Waiting for Godot - Mandiri Sekuritas

The Indonesian Parliaments has formed a special committee (Pansus) to speed up the deliberation on the bill concerning land clearance for public usage, which is targeted to be completed by April this year and can be signed by end of 1H. Under the proposal the rights of the land owners automatically will be revoked when the land is set for public usage. But please note that the law implementation requires a government regulation, which usually takes at least a year to get issued. Hence, we are still skeptical on the land clearing process due to the long time lag of the impact of the new land law implementation.

Slow process on new toll road operations in 2010. According to the Ministry of Public Affairs, only 52.7Kms of new toll roads started operations in 2010, lower than initial estimate of 63.8Kms. Nonetheless, we think that the actual realization is lower than the ministry cited. We noted only 2 new toll roads started to operate commercially in 2010, namely: the Kanci-Pejagan (34.0Km) in Jan’10 and Kebon Jeruk – Penjaringan (9.7Km) also known as JORR W1, in Feb’10.

Prolonged land clearing process on Trans Java toll road project. The plans to connect Jakarta-Surabaya with toll roads popped up in 1995, but the economic crisis in 1998 delayed the development of the project. In 2005, the government formed the Toll Road Regulatory Authority (BPJT) to revive the mega project. Nonetheless, the hurdles in land clearing were the main constrain of the project. Land clearing process only reached 36.5% or equivalent to 1,970ha by mid Jan’11. The Ministry of Public Affairs is targeting land clearing process on the Trans Java toll road project (total length 653Km or equivalent to 5,281ha, consisting 10 branches) to reac h 80% by end 2011. Such expectation is supported by a new land law and additional budget for land clearing cost amounting to Rp315bn. But, we are skeptical on the target considering its slow historical record.

At least one more year until the law can be implemented … We definitely don’t doubt that better regulation would speed up the realization of toll road development; nonetheless, our skeptical view remains. Please note that a government regulation is required for the implementation of the law, which commonly takes at least one year to be issued and land owners might remain uncooperative.

We like JSMR, being the biggest toll operator in Indonesia. JSMR operates 531Km length of toll roads covering 70% of the country’s total toll road length, consisting 14 sections from 11 branches of toll roads. Most of its existing toll roads are located in the Greater Jakarta area, the most populous area in Indonesia and has integrated connection. Thus, this makes JSMR the busiest toll operator with a total traffic in 2009 reaching 916mn vehicle s (+4.1% yoy).