Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

Multi Lane Free Flow Toll Collection In Indonesia Feasibility Study April 2020

MLFF feasibility study

EXECUTIVE SUMMARY 4

GLOSSARY 28

VOLUME I LEGAL AND INSTITUTIONAL STUDY 36

VOLUME II TECHNICAL STUDY 118

VOLUME III ECONOMIC AND COMMERCIAL STUDY 270

VOLUME IV ENVIRONMENTAL AND SOCIAL STUDY 308

VOLUME V PPP COOPERATION FORM 322

VOLUME VI RISK MANAGEMENT STUDY 332

GOVERNMENT SUPPORT AND/OR VOLUME VII 348 GUARANTEE

VOLUME VIII STUDY OF FOLLOW-UP ISSUES 354

VOLUME IX CONCLUSION 362

MLFF feasibility study

EXECUTIVE SUMMARY

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study Executive Summary

1. INTRODUCTION - SOCIAL COST OF TRAFFIC JAMS AND QUEUES ON HIGHWAYS ...... 8 2. OVERVIEW OF THE CURRENT TOLL COLLECTION SYSTEM ...... 9 3. COMPARISON OF AVAILABLE TOLL COLLECTION TECHNOLOGIES, PROPOSED TECHNOLOGY ...... 11 4. PROPOSED IMPLEMENTATION ...... 15 5. FUNCTIONAL AND ARCHITECTURAL OVERVIEW OF THE ENVISAGED SYSTEM ...... 17 6. CAPEX SUMMARY ...... 20 7. OPERATING EXPENDITURES SUMMARY ...... 22 8. CTSP SERVICE FEE IN THE NEW TOLL COLLECTION SYSTEM ...... 23 9. CTSP CASH FLOWS IN THE NEW TOLL COLLECTION SYSTEM ...... 25 10. COST SAVINGS ACHIEVED BY THE TROS ...... 26 11. SUMMARY RESULTS ...... 27

MLFF feasibility study Executive Summary

1. INTRODUCTION - SOCIAL COST OF TRAFFIC JAMS AND QUEUES ON HIGHWAYS According to President Jokowi, based on an analysis prepared by the National Development Planning Agency, Indonesia loses USD 4.6 billion every year because of the traffic jams in Jabodetabek.

Not only the time spent in urban traffic jams, but time spent at highway toll plazas cause losses to Indonesia.

Based on highly conservative calculations, introduction of a free flow electronic toll collection system could save from 0,5 minute up to 5 minutes per transaction depending on the length of the queue (30 seconds per transaction, maximum 10 vehicles in the queue in case of normal conditions).

Based on various data sources and assumptions, the social cost of time ranges between 0.9 USD to 1.2 USD and 1.9 USD to 3.2 USD in case of non-working hours and working hours respectively (please refer to Annex 1 in Volume III.).

Assuming 2 billion transactions per annum (please refer to Annex 2 in Volume III.), 60:40 split between non-working hours and working hours, and the above social cost of time, the loss caused by delays at toll plazas may amount up to USD 300 million per annum.

This in itself justifies the need for a free flow electronic toll collection system on the Indonesian highway network.

In addition to a substantial save in social cost arising from reduced travel time, the introduction of a free flow electronic toll collection system may result in savings in toll collection costs through a modern e-payment system, that offers flexibility and convenience to all users.

MLFF feasibility study Executive Summary

2. OVERVIEW OF THE CURRENT TOLL COLLECTION SYSTEM Based on primary data officially received from ITRA, the toll road network of the Indonesian archipelago is 1,713 km in length as per data provided by ITRA in April 2019, however with regard to road sections under preparation and under construction, the eventual network will exceed 6,000 kms in the next years. The biggest part of the toll road network (motorways and express roads) – in line with the distribution of the population – is located in the island of Java (approximately 60% of population lives in Java) and South Sumatra, but there are shorter road sections in Sulawesi, Borneo and Bali1.

Toll roads in Toll roads in Toll roads in construction preparation Total Length operation Islands phase phase (km) (km) (km) (km)

Java & Bali 1,418.25 592.2 970.4 3,361.85 Sumatra 277.24 940.0 1,713 2,549.23 Sulawesi 17.65 25.5 13.5 56.65 Borneo 0 99.6 7.6 107.20

Total 1,713.14 1,657.3 2,704.5 6,074.93

Table 1: Toll roads in Indonesia - Length (km) data per island

The toll road network consists of 48 concession companies' road sections. Tolls to be paid on 265 sections, are collected at 389 plazas, in 2,115 toll booths, located at the section borders.

