The Jakarta–Bandung corridor had been recognized to have a high traffic volume for many years. Although there are several alternative routes connecting these two cities, they were unable to cope with the increasing traffic volume. One alternative route in particular, which goes through the city of Purwakarta, experienced an average traffic volume increase of 7-9% per year in 3 years leading to 2002 (PT. Jasa Marga, 2002). Such condition occurred mostly due to the vast development of the industrial sector just outside the East Jakarta region,
such as Bekasi, Cikarang, Karawang, Tasikmalaya and Garut, as well as the economic development in Purwakarta, Subang, Plered and Cikalong Wetan.
Due to these conditions, the Indonesian government realized the urgency to develop a high standard primary road in order to increase transportation efficiency, so that it may decrease the required traveling time. Moreover, it was also intended to accommodate the growing traffic volume between Jakarta and Bandung.
As mentioned previously, the project was proposed as a solution to solve the traffic problems along the Puncak route and Purwakarta area, which were the main alternative routes between Jakarta and Bandung. Its development was also expected to stimulate the economic development in the West Java area as well as encouraging the development of Jakarta and Bandung in becoming mega-cities.
As a follow up to this national plan, the Indonesian government initially appointed PT. Citra Ganesha Marga Nusantara (CGMN) in 1994, a local private company, as the main investor and contractor for this 2nd Stage Cipularang Tollway project. A concession was then created between CGMN and Trafalgar House Construction, a British investor, along with PT. Jasa Marga as well as several other small local investors. CGMN was the consortium leader and had received licensed agreement from PT. Jasa Marga to finance, construct and operate this tollway project. As for Trafalgar, it provides additional financial support and construction technology.
However, due to the financial crisis in 1997, the project along with several other infrastructure projects was reevaluated based on the Presidential Decree No.39/1997. Since there was no significant progress made by the joint venture, the project was then suspended and resulted in the termination of the joint venture, including the withdrawal of CGMN as the investor. In 2000, a Presidential Decree No.64/2000 was issued by the Indonesian government to confirm the continuation of this project and appointing PT. Jasa Marga as the main developer.
The 2nd Stage Cipularang Tollway has a total length of 41 km that connects the north side of Purwakarta (Sadang) with Cikamuning, which is located at the west side of Padalarang (Figure 1). It connects the Padalarang-Bypass Tollway with the Jakarta-Cikampek Tollway, thus making it the longest tollway network in Indonesia (Hasanudin, 2005).
Initially, the project was divided into 4 work packages with an average length of 8.5-12 km for each package. However, since Indonesia would be hosting the 50th Asia-Africa Conference in Bandung in 2005, Megawati Soekarnoputri, who was the Indonesian President at the time, had requested PT. Jasa Marga through the Ministry of Public Works to accelerate the construction time of the project so that it may be completed just before the conference. To comply with this demand, the project was then divided into 9 packages or sections as follows to accelerate the construction process :
- North Purwakarta-South Purwakarta (Section 1)
- South Purwakarta (Section 2)
- Plered-Darangdan + Ciujung Bridge (Section 3.1)
- Darangdan-Cikalong Wetan (Section 3.2)
- Cisomang Bridge (Section 3.3)
- Cikalong Wetan-Cikubang (Section 4.1)
- Cikubang Bridge (Section 4.2)
- Cikubang-Cipada + Cipada Bridge (Section 4.3)
- Cipada-Cikamuning (Section 4.4)
Nine local contractors were selected through a tendering process and nine project managers from PT. Jasa Marga were selected to supervise each of these sections, coordinated by a project director. Several consultants were also appointed to provide professional assistance to each of those project managers. Additionally, a group of experts from various academic institutions was also hired to provide PT. Jasa Marga professional advice on problems encountered during the design and construction stage of the project.
In terms of project financing, the Indonesian government, who was represented by PT. Jasa Marga in this project, was faced by limited capital due to high constraint of the construction time and limited liquidity. In order to anticipate the consequences that may arise due to this situation, PT. Jasa Marga developed a new financial strategy that would ensure financial security for the project as well as maintaining a healthy condition on the company’s cash flow. Thus, the Contractor’s Pre-Finance (CPF) system was developed.
In this system, several local banks (government and private) agreed to make a commitment with PT. Jasa Marga to finance the project by providing loan for all of the nine appointed contractors. In addition to that, these banks also agreed to apply a fixed interest rate for the whole loan and payback period. They were willing to provide such demanding commitment because of the guarantee from PT. Jasa Marga that the project will be completed and will not be suspended at any time during the construction phase. In other words, the banks were guaranteed to get their money back no matter what happens with the project. The agreement was then formulated in the form of Letter of Comfort which is then used by the contractors to request for a loan from these banks.
The difference between the CPF system with the other financial strategies, such as the conventional project financing or BOT, is that in the CPF system the project does not need to look for an investor to finance the project and they are not in debt to the banks who provided the loans during the construction phase because the contractors borrowed the money directly from the bank and these debts will only be acknowledged by the project owner after the project is completed and handed over to the owner. As long as it is still in the construction phase, the contractor is fully responsible for the loan debt to the bank. After the project is completed, the project owner has the responsibility to repay the loans made by the contractors to the bank within a certain period that has been agreed previously by the owner and the banks. On the other hand, conventional project financing requires the owner to ask for loan directly to the bank, appoint contractors to carry out the construction work and finance the project with the loan; while the BOT system requires the owner to look for an investor through a tendering process to help finance the project and form a concession with the investor.
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