or approximately 70 percent). excluding any construction cost risk contingency.666 125.085 58.119 2.453 26.910 Additional . Table 3-6: Summary of Expressway Investment Required by Island (Unconstrained. Real 2016 Values – Excluding Contingency Risk) Island Program 2015–19 2020–24 2025–29 2030–34 Total Island Sub-Total 66. DGH’s existing plans. Rp Billion.134 69.115 .406 69.675 153.974 363.119 2.910 .775 Island Sub-Total 9.376 11.033 Additional 6.528 11. . approximately 30 percent is DGH committed (i.144 . Rp 180.131 69.578 Additional “New” Investment 17.528 7.705 Sumatera DGH Committed 44. The following summary shows the unconstrained investment cost of the proposed expressway program from the current 2015–19 RENSTRA to 2030–34. 127 5.501 425. Also. It should be noted that the values are stated in real (non-inflated) 2016 terms.974 268.127 .e.731 Kalimantan DGH Committed 9.6 trillion) and the additional “new” investment program is Rp 425.063 79.900 66. 95.903 Additional 11. 9.853 40.8 trillion required for the program. .528 194.439 91.966 98. the program has not been capped (“constrained”) by any budget limitations.731 .098km) are additional projects identified in the course of the planning process described in Volume 1.045 66.501 605.910 127 5. . Table 3-5: Expressway Investment (Unconstrained. 3. while two thirds (3. .242 .731 .

with an indicative duration of project activities as shown in Table 3-7 (below).916 184. .918 Bali DGH Committed . . - Island Sub-Total 480 4. These roads would be designed and constructed using the approach of planning.000 Sumatra Java 50.528 194. . CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Island Program 2015–19 2020–24 2025–29 2030–34 Total Additional . The schedule of other arterial project activities would be similar to that of expressways.853 40. 180. which illustrates clearly how the expressway investment activity shifts from Java to Sumatera over the four periods.2. . .000 IDR billion Kalimantan Sulawesi 100.578 Total Additional 17.134 69. - Additional 480 4. preparation and design done under the auspices of DGH.272 .369 210. .453 26. 4. Figure 3-1: Expressway Investment Required by Island 250.675 153. .406 69.804 DGH Committed 113.438 . In section 0.2 Investment in Other Arterials (Unconstrained) All arterials that are not classified as expressways will remain the responsibility of DGH and would continue to be financed from APBN. NETWORK DEVELOPMENT MASTER PLAN .000 Bali 150.438 .000 - 2015-19 2020-24 2025-29 2030-34 3. 4.501 425.000 200.918 Total 131.226 “New” Figure 3-1 presents Table 3-6 as a graph. the argument is presented that DGH should take more active control itself over the preparation and delivery of the more significant (“major”) projects.VOLUME 2: IMPLEMENTATION 13 FRAMEWORK . .501 605.

2016 Values – Unconstrained) Island Intervention Unit Rate 7m: Widening to 7m 7. 3.8 2x2: Widening to 4 lanes 22.6 7m: New alignment of 7m 19.4 NETWORK DEVELOPMENT MASTER 14 PLAN .6 2x2: Widening to 4 lanes 24. Table 3-7: Duration of Arterial Project Activities Milestone Activity Duration (years) Planning/Preparation 1 Land Acquisition 2 Detailed Design and Procurement 1 Construction 2 Note that land acquisition may run concurrently with detailed design and procurement.0 2x2: Widening to 4 lanes 25.5 Sumatera NR: New alignment of 4 lanes 32.5 7m: Widening to 7m 8.VOLUME 2: IMPLEMENTATION FRAMEWORK . Table 3-8: Other Arterial Construction Unit Rates by Island (Rp Billion/km.2 7m: Widening to 7m 9.8 7m: New alignment of 7m 17.1 Other Arterial Construction Unit Rates The following table lists the construction unit rates for “other arterials” for the type of intervention in the NDMP.0 7m: New alignment of 7m 20.8 Java NR: New alignment of 4 lanes 27.2. The construction unit rates advised and used in the calculation of program costs are the same for all the islands.6 Sulawesi NR: New alignment of 4 lanes 30.2. and project size will critically affect the duration of some activities.

170 Sulawesi .172 NTT NETWORK DEVELOPMENT MASTER PLAN .5 trillion (28 percent) and Kalimantan with Rp 18.208 6.6 Kalimantan NR: New alignment of 4 lanes 30. Rp Billion.790 1.4 7m: Widening to 7m 8. Table 3-9: Summary of Other Arterial Investment Required by Island (Unconstrained.VOLUME 2: IMPLEMENTATION 15 FRAMEWORK . Papua has the highest investment in other arterials with Rp 45.2 Summary of Other Arterial Investment Required (Unconstrained) As set out in Table 3-9 (below). No allowance has been made for Contingency or Price Escalation. 3.3 trillion or 81 percent of total investment) will be expended on other arterials over the last 10 years of the program with Rp 47.627 4.057 905 4.6 7m: New alignment of 7m 19.252 Sumatera 1. Real 2016) Island 2020–24 2025–29 2030–34 Total Java 2.2 7m: New alignment of 7m 18.701 10. NTB and 373 799 .468 18.3 trillion (45 percent of the total investment) in 2025 –2029 and Rp 38 trillion (36 percent) in 2030–2034.2.277 6.680 9. 2.1 trillion (43 percent of the total investment).7 Bali NR: New alignment of 4 lanes 29. 1. Most of the investment (approximately Rp 85.417 Kalimantan 1.4 trillion (18 percent).446 Bali.315 29.5 trillion for the period 2020–2034.3 Note: Costs in 2016 prices.2 2x2: Widening to 4 lanes 23.258 17.6 2x2: Widening to 4 lanes 24. the total cost of other arterial investments for all islands is estimated at Rp 104.2. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Island Intervention Unit Rate 7m: Widening to 7m 8. followed by Java with Rp 29.

000 Bali. including proposing several new policy measures.874 16.334 45.000 45.3 PRIVATE SECTOR ROLE IN THE FINANCING OF EXPRESSWAYS The “unconstrained” investment costs summarised in the above sections show the total program investment cost required without consideration of affordability factors and the private sector assisting in the delivery and financing of the proposed NDMP.258 47. NTB &NTT IDR billion 25. Figure 3-2: Other Arterial Investment Required by Island 50. financing and delivering the proposed investment program will need to be shared between GoI and the private sector. NETWORK DEVELOPMENT MASTER 16 PLAN . the outer islands are more prominently represented than is the case for expressways (refer to Figure 3-1). Given finite resources within GoI.000 Java 10. preparation and construction supervision costs. This section outlines an approach to the private sector’s potential role to assist the delivery of the proposed NDMP.000 Kalimantan 20.535 Note: Costs of arterial network improvements include construction costs plus land only and exclude VAT. For non-expressways.000 Papua 30.953 104. The NDMP assessed additional expressway requirements for the period 2015–2019 (refer to Table 3-5) but considered non-expressway requirements only from 2020 onwards.VOLUME 2: IMPLEMENTATION FRAMEWORK .325 37.870 14.078 Total 19.000 35.000 0 2020-24 2025-29 2030-34 3.000 5. Island 2020–24 2025–29 2030–34 Total Papua 13.000 40. The relative shares of expenditure are illustrated in Figure 3-2.000 Sulawesi Sumatra 15.

VOLUME 2: IMPLEMENTATION 17 FRAMEWORK . It is important to distinguish “financing” from “funding”.3. 3.1 Delivery and Financing Options “Delivery and financing options” denotes the allocation of the responsibilities for financing and funding the expressway projects.g.3. Delivery and financing options range from fully financed and funded by government in the form of conventional procurement.  Availability PPPs (AP). but a packaged design-build approach is also possible.1. The full commercial risk of financing. developing and operating the road is transferred to a private sector concessionaire. Service payments do not start until after construction is completed and the asset is certified as ready for use. “physical” VGF is a roads section constructed by DGH/PUPR that is an in kind contribution. or debt spread over time.  Roads constructed under conventional contracting arrangements. funding refers to the source of funds that actually pays for the project. but as the expressway network grows there will be a share of projects that cannot be completely self-financed using BOT schemes. Most expressways have been developed as BOTs. Usually DGH does the design and a private or SOE contractor builds it (design-bid-build). These delivery models are:  Build-Operate-Transfer (BOT) toll concessions have been the preferred way of delivering expressways. construction. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN 3. Funding sources include either or a combination of general taxation (disbursed to line ministries through APBN allocation) and user charging (e. who charges a toll on the user. NETWORK DEVELOPMENT MASTER PLAN . VGF comes in two forms: “financial” VGF is a cash grant by MoF. involving the private sector in the financing. and without depending on any GoI financial contribution. GoI makes an annual “service payment” to the AP concessionaire subject to meeting defined performance obligations. Financing refers to the application of funds commonly either as upfront capital or equity. and maintenance of major road projects.  Viability Gap Funding (VGF) is an up-front GoI contribution to buy down the initial investment to ensure that the private concessionaire earns an adequate return on investment. operation. design.1 Existing Delivery Options Four delivery options are available to DGH to implement the proposed expressway program. tolls). In contrast. through to fully financed and funded by the private sector through build-operate-transfer (BOT) concessions.

Also. care should be taken with the use of VGF as this approach may not transfer asset lifetime risk to a concessionaire as intended under the BOT model.3.3. Accordingly. most if not all the benefits of VGF can be obtained by applying purely financial VGF.3 Policy Issue – Using Availability Payment Requires a “Value for Money” Test In 2015 under the auspices of Perpres no. 3. the AP concession was introduced. operates the asset over its life and earns revenue only once the asset is operational.1. operation and maintenance contracts. government should consider if policy changes should be made to streamline the application of physical VGF to high-risk project elements only and allowing the eventual concessionaire to be involved in quality assurance of those assets that will be delivered. APs would be appropriate where there is a major benefit to the public from improved services. A1. But in contrast with BOT. NETWORK DEVELOPMENT MASTER 18 PLAN . Organisationally. Also. Commercially. a private concessionaire designs and constructs the asset. the concessionaire’s revenue does not depend on tolls from users.1. Transferring a pre-constructed section that has not been optimised in this manner and the quality of which the concessionaire cannot control or verify. and therefore hold the potential for risk transfer. 3. However. Like a BOT. 38/2015. there is usually private sector reluctance to accept third party completed works (which is effectively a form of interface risk) unless there is sufficient transparency and due diligence concerning such contributions. the concessionaire should trade off design and construction decisions to obtain a cost- optimal project cost (lowest net present value). streamlining the use of physical VGF may allow DGH to focus more on “outputs” rather than inputs. This approach would see GoI assume an “outputs” focus rather than concentrating on managing inputs. Ideally.2 Policy Issue – Use of Physical Viability Gap Funding Isolating specific sections for physical VGF should be considered appropriate where government is assuming the responsibility for high-risk project elements which can impact on delivery – an example is government assuming the responsibility for land acquisition. can bundle construction. will increase the overall cost of the project. In the medium term.VOLUME 2: IMPLEMENTATION FRAMEWORK . Projects that lend themselves to AP will be those that have scope for innovation. there may be a residual risk to government if required to “make good” the condition of any assets procured through physical VGF that are then transferred to a BOT concessionaire. but is a payment by government subject to the asset actually being made available using defined performance criteria.

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Importantly, to be consistent with the proposed policy of equal treatment of expressway
users, the use of the AP scheme should not preclude separately charging road users a
fair charge through a separate tolling agreement.

From a cash flow perspective, AP schemes do allow government to postpone paying for
an investment that is originally financed by the private concessionaire. However, this
creates a financial risk in the form of long-term balance sheet liabilities, as the full cost
of an AP scheme is recognised on the Government Contracting Agency (GCA) – and
hence government – balance sheet when the asset is commissioned and service
payments are made by government.

In this context, use of AP schemes needs to be determined on a “value-for-money” basis
to ensure there are appropriate services benefits, risk transfer, and budget rules.
Internationally, evidence indicates that in well-developed

PPP nations the national share of public investment infrastructure using AP ranges from
5–20 percent. Implementation times, financing capacity, and contingent liability issues
for government appear to be factors behind this evidence.