As a starting point for the financial feasibility assessment, toll collection costs in the current system have been estimated. The most appropriate cost driver is the unit cost per toll booth which has been analysed based on three different data sources - actual figures of Citra Marga and Hutama Karya based on annual reports, and the business plan of a future toll road. The chart below summarizes unit costs calculated. The unit cost calculated based on the business plan provided by a toll collection operations expert is lower than the unit costs calculated based on the annual reports. Due to the in-depth breakdown presented in the business plan, and to be in the conservative side, the unit cost calculated based on those figures are applied for the purpose of financial return calculations.

1 map: http://gis.bpjt.pu.go.id/

MLFF feasibility study Executive Summary

Business plan Hutama Karya Citra Marga

1,005 1,655 2,447

800 1000 1200 1400 1600 1800 2000 2200 2400 2600

Estimated unit cost (million rupiahs / toll booth / year)

Figure 1: Summary of the estimated toll collection expenses of the current system

Existing network Existing network & Existing network, in Java + Bali construction phase toll construction & roads in Indonesia preparation phase network Number of toll booths 1,881 4,336 7,191 Toll collection costs per 1,890 4,358 7,227 annum (billion IDR) Toll collection cost per 136.2 313.9 520.6 annum (million USD)

Table 2: Total toll collection cost per annum (USD / IDR exchange rate 13,882.5)

MLFF feasibility study Executive Summary

3. COMPARISON OF AVAILABLE TOLL COLLECTION TECHNOLOGIES, PROPOSED TECHNOLOGY The new toll collection system shall provide economic benefits (higher traffic flow, lower capital and operational expenses). In order to identify the most suitable technology, which fits local conditions and provides economic viability, previously introduced toll collection technologies have been compared based on the following factors:

• Road-side infrastructure: The cost of the initial investment for the road-side infrastructure • Operating expenditures: Yearly cost level of the system • Equipment installed in the vehicle: Requirement and potential cost of equipment in vehicle • Cost of expansion: additional investment need and operational costs in case of expanding the tolled road network • Characteristics of suitable toll road: The type of the toll road where the system can operate in the most efficient way • Useful lifespan: useful lifespan of system equipment • Data communication: Technology of communication with the vehicle • Need for central database: System requirement about database of the registered vehicles • Primal charging schemes: Primary toll collection scheme • Distance-based tolling capability: Applicability for distance based charging scheme • Dynamic traffic management capability: capability of introducing dynamic traffic management measures, such as congestion charges

MLFF feasibility study Executive Summary

Passive RFID DSRC ANPR GNSS Vignette

Only for Only for Road-side Expensive Expensive Expensive enforcement enforcement infrastructure Rating: 1 Rating: 1 Rating: 1 Rating: 10 Rating: 10

Operating Mid High High Low Low expenditures Rating: 5 Rating: 2 Rating: 1 Rating: 9 Rating: 10 OBU - high cost RFID tag - OBU - mid- Rating: 1 Equipment No Vignette low cost cost installed in the GNSS e-OBU - Rating: 10 Rating: 10 vehicle Rating: 9 Rating: 5 no cost Rating: 10

Cost of High High High Low Low expansion Rating: 1 Rating: 2 Rating: 1 Rating: 10 Rating: 10 Limited Limited Middle sized Middle sized Characteristics express road express road network, Sizable network, network, of ideal toll network, high network, high normal traffic low traffic flow normal traffic traffic flow traffic flow flow flow road Rating: 1 Rating: 1 Rating: 1 Rating: 1 Rating: 1 Radio Radio Optical GSM Optical Data frequency frequency solution communication solution communication Rating: 6 Rating: 6 Rating: 1 Rating: 9 Rating: 2 Only for Only for Only for Only for Need for Yes central enforcement enforcement enforcement enforcement Rating: 2 database Rating: 10 Rating: 10 Rating: 10 Rating: 10 Primal Distance- Distance- Distance- charging Distance-based Time-based based based based schemes

Distance-based Yes Yes Yes Yes No tolling capability Rating: 10 Rating: 10 Rating: 10 Rating: 10 1

Dynamic traffic Yes Yes Yes Yes No management capability Rating: 10 Rating: 10 Rating: 10 Rating: 10 Rating: 1 OBU – 70 Overall rating 53 47 37 55 e-OBU – 79

Table 3: Comparison of tolling technologies

It is our assessment that the long term prevailing technology shall be the GNSS based technology for the following reasons:

