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Indonesia Considers Offering Concessions For Sunda Bridge to Spur Investment

The government may offer contractors concessions in the areas around the proposed Rp 100 trillion ($10 billion) Sunda Strait Bridge linking Java and Sumatra to encourage more potential investors to become involved in the project, an official from the National Development Planning Board said on Thursday.

“The internal rate of return alone is so low that it would not be profitable,” said Dedi S. Priatna, the deputy for infrastructure at the board, which is also known as Bappenas.

Dedi said that the concessions would likely be in sectors such as forestry or tourism. “It will have to be that way if it is to be profitable. We will conduct a series of seminars to assess the feasibility of the proposal,” he said.

Private contractor PT Bangungraha Sejahtera Mulia, a subsidiary of Artha Graha Networks (AGN), a business group owned by tycoon Tommy Winata, has completed a “prefeasibility” study on the bridge, the findings of which were handed to the government last week. The government has also completed a number of studies, but these were confined to construction-related matters, Dedi said.

The completion of the prefeasibility study is the latest step in the planning process, which was kicked off by the signing of a memorandum of understanding in October 2007 between AGN and the Banten and Lampung provincial governments.

In addition to the findings of the prefeasibility study, the provincial governments have submitted proposals for their inclusion in public-private partnerships to develop the project.

Currently, the government has 87 such partnerships in the pipeline worth Rp 326 trillion, as part of its master plan to develop Rp 1,429 trillion worth of infrastructure over the next five years.

Separately, State Minister for National Development Planning Paskah Suzetta said that the government would award the individual contracts in the bridge project by public tender.

“Under the law on private-public partnerships, we’re required to hold public tenders,” Paskah said. “We will do so as soon as we get official requests from the provincial governments.”

Paskah said he expected public tenders to encourage more private-sector investors to participate. “Arthagraha as the initiator of the project will be given a 10 percent weighting advantage in the bidding process,” he said.

State Enterprises Minister Sofyan Djalil said on Wednesday that state infrastructure companies would likely form a consortium to bid for contracts for the bridge project.

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