A2. AP schemes are useful and effective in the appropriate circumstances; however,
this form of contracting should be subject to a proper evaluation and not just be
seen as a replacement for VGF or similar existing funding arrangements.

A3. Care should be taken to not over-use availability payment concessions and in so
doing create an unmanageable compound financial obligation in future years.

3.3.1.4 Policy Issue - Introducing “Surplus-Build-Operate-Transfer” Schemes

For projects with high financial viability, the present approach is for a bidder to propose
a toll rate, with the lowest rate winning the bid. BPJT tests the rate to ensure that it is in
line with the benefit users derive from the road as well as their ability to pay (ATP) and
willingness to pay (WTP).

Currently this ATP/WTP test is very general, as is evidenced by the wide range of tolls that exist in
that exist in practice.

Figure 3-3 (below) shows the wide spread of toll tariffs for proposed projects. Actual
tariffs for operational roll roads are spread even more.

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Figure 3-3: Tariffs on Upcoming Toll Roads, April 2014

1,600

1,400

1,200
Average
Rp/km (Class I)

1,000 Median
Trans-Java
800
Jakarta
600 Other Java
Sumatra
400

200

-

The current evidence indicates some toll roads are financially viable at rates far lower
than others. Therefore, if the lower tariffs were raised to average levels, “surplus”
revenue would arise, while the resultant rates charged would still fall within the ATP,
WTP and net benefit envelopes.

This approach to managing tariff levels to “average” levels allows for a policy to be
implemented where bidders can submit surplus-generating proposals in their bid offers
to government, potentially creating an available source of funding for expressway
development.

A4. Create the legal framework for bidders to submit surplus-generating proposals
in their expressway bids (subject to the creation of a suitable institutional
framework to manage such surpluses so that these are reinvested in the
expressway system).

The mechanism to unlock such surplus would be to state a “reference” toll rate in the
bid document, and to invite the bidder to propose a tariff above (standard BOT) or at a
discount to that level (Surplus-BOT). In practice, then, the winning concessionaire would
charge the reference toll rate and repatriate the discount to BPJT. This option can also
be described as a “highest tariff share” option.

There are a couple of variations on the theme of extracting a surplus at bidding stage, or
even thereafter. These are shown in Table 3-10 (below), in terms of decreasing order of
risk to concessionaire. Other options are:
 Highest capital payment: against the background of a reference toll rate, the bidder
offers an up-front capital amount that BPJT can then redeploy to another
expressway concession.

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 Highest lease payment: against the reference toll, the bidder offers an annual lease
amount (appropriately indexed) payable for the duration of the concession term.
The concession therefore is a build-lease-transfer (BLT).
 Highest revenue share: this is similar to the “highest tariff share”, but expressed as a
percentage of revenue (not a tariff discount).

Table 3-10: Options for Surplus Build-Operate-Transfer Bid Parameters and Timing

Form Timing of Transfer

Highest capital payment Up-front, during construction phase

Highest lease payment

Highest revenue share During operations, ongoing for concession term

Highest tariff share

Introducing the Surplus-BOT concept requires the implementation of a network-wide
tolling policy, (see action recommendation A6 in Section 3.3.1.8). Also, for BPJT to be
able to capture the surplus revenue and reinvest these amounts in the expressway
system requires the institutional restructuring of BPJT (see action recommendation A32
presented in Section 4.5.6).

3.3.1.5 Other Sources of Surplus

Potentially, there are at least three further means of generating re-investable surpluses
in the expressway sector:
 Government implementing toll collection agreements

In line with the equal treatment principle and the aim of not losing out on potential
revenue when applying AP concessions, BPJT could have the ability to apply a toll
collection agreement. Although aimed firstly at AP concessions, this agreement could
be applied to any non-BOT or non-VGF expressway, notwithstanding the background
construction and operations and maintenance (O&M) legal framework.

A5. A legal framework should be created for BPJT to attach a toll collection
agreement on any expressway project that would otherwise not have been
tolled.

This approach requires BPJT to be reconstituted as an expressway (i.e. not just “toll
road”) agency, and has the added benefit of legally bringing all expressways under BPJT’s
mandate. This may mean some changes to the current DGH structure.

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 Potential for asset recycling

This opportunity arises at the end of a concession’s term when it can be re-concessioned
(an expressway is part of the public transport network and would therefore not be
considered for an outright sale). At this point, there may be some investment required
to refresh the road asset, but this should be far less than its replacement cost.

Therefore, the cost-recovering tariff required should be lower than the reference toll
rate; or, an opportunity arises to extract value up-front via for example a capital
payment; or value extraction during the operating period in the form of a lease. Other
variations could also be considered, for example bidding the expressway out under a
performance-based maintenance contract (PBMC) – a contract for maintenance only –
and applying a separate, parallel toll collection agreement.
 Land Banking Benefits

Thirdly, under the discussion of BPJT’s future roles and organisation (refer to Section
4.5), it is proposed that BPJT manages banked land prior to construction, with the
appropriate delegated responsibilities to buy and hold land required for expressway
development. Potentially, for land banked that is not subsequently used, these land sale
proceeds could provide a further revenue source to be reapplied to expressways.
However, adopting this policy measure would require GoI parties to recognise that they
would be accepting a degree of property risk – this may not be seen as a core business
function for some government agencies.

3.3.1.6 Additional Financing Options and Support

Should GoI decide a future policy to increase BPJT’s financial autonomy, then BPJT could
provide direct support to an expressway project. A reference model could be a
guarantee arrangement provided by the Indonesia Infrastructure Guarantee Fund (IIGF).
Through the Limited Liability Fund (LLF), IIGF would effectively guarantee the rate of
traffic growth during the road’s ramp-up phase. A shortfall against projected traffic is
quantified in terms of revenue lost, where such loss is capitalised as a loan, and that loan
must then be repaid by the concessionaire within a specified period after ramp-up.

BPJT could avail a similar “amortisation payment”, that is, providing temporary support
to an expressway project by shaping project costs to fit the demand profile closer. In
other words, during the traffic ramp-up period a facility would be made available to the
concessionaire to supplement the revenue shortfall until such time that traffic stabilises.
The IIGF LLF would therefore only be drawn on in as far as actual traffic ramp-up falls
short of the forecast underlying the amortisation payment facility.

NETWORK DEVELOPMENT MASTER
22 PLAN - VOLUME 2: IMPLEMENTATION
FRAMEWORK

Smallest loan commercial operation date (COD) Availability payment Payment Post-COD Lowest AP Conventional Payment Construction Lowest Cost 3.1. However. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN 3.3.3. for purposes of financing the NDMP only existing delivery options have been applied. as the NDMP is revised and updated.VOLUME 2: IMPLEMENTATION 23 FRAMEWORK . A6. but also to condense the excess number and the variability of existing toll rates. .7 Overview of Delivery Models and Support Mechanisms The following Table 3-11 summarises the existing and proposed delivery models and financial support approaches. The grey cells indicate the additional measures proposed above that could complement existing modalities. In later years. notwithstanding the potential benefits of expanding the range of delivery options. it is expected that these additional options will also be considered. NETWORK DEVELOPMENT MASTER PLAN .8 Policy Issue – Introducing a National Toll Policy To accommodate the proposed new financing and support models. consideration should be given to formulating a comprehensive expressway toll policy. Table 3-11: Summary of Financing Models Instrument GoI Contribution Bid Parameter Category Type Form Timing Form Highest capital payment Highest lease payment Surplus BOT . - BOT Highest revenue share Highest tariff share Standard BOT . A national expressway toll strategy should be prepared. Lowest Tariff Physical VGF (DGH) Grant Construction Lowest VGF VGF Financial VGF (MoF) Grant Construction Lowest VGF Delayed Support Amortisation Payment Loan Post.1.

An important consideration in extending toll collection across the expressway network is that inter-operability should be maintained. For example. However. That implies making use of state-of-the-art technologies that apply standard data exchange specifications. is a sunk cost at the completion of construction and not subject to future inflation. rates may differ in that band between islands.3 Toll rate discounts and premiums should be partially indexed to reflect the actual effect of inflation on the concessionaire’s costs. NETWORK DEVELOPMENT MASTER 24 PLAN . and could therefore cause a financial shortfall or create a surplus.2 A more definitive analysis of user benefit. Currently. although the range of toll rates will therefore be narrowed to a reference band. Since a part of the concessionaire’s cost. the indexing of toll rates to inflation has the effect of artificially overinflating toll rates over time.4 The toll rates applied on future expressway concessions.VOLUME 2: IMPLEMENTATION FRAMEWORK . The range of toll rates is essentially bounded based on two considerations:  Toll rates are capped to ensure that users derive benefit from the road. A6. ability to pay and willingness to pay should be carried out so that a tighter band of reference toll rates can be determined. Accordingly. The expressway network as a system should ideally match any shortfalls and surpluses. it would probably be overly dogmatic to strive for a single rate across the whole system (a single reference rate). the first consideration above applies across the expressway system. A6. Since expressway users have similar profiles. should fall within the band of reference toll rates. the key principle contained in the national toll policy would be the ability of government to apply tolls on all expressway roads.1 Tolls should be able to be applied on all expressways (even if those roads are not BOT or VGF concessions). the techniques of tolling should also converge to a common platform. A6. In support of expressways providing a standardised and seamless level of service. A6. specifically most of the capital cost.  Toll rates should be at least a certain minimum level to provide a reasonable return to the concessionaire. toll rates are indexed to the general rate of inflation. The second consideration above is unique to a specific road. including for concessions that are re-bid at the end of their terms. or in close proximity to competing road alternatives.

as shown in Figure 3-4. The obligation to recommend a toll policy. and to make independent tariff findings and recommendations to government. A6. 3. Once operational. It should be less complex to systematically increase the toll rates of low-tariff concessions.5 Existing concessions should be systematically migrated to the reference tariff band. BPJT does background investigations into tariffs before awarding toll concessions. toll rates are subject to review and approval by the Minister. A7. and to also execute the policy when approved. NETWORK DEVELOPMENT MASTER PLAN . The planning process itself identifies and prioritises economically viable expressway projects.1 Selecting Delivery and Financing Model At the planning stage. with projected financial returns above a pre-determined hurdle rate) are categorised into outright viable vs.2.2 Private Sector Financing Strategy 3. The trend internationally is to house investigation and review skills in a tariff (and service level) regulator. Those that are also financially viable (i. Presently. The remainder of the projects should be delivered conventionally. marginally viable.e.VOLUME 2: IMPLEMENTATION 25 FRAMEWORK . within the contractual frameworks of those concessions. Non-financially viable projects are selected for AP delivery partly based on project characteristics (the potential to achieve cost reductions from a lifetime construct- maintain-operate perspective) and government financing portfolio conditions (ensuring sufficient future budget flexibility). In both cases demand risk is transferred to the concessionaire. each expressway project is assessed for the most appropriate delivery mechanism. but the actual approval of the toll rate is the prerogative of the Minister of PUPR or the President. should rest with BPJT which should be structured and resourced appropriately. but also independent enough to attract the required skills in the first place. The regulator should be sufficiently close to government.3. These rates will have to be reconsidered progressively over time. The outright financially viable projects are designated for delivery via BOT and the marginal ones set aside for VGF support.3. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Lowering tariffs for those BOT and VGF concessions that have toll levels above the reference band may jeopardise the financial position of the concessionaire. as partial indexation plays out and contracts come to the end of their terms. Projects that are projected to make “surplus” profits can be considered for Surplus-BOT.

e.VOLUME 2: IMPLEMENTATION FRAMEWORK . that is. for the construction and O&M costs. all land acquisition (in future). If the project is procured as a traditional construction contract. By making VGF available.3. government has no further funding obligations once a road project is awarded to a concessionaire.2 Allocating Cost Responsibility Government is always responsible for project planning. there is no up-front capital cost to government but it makes ongoing service payments that include the amortised cost of construction and for O&M obligations. Figure 3-4: Framework for Selecting from Delivery and Financing Model Options Note: For VGF. environmental impact assessment (AMDAL). and project procurement. NETWORK DEVELOPMENT MASTER 26 PLAN . certainly below 50 percent of capital cost The effect of applying different delivery options is that the financing cost of the expressway program is shared between government and the private sector. the mix of delivery options used changes the nature and size of government’s funding obligations. The decision framework to select from the different delivery options is shown in Figure 3-4. i. 3. If procured via AP schemes. For BOT. the project would need to be financially viable within the allowable level of VGF. and instead can share the funding obligations and risk. government is not responsible to fund the whole expressway program. government carries the cost of the detailed engineering design (DED) that under a BOT scheme would be privately financed by a concessionaire.2. government makes an up-front contribution to construction cost but has no ongoing O&M obligation. However.