MLFF feasibility study Executive Summary

• The ability to locate and track a vehicle in space and time is becoming more and more fundamental to road user charging. This ability enables the differentiation of a scheme regarding distance, time and place and an implementation on nationwide, high density road networks, including all vehicle and road types. GNSS-based solutions also offer possibilities to employ charging schemes, that are not available for other systems. • Moreover, the low costs for expanding a GNSS-based system allow to employ area- wide tolling systems (inter-urban tolling). This is especially important as an area-wide system can help to prevent from possible traffic rerouting, which may cause serious environmental and social problems. • Once a GNSS-based tolling system is established, the OBU/e-OBU can be used for additional purposes and these value-added services may create opportunities for new business projects. (Numrich, Julia & Ruja, Sascha & Voss, Stefan, 2012) • Cooperative Intelligent Transportation Systems are foreseen to be merged with the current road tolling technologies for the benefit of the users. For example, vehicles and infrastructure equipped with C-ITS (e.g. e-obu) can communicate a warning to each other, after which the drivers are informed about the upcoming traffic situation in time for them to take the necessary actions in order to avoid potential harm. • Other potential benefits of the use of C-ITS include reduced congestion and improved driver comfort. • The European Commission has already outlined its plan for the coordinated deployment of C-ITS in Europe in its communication, in which it also states that the full-scale deployment of C-ITS services and C-ITS enabled vehicles is expected to start in 2019. (European Transport Safety Concil - 2017)

Toll chargers and service providers are beginning to embrace a wide variety of third party devices

Non-Freeflow DSRC / RFID Interoperable DSRC / RFID Non-Cash • Electronic toll payment • Electronic toll payments across Non-Freeflow within a single tolling domain multiple tolling domain • Electronic • All electronic tolling • All electronic tolling Cash payment • Free flow tolling • Free flow tolling GNSS • Manual payment • • Other mobility payments • Other mobility payments Electronic toll payment within a single tolling domain • All electronic tolling • Free flow tolling • Open road tolling

Smartphone (GNSS) Telematics devices OEM platform • Electronic toll payments across Video tolling • Electronic toll payments across multiple tolling domain • Electronic toll payments (GNSS) • multiple tolling domain All electronic tolling across single and multiple • Electronic toll payments • • All electronic tolling Free flow tolling tolling domain across multiple tolling • Interoperable RFID • • Free flow tolling Mobile wallet integration • All electronic tolling domain + GNSS Ready • Mobility bookings and payment • • Open road tolling • Free flow tolling All electronic tolling • Electronic toll payments • • Mobile wallet integration Free flow tolling across multiple tolling • • Mobility booking and payment Open road tolling domain • • Vehicle telematics services Vehicle telematics services • All electronic tolling • Free flow tolling • Open road tolling • Other mobility payments

Current system Target system

Figure 2: Tolling technology evolution

MLFF feasibility study Executive Summary

Based on the above analysis and taking into consideration the Indonesian local requirements, our recommendation is a GNSS based technology in which the road users can use their own devices (e.g. smartphones) as on-board equipment.

There are several compelling reasons that justify the GNSS technology to be the most attractive one for Indonesia:

• No exposure to roadside infrastructure (unlike DSRC, RFID or ANPR based technologies) • Flexible and low cost for extension to further road network (unlike DSRC, RFID or ANPR based technologies) • May serve as a basis for Jakarta ERP and parking payment solution without having to construct extra roadside infrastructure taking valuable space and potentially damaging existing underground infrastructure • Roadside infrastructure is only required for enforcement purposes • Enables continuous tracking of vehicles potentially outside the road network subject to toll as well • May serve as a basis for additional Intelligent Transport Services including heavy vehicle control system, speed metering, emergency information system, control room, asset management Key disadvantage of traditional GNSS technology solutions is the high cost of on-board equipment. In case the road users can use their existing devices (e.g. smartphones), the cost from the road user’s perspective is minimized. The developments in this field suggest that systems involving third party devices (e.g. e-OBU) will be available in a reasonable timeframe, pilot GNSS e-OBU are currently being tested.

MLFF feasibility study Executive Summary

4. PROPOSED IMPLEMENTATION Introduction of the free flow electronic toll collection system not only generates substantial social cost savings, but also creates cost saving opportunities to the Toll Road Operators.

Operating expenditures of a free flow electronic toll collection system is lower than operating expenditures of the current manual toll collection system even taking into consideration the return on investments in implementation of the new system and the financing costs.

Various scenarios have been analysed from a network coverage and network extension point of view in order to assess the financial feasibility of the proposed system through the potential cost savings achievable by the toll road operators.

As per the proposed business model, the CTSP would implement and finance the system on all toll roads, which are expected to be operational by the end of 2021 across Indonesia (3,700 kms). Identical roadside infrastructure implementation on toll roads completed from 2022 going forward have to be financed by the respective TROs (instead of constructing toll booths, which they no longer need). The CTSP is responsible for operation of the system on all toll roads, both for those completed before the end of 2021, and those completed after this date (6,100 kms overall).

After 2025, the overall length of the toll road network is assumed to remain unchanged. The following chart summarizes the evolution of the total forecasted length of the toll road network by islands.

