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Investor Daily - Bali Urban Rail diminati investor
26 July 2024
By Heru Febrianto
The construction of the Bali Urban Rail, an underground rail-based mass transportation project in Bali costing US$20 billion (Rp324.4 trillion), is attracting numerous investors both domestically and internationally.
The project called Bali Urban Rail and Associated Facilities was initiated by Bali Provincial Government through PT Sarana Bali Dwipa Jaya (SBDJ). The construction of Bali Urban Rail will be conducted in four stages.
The first stage will cover the Airport-Kuta Central Park-Seminyak-Berawa-Cemagi route. The second stage will connect the Airport-Jimbaran-Unud-Nusa Dua route. The third stage will extend from Kuta Central Park to Sesetan, Renon, and Sanur. The fourth stage will link Renon, Sukawati, and Ubud.
The Airport-Kuta and Airport-Jimbaran-Unud-Nusa Dua phases are scheduled for completion in early 2028, with all of phases one and two set to be finished by 2031. The total investment for these first two phases amounts to US$10.8 billion (Rp175.7 trillion). Meanwhile, the overall cost for all four construction phases is projected to reach US$20 billion (around Rp234.4 trillion).
PT Sarana Bali Dwipa Jaya (SBDJ) President Director Ari Askhara stated that the Bali Urban Rail project was seeking a strategic partner and a lead consortium of investors to actively participate in the project's development. Following a selection process, SBDJ has appointed PT Bumi Indah Prima (BIP) as the qualified partner and lead consortium of investors.
PT Sarana Bali Dwipa Jaya and PT Bumi Indah Prima will construct the underground railway infrastructure in stages. "Following an assessment supported by a consultant, we have secured a qualified investor, PT Bumi Indah Prima. They will not only be the main investor but will also coordinate with other investors to join," said Ari, as quoted by Antara in Jakarta on Thursday (25/7/2024).
The former president director of PT Garuda Indonesia Tbk (Persero) explained that the process of seeking investors was non-conventional. Potential investors interested in participating in the development were invited to present their vision, business plan, project structure, and other relevant aspects to qualify.
He noted that investor interest in participating in the development of Bali's first railway was quite high. During the qualification stage, five investors, including global companies, domestic firms, and state-owned enterprises (SOEs), submitted proposals.
However, with support from a consultant, Bali Provincial Government through PT SBDJ decided to appoint PT BIP as the investor willing to invest without a state financing guarantee. This said, his company is also open to collaborating with other investors to realise and operate the Bali Urban Rail.
Ari added that groundbreaking was scheduled for September 2024. The construction will include tunnels, underground tracks, supporting facilities such as telecommunications, electricity, water, and waste management, as well as transit-oriented development (TOD).
The groundbreaking will take place at Kuta Central Park, which will also serve as the management and site office for PT SBDJ. The construction of the Bali Urban Rail will begin with phases 1 and 2, starting simultaneously. The limestone soil contour in the area makes the construction process easier, so once these phases are completed, they can serve as a guarantee for the populace.
Pilot project
During the occasion, National Development Planning Minister and Bappenas Head Suharso Monoarfa announced that the financing model for the Bali Urban Rail project was being implemented for the first time in Indonesia. Bali serves as a pilot project, being the first region in the country to adopt an economic transformation concept launched by President Joko Widodo on 3 December 2021. According to Suharso, this financing model is advantageous because it does not incur debt for the state or the region, but rather generates profit.
"The investors are confident because they have done their calculations. I understand where they can achieve a return on their investment. We hope this concept can be implemented in other locations across the country,” he stated.
As a continuously developing global tourism destination, he believes that traffic conditions in Bali have changed significantly compared to several years ago. This issue must be addressed, as flyovers are not a viable option. He suggests that subways or underground railways are the right solution.
Meanwhile, Acting Bali Governor Sang Made Mahendra Jaya acknowledges that many investors are interested in the Bali Urban Rail project. Unlike other regions where the primary market is local residents, the main market in Bali is tourists.
Additionally, investors will generate revenue from ticket sales. Other profit sources include naming rights, underground space utilisation (such as for MICE, malls, hotels, restaurants, and other entertainment facilities), utility leases (covering telecommunications networks, electricity, water, gas, and more), and carbon credit calculations.
“Not only for investors, if the subway has operated, the regional government will also obtain revenue from operations,” Sang Made stated.
TOD
Yayat Supriantna, an urban infrastructure observer from Universitas Trisakti, commended Bali Provincial Government for its efforts to realise the Bali Urban Rail by constructing underground tunnels. He views the development plan positively, noting that the investment amount is substantial.
“This demonstrates that Bali Provincial Government is capable of undertaking major infrastructure projects worth trillions. Additionally, the project appears to prioritise local investors. I believe this type of transportation infrastructure can serve as a model for other regions in Indonesia,” he told Investor Daily.
He believes that massive transportation infrastructure development in Bali will attract investors, primarily because Bali's main sector is tourism. Such infrastructure projects should be supported to enhance TOD in the region and other areas served by the urban railway.
“I believe the remaining areas to be developed in Bali are TOD, recreational areas, and other entertainment zones that align with Bali's unique characteristics. As long as the development process is appropriate, culturally reflective, and supported by the local community, why not proceed? It is essential that all parties back this project,” he stated.
He added that, as a destination for tourism and international conferences, Bali has a strong backbone to attract as many investors as it can to develop its infrastructure to support its main sector as the national tourism centre.
“This sector can benefit both the people of Bali and the government by generating regional income. Therefore, if there is an infrastructure project designed to enhance tourism by improving transportation to key destinations in Bali, there is no reason not to support it,” he added.