Thereafter.1 Calculating the Network Development Master Plan Spending Envelope As yearly budget allocations that GoI provides for roads are only known shortly before the year of expenditure. Real 2016 Values) Historic Projected Item 2013 2014 2015 2016 2017 2018 2019 2020+ GDP Growth (real.3 5. The process followed is similar to how the national budget would be formulated using expenditure forecasts determined with reference to the national economy. Table 3-12: Calculation of Expressway Envelope (Rp Trillion. the spending plan should be adjusted accordingly downwards. and stable ratios of public budget to GDP.4. it assumed that this parallel (i.9 5. real annual amount.VOLUME 2: IMPLEMENTATION 27 FRAMEWORK . In the projection shown below.5 5. not via PUPR budget) set aside for expressway will continue. If not all of the budget is required. Lastly. The purpose of estimating a spending envelope is to determine whether the allocation to government can realistically be achieved. this allocation has been quite variable. some long-term program assumptions have to be made to obtain a budget projection for the 20-year scope of the NDMP. This assumption reflects both the actual land acquisition requirement and the need to systematically develop the portfolio of banked land.0 NETWORK DEVELOPMENT MASTER PLAN .0 4. However. The level has been set based on the actual allocation of projects to SOEs during the current RENSTRA period (2015–19) and the next RENSTRA periods (2020–24).8 5. a provision is made for expressway land acquisition.e. it must be stressed that the estimation of the future envelope is a process of approximation only – providing an indicative budget path across the overall road development program. 3. Although expressed as a percentage of expressways (EW) expenditure in the table below. In the past. The key assumptions are indicated in red in Figure 3-5 and the details are shown in Table 3-12. If a shortfall is projected. To that base is added a provision for SOE-delivered expressways. this is an indication that resources could possibly be reallocated. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN 3. It is noted that forecasting program spending requirements takes a long-term view that effectively “smoothes out” budget variations that can occur on a year-by-year basis. a nominal allocation is made to SOE delivery.6 5. %) 5. The base capital expenditure on national roads is derived from assuming a growth of the national economy at just below recent growth rates.4 GOVERNMENT ROLE IN THE FINANCING OF NATIONAL ROADS This section considers whether government’s share of the proposed investment costs is affordable by estimating a spending envelope based on macro-expenditure assumptions using a long-term program approach.8 4. it is shown as a stable.

9 2.9 6.0 5.1 6. NETWORK DEVELOPMENT MASTER 28 PLAN .0 3.0 . trillion 2.9 16.3 2.3 15. is shown as a flow diagram in Figure 3-5 below.0 3.0 5. trillion .0 3.3 5.1 18.0 5.4 5. .2 5.0 Roads % of PUPR Budget 50 48 71 43 40 45 45 45 % of Roads 5.9 18.1 3. 3.0 0.6 4. For projection – IndII NR Policy Team The process described above and summarised in Table 3-12.0 3.5 DGH Budget Expressways Rp.6 4.3 11.0 5. Note that the assumptions highlighted in the last column in Table 3-12 are the ones shown in the red circles in Figure 3-5.5 5. trillion 1.9 1. Historic Projected Item 2013 2014 2015 2016 2017 2018 2019 2020+ National Budget as % of GDP 19.8 2.0 5.9 3.0 3.9 1.0 0.7 6.6 16.VOLUME 2: IMPLEMENTATION FRAMEWORK .5 % of DGH EW 103 0 221 182 0 0 0 54 SOE Toll Roads Rp.5 PUPR as % of National Budget 4. The figure shows the process of progressively “filtering” the national economy (GDP) through taxation.0 3.4 16.5 5.5 5.5 Total EW Rp.4 16.5 5.0 Budget Source: For historic data – APBN and DGH DIPA.3 0.6 17.3 3. down to budget allocations (expressways in this case). 8. trillion 3.0 1.1 7.9 % of EW and SOE 0 0 24 37 130 103 97 65 Land for EWs Rp.

NETWORK DEVELOPMENT MASTER PLAN . It should be noted that all the constituent components are in the hands of other ministries. Figure 3-6 below summarises the composition of the projected GoI budget envelope for expressways.VOLUME 2: IMPLEMENTATION 29 FRAMEWORK . the Ministry of State- Owned Enterprises (BUMN) and National Asset Management Agency [LMAN]) are shown in the same colours in the two figures. Roads Expressways x≤54% Expressways X65% Acquis. i.5% Capex Other Capex Capex SOE Land Nat. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Figure 3-5: Determining the Network Development Master Plan Expenditure Envelope (Assumptions Shown for 2020+) GDP +5% x18.e.5% APBN x5% PUPR BUMN LMAN x45% National Roads x73% x5. the origins of the three funding streams (APBN via PUPR/DGH. the allocation for expressways (and other roads) expenditure is not determined by PUPR/DGH. To link the flow chart of Figure 3-5 with the resultant budget envelopes in Figure 3-6.

000 D.VOLUME 2: IMPLEMENTATION FRAMEWORK .000 contribution B. so that there today exist BOT and non-BOT SOE concessions. For the committed program. Land budget for EW development 40.2 Note on Allocation of Expressways to SOEs A part of the NDMP budget envelope is expressway expenditure by SOEs.000 IDR Billion C. Figure 3-6: Projected Spending Envelope for Expressways (Rp Billion. that amount is calculated with reference to DGH’s expenditure on expressways. etc.4. GoI has the prerogative to assign an expressway project to a SOE. although the actual flow of funds – as indicated by dotted lines – occurs through BUMN. toll level and other obligations as would apply to any other concessionaire. guarantees.000 50.3 Budget Gap Figure 3-7 and Table 3-13 below show GoI’s expenditure obligation after applying the financing strategy compared with the available budget envelope. Real 2016) 60. 3.000 - 2015-19 2020-24 2025-29 2030-34 Period 3. once assigned.State equity 30. NETWORK DEVELOPMENT MASTER 30 PLAN . the SOE should be subject to the same performance.000 Total Government Budget 10. Later GoI will channel support (financing. In the past. The totals shown are in real and 2016 values. The decision to make use of SOEs in the economy is a policy decision made by government.4. As shown in Figure 3-5.EW construction budget 20. DGH . The way of calculating the SOE-related amount is not directly linked to the future role of SOE contractors/concessionaires. However. no allowance is made for price contingency. Notwithstanding the already existing and proposed delivery models discussed above.) to that non- feasible project via the SOE. SOE Toll Roads . The present national policy position is that only projects that are not financially feasible will be assigned. projects across the range of financial feasibility were assigned in this manner.

at the end of the proposed investment cycle in 2030–2034.794 NETWORK DEVELOPMENT MASTER PLAN .e. for the additional program (identified in Volume 1). GoI investment required 46. approaching the international benchmark of AP schemes 20 percent of capital investment programs). However. preparation.) 40.000 Other 20. affordability for the 2015–19 period will need to be managed by reviewing either the expenditure plan and/or budget envelope (the latter through additional investment.893 41.000 Expressway Budget 0 AP Budget 2015-2019 2020 . including possibly GoI or multilateral loans).684 35. in the first RENSTRA period (2015–19) the expenditure plan exceeds the projected budget. the budget affordability envelope is not exceeded. and capital contributions) allocated to GoI. In practical terms. Real 2016) 60. It should be noted that most of the expenditure is on the committed program (refer Table 3-6). Moreover. Figure 3-7: Government Budget Envelope Versus Government Expenditure Requirements for Expressways (Rp Billion. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN however.2024 2025-2029 2030-2034 Period Table 3-13: Budget Envelope Versus Expenditure Requirements for Expressways (Rp Billion.000 50.000 VGF BOT 30. Real 2016 Values) 2015– 2020– 2025– 2030– Component 19 24 29 34 Investment Required A.698 36. Indications are that the budget envelope should mostly be sufficient to afford the portion of expressway costs (land.VOLUME 2: IMPLEMENTATION 31 FRAMEWORK . and the budgets of at least two (2015 and 2016) of the five years cannot be changed anymore. a price risk contingency is now provided.000 Conventional SOE IDRbill (risk adjust. and as a greater share of expressway projects is developed with conventional and AP procurement (i.000 GOI Preparation AP 10.

359 46.678 48.638 3. Total GoI core sources and leveraged borrow (B + C 43. SOE Toll Roads . DGH .5.808 3.EW construction budget 15. Land budget for EW development 15.615 25.1 Expressway Financing Plan Using the decision framework in Figure 3-4 to allocate delivery and financing models.State equity contribution 13.824) 11.VOLUME 2: IMPLEMENTATION FRAMEWORK .495 D.000 17.721 33.980 11.000 E.5 trillion as outlined in NETWORK DEVELOPMENT MASTER 32 PLAN .603 + D) Surplus/Deficit based on core funding sources (E . and incorporating the funding role allocation between GoI and other parties. the total financing cost for the inter-urban expressway program is about Rp 666.000 10.060 19.800 10.467 4.A) (2.500 10. 2015– 2020– 2025– 2030– Component 19 24 29 34 Core Funding Sources B.860 47.562 12.5 CONSTRAINED FINANCING PLAN The expressway and other national arterial development plans that have been tested against the available GoI budget as set out above are referred to as the “constrained” plans.107 C. 3.

and possibly a further 26 percent via BUMN and SOE delivery. The SOE share is dependent on GoI’s general policy (i.e. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Table 3-14. VGF- BOT and AP) projects as all these delivery models attract interest costs during construction. If the SOE share goes down (or up). it is anticipated that the PUPR share will expand (or contract) so that the overall APBN envelope (i. GoI is projected to be responsible for financing Rp 161. not roads policy specifically). and because of the risk adjustment applied to the additional program. 50 percent of expressway expenditure) will still be available.VOLUME 2: IMPLEMENTATION 33 FRAMEWORK . This applies to private (BOT. NETWORK DEVELOPMENT MASTER PLAN . Over the 20 years. This financing amount exceeds that of Table 3-6 because of the financing costs involved with all the other delivery models except for conventional procurement.e.1 trillion or approximately 24 percent of the cost expressway program via PUPR/DGH.

250 .645 87.698 36. 331. Private sector includes private (BOT and VGF) investments but excludes AP financing (as these financing costs are paid for by GoI through the AP payment obligations) 3.274 119. Rp Billion. especially for the later years of the expressway program.505 GoI % of Total 33 16 15 69 24 Note: GoI contribution includes project preparation (planning. and conventional construction projects. NETWORK DEVELOPMENT MASTER 34 PLAN .196 666. procurement).069 GoI via SOE 24. AP payments.864 219.685 18.617 243. land. The delivery models shown in Table 3-15 should be treated as indicative only.VOLUME 2: IMPLEMENTATION FRAMEWORK .117 171.684 35. AMDAL. Much of the first tranche of projects reflects the plan in the RENSTRA 2015–2019.794 161.2 Expressway Roll-Out The projected expressway delivery schedule is presented in Table 3-15 below.5.423 Private Sector 72.402 174.062 12. Table 3-14: Estimated Expressway Program Cost (Constrained if Applicable.893 41. The opening dates and financial models shown for these projects are as per the latest programming by BPJT for toll concessions. as well as contributions to VGF.013 Total 142.829 60. Real 2016) Component 2015-19 2020-24 2025-29 2030-34 Total GoI via PUPR 46. The indication of delivery model for the non-RENSTRA projects is based on the project characteristics obtained from the roads planning process (as reported in NDMP Volume 1). that is “RENSTRA BOT” and “RENSTRA VGF” or projects assigned to SOEs (“RENSTRA SOE”).