Network development by islands (ths km)

7.0 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.0 5.5 4.8 5.0 4.0 3.7 4.0 2.9 3.0 2.4 1.7 2.0 1.0 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Metro Jaya Java Bali Sulawesi Kalimantan Sumatra Total

Figure 3: Network development forecast

MLFF feasibility study Executive Summary

In order to secure the toll revenues in the first period after start of the new system and to maximize the usage of existing roadside infrastructure, approximately 50% of existing toll booths are converted to support tolling transactions via the new system, while the remaining toll booths are operated as per the current toll collection system. Introduction of the new electronic fine collection system in Indonesia will benefit from the introduction of the MLFF solution as well, providing practical support to the enforcement.

In the first period, 50% of the existing toll booths will be equipped with ANPR cameras to open barriers for users who are eligible to access toll roads in the new system by having an e- OBU or valid Route Ticket. Users not eligible to access the toll road network via the new system will have to use the remaining, traditional toll booths when entering or exiting the network. Converted toll booths enable for access without having to stop, but require registration with the CTSP and having either an operational e-OBU or a valid Route Ticket by the road users. Remaining toll lanes operate as they operate currently.

When the registration of road users is close to 100%, equipment from the toll plazas is relocated to the gantries, barriers at the toll plazas are removed, and the toll plazas are entirely removed from the highways in order to enable for even higher speed on the road (i.e. not having to decelerate at the toll plazas). Expansion of the toll collection system to cover Jakarta ERP and potentially national roads as well becomes possible.

MLFF feasibility study Executive Summary

5. FUNCTIONAL AND ARCHITECTURAL OVERVIEW OF THE ENVISAGED SYSTEM For the purpose of the implementation of the new MLFF toll collection system, an implementing regulation is proposed which specifically appoints a government institute, for example the Indonesia Toll Road Authority (in the form of Public Service Agency (BLU)) as the sole entity to have the following authorization: a. Jurisdiction for toll payment collection; b. Ability to contract with third party to implement its duty; and c. Road Enforcement and sanctioning. The appointed entity shall also have the right to outsource services to a third party (specifically a Central Toll Service Provider, CTSP) for exercising the given actions and to determine the duties of the involved third party in the implementation of MLFF, it is advised that an issuance of regulation which stipulate the minimum provisions to have under the terms and conditions of the contract.

Key activities, processes, money flows and data flows of the envisaged new toll collection system are summarized below.

1.E-money integration • Toll Road Operators and the CTSP open accounts in banks participating in e-tolling (These banks are the same ones issued e-toll cards already) • Top-ups are made by the Road users using widely accessible e-money top-up solutions on the bank accounts of the CTSP or to 3rd party e-wallet providers • CTSP manage virtual accounts of the registered road users • CTSP installs servers physically in each bank participating in order to enable quasi real-time transfer of toll revenues to the BLU account

2.Road usage data collection • Traffic counting at elementary sections • Vehicle categorization at selected sections • Tracking of vehicles using the network with OBUs and Route Tickets • Photos and identification data in case of unsuccessful payment

3.Key activities of the central system • Matching virtual accounts with road usage data • Determination of unauthorized road usage (gap analysis between traffic data and succesful toll charging) • Charging toll to virtual accounts • Allocation of actual toll charged to users to eligible Toll Road Operators • Aggregating information on toll revenue collected, fines collected and the allocation of these to Toll Road Operators and providing these to the BLU • Maintenance of OBU black lists and white lists

MLFF feasibility study Executive Summary

• Calculation of justified toll revenue for Toll Road Operators based on traffic data (service provided to Toll Road Operators on an optional basis for extra charge)

4.Key activities of the enforcement system • Continuous information on vehicles passing without authorization • Vehicles not equipped with OBU or having a valid Route Ticket • Vehicles without valid balance or Route Ticket • Providing data packages to the enforcement units required to perform enforcement and collection activities (number plate, location, photo etc.) • Off-site collection is performed by the enforcement units • In case of unseuccessful off-site collection by the enforcement units, the case with the necessary evidences is transferred to the Police to initiate electronic fine collection procedure

5.Collection of fines • Enforcement units attempt to stop all vehicles evading toll on the spot and collect the fine • In case of unsuccesful collection on the spot, owner of the vehicles are approached by the Police (electronic fine collection) • In case of unsuccesful collection by the Police, the claim is provided to the authority to collect it from the owner of the vehicle during the annual inspection

6.BLU clearing • Collected toll revenue is transferred to the BLU account quasi real time after road usage based on the virtual accounts managed by CTSP • 20-25% of collected fines and penalties are transferred to the BLU by the CTSP and the Police(rest of the penalties are required to cover the costs of collection) • BLU pays the service fee to CTSP based on collected toll and fines • BLU pays the toll revenue (reduced by CTSP service fee) and the fines and penalties transferred to it to Toll Road Operators • on a daily basis in case of users who have their bank accounts in the same bank(s) in which the Toll Road Operator has bank account(s) • on a monthly basis in case of users who do not have their bank accounts in the same bank(s) in which the Toll Road Operator has bank account (s) Key activities, processes, money flows and data flows of the envisaged new toll collection system are summarized on the below chart as well.

