Jasa Marga leading toll road development-
Jasa Marga is the biggest toll road operator in Indonesia, operating three-fourths of the country’s toll roads. Established in March 1978, its main task is to plan, build, operate, and maintain toll roads, and enable them to function as highways. Jasa Marga’s role in Indonesia’s road development has become increasingly crucial, as the country’s toll road development continues to lag behind that of neighbouring countries such asMalaysia. Despite being the largest economy in Southeast Asia, Indonesia has only around 750 km of toll roads, compared to 4,000 km of toll roads in Malaysia.
Initially, Jasa Marga functioned as an operator as well as a toll road authority in the country. For nine years up to 1987, Jasa Marga was the only toll road operator in Indonesia. However, by the end of the 1980s, the company’s role as an operator had declined significantly. As the government sought to encourage private sector participation in toll road development through the build-operate-transfer mechanism, Jasa Marga began to facilitate private investors so that they could complete their projects, which had suffered due to the economic crisis that affected Southeast Asiain 1997. As a result, the company took over toll roads that include the Jakarta Outer Ring Road (JORR) and the Cipularang Road.
During the mid-2000s, a number of changes occurred in the toll road industry in Indonesia, in particular the formation of the Indonesian Toll Road Authority to regulate the toll road industry and the decision to impose toll tariffs that were adjustable every two years – the latest of which took place in late 2011. Jasa Marga was listed on the Indonesia Stock Exchange in 2007 with a public shareholding of 30 per cent. Today, it functions fully as a toll road operator and developer requiring concession licence issued by the government. The company’s development is financed by the government through foreign loans and issuance of bonds.
As for Jasa Marga’s future plans, its president director/chief executive officer, Ir. Adityawarman, summed it up aptly in the company’s 2011 annual report: “Going forward, we are determined to bring the company to become more superior…while focusing on two main points, that is, development of new toll roads: the company will focus on the construction of new toll road sections whose land is ready for construction activity; and toll road operation: the company will focus on improving the quality of service through modernisation efforts.”
Company operations
Jasa Marga is currently operating 545 km, or 73 per cent, of toll roads in Indonesia through its nine branch offices and four subsidiaries. The company operated the Jagorawi (Jakarta–Bogor–Ciawi) toll road, the country’s first toll road, creating a significant milestone in the development of the toll road industry in Indonesia.
The company expects to add another 211 km of new toll roads by 2014, at an approximate investment of IDR 25 trillion (1 IDR [Indonesian Rupiah] = USD 0.0001). Nine projects are currently under implementation: four of them, comprising a total length of 46 km, are likely to be operational in 2013. Of these projects, the 10 kmBalitoll road connecting Nusa Dua-Ngurah Rai and Tanjung Benoa is expected to be complete in July 2013, before the Asia Pacific Economic Co-operation Summit in October 2013. This is the first toll road project that the company is undertaking with six other state-owned enterprises. Jasa Marga has been appointed as the developer of the project. The company called it the “fastest major project inIndonesia”, in a press release in September 2012. According to another press release, in October 2012, almost 41 per cent of the road has been completed. The other toll roads that Jasa Marga expects to finish by year end are the JORR W2 North Toll Lane, Surabaya–Mojokerto toll road in East Java and the Semarang–Solo toll road in Central Java.
Besides developing toll roads, Jasa Marga is also seeking to acquire toll road concessions from other operators. The company is reportedly engaged in the process of acquiring two toll road concessions: one of the toll roads is the Aloha–Tanjung Perak section inEast Java; there is no information as yet on the other toll road. The company had also signed a deal in August 2012 to purchase a 21.24 per cent stake in PT Translingkar Kita Jaya, the operator of the Cinere–Jagorawi toll road, for IDR 137.93 billion, as a part of its expansion plans.
On the financial front, Jasa Marga reported IDR 5.59 trillion in revenue up to the third quarter of 2012. Toll road operations yielded IDR 4.08 trillion that stemmed from a total traffic flow of 870.2 million vehicles during the first nine months of the year, which constitutes an increase of approximately 10 per cent over the same period in 2011. Jasa Marga expects to book IDR 6.5 trillion in revenue from toll road operations in 2013 – a 20 per cent increase from the 2012 target of around IDR 5.4 trillion. The company attributes the growth of its average daily traffic revenue to an increase in the average daily traffic volume and scheduled tariff adjustments.