1 Java RENSTRA BOT 2018 9 Semarang-Solo Sections CD1.Sukabumi 54. DE.3 Java RENSTRA BOT 2018 7 Semarang-Solo Sections DE and EF 32.1 Kalimantan RENSTRA BOT 2019 19 Manado .Dumai 135.Padalarang 62.0 Sumatera RENSTRA SOE 2020 29 Pandaan-Malang 40.1 Java RENSTRA BOT 2017 4 Mojokerto Surabaya Section AB2.3 Sumatera RENSTRA SOE 2019 17 Medan-Lb.0 Sulawesi RENSTRA VGF 2019 21 Balikpapan .Pandaan .2 Java RENSTRA BOT 2019 27 Kayu Agung-Sp. 22 44.4 Java BOT 2023 NETWORK DEVELOPMENT MASTER PLAN .5 Sumatera RENSTRA BOT 2022 38 Probolinggo .2 Java RENSTRA VGF 2019 15 Ngawi-Kertosono Sections AB.Solo 40.5 Sumatera Conventional 2019 28 Pekanbaru . Name Km Island Type Opening 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 1 Semarang-Solo Sections AB and BC . CD and DE 66.Banyuwangi 170. Pakam-Tebing Tinggi Sections AB and BC 18.5 Java RENSTRA VGF 2022 35 Serang .Panimbang AB 29.2 Java RENSTRA VGF 2018 11 Palembang – Sp.0 Java BOT 2022 37 Palembang-Betung 78.4 Java RENSTRA BOT 2022 36 Sukabumi .Binjai 17.Bitung Sections AB 14.1 Java RENSTRA VGF 2018 8 Gempol-Pasuruan 34.0 Java RENSTRA BOT 2021 30 Yogyakarta .0 Java RENSTRA BOT 2022 andFG 34 Serang .8 Java RENSTRA VGF 2018 6 Solo-Ngawi Sections CD and DE 68.0 Java RENSTRA BOT 2019 25 Pejagan .Samarinda Sections BC.Samarinda Sections AB and EF 33.8 Java RENSTRA BOT 2019 16 Bakauheni .Terbanggi Besar 66.Panimbang BC and CD 54.Bandar Lampung 88.Bitung Sections BC 26. CHAPTER 3: FINANCING AND FUNDING THE NETWORK DEVELOPMENT MASTER PLAN Table 3-15: Expressway Projects Delivery Schedule and Anticipated Financing Model Ref.3 Java RENSTRA BOT 2019 26 Pemalang-Batang 39.Indralaya 33.0 Sumatera RENSTRA BOT 2019 FG and GH 23 Cileunyi-Sumedang-Dawuan Sections AB and BC 28. CD and DE 26.0 Sulawesi RENSTRA BOT 2019 20 Manado .3 Java RENSTRA BOT 2021 32 Bandar Lampung .1 Java RENSTRA BOT 2017 5 Solo-Ngawi Sections AB and BC 21. Pakam-Tebing Tinggi Sections CD.0 Sumatera RENSTRA VGF 2019 18 Balikpapan .0 Java RENSTRA BOT 2019 14 Ngawi-Kertosono Sections CD2 and DE 38.5 Java RENSTRA VGF 2019 24 Ciawi . CD2 and CD3A 15. BC and CD 18.5 Java BOT 2021 31 Pasuruan . BC and CD1 48.Probolinggo 31. DE.VOLUME 2: IMPLEMENTATION 35 FRAMEWORK .Pemalang Section CD and DE 37.5 Sumatera RENSTRA SOE 2018 12 Medan . Java RENSTRA BOT 2015 2 Gempol .4 Java RENSTRA BOT 2018 10 Semarang-Solo Sections CD3B 2.0 Sumatera RENSTRA SOE 2018 13 Batang-Semarang 75. Indralaya 24. EF. Java RENSTRA BOT 2015 3 Kertosono-Mojokerto Section BC.7 Sumatera RENSTRA SOE 2022 Cileunyi-Sumedang-Dawuan Sections CD. EF 33 30.2 Kalimantan RENSTRA VGF 2019 Medan-Lb.

36 25.57 20.Bengkulu 311.41 3.0 Sumatera RENSTRA SOE 2029 54 Medan .00 3.5 Sumatera AP 2033 61 Sigli .21 17.Tasikmalaya 71.972 41.16 6.Bawen 71.59 3.69 7.37 40.Kayu Agung 185.Padang 218.5 Sumatera BOT 2024 45 Tasikmalaya .17 3.15 5.0 Sumatera BOT 2024 44 Dumai .70 2.29 4.Banda Aceh 98.0 Java BOT 2026 48 Semarang .71 3. including land (Rp Trillion Cost) 2.5 Sumatera SOE 2029 56 Makassar .5 Java BOT 2027 49 Yogyakarta .Tomohon 20.Tanjung Api-Api 70. - Annual Cost of Construction – APBN (Rp Trillion Cost) .Kisaran 268.18 .0 Bali AP 2023 41 Palembang .79 0.32 3.921 180 5 years Cost of Construction – APBN (Rp Billion Cost) 29.5 Java BOT 2025 46 Cileunyi .Tabanan 21.10 56.72 10.90 11.0 Sulawesi Conventional 2029 57 Rengat .0 Sulawesi Conventional 2034 Completed freeways (km) 904 1.0 Sumatera RENSTRA SOE 2023 40 Tabanan .5 Java BOT 2028 51 Wangon .0 Java BOT 2025 47 Wangon .621 863 Cost of Preparation.402 8.936 18.395 1.295 27.Rembang 105.869 16.95 2.Wangon 97.03 28.69 2.98 4.36 3.0 Sumatera RENSTRA SOE 2023 42 Soka .36 5. Ref.89 26.919 206.39 13.02 9.Yogyakarta 155.37 11.88 1.94 42.50 5.0 Sumatera Conventional 2034 63 Manado .29 4.5 Sumatera SOE 2034 62 Lhokseumawe .0 Bali Conventional 2023 43 Pekanbaru .03 0. including land (Rp Billion Cost) 16.28 2.Denpasar 19.Surabaya 160.50 41.Brebes 73.614 Cost of Construction – Other (Rp Billion Cost) 96.97 0.98 2.Pekanbaru 144.Tebing Tinggi 60.Langsa 105.5 Sumatera VGF 2030 58 Betung .99 5.5 Java VGF 2028 52 Sp.0 Sumatera SOE 2029 55 Binjai .5 Sumatera SOE 2028 53 Terbanggi Besar .21 44.Sibolga 245.83 40.402 Cost of Preparation.91 13.Rengat 197. 2.64 4.0 Java BOT 2027 50 Rembang .Takalar 40.54 56. Name Km Island Type Opening 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 39 Kisaran .Sigli 102.VOLUME 2: IMPLEMENTATION FRAMEWORK .Jambi 154.41 - Legend Planning Document Land Acquisition Procurement Construction Stage 1 Construction Stage 2 NETWORK DEVELOPMENT MASTER 36 PLAN .39 0.07 6.01 1. .09 6.815 19.Lhokseumawe 145.39 2.5 Sumatera SOE 2031 59 Langsa .5 Sumatera Conventional 2032 60 Jambi .180 183. Indralaya . .11 Cost of Construction – Other (Rp Trillion Cost) 4.38 7.73 8.

NETWORK DEVELOPMENT MASTER PLAN .3 Financing Other National Roads Non-expressway arterials will be constructed using APBN budget funding and applying the DGH conventional contracting system. Therefore. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 3. no commercial risk-transferring approaches have been considered for non-expressway arterials.5.VOLUME 2: IMPLEMENTATION 37 FRAMEWORK .

If delivered using a BOT concession. through widening or extension of current roads). Figure 4-1: Major Phases in Roads Project Cycle and Institutional Responsibilities DGH: Major Roads BPJT: Expressways Project Final Business National Roads Land Planning Case Procurement Execution Regulation Master Plan Acquisition Document (Final PFS) Prepare Planning Select Final Delivery Negotiation & Finalise RUJPJJN Acquire Land O&M Document Model Financial Close Objections to Confirm MOF Conduct Final Commercial Consultation Obtain AMDAL Decree & Approval Budget Envelope Tender Operations Date Obtain Decree on Confirm FIRR. as shown in Figure 4-1. If conventionally procured by DGH. the identified projects need to be properly prepared. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. Obtain any other Business Cases Basic Design & Objections Sounding Qualification Approvals & Permits (Initial PFS) Prepare Tender Initial Study Package Carry out any Do Detailed Design further studies DGH: Non-Expressways NETWORK DEVELOPMENT MASTER 38 PLAN . the design is usually carried out before procurement (the solid red arrows in Figure 4-1). 4. project details are refined and risks better understood and mitigated.g.VOLUME 2: IMPLEMENTATION FRAMEWORK . each project is procured. However.1 INTRODUCTION To achieve the road capacity improvements in the NDMP by 2034. VFM. Public Consultation Carry out Market Conduct Pre. The process starts with network planning (i. the creation of the RUJPPJN).e. the current output rates need to be accelerated. and then executed. requiring changes to the current approach to and organisation of road delivery.2 OVERVIEW OF ROLES AND RESPONSIBILITIES There is a fairly standard sequence of activities required to create a road or add capacity (e. the project is procured and the appointed concessionaire carries out design and construction using private finance and then collects user toll revenue. The overall process logic is that as a project moves from concept to reality. sometimes procurement happens first with design and construction bundled thereafter (dotted red arrow). There are small variations in the order of activities. Prepare Draft Select final Due Diligence by Project Location required GOI Construction RUJPJJN alignment shortlisted bidders (SP2LP) support Prepare Outline Review studies.

The effect is that the project does not develop progressively through the normal project development cycle. Figure 4-1 shows the division of roles between the two major public institutions in the roads sector. To implement quality control through the project development cycle. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS While the standard policy is for projects to proceed using the above project development cycle. A8. It is therefore important that a specific person be assigned the responsibility to guide a project through all the stages performed by an entity. NETWORK DEVELOPMENT MASTER PLAN . separated by “gates” where a project is assessed and approved (or turned back) to proceed to the next stage.1 Role of Directorate General of Highways By identifying the process steps in the project development cycle. Best practice approaches to managing a project’s progress is to submit all projects to a proper stage gate process. This happens in the case of projects that are prioritised outside the normal planning process. Implementing a review “gate” assurance policy will allow DGH to monitor the progress and readiness of both planned and unplanned projects. overarching plan guide the development of the road network. Creating such a plan (RUJPJJN) is also a specific legal obligation of DGH. and often in the case where projects are assigned to SOEs or earmarked in other ways. 4. potentially resulting in technical and/or commercial issues requiring attention. best practice approaches adopt a series of “review gates” to assess the readiness of projects to proceed to the next stage of development. Even though there are hierarchical layers (classes) of roads. personal responsibility to manage a project and steer it through the stage gates.e. their integrated nature requires that a single. there is a risk of lack of ownership of the project. which it executes under its responsibility to plan the national road network. DGH is the coordinator of the national roads sector. Although it is clear what stage the project has reached in the cycle.2. i.1 There should be a clear. some projects are fast-tracked for policy and/or priority reasons. namely DGH and BPJT. A8. dividing them into stages or phases. The risk of stage gating a project is that it then gets relayed from one point of responsibility to the next. Such stage gating should apply equally to planning and preparation by DGH as well as implementation of expressways (BPJT) and other national roads (DGH).VOLUME 2: IMPLEMENTATION 39 FRAMEWORK .