MLFF feasibility study Executive Summary

Figure 4: The complete architecture of the System

MLFF feasibility study Executive Summary

6. CAPEX SUMMARY The following charts and tables provide an overview on the capital expenditure structure of the CTSP for the proposed business model, calculated based on 2019 price levels.

Central system CAPEX on charts cover the costs of server sites, central software and sales and toll declaration modules as well as education and PR campaign, training, experts and project management costs.

Other CAPEX items presented on the charts include costs related to the conversion and deconstruction of toll booths.

We propose that the initial scope of the project shall cover the existing network plus toll roads to be constructed by the end of 2021. For the remaining investment we propose converting the investment costs of the toll-road concessionaires which were attributed to building the toll- gates to be redirected towards building the gantries compatible with the new system to be implemented. In line with this approach the charts below include all CapEx related to toll roads finished by the end of 2021, since these costs are borne by the CTSP. CapEx related to enforcement gantries of toll roads scheduled to be completed after 2022 are not included in this calculation, since these costs will be borne by the respective TROs.

300.0 274.0

250.0

200.0

150.0 116.0

100.0

50.0 25.6 0.9 0.8 4.4 1.2 7.6 1.1 1.0 -

Central system Enforcement devices Gantry construction Mobile enforcement & Workspaces Other TOTAL

Figure 5: Capital expenditures (includes CTSP financed CapEx only)

MLFF feasibility study Executive Summary

CTSP's cost structure (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 TOTAL CAPEX (274.0) (25.6) (0.9) (0.8) (4.4) (116.0) (1.2) (7.6) (1.1) (1.0) Central CAPEX (117.1) - - - - (33.8) - - - - Server sites (28.6) - - - - (33.8) - - - - Central software (56.5) ------Sales and toll declaration modules (17.7) ------Education and PR campaign (6.1) ------Training, experts and project management (8.2) ------

Progressive CAPEX (156.9) (25.6) (0.9) (0.8) (4.4) (82.2) (1.2) (7.6) (1.1) (1.0) Purchasing equipment (68.3) - - - - (80.7) - - - - Installing on existing toll boothes (23.1) ------Gantry construction (64.7) ------Uninstalling equipment from boothes - (19.2) ------Enforcement units - (5.8) (0.8) (0.7) (4.4) (0.5) (0.5) (7.6) (1.0) (0.9) Office & FTE equipment (0.8) (0.6) (0.1) (0.1) (0.1) (0.9) (0.7) (0.1) (0.1) (0.1)

Table 4: Capital expenditures (includes CTSP financed CapEx only)

MLFF feasibility study Executive Summary

7. OPERATING EXPENDITURES SUMMARY Operating expenditures are summarized in the chart and table below. Other OpEx on the chart and table below includes Marketing & PR costs, office rental fees, OpEx related to server sites at banks and other OpEx.

160.0 149.0 144.0 134.5 139.2 140.0 130.1 120.8 120.0 110.6 99.9 100.0 92.7

80.0

60.0

40.0

20.0 10.8

- 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Central system Roadside infrastructure Central FTE Customer service FTE Enforcement FTE Transaction fees Mobile enforcement Other OpEx Total

Figure 6: OPEX summary

CTSP's OPEX structure 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Central system 7.5 15.4 16.0 16.5 17.1 17.7 18.3 18.9 19.5 20.2 HR costs 2.3 23.0 25.5 28.6 31.6 33.7 34.9 36.2 37.5 38.9 Central FTE 2.3 4.7 4.9 5.0 5.2 5.4 5.6 5.7 5.9 6.1 Customer service FTE - 4.0 4.3 4.7 5.0 5.4 5.6 5.9 6.2 6.5 Enforcement FTE - 14.4 16.4 18.9 21.4 23.0 23.7 24.6 25.4 26.3 Roadside infrastructure - 37.5 41.0 47.2 53.0 58.9 60.9 63.0 65.1 67.3 Mobile enforcement - 1.6 1.9 2.1 2.4 2.6 2.7 2.8 2.9 3.0 Transaction fees - 11.0 11.3 11.7 12.1 12.5 13.0 13.4 13.9 14.3 Other OpEx 1.0 4.1 4.2 4.4 4.5 4.7 4.8 5.0 5.2 5.3 Total 10.8 92.7 99.9 110.6 120.8 130.1 134.5 139.2 144.0 149.0

