Investor Daily, 4-5 March, 2017, Page 6, Section: Infrastructure & Transportations
By Deandra Syarizka
In the implementation of infrastructure projects under the scheme of government cooperation with business entities (KPBU), preparation of a project becomes one of the determinants of the success of the project’s auction process.
The large number of stakeholders, ranging from the central government, local government, as well as planning consultants is also a factor determining the length of a project’s preparation process.
Not surprisingly, the preparation of a KPBU-schemed water supply system (SPAM) project takes longer when compared to other projects, such as toll roads.
If in a year the government could auction off several toll road projects, preparation for a SPAM project actually takes several years. In certain cases, such as the Umbulan SPAM in East Java, the project preparation even takes up to 20 years before it is successfully auctioned.
A similar situation happens to the Bandar Lampung SPAM project. The project, which is included in the list of national strategic projects, encountered auction failure twice due to the lack of investors who submit bidding documents.
In fact, the process to prepare this project has been carried out since 2012, and the Ministry of Finance has also approved the provision of viability gap funding worth Rp 345 billion.
Director General of Human Settlements (Cipta Karya) of the Ministry of Public Works and Housing (PUPR), Sri Hartoyo, said that the government already made improvements to the project’s technical and financial feasibility documents in the past year. Thus, the project is ready to offer to the private sector this year.
"We want to push the Bandar Lampung and Jatiluhur [SPAMs]. In principle, infrastructure projects should, as much as possible, involve private investment, because, in addition to providing investment opportunities for investors, the state budget (APBN) could be levelled for other programmes," he said.
There are a number of issue that have led to the auction failure of the project, twice.
First, the lack of clarity of the potential customers of Way Rilau PDAM of Bandar Lampung has made investors hesitant.
Second, the use of imported components in the construction design leads to perceptions that the cost of investment is too expensive.
In preparing this project this time, Ministry of PUPR has also involved Bappenas and PT Penjaminan Infrastruktur Indonesia [Indonesia Infrastructure Guarantee Fund] in order to have the best possible project structure for all parties.
As a result, The Bandar Lampung SPAM project has now been declared as a KPBU project most ready to be offered to the private sector in the project list outlined in the PPP Book 2017.
President Director of PT Penjaminan Infrastruktur Indonesia, Sinthya Roesli, said that his company helped facilitate the formation of KPBU Joint Office of the Republic of Indonesia, together with Coordinating Ministry for Economic Affairs, Ministry of Finance, Investment Coordinating Board, and Policy Institute for Government Procurement of Goods and Services.
The availability of a joint office is expected to facilitate coordination across ministries/agencies in preparing LPBU-schemed infrastructure projects.
According to Sinthya, the Bandar Lampung SPAM project is needed to improve service coverage for access to piped drinking water in the City of Bandar Lampung to 46 percent by 2024, from the current coverage of only 20 percent.
Currently, the majority of residents in the capital of Lampung Province are still dependent on the availability of ground water. The project is also in line with government efforts to meet the target of 100 percent access to drinking water by 2019, as listed in the national medium-term development plan.
In the PPP Book, the estimated investment requirement for the Bandar Lampung SPAM project is US$ 81.48 million, with a concession period of 25 years. To increase its investment feasibility, the project also needs the support of viability gap funding worth US$ 22.22 million, APBN funding to the amount of US$ 11.85 million, and funding from the city government’s budget (APBD) valued at US$ 11.11 million.
The raw water, which comes from the Way Sekampung River, will be pumped into a raw water treatment plant located in the village of Rulung Helok, within 500m from the raw water source.
Furthermore, the water will be distributed through a 21km-long transmission pipeline covering eight subdistricts in the City of Bandar Lampung, namely Rajabasa, Labuan Ratu, Way Halim, Kedaton, Tanjung Senang, Sukarame, Sukabumi, and Kedamaian, with the total number of house connections reaching 600,000 house connections (SR).
The plan is for the pre-qualification process of the project to begin in the first quarter of this year and this will continue with the auction in the second and third quarters, as well as the determination of the tender winner at the end of 2017.
Meanwhile, the signing of the contract will be done in 2018 and the processes to meet the funding requirement and undertake the construction will begin in 2019.