e. there are also preparation activities for those projects (like land acquisition) which DGH has the obligation to oversee. Maintenance of non-expressway national roads is also carried out by balai.1. DGH prepares the projects comprising the roads plan. There are. Not shown in Figure 4-1 is DGH’s role in setting technical standards and techniques (the “BINTEK” function. situations where DGH’s role as the national roads planner is potentially bypassed. DGH also executes those non-toll/non-concession projects not allocated to BPJT. and should therefore be subjected to the same tests DGH carries out on projects that it initiates itself or are brought to it by others. with the view to ensuring there is clarity about which functional area in GoI is responsible. In addition to a coordination role. The outcome of this review may decide NETWORK DEVELOPMENT MASTER 40 PLAN . This role uncertainty may become even more unclear as additional non-toll PPP delivery mechanisms are introduced which are not clearly assigned in the Road Law. DGH also has an execution role. which is currently not well defined within DGH).2. However. not requiring GoI support). A9. If deemed to be a toll road outright (i. Unsolicited toll projects should be analysed in the same manner as other roads projects before being handed over to BPJT for implementation. First.1 below). an area of role uncertainty exists presently in that DGH may decide to develop a portion of that project itself and hand the physical works over to the concessionaire as GoI’s form of support. These are sometimes managed by DGH centrally. it transfers that project to BPJT for implementation. This should require DGH to have a review role for unsolicited toll projects to ensure there is alignment with the objectives of the national road network. although this role does not extend as far for expressways as it does for other national roads. but also the case where unsolicited toll road bids are presented to and adjudicated by BPJT (without those projects being tested first for their network impacts or their preparation measured against DGH’s usual norms).2 Role of the Toll Regulatory Agency In the course of preparing the roads plan. Second. These projects may enhance or disrupt the national network. To address this role uncertainty.VOLUME 2: IMPLEMENTATION FRAMEWORK . These include other arms of GoI introducing and prioritising roads (refer to “Planning Roles” in Section 4. DGH assesses the commercial prospects of a road. Furthermore. consideration should be given to reviewing the role responsibilities for expressway road delivery. for unsolicited projects. 4. but generally more locally through the balai. however. This entails the necessary physical design of the project so that the environmental and social assessments can be executed and land obtained.3.

the concept of transforming BPJT into a proper. preparation and investment decisions.5 below. execute and regulate expressways. consideration will need to be given to each entity’s specific responsibilities. the highest level of service of all roads classes. BPJT with its current legal form and mandate (which is restricted to toll roads). There may be circumstances where GoI chooses to implement a “zero toll” for a period to attract demand and encourage use. In exchange for a comparable service level. if so decided. Should GoI decide to implement the above action recommendation. As a reference point. autonomous expressway authority is outlined in Section 4. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS if DGH should focus on planning. the intent is to provide GoI with the ability to levy a toll on an expressway standard road sometime in the future. Thus. all expressways will be tolled under the principle of equal treatment of expressway users. Therefore. Some of the weaknesses of the current road system are related to planning done on a tactical rather than strategic basis. This outcome should formalise expressways to be designed to provide the highest degree of connectivity and mobility. with another functional area in GoI (possibly BPJT) given responsibility to procure. The “tactical” planning approach has been:  Short-term. that is. A11. one coordinating area should be responsible for planning. execute. Although expressways are not defined in law as having to be toll roads.3 PLANNING OF CONNECTIVITY AND CAPACITY The preceding sections outline the broad role division between DGH and BPJT in the development of expressway roads. and required change in approach and organisational structure. Even though some expressways may not be directly financed from toll revenue. with a maximum five-year planning horizon NETWORK DEVELOPMENT MASTER PLAN . the intention is to combine the definitions so that all toll roads are indeed expressways. preparation and investment decisions for all expressways projects. the users of expressways should be expected to make a similar financial contribution for expressways. and regulate expressways A10. this does not mean all expressway roads would be levied with a toll – rather. Note. designed or resourced to carry out this responsibility. To avoid any doubt about responsibility. the project development cycle set out in Figure 4-1 provides a useful guide concentrating firstly on the national roads plan prepared by DGH. is not empowered.VOLUME 2: IMPLEMENTATION 41 FRAMEWORK . 4. and BPJT should procure.

the identification and prioritisation of roads projects will need to be recognised by all agencies as falling under the responsibility of DGH.1. but it is not useful to have these entities defining competing lists of projects if DGH is the mandated centre of excellence for roads planning. preparing the roads response is the obligation of DGH. focusing on individual sections of roads rather than network or system- wide planning and configuration  Incremental. roads projects have been pinpointed by the Ministry of Transportation (MoT) (National Infrastructure Plan). CMEA/KPPIP and other interested entities to ensure regular interaction. However.  Fragmented. Bappenas. traffic and other roads-related information. Bappenas (Medium Term Economic Infrastructure Strategy) and Committee for Infrastructure Prioritisation (KPPIP) (National Strategic Projects). by reinforcing and adding lanes to existing roads that should be functionally realigned or supplanted Planning has been impaired in the past by the shortcomings of available analytical and predictive tools adopted by DGH. 4. as well as the lack and low reliability of planning data on road condition. NETWORK DEVELOPMENT MASTER 42 PLAN . to be successful with reform measures. One of the underlying principles of the NDMP is that the expressway plan must be developed systematically. fully integrating traffic movement between the different hierarchies of roads. considering the integrated nature of the road network and with the goal of addressing specific development and land use objectives. It has a duty to obtain others’ inputs to its plan and to provide them an opportunity to influence the result. Addressing these current weaknesses in the planning process for national roads has the potential to deliver a modern standard road network with a clear hierarchy of functions. Traditionally. DGH is being empowered to carry out roads planning on a best practice basis. sufficient capacity and efficient performance. early enough in the planning cycle. Setting the development objectives is the duty of other ministries and entities. and should formalise a consultation procedure with MoT.3. in addition to DGH planning.1 Planning Roles Under an enhanced planning approach. DGH should be recognised as mandated centre of excellence for roads planning. A12.3. there will be one national roads plan (RUJPJJN) that shows how the network will be developed by adding links and capacity.1 Enhanced Approach to Planning 4.VOLUME 2: IMPLEMENTATION FRAMEWORK .

The intention is to form a National Roads Forward Planning Group (NRFPG) within DGH with explicit responsibility for RUJPJJN development. the project pipeline will in any case stabilise with new projects being added progressively longer in advance.2 Organisational Implications The need for a clearly defined single entity responsible for road planning and programming at the national level is a key element of the development of such integration.VOLUME 2: IMPLEMENTATION 43 FRAMEWORK . At the heart of this approach are the Transport Models (TMs). Such software makes it possible to analyse and estimate the impacts of a wide range of infrastructure improvements and operating policies. for the forward planning objectives of this activity to be sustainable in the long term. Further. the NRFPG would be expected to internally update the various land use. The long-term sustainability of a modelling capability will require training. TMs have been developed. and to manage updates and verification of the phased implementation of the RUJPJJN.3. This natural evolution will allow other ministries to introduce new potential road projects as identified. It is envisaged that their participation will be in the form of commissions by DGH to provide detailed modelling support services. programming and coordination with GoI entities. a continuing supply of local transport planning professionals is required. The intention is that the Indonesian private sector will play a key role in the future forward planning and delivery of the RUJPJJN. and experience in application. 4. guidance.2 Enabling the Planning Function Volume 1 demonstrated the merit of a systematic planning process with a clear rationale for project selection. NETWORK DEVELOPMENT MASTER PLAN . namely the provision of a focal point for facilitating decision-making and action. suitable for the assessment of inter-urban travel on national roads. and supported by automated.3. integrated and predictive planning procedures and tools. coupled with the opportunity to exchange knowledge through a user group forum. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS As the new planning approach stabilises and as progress is made with rolling out the expressway system.1. such as BPJT. 4. for the islands of Java and Sumatera. Also. but in the context of a disciplined national roads planning framework. such as maintaining and updating the models and undertaking scenario tests and producing standardised outputs for interpretation by DGH. The NRFPG would fulfil a role that is at present lacking within the administrative structure. socio- economic and traffic data held by the Directorate to reflect the evolving pattern of development. revision.

sufficient design to locate the junctions and determine the required road reserve and an approved Environmental Impact Assessment [AMDAL]).4 PROJECT PREPARATION The second gate of project preparation is a responsibility that currently is the responsibility of DGH. strengthening project processes to address land acquisition issues should continue to be a major reform priority. NETWORK DEVELOPMENT MASTER 44 PLAN .VOLUME 2: IMPLEMENTATION FRAMEWORK . The level of pre-preparation review should be sufficient to conduct an economic evaluation and inform an initial decision on viability of private sector participation options. or initial Pre- Feasibility) is documented. A project is properly prepared when its Outline Business Case (OBC. requiring adjustments to land requirements after the project was let out. This stage should also include initial survey work and some site investigation. some projects were not sufficiently prepared. Given that land acquisition issues can be the major bottleneck to development and delivery of road projects.4. 4. the Decree on Project Location is approved and land titles have been obtained. a project and the accompanying “pre-acquisition land package” should be sufficiently well developed and planned before being handed over to BPJT. It is proposed that the NRFPG to be located within DGH’s Sub-Directorate of Integrated Planning and Network Development. or concessions were signed with low levels of land availability or over ambitious land acquisition obligations on the concessionaire. there should also be a focus on “pre-land acquisition” preparation.1 Pre-Land Acquisition Preparation Consistent with project preparation including pre-feasibility and preliminary design. Various recent toll concessions have stalled because the projects were not sufficiently ready mainly due to land acquisition issues. A key test for the quality of preparation is whether such a fundamental change in location or design has to be made later on that the project requires a revision of the AMDAL and/or an approval for land location renewal. Further. the Project Planning Document is concluded (including final route selection and position of the centre line. Therefore. 4. Applying a stage gate approval process (refer to action A8) and formalising the major project as an “order” (as envisaged in action A21 below) will increase the scrutiny of projects and go some way to addressing future project bottlenecks caused by land pre-acquisition issues. This enhanced process of land acquisition will provide route selection with centreline defined sufficiently to determine required road reserve and commence land acquisition.

project planning and preparation will have to be accelerated.4. and implement proper land banking where rights of way are acquired well in advance of (decades before) construction.VOLUME 2: IMPLEMENTATION 45 FRAMEWORK . 9/2016 which envisages planning data from all ministries to be combined in one GIS database. The benefit of procuring land well ahead of time. A15. Land for projects such as expressways. or be subsumed in the funds of LMAN. often after concessions had already been concluded and even after construction had started. should be impaired in this manner well (even decades) ahead of construction. And to enable land banking. To protect the expressway program. DGH and BPJT should come to specific agreement with the National Land Agency (BPN). NETWORK DEVELOPMENT MASTER PLAN . DGH should contribute to this important initiative and make use of it. the land acquisition policy should be proactive and establish a land “surplus”. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4.4. GoI should review the current approach of procuring land on an as-needed basis. will exceed the holding cost associated with any land bank. A14. Whereas the purchase of land was previously financed by the relevant implementing ministry. so that further development on that land is sterilised and sale of the land can only take place under defined conditions. Such land banking is supported in GoI‘s “one- map” policy supported by Presidential Regulation no. Note that clarification may be required to confirm whether the funds already assigned to the BPJT Public Service Unit (BLU) for land will remain available for expressway land. valuation and objections. To ensure the continuation of the land purchase program. previously responsible for executing land acquisition.3 Land Banking GoI has in the past procured land on a just-in-time basis. 4. the current funds and future allocations to BPJT BLU should ideally remain available for the purchasing of expressway land. placing the obligation to acquire land on GoI itself and regularising the process of designation. and LMAN to ensure the seamless transfer of ongoing and pending land purchase arrangements. A13. It has also availed a significant budget to this agency. GoI has now created LMAN to procure land for all ministries and agencies involved in infrastructure development. which contribute to defining the future pattern of land use.2 Land Acquisition Recent reforms to the land acquisition policy will improve the delivery of national road projects. under less time pressure and at not- yet-inflated prices. This implies earmarking the land that will be required in future.

e. the best suited government agency would appear to be the functional unit that is experienced in shaping and managing road concession packages and interacting with financing institutions and concessionaires. The simpler. If a land bank “ownership” function is established by GoI. A16. These preservation or widening activities are included in this NDMP. Further. allowing such land proceeds to be a source of additional road funding. not to bank land as considered in action A15 above.4 Treatment of Major Projects 4. These interventions should also be treated as a type of major project in terms of their preparation and implementation. and all provide additional lane-kilometres. From a skills perspective. 4. Although LMAN is referred to as a “land bank”. Incremental carriageway widening (which adds capacity but not lanes) is of a similar complexity. its banking role appears to be in terms of providing finance (i.VOLUME 2: IMPLEMENTATION FRAMEWORK . An “ownership” function responsible for land bank access should be established in either DGH or BPJT. This includes the potential role of limited trading in surplus land that is deemed not required for road developments. NETWORK DEVELOPMENT MASTER 46 PLAN . Under a future mandate the government agency owning the land bank function should be self-financing and commercially autonomous (refer to Section 0) so that it can respond to market conditions in a timely manner. Given the commercial skills required and the need to respond proactively to land requests as they arise during construction.4. All the capacity expansion projects included in this NDMP are “major” projects.1 Concept of “Major Projects” Underlying the NDMP is a sense of urgency to catch up with other countries and improve the roads network connectivity. that means adding capacity to the backbone network and making prudent interventions in the arterial network supporting the backbone.e. including rehabilitation and reconstruction. As set out in Volume 1. a supplier). being able to influence the injection of land as required suggests that BPJT would be a possible candidate to fill this role. This approach implies targeting those major projects that will make the biggest difference. The projects are all on national arterials (including expressways). involving a new alignment or at least substantial additional land-take. A major project is quite complex. However. then this role will need to be assigned to either DGH or BPJT. complex preservation interventions can be challenging. large and unique. routine and periodic maintenance). this function may be best suited for BPJT.4. more frequent types of maintenance are clearly not “major” projects (i.4.