Table 5: OPEX summary

MLFF feasibility study Executive Summary

8. CTSP SERVICE FEE IN THE NEW TOLL COLLECTION SYSTEM The annual service fee payable was calculated in a way that the private player (Central Toll Service Provider – CTSP) invests in implementation of the new system, operates the system and transfers the system to the state after 10 years achieving a total IRR of 12.5% (Design- Build-Finance-Operate-Transfer model). The 12.5% IRR is determined in line with PPP regulations, based on current commercial lending rates, equity return rates and a debt to equity ratio of 70% / 30%. The 12.5% asset level return is derived based on the following components:

• 7.05% risk free rate is applied based on the spot rate of IDR denominated 10-year government bonds as of 2019 December 31 • Adjusted unlevered beta of 0.54 is applied based on the peer goup of international traded companies involved in transport infrastructure with toll collection activities • 66% leverage is applied based on the same peer group • 25% marginal tax rate applied in line with the statutory corporate tax rate in Indonesia • Market risk premium of 4.89% applied based on the implied equity risk premium published by Damodaran (12-months trailing) • A size risk premium of 5.22% is applied as per the study published by Duff & Phelps • 9.05% pre-tax cost of debt (2% spread over the risk free rate) is in line with Indonesian lending rate benchmarks published by the Bank Indonesia as of 2019 December

Weighted average cost of capital - IDR Comment Risk free rate 7.05% IDR denominated Y10, spot rate, 2019 dec. 31 Adjusted unleveraged beta 0.54 Peer group median Leverage (D/E) 0.66 Peer group median Marginal tax rate 25.00% Statutory corporate tax rate Adjusted leveraged beta 0.81 Damodaran 2019 year-end implied trailing 12 months Market risk premium 4.89% ERP Preliminary cost of equity 11.01% Size risk premium 5.22% Guide to Cost of Capital (Duff and Phelps) Cost of Equity 16.2%

Risk free rate 7.05% Government bond Risk premium 2.00% Based on Bank Indonesia lending rate benchmarks Pre-tax cost of debt 9.05% Marginal tax rate 25.00% Statutory corporate tax rate After-tax cost of debt 6.8%

Equity-to-value ratio 60.41% Peer group median Debt-to-value ratio 39.59% Peer group median

WACC 12.5%

Table 6: OPEX summary

MLFF feasibility study Executive Summary

The level of annual CTSP service fee on 2019 price levels is calculated based on the capital and operating expenditures, as well as the corporate income tax taken into account at 25%.

CTSP service fee will be composed of the following parts:

• Lump sum service fee for existing toll roads on Java and Bali (for the list of toll roads and the respective maximum number of sections and traffic lanes included in the lump sum service fee please refer to Annex 3 of Volume III.); • Per tolled lane based service fee for any additional lanes to be covered in line with the extension plans of the toll road network.

The CTSP will be eligible to receive its service fee once the operation of the system goes live (from the beginning of 2022).

Note, that since after 2021, Concessionaires are required to finance the implementation of enforcement gantries on their respective additional toll roads instead of building toll booths, therefore they do not have any toll collection activities related costs other than CTSP fees from their start of operation date. The level of annual CTSP service fee on 2019 price levels calculated in line with key operational assumptions set out in Chapter 1.2 of Volume III., based on the CapEx, OpEx and tax assumptions presented in this study are as follows:

• Lump sum service fee per annum: 104.7 USD m per annum; • Per lane service fee: 47.7 USD t per annum per tolled lane.

MLFF feasibility study Executive Summary

9. CTSP CASH FLOWS IN THE NEW TOLL COLLECTION SYSTEM The following chart and table present the aggregated cashflows of the CTSP.

300.0

200.0 64.3 68.6 69.2 77.7 73.7 82.6 85.3 100.0 35.0 - (39.8)

(100.0)

(200.0) (284.8) (300.0)

(400.0) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Total OPEX Total CAPEX Lump sum SF Per lane SF Tax Cashflow

Figure 7: CTSP cashflows

CTSP cashflow (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Total CAPEX (274.0) (25.6) (0.9) (0.8) (4.4) (116.0) (1.2) (7.6) (1.1) (1.0) Total OPEX (10.8) (92.7) (99.9) (110.6) (120.8) (130.1) (134.5) (139.2) (144.0) (149.0) Service fee revenues - 159.8 173.1 189.2 205.0 216.5 223.9 231.5 239.4 247.5 Lump sum SF - 114.8 118.7 122.7 126.9 131.2 135.7 140.3 145.1 150.0 Per lane SF - 45.0 54.4 66.4 78.1 85.3 88.2 91.2 94.3 97.5 Tax - (6.4) (7.9) (9.2) (10.5) (10.3) (10.4) (11.0) (11.7) (12.2) Cashflow (284.8) 35.0 64.3 68.6 69.2 (39.8) 77.7 73.7 82.6 85.3

Table 7: CTSP cashflows

MLFF feasibility study Executive Summary

10. COST SAVINGS ACHIEVED BY THE TROS

TROs’ avoided toll collection costs would be replaced by the service fees payable to the CTSP in the proposed system. Therefore, TROs' saving potential is calculated as the difference between the anticipated level of existing toll collection costs borne by them in the current system, and the service fees payable to the CTSP in the proposed system. The net present value of TROs’ overall cost saving potential over the concession period is over 1,800 USD m (over 24.84 IDR trn), calculated at a 12.5% discount rate. The following chart presents the TROs' cost saving potential on an annual basis throughout the concession period.