Land acquisition: A key hurdle
Land acquisition is one of the key risks that the company faces in its execution of toll road development projects: as noted by Ir. Adityawarman in the company’s 2011 annual report: “The greatest challenge in the completion of new toll roads remains in the stage of land acquisition…”For instance, the JORR W2 North Toll Lane project is mired in land acquisition issues. Of the 42 hectares of the land required for the toll road that will be nearly 8 km long, 3 hectares is yet to be acquired. The land should originally have been acquired by the end of December 2012; however, there are still no updates. Therefore, the actual completion of the project that was scheduled for completion by 2013 would now depend on the speed at which the government acquires and hands over the balance land to the company.
Despite these delays, the president director of PT Marga Lingkar Jakarta, the subsidiary undertaking the project, S. Surahman, still sounded a hopeful note in a company news release in October 2012: “We are optimistic that the land clearing issue will be solved immediately, considering the support from all stakeholders.” Similarly, Ir. Adityawarman reiterated the company’s commitment to toll road development in the company’s 2011 annual report: “Jasa Marga is determined to contribute to assisting the government in realising the provision of road infrastructure that is currently far from sufficient.”
On the positive side, the government passed the land acquisition law in December 2011, thus providing a legally prescribed time frame for each stage of the acquisition process. In the company’s annual report, Ir. Adityawarman opines that the “Ratification of the said law will accelerate the development of infrastructure such as toll roads in the country”. However, the current projects will not benefit from the new land acquisition law until December 2014, and will have to use the old regulation, namely, the Basic Agrarian Law.
Due to delays in the land acquisition process, some analysts believe that the returns on Jasa Marga’s toll roads will be undermined. Some of the other potential risks that the company may face include:
- Lower-than-expected traffic volumes on new and existing toll roads
- Poor execution of toll road projects
- Delays in tariff adjustments
- Failure to successfully implement cost-reduction initiatives
- Demonstrations disrupting toll operations and development
- Financial losses arising from lawsuits.
The occurrence of any one or more of the aforementioned factors could significantly hamper the company’s bottom line, according to industry analysts.
Technology upgrades
Jasa Marga has been engaged in a continuous endeavour to enhance its technology. For example, the company has installed automated toll booths to support the implementation of e-toll cards. In 2011, 24.6 million vehicles were reported to have used e-toll cards, compared to 14.19 million the year before, thus registering a significant year-on-year increase of 73.36 per cent. The company expects the usage of e-toll cards to rise by another 25 per cent in 2012.
In a further development, Jasa Marga, in collaboration with Bank Mandiri, officially launched the On Board Unit (OBU) at the Cililitan, Halim, and Cengkareng toll gates in November 2011. The OBU, also known as the e-toll pass, is a more developed version of the e-toll card. Installed in a vehicle, the OBU is essentially a receiver that captures the laser beam from the transceiver at the toll booths, which then enables the barrier to open automatically for the vehicle to pass. As a result, toll road users will be able to make transactions without having to stop.
Furthermore, Jasa Marga has also set up an effective and integrated traffic communication and information system. Specifically, it has intensified its use of closed-circuit television cameras to find out about real-time traffic conditions and obtain prompt information on traffic conditions from the Variable Message Sign and Jasa Marga Traffic Information Center.
Cementing its leadership position
In a country where the demand for road infrastructure outstrips the supply, Jasa Marga’s role as the country’s largest toll road operator has become increasingly critical. The company has undertaken a number of road projects that will help to make Indonesia a more connected country. Apart from reducing travel time, Jasa Marga has also upgraded its technology to make it more convenient for commuters to make toll payments. Thus, it is clear that Jasa Marga has every intention of maintaining its leading position in a bid to develop new toll roads and operate at least 50 per cent of the total toll road length inIndonesia.
Jasa Marga’s journey ahead will be fraught with challenges, particularly in the area of land acquisition. The company and the government will need to work closely together to ensure that this aspect does not block road development in the country, even while ensuring that the people affected are adequately compensated and rehabilitated.