3 Creation of Major Project Preparation Unit The preparation of expressway projects is currently carried out centrally by DGH.VOLUME 2: IMPLEMENTATION 47 FRAMEWORK . The MPPU unit will procure and direct consultants to undertake the required survey. However. In the first instance. The unit will procure and manage teams of consultants to carry out this work. national arterial projects. the scale of the NDMP is substantially bigger and projects now have to be prepared further than before. It will similarly support other major national arterials. The MPPU will be responsible for procuring and executing major. 4. design and document preparation. DGH will approach development partners to financially support the creation and operation of the MPPU. A single central unit can maximise effective use of resources and provide the required outputs on a scheduled basis. A20. it is likely that there will be a need to rely on some international consultant inputs. A18. procurement and contract oversight. The most effective way to provide this is to establish a dedicated unit to manage preparation of all major projects.4. A19. The MPPU will support DGH by means of additional. DGH will be supported by means of a dedicated Major Projects Preparation Unit (MPPU) which would be responsible for preparing both expressway and other major arterial projects.4. resources and experience. placing a significant additional burden on DGH. external but temporary resources and skills.4. but in this case also assist with detailed design. The responsibility for major projects should in principle be centralised and not devolved to the lower. NETWORK DEVELOPMENT MASTER PLAN . CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. A17. local balai level. The MPPU will attend to the planning and preparation of expressways up to the point where the expressway order is placed with BPJT.4. non- expressway.2 Centralising Major Projects Preparation of major projects to a high and consistent standard requires specific skills.

only to discover later that the funds are actually not available. BPJT needs to formalise how it develops the project final business case (FBC) to ensure that the project is properly defined. and on the other BPJT’s role of refining preparation. noting some expressway roads may have a “zero toll” applied for a set time). A21. for which sections are then not available in a timely way for incorporation into the relevant toll road. implementing and managing all expressway projects. A21.2 above. assessing (OBC). This happens particularly in the case of physical VGF contributions developed by DGH and funded from APBN.4 Handing Over Projects to the Toll Regulatory Agency: The Expressway Order BPJT is the entity responsible for contracting toll roads. Specifically.2 BPJT should implement an affordability check. The order therefore cleanly differentiates on the one hand DGH’s role of identifying (initial study).4. in the form of a formal “order” placed by DGH with BPJT. procurement. i. and potentially in the future also any expressway since all expressways may be tolled (refer to Section 4. 4. No unresolved land acquisition should still legally be more than a couple of months outstanding.4.e.1 DGH undertakes that there will in future be a minimum level of land acquisition by GoI before awarding a concession. In the future. NETWORK DEVELOPMENT MASTER 48 PLAN . In the past BPJT has relied heavily on DGH for technical support and the lines of responsibility between DGH’s project preparation role and BPJT’s execution role may not have been clear to all relevant parties. That “expressway order” is timed to be made after land acquisition (so that all right of way [ROW] issues are settled and the order is therefore not subject to major preparation uncertainties).2. prioritising (with KPPIP and others in GoI) and preparing (including AMDAL and land acquisition) all expressway projects. it must avoid the risk of land relocation renewal or any other fundamental change in design that has AMDAL and land implications. preparation of project documentation. a verification procedure to confirm that any GoI financial support is available before signing the concession.VOLUME 2: IMPLEMENTATION FRAMEWORK . but before procurement (so that BPJT can package the transaction itself). A21. What also happens all too often is that an expressway project requiring GoI support funding is let out. there should a defined hand-over of an expressway project from the planning/preparation to the delivery phase.

Such efficiency gains will emanate from the implementation of the new RAMS. improving the efficiency of maintenance creates the opportunity to shift some recurrent spending to construction and therefore increase the NDMP affordability envelope. and. 4. 4. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. which implies a single point of control by a body that has the necessary institutional autonomy and authority and is properly resourced organisationally and financially. maintenance is done by the concessionaire. it consumes a substantial part of the DGH budget. in return. but for other national roads. second.6 Assimilation of Expressway Section Addressing the arrangements for the expressway delivery roles between DGH and BPJT and consolidating the delivery of expressways under BPJT (action A10) will require a review of the role of the construction of expressway sections by DGH. this responsibility remains with DGH. Also.5 IMPLEMENTING EXPRESSWAYS: REFORM OF THE TOLL REGULATORY AGENCY Executing the expressway program is both urgent and vital and operationally will require a clear line of command-and-control.4. assuming more responsibility and control of pre-construction activities of proposed expressway roads. DGH will continue rolling out and further developing RAMS to include all asset types as a priority. A22. and intervention requirements can therefore be shaped in a much more bespoke fashion.4. The reason for referring to national roads maintenance here is two-fold: first. early indications are that introducing a Road Asset Management System (RAMS) could reduce preservation budgets significantly (possibly by up to 20 percent) over time as it is rolled out nationally. RAMS furnishes a much higher resolution of analysis of the road condition (at the lane rather than link level). This review could result in DGH’s expressway section handing over construction activities to BPJT but.VOLUME 2: IMPLEMENTATION 49 FRAMEWORK . In the case of expressways. NETWORK DEVELOPMENT MASTER PLAN .5 Improved Asset Management Through Road Asset Management System The NDMP does not deal with the maintenance of roads once created.

Table 4-1 summarises the core functions required of BPJT. operational performance and toll level requirements contracted for. This last aspect. which primarily entails confirming the final business case and verifying the suitability of the concession financing model (BOT.2 Future Toll Regulatory Agency Organisation BPJT currently is not organised around the expressway project life cycle. this role can be outsourced to a third party. some specific functions that BPJT is not responsible for include project identification and prioritisation (done by DGH).3 below. First. In this role.1. not shown in Table 4-1 are the non-core supporting functions that BPJT NETWORK DEVELOPMENT MASTER 50 PLAN . The other is to act as “expressway bank” by utilising surpluses (as proposed earlier in this chapter) to support non-financially self-sustaining roads in the rest of the expressway system. the quality of implementation. Also. etc. or original expressway design (which is done by the expressway concessionaire but overseen by BPJT). With the potential introduction of Toll Collection Agreements. and overseeing implementation (construction). One is to manage and optimise the use of banked land prior to construction (as foreseen under action A16). 4.) as nominated by DGH. The entity needs to be aligned to its three core responsibilities:  Least cost. carrying out procurement. BPJT must ensure that the road concessions remain compliant with the infrastructure. which includes preparing project documentation. and such expressways shall be developed efficiently to minimise the required toll rate.5. it is understaffed and it relies on DGH for key technical skills. Second.1. and in so doing. VGF.1 Organisational Restructuring 4. it is also not the intention that BPJT itself manages tolling or collects tolls.  Project delivery. For clarity.5. land acquisition (now the responsibility of LMAN). Presently. Implementing a system-wide toll strategy as raised earlier would imply making BPJT responsible in future to set and regulate toll levels. 4.5. is an area that requires reform even before a general reorganisation of BPJT is carried out. as a GCA it is responsible to deliver toll roads (in future all expressways) on time as per the RUJPJJN schedule and in terms of the orders received from DGH. relieve pressure on the APBN.VOLUME 2: IMPLEMENTATION FRAMEWORK .5.  Compliance. toll rate levels are established as part of the contract award process and tied to inflation thereafter. There are two further areas where BPJT can add value and reduce the overall cost of the expressway portfolio.1 Toll Regulatory Agency Functions BPJT has two fundamental roles. as regulator of expressways. Improvements to the current BPJT Minimum Toll Road Service Standards (SPM) are addressed in Section 4. BPJT would also reduce the financial burden on GoI. including the regulation and enforcement of asset condition and operational service level.

ICT and assurance. liaison. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS would require such as strategic and annual business planning. Delivery Model assessing project for appropriate delivery model by applying delivery model selection rules Least Cost Business Case Estimation/ Converting Expressway Order into more Benchmarking precise design. Table 4-1: Toll Regulatory Agency Summary Responsibilities Core Sub-Aspect Function Short Description Responsibility Right of Way Maintaining ROW prior to construction. financial administration. Maintenance preventing occupation Land Property Adding value to reserve prior to construction by Management allowing selected.VOLUME 2: IMPLEMENTATION 51 FRAMEWORK . To restate the case: a project should not just drift from stage to stage but should be actively managed and driven along. That implies someone should “own” the project throughout its life. including Toll toll determination In terms of how BPJT should be organised internally. Project Delivery Procurement Placing contract on the market Overseeing construction and execution of Implementation expressway contractual obligations Infrastructure Regulating compliance with physical standards Regulating compliance with expressway Performance Compliance performance standards Regulating compliance with toll levels.1 is fundamental. temporary land use Assessing performance opportunity and associated performance specifications. roll-out plan and costing Updating plan-level budget based on revised Expressway figures. addenda. the principle of project ownership embedded in action A8. legal services. etc. determining MoF exposure/requirement Budget and need for debt Manage toll-derived revenues and any other Funds Treasury form of income not immediately/directly Management expended on expressways Preparing concession agreements and Documentation associated specifications. This understanding argues for a matrix-type organogram where “project sponsors” (supported by their project teams) NETWORK DEVELOPMENT MASTER PLAN . human resources.