1,000

800

524 600 474 490 506 419 458 356 400 290 239 200 - -

(200)

(400) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Avoided OPEX CTSP service fee Net savings

Figure 8: TROs' toll collection cost saving potential

MLFF feasibility study Executive Summary

11. SUMMARY RESULTS Based on the assumptions made in the Economic and Commercial Study, the recommended operational setup is financially viable from the perspective of TROs' cost savings while granting the required return of 12.5% for the CTSP.

However, it is important to note, that due to a significant part of the overall capital and operating expenditures being attributable to the core central system, the larger network coverage serviced by the CTSP provides a higher overall saving potential for TROs due to economy of scale.

GLOSSARY

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study Glossary

Abbreviation Meaning / Definition AET all electronig tolling ANPR Automatic Number Plate Recognition ASECAP European Association of Operators of Toll Road Infrastructures ATM Automated Teller Machine A registry maintained by CTSP in its IT system showing the financial Balance position of a User to pay toll to CTSP. BE Business Entity BLU Badan Layanan Umum / Public service agency BPJT Badan Pengatur Jalan Tol (ITRA) BUJT Badan Usaha Jalan Tol / Toll Road Business Entities CAPEX Capital Expenditures CI Configuration Item C-ITS Cooperative Intelligent Transportation System CMDB Configuration Manager Database Concessionaire Business entity, which financed and carried out the implementation of a or Concession tolled road and operates that. Company COTS Commercial off-the-shelf CPI Consumer Price Index CTSP, Central The entity which operates the unified central toll collection system and Toll Service carries out all the toll collection activities Provider CS Central System DSRC Dedicated Short Range Communications EETS European Electronic Toll Service Electronic money (e-money) is a digital alternative to cash. It allows users e-Money to make cashless payments with money stored on a card or a phone, or over the internet. Activities to monitor or enforce compliance with legal provisions relating Enforcement to Toll Road Usage, including procedures for the payment of Fines.

MLFF feasibility study Glossary

Abbreviation Meaning / Definition e-OBU electronic on-board unit ERA Russian automatic emergency call system GLONASS ERP Electronic Road Pricing ETC Electronic Toll Collection The e-Money card which the toll road users currently pay the toll on the e-Toll Card road with. ETS, An electronic system capable of calculating, charging and paying tolls Electronic electronically without stopping or slowing down the road user. Tolling System FHD Full High Definition FPS Frames Per Second FTE Full-time equivalent Equipment that is part of a system and is permanently installed at specific points on the Toll Road Network and that operates automatically. Gantry Gantry/Roadside Equipment can support both Toll Collection and Enforcement activities. GHz Gigahertz GNSS Global Navigation Satellite System GPN National Payment Gateaway GSM Global System for Mobile Communication HD high definition HGV heavy good vehicle IC Cost of routine operation-ban van IEC An international standard IIGF Indonesian Infrastructure Guarantee Fund IR infrared camera IRR internal rate of return

MLFF feasibility study Glossary

Abbreviation Meaning / Definition

The industrial, scientific and medical (ISM) radio bands are radio bands (portions of the radio spectrum) reserved internationally for the use of ISM radio frequency (RF) energy for industrial, scientific and medical purposes other than telecommunications.

ITRA Indonesia Toll Road Authority ITS Intelligent Transportation System IVR Interactive voice response km kilometer KPI Key Performance Indicator LAN Local Area Network LV Light vehicles MJPEG Motion Joint Photographic Experts Group MLFF Multi-Lane Free Flow Mobile The part of the Enforcement Support that is carried out with the help of Enforcement Enforcement Equipment installed on a vehicle. NM nanometer OBU on-board unit OEM Original Equipment Manufacturer On-Board An in-vehicle electronic on-board unit that records a route using GPS and Unit, OBU communicates with a toll service provider's system. OPEX Operating Expenditures ORT open road tolling PC Passenger cars Penalty Financial penalty for failure to pay tolls. Penanggung Jawab Proyek Kerjasama / Government Contracting Agency PJPK (GCA) Equipment that is part of a system and is permanently installed at specific points on the Toll Road Network and that operates automatically. Portal Gantry/Roadside Equipment can support both Toll Collection and Enforcement activities.