This requires implementing a project life cycle approach.5. the pool managers define the body of work/skills to support the project sponsor. designs and records will be asserted in concession agreements. documentation. At the outset. setting up Standard Operating Procedures (including stage gate reviews) and improved documentation to systematically capture project intelligence throughout the project’s life. 4. i. The project sponsor is the face of the project. But given BPJT’s limited resources. with PMIs directly contracted to and paid by BPJT. the current relationship between the PMI and concessionaire should be divided. The immediate focus should therefore be on improving and assuring the quality of the road assets constructed.VOLUME 2: IMPLEMENTATION FRAMEWORK . It is generally recognised that monitoring and supervision by BPJT and DGH requires strengthening.2 Quality Assurance and Independent Quality Controller Consultant Reform The critical and pressing area of insufficient capacity in BPJT relates to project delivery. steer the project along making use of the expertise made available by skills “pool managers”. it should be recognised that the asset quality achieved depends on the full project development process. and operation and maintenance. procurement. managing the project as a single output through FBC. This approach implies single-point responsibility of an internal project manager. A23. NETWORK DEVELOPMENT MASTER 52 PLAN . Figure 4-2: Asset Quality the Result of Project Life Cycle Approach Programming Execution Compliance Land Toll Expressway Order Business Case Documentation DGH Procurement Construction Condition Funds Management Performance BPJT Asset quality assurance is presently overseen by PMIs (independent quality controller consultants). A23. Introducing PMI and other fees (refer to action A28) in the framework of a more financially autonomous BPJT will allow and ensure PMIs assert themselves in an independent role and will improve quality assurance. In the future.e. they are contracted and paid for by the concessionaires and therefore potentially compromised. construction. not just supervision (refer to Figure 4-2).1 The right of PMIs to access construction sites and inspect plans.

tools and processes for project delivery.VOLUME 2: IMPLEMENTATION 53 FRAMEWORK . A24.3 Best practice industry-wide methods of developing the contract management and quality assurance industry should be identified and applied in the near future. Initially. A Project Management Office (PMO) should be established in BPJT to support developing the FBC and delivering projects.5. a measurement and payment mechanism framework has been developed for operational performance (i.2 PMIs should be paid market-related fees and rates.e.5.1 Introducing a Project Management Office Under the theme of quality assurance.g. The SPM covers selected aspects of road asset condition and road operational performance. The PMO will play a similar supporting role as the MPPU to DGH. There will be phased step-out dates and diminishing decision-making as BPJT itself grows into its quality assurance role. it is recommended that a Project Management Office (PMO) be established to fill key skills and capacity requirements. the PMO would also include one or two PMI teams. where this is commercially possible. key positions in the BPJT organogram. In terms of shaping and sizing the PMO. for road “availability”). 4. 4. A23. For AP. The PMO will be an external party providing individuals to fill specific. notwithstanding the delivery model applicable (e. For toll roads. the compliance industry needs to be developed by professionalising the contract management function (for the contractor) and building capacity in the PMI industry. representing both international best practice as well as local experience. BOT or AP). Lastly. but these would be phased out as the domestic PMI industry becomes more empowered and active. it should be staffed by a core group of specialists. including providing oversight of and support to PMIs. NETWORK DEVELOPMENT MASTER PLAN . It may have a mandate to expedite delivery of specific projects. The toll SPM and AP approaches should therefore be migrated to a common performance framework. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS A23. expressways must comply with minimum service standards. Therefore. and by coordinating between projects. It will steer projects to completion by establishing standards. The aim is to provide expressway services at a standardised and high level of service.3 Expressway Service Standards Once constructed. these are currently specified in the SPM.2. it is important that the assessment of expressway performance be done on the same basis.

response time to accidents) and output (e. reduction in journey time). Creating that framework will be an opportunity to apply the most recent thinking in roads performance assessment. The new AP contract makes it possible to withhold payment for non-performance. A26. The performance frameworks for expressways provided under different delivery models should be harmonised. object detection. 4. occurrence of accidents) indicators. NETWORK DEVELOPMENT MASTER 54 PLAN . Amend the legal framework for toll concessions to enable BPJT to penalise a concessionaire for non-performance. The main enforcement limitations are that it has no sanction over non-performance or underperformance in terms of the SPM. it has no grounds to reduce toll rates or limit rate increases. and even satellite-based navigation.e. and can be linked to electronic toll collection systems.VOLUME 2: IMPLEMENTATION FRAMEWORK . A25. A25. Whereas performance has in the past typically been determined based on an index of subjectively selected input (e. It may only advise the Minister to withhold a toll increase for a short period. the movement now is towards assessing performance on an outcome (results) basis. that is. where commercially possible. Active management has become more practicable with the improvement of vehicle location technologies such as radio frequency identification.g.1 The future consolidated performance framework should be oriented to outcome levels of service and make use of proven technologies so that the tracking of service becomes real time.4 Toll Regulatory Agency Powers of Enforcement BPJT currently has limited powers of enforcement over toll roads once operational for which this shortcoming will persist when its remit is increased to expressways in general. Under this “active- management performance measurement” approach the focus is on vehicle speeds and congestion. and it also does not have the ultimate sanction of terminating a concession agreement (except if the concessionaire cannot fulfil its financial obligations any longer).g.5. terminate the concession. and in extreme cases. This is an obvious principle that should be extended to expressway concessions in general. the same approach to level of service on which the capacity planning in Volume 1 is based (i. but also to reduce the requirement for subjective interpretation and audit of a concessionaire’s performance.

They provide high connectivity and mobility. expressways are the top layer in the national roads system. Expressways are therefore not “social” roads. Notwithstanding the required versus available budget amounts. A27. but rather has to rely on concessionaires to employ PMIs. ensuring good value for money and upholding operational performance standards. and are sized and operated to provide a superior level of service to the road user. reduce cross-subsidisation from the general taxpayer to the expressway user since users who can pay will be required to pay. Based upon established Indonesian road policy.5 Financial Self-Sufficiency BPJT is currently fully reliant on limited APBN appropriations to fund its activities. Circumstantially. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. As emphasised in Principle 1 in Chapter 2.5.VOLUME 2: IMPLEMENTATION 55 FRAMEWORK . There is therefore a strong argument to make to shift the responsibility to pay for BPJT’s services from the general taxpayer via APBN. It is therefore reasonable to expect the project itself to internalise and pay for such services. but rather roads that serve economic interests directly for both private individuals and private organisations and entities. and ensure a sufficient income stream given the growing expressway program. Establishing this linkage will protect BPJT from the recent downward funding cycles in APBN. 4. A definitive estimate of BPJT’s operating expenses to oversee the existing portfolio of toll roads and its expenditure requirements to launch its future program is not available. but rather by the direct beneficiaries. it is the expressway user that primarily benefits from BPJT’s services. It will be subject to the same types of budget restrictions currently being applied to PUPR as a whole.5. increase BPJT’s accountability to its clients. The funding of BPJT’s activities should shift from the general APBN towards the expressway user as the direct beneficiary of BPJT’s services. such roads should not be paid for by the general taxpayer. to the direct beneficiary – the expressway user. NETWORK DEVELOPMENT MASTER PLAN .5.1 Introducing a Concession Administration Fee There are both existing services and future potential services that BPJT will deliver which relate to a specific expressway. This has effectively been the case to date. and its budget is too low for it to fulfil its current functions effectively. These services all relate to ensuring that the project complies with its legal obligations. overseeing and regulating expressway projects. an indication of how limited its resources are is that BPJT is not able to pay for independent quality control from its own budget. BPJT is essentially looking after the user’s interests by procuring. with major roads delivered as tolled concessions. This is notwithstanding its growing work load and expectations of accelerating the expressway program.

not create a new charge. these costs are to prepare a project and procure it. instituting a PMI fee will just replace an existing payment mechanism. the ongoing infrastructure. PMIs are currently paid by the concessionaire who capitalises this cost and recovers it from the expressway user. BPJT incurs substantial costs to prepare project documentation. After commissioning. the costs that BPJT incurs are for quite discrete services (following the categories of activities shown in Figure 4-2). Each of these activities can be packaged into a discrete charge. As a minimum. An amount may even be payable to the losing shortlisted bidder/s to ensure everyone puts in a well-prepared bid to maximise the competitive bidding process for the benefit of government. An asset lifetime regulatory regime should be paid for by an income stream of similar length.e.VOLUME 2: IMPLEMENTATION FRAMEWORK . should GoI decide on an enhanced expressway role for BPJT. Concessionaires carry their own bid preparation cost. i. market a project and procure it. operations and tariff regulation require internal BPJT resources and also specialist external skills.3 A periodic toll regulatory fee should be charged to all expressway concessionaires. ensuring the quality of construction. the cost of a competitive bidding process should ultimately be recouped from the winning bidder. Also. such an administration fee is not tied to the potential or actual commercial performance of the concession. Should that scenario eventuate. that means that the concession administration fee can also be introduced incrementally. A28. NETWORK DEVELOPMENT MASTER 56 PLAN . The cost of overseeing the creation and operation of expressways should be recovered from expressway concessionaires and charged through to the users of expressways. As noted in Section 4. but it is quite common internationally for the winning bidder to pay an amount to the government contracting agency. Apart from background administration.2 BPJT’s cost of preparing and procuring an expressway project should be charged through as a procurement fee to the winning bidder. Initially. A28.e. Last.1 A PMI administration fee should be levied on expressway concessionaires. it does not fluctuate with the concessionaire’s financial results. It is a flat fee – an overhead – charged to all concessions to compensate BPJT for road development obligations on behalf of GoI. i. A28. especially as the road asset ages and deteriorates.2. A phased transition towards financial autonomy for BPJT is foreseen. So. Then the focus is on delivery. For clarity.5. the project must be regulated over its life. to be utilised by BPJT to remunerate PMIs who are contracted by the agency directly. an immediate priority is ensuring the independence of the PMIs. A28.

etc. but does not have the income or funds to underwrite it financially. revenue shares and/or tariff share (refer to action A4). there is a predictable pipeline of expressway concessions coming on-stream and reaching the end of their terms. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS 4. under an enhanced role mode it is also foreseeable that BPJT will in future receive concession surpluses in the form of capital payments.5. Fortunately.3.4) and the implementation of the toll strategy (refer to action A6). IIGF enters into a recourse agreement with the GCA (BPJT in the case of expressways).5. BPJT could receive the proceeds from toll operating agreements. allowing the financing portfolio approach to be rolled out incrementally. such surpluses do not in any case accrue to APBN at present. increase the toll rate. Typical applications of the surpluses would take the form of:  Utilising up-front capital payments from one project to provide financial VGF to another project  For an AP concession.VOLUME 2: IMPLEMENTATION 57 FRAMEWORK .1. The “equal treatment” principle will also imply “equal benefit”. NETWORK DEVELOPMENT MASTER PLAN . to back up the LLF (refer to Section 3.). Surplus would also unlock the PPP guarantee arrangement provided by IIGF. Presently. These types of surpluses would arise because of asset recycling (Section 3. Enabling BPJT to capture and reallocate surpluses will mean that financial proceeds from expressways will be retained for application to expressways. This income stream will increasingly position BPJT to act as financing intermediary in the expressway sector by pairing surpluses and deficits. lease payments. and capturing these under BPJT will therefore not be a “loss” to APBN. it must be noted that the surpluses discussed here currently are either not realised at all (where toll levels are below fair.g.5). Crucially. benefit-based levels) or are retained by toll concessionaires (in the cases where fair toll levels exceed cost-recovering levels). temporary toll discounts required from time to time).2 Future Financial Management of Expressway Sector Over and above the concession administration fees. temporarily making the annual service payments until such time that revenue from the (separate) toll operating agreement is sufficient to meet the full cost of annual service payments  Compensating concessionaires for legitimate claims (e. which means the GCA underwrites the concessionaire’s obligations to repay the LLF. Also.3. BPJT can underwrite the arrangement in kind (by committing to extend the concession term.1. Therefore. There is obviously a risk of not achieving this balancing act. Critically. The management of income and funds contemplated above implies that BPJT’s financial management approach will evolve from being purely project-based. to a portfolio approach where the income stream from one project also affects the financing arrangements on another.

a private professional). with the necessary predictive capability. Should GoI decide to implement a National Road Agency function using BPJT.e. and to attract the types of skills required by a sophisticated network manager. These competencies of a BLU are sufficient to achieve the aims of implementing a portfolio financing approach to the expressway network. financial statements and performance results. A29.6 Unlocking Institutional Potential As has been the experience in various other countries. Singling out BPJT in this manner demonstrates the seriousness of delivering the NDMP. BPJT is currently designated as a full BLU (Public Service Unit). A BLU may also be managed by a non-civil servant (i. The creation of a national roads entity is an ambitious undertaking and can only happen with the necessary political sponsorship. it is endowed to:  Receive transaction fees from bidders to pay for the cost of procuring toll concessions NETWORK DEVELOPMENT MASTER 58 PLAN . A31. To support the portfolio financing approach. including a resource and revenue plan. including for the appointment of private professional advisors.5. it remains accountable to an originating GoI institution (PUPR in the case of BPJT BLU) to whom it submits its working plan. reflecting its enhanced expressway network management role. subject to specific approval procedures. it is possible that part or all of the national roads management function may eventually migrate out of government proper and be housed in a semi-autonomous. including an expressway system financial model. and in other sectors in Indonesia. 4. then BPJT should prepare a working plan and budget. Noticeably. In exchange for these liberties. In terms of the requirements raised in this Volume 2. It is therefore recommended to start the migration by focusing on BPJT first.or long-term basis. budget. a BLU may borrow on a short. for approval of the Minister. for approval of the Minister. BPJT should implement the required management tools.VOLUME 2: IMPLEMENTATION FRAMEWORK . specialist entity. A30. This means that it may receive revenue and income (apart from transfers from the state budget). keep this in its own bank account and utilise it for its own needs. It may employ staff as civil servants or private employees. The aim of the BLU legal form is to foster efficiency and flexibility in the delivery of public services. A BLU provides public services in a semi-commercial manner but without a profit motive. It may set its own procurement rules. with “full” denoting that it can undertake all the potential functions of a BLU. BPJT should prepare procurement rules.

NETWORK DEVELOPMENT MASTER PLAN . i.g. or revenue claw-back during the life of a concession  Borrow.VOLUME 2: IMPLEMENTATION 59 FRAMEWORK . e. take up a loan or issue a bond However. some need to be specifically provided for in the appropriate legal instruments (GoI and MoF regulations). before these actions are undertaken.e. especially to unlock its ability to generate a revenue stream. up-front payment by a concessionaire. setting toll levels.  Receive surpluses from concessions in whatever forms. A set of regulations should be developed to give effect to the dormant legal powers of the BPJT BLU. A32. so that BPJT can pay the PMIs directly  Receive regulatory fees from the concessionaires over the life of concessions. so that BPJT can utilise those fees to pay for its expenses like inspections. etc. CHAPTER 4: INSTITUTIONAL AND ORGANISATIONAL REQUIREMENTS  Receive the fees that concessionaires currently pay to PMIs.

That is. NETWORK DEVELOPMENT MASTER 60 PLAN .VOLUME 2: IMPLEMENTATION FRAMEWORK . The columns that comprise the following table describe the following:  Theme/Topic: section or sub-section heading and number in this Volume  Reference: the principle(s) in Chapter 2 and the discussion reference point in Chapters 3 and 4 to which the Theme/Topic is aligned  Instrument: the Government Regulation (GR) and Law that specifically relate to the Theme/Topic  Action (either N/A/R): the action that is proposed to be taken where: N = New instrument A = Amendment to existing instrument R = Retraction to existing instrument  Comment: brief description. CHAPTER 5: REGULATORY MEASURES This chapter summarises the legal principles/changes required to give effect to the RUJPJJN and NDMP. of the rationale for the listed action. where appropriate. this summary does not prescribe detailed “drafting” but instead outlines the basic principles and consequential actions to implement the necessary changes for financing and institutional arrangements proposed in Chapters 3 and 4 respectively.

2 AMENDMENTS RELATED TO DELIVERY AND FINANCING OPTIONS PUPR Regulation no. Amendments and Retractions Action Theme/Topic Reference Instrument Comment N/A/R To provide more detailed description on primary arterial (Jalan Arteri Primer) to introduce “main primary arterial” class Note: Under the RENSTRA of DGH. 5. 34/2006.New Instruments.1 INTRODUCE AVAILABILITY PAYMENT Principle 2 13/PRT/M/2010 (as expressway program as well as to provide A MECHANISM IN PUPR 3.VOLUME 2: IMPLEMENTATION 61 FRAMEWORK .1.2 amended) on Guideline on procurement guidelines for expressway AP PPP for Toll Road Sector projects NETWORK DEVELOPMENT MASTER PLAN .1 ROADS CLASSIFICATION Principle 1 A (GR) 34/2006 on Roads sub-classification on Arterial Roads is expected to be completed by 2017. the amendment Government Regulation on GR no. To introduce AP as an option for PPP in 5. We also note that PUPR has provided further sub-classification on Primary Collector Roads in the Ministry of Public Roads no.2.3. CHAPTER 5: REGULATORY MEASURES Table 5-1: Legal Instruments . 34/2006 to accommodate further 5. 3/PRT/M/2012 on Guideline to Determine Function and Status of Roads without amending GR no.

2. Action Theme/Topic Reference Instrument Comment N/A/R Principle 2 GR no.VOLUME 2: IMPLEMENTATION FRAMEWORK .2.4 PUPR Regulation no. 13/PRT/M/2010 (as To provide the mechanism for procurement. 38/2004 on Roads A To revise the toll tariff escalation formula 3.2 INTRODUCE SURPLUS-BOT AND OTHER FORMS OF SURPLUS AND 3.3 PROVIDE FOR NATIONAL TOLL POLICY 3 Law no. 01/PRT/M/2010 (as amended) on Organisation To provide broader scope of works of the BLU A and Working Procedure of to manage and utilise the surplus BOT funds BLU for Financing within BPJT Secretariat Principle 2 and Principle 5. A amended) on Guideline on calculation and payment of surplus BOT PPP for Toll Road Sector GR no.1.3.3.2.4 amended) on Guideline on operator in expressway PPP project PPP for Toll Road Sector NETWORK DEVELOPMENT MASTER 62 PLAN .3.3 amended) on Toll Roads A To introduce the concept of surplus BOT CONCESSION FEE ARRANGEMENT 3.1. 15/2005 (as 5.7 PUPR Regulation no. Principle 2 13/PRT/M/2010 (as To provide an option to appoint toll collection 5.1. 38/2012 on Non-Tax To provide the surplus BOT as one of the Non- A GoI Revenue under PUPR Tax GoI Revenue streams PUPR Regulation no.3.1.4 APPLY TOLL COLLECTION AGREEMENT A 3.

3.2. CHAPTER 5: REGULATORY MEASURES Action Theme/Topic Reference Instrument Comment N/A/R BPJT procurement To provide the procedure on appointment of toll N regulation collection operator PUPR Regulation no. 15/2015 on Toll A expressways (excluding planning that will Road (as amended) remain with DGH) 5.5 EXPRESSWAY ORDER A to enable BPJT to carry out the procurement amended) on Guideline on process for expressway PPP for Toll Road Sector GR no.2.3 BPJT INSTITUTIONAL AND ORGANISATIONAL REFORM To allow BPJT to obtain assignment for all GR no. Adjustment of BPJT tasks due to the A 43/PRT/M/2015 on BPJT assignment NETWORK DEVELOPMENT MASTER PLAN .1 ASSIGNING EXPRESSWAYS TO BPJT Principle 4 PUPR Regulation no.VOLUME 2: IMPLEMENTATION 63 FRAMEWORK . 34/2006 on Road A To allow PPP for roads other than expressways 5.6 PPP FOR NON-EXPRESSWAY ROAD PUPR Regulation on PPP To provide the guidelines on PPP for roads N for non-expressway road other than expressways 5. To provide the provisions on expressway order 13/PRT/M/2010 (as 5.

2 PUPR Regulation no.3.2.VOLUME 2: IMPLEMENTATION FRAMEWORK .1.3. 15/PRT/M/2015 on Adjustment of DGH tasks due to the A Organisation and Working assignment Procedure of PUPR PUPR Regulation no. BPJT and Project Company PUPR Regulation no. BPJT and Project Company PUPR Regulation no. 5.2 UPDATE DGH-BPJT RELATIONSHIP 43/PRT/M/2015 on BPJT and BPJT on expressway development 4.2 A LAND) Organisation and Working Note: Procedure of PUPR NETWORK DEVELOPMENT MASTER 64 PLAN .2. 4.4. Action Theme/Topic Reference Instrument Comment N/A/R PUPR Regulation no.3 TOLL ROAD LAND ACQUISITION (BANK 15/PRT/M/2015 on To allow BPJT to manage the banked land 4. 15/PRT/M/2015 on A Organisation and Working Procedure of PUPR Principle 4 and Principle PUPR Regulation no. 11/PRT/M/2006 on Division Adjustment of the division of tasks between Tasks in Toll Road A DGH and BPJT due to the assignment Development between DGH. 5 A To provide the division of tasks between DGH 5. 11/PRT/M/2006 on Division Tasks in Toll Road A Development between DGH.

institution be authorised to manage the BPJT and Project Company land for infrastructure development.3.011/2011 on To provide for new PMI arrangement and Financial VGF and MoF A charging regime relevant for a PPP project with Regulation no.3.5 INTRODUCING NEW PMI financial VGF 4. This institution shall have the task to manage GoI assets that have been assigned to this institution. banking. We also note that GoI is under discussion to establish institution or process for land PUPR Regulation no.4 RESTRUCTURE BPJT INTERNAL PUPR Regulation no. 4. A Lembaga Manajemen Aset Negara 43/PRT/M/2015 on BPJT (LMAN) within MoF. 11/PRT/M/2006 on Division Tasks in Toll Road A  Should the LMAN or land banking Development between DGH. CHAPTER 5: REGULATORY MEASURES Action Theme/Topic Reference Instrument Comment N/A/R  We note that GoI has established MPU Regulation no.5 A To provide for the internal restructuring of BPJT ORGANISATION 43/PRT/M/2015 on BPJT MoF Regulation no.2 143/PMK. then the management of land required for expressways can be managed by this institution.VOLUME 2: IMPLEMENTATION 65 FRAMEWORK .5. 5. 5.011/2013 on ARRANGEMENT Guidelines on Financial VGF BPJT procurement To provide the procedure on appointment of N regulation PMI by BPJT NETWORK DEVELOPMENT MASTER PLAN . 223/PMK.

15/PRT/M/2015 on 5. any fundamental refinement on road provisions.6 REFORM BPJT BLU 4. 01/PRT/M/2010 (as amended) on Organisation 5.5.3 A To establish MPPU within DGH Organisation and Working Procedure of PUPR 5. including the road class and 5. 38/2004 on Roads A institutional.7 ESTABLISHMENT OF MPPU 4.4.2 A To provide broader scope of works of the BLU and Working Procedure of BLU for Financing within BPJT Secretariat PUPR Regulation no. Action Theme/Topic Reference Instrument Comment N/A/R PUPR Regulation no. NETWORK DEVELOPMENT MASTER 66 PLAN .4.1 REFINEMENT OF ROAD LAW Law no.4 ROAD LAW In the long term.3.4.VOLUME 2: IMPLEMENTATION FRAMEWORK .5. need to be accommodated by amending the Road Law.3.

4 Preparation of amendment on Mandate of presidential direction MoT. Table 5-2: National Plan Regulatory and Legal Requirements Not Covered in Volume 2 Theme/Topic Reference Related Authorities 5.5. Bappenas grant mechanism for regional roads 22/2009 on Traffic and Road Transportation 5. Under DGH’s Strategic Plan for 2015-2019 (Rencana Strategis Direktorat Jenderal Bina Marga 2015–2019).5. these RENSTRA regulations have not been discussed in this Volume 2. DGH has indicated that it will prepare the new road regulations. Ministerial Regulation on Procedure (instruksi presiden) no.2 Preparation of Ministerial Mandate of Law no. The regulations listed are all under the responsibility of the PUPR.5. National Police Department. 22/2009 on MoT. MoF. 4/2013 on Transportation Office of Regional and Requirements for Road Action Program for Road Safety and Government Operational Acceptance (Laik Fungsi to review the existing Ministerial Jalan) Regulation no.3 Preparation of Ministerial Implementing regulations of Law no. and are briefly described in the following table. 11/2010 on Procedure and Requirement for Road Operational Acceptance since up to the end of 2014 national roads have not fully complied with the requirements NETWORK DEVELOPMENT MASTER PLAN .5 RENSTRA Regulatory and Legal Requirements 5. However. MoT Regulation on minimum service 38/2004 on Road and GR no. standards for national roads 34/2006 on Road (excluding expressways) 5.1 Preparation of Presidential Implementing regulation of Law no.5. Regulation on guidelines to determine Traffic and Road Transportation and Transportation Office of Regional road class GR 79/2013 on Traffic and Road Government Transportation Networks 5. Ministry of Home Affairs and Regulation on preservation fund and 38/2004 on Road and Law no. National Police Department.VOLUME 2: IMPLEMENTATION FRAMEWORK .