MLFF feasibility study Glossary

Abbreviation Meaning / Definition POS Point of Sale PPP, KPBU Public-Private Partnership / Kerjasama Pemerintah dengan Badan Usaha PT Limited Liability Company / Perseroan Terbatas Project Multi Lane Free Flow Toll Collection in Indonesia PUPR Public Work and Housing / Pekerjaan Umum dan Perumahan RFID Radio-frequency Identification Equipment that is part of a system and is permanently installed at specific Roadside points on the Toll Road Network and that operates automatically. Roadside Equipment Equipment can support both Toll Collection and Enforcement activities. RTSP Real Time Streaming Protocol RUC, Road Road user charges are a tax paid by users of vehicles which use a fuel User Charges which is not taxed at source Service The entity which operates the toll collection system and carries out toll Provider collection activities SF Service fee SLA Service Level Agreement SLFF Single Lane Free Flow SOA service-oriented architecture TDO Toll Declaration Operators TIC Token Ring interface coupler The Toll payable for the use of the Toll Road Network as defined in the Toll specific legislation. Grouping used to determine the amount of the toll for a particular toll Toll Category section based on the section and the characteristics of the vehicles and vehicle Combinations. Toll Collection A software, hardware combination which carries out toll collection System activites. Toll Provision of information on the use of a toll road section by a toll motor Declaration vehicle as a basis for establishing the toll payment obligation. Toll Road The totality of the parts of the Road Network which may be used for Network payment of the toll in accordance with the respective separate legislations.

MLFF feasibility study Glossary

Abbreviation Meaning / Definition TRO Toll Road Operators UKL Upaya pengelolaan Lingkungan Hidup / Environmental Management Upaya Pemantauan Lingkungan Hidup / Environmental Monitoring UPL Program USD US dollar VA Virtual Account Vehicle subject A Vehicle the owner or operator of which is a Road User liable to a Fee. to Toll VIN Vehicle Identification Number VLAN Virtual Local Area Network VM Virtual Machines VSAT Very Small Aperture Terminal

MLFF feasibility study Glossary

VOLUME I LEGAL AND INSTITUTIONAL STUDY

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study - Volume I Legal and Institutional Study

1. PREFACE ...... 40 1.1. Regulation Analysis ...... 40 1.1.1. Provisions on the laws and regulations in MLFF business activities ...... 41 1.1.2. Laws related to the Non-cash Transaction system on the Toll Road ...... 41 1.1.3. Laws related to the MLFF System ...... 45 1.1.4. Establishment of Business Entity ...... 48 1.1.4.1. Establishment Requirement ...... 48 1.1.4.2. Establishment procedure ...... 50 1.1.4.3. Shareholders Composition ...... 50 1.1.4.4. Permit After Establishment ...... 50 1.1.4.5. Legal Issues with regards to PT Establishment ...... 51 1.1.5. Foreign Capital Investment ...... 52 1.1.6. Business Competition ...... 53 1.1.7. Environment ...... 54 1.1.8. Manpower & Work Safety ...... 54 1.1.9. Asset Utilization owned by the PUPR Ministry for the Project Implementation .... 63 1.1.10. PPP Financing ...... 65 1.1.11. Permit ...... 71 1.1.12. Taxation ...... 73 1.1.13. Construction ...... 73 1.1.14. PPP Forms (type) ...... 74 1.1.15. Government Support ...... 75 1.1.16. Government Guarantee ...... 75 1.2. Legal Risk and Mitigation Strategy ...... 85 1.3. Analysis of Improvement of Legislation or Issuance of New Legislation ...... 86 2. INSTITUTIONAL ANALYSIS...... 88 2.1. Institutional Regulations ...... 89 2.2. Roles and Responsibilities of Agencies Related to the Project...... 93 2.3. Roles and Responsibilities of the PJPK Unit for the Project ...... 107 2.4. Institutional Regulation Tools ...... 110

MLFF feasibility study - Volume I Legal and Institutional Study

2.5. Terms of Reference for Decision Making ...... 111 3. ISSUES RELATED TO THE IMPLEMENTATION OF THE MLFF ...... 115

MLFF feasibility study - Volume I Legal and Institutional Study

1. PREFACE In preparing a report on the Analysis of Legislation and Institutions for the proposed Multi Lane Free Flow Toll Collection In Indonesia Project (hereinafter is referred to as “Project”), the approaches and methodologies used are divided into several stages, namely:

➢ regulation review which applies to business activities or the structure of transactions related to the implementation of the Project, which will also be related to institutional studies of each institution relevant to the Project; ➢ analysis of each existing document in connection with the planned implementation of the Project; ➢ identification of legal gaps (regulatory gaps) related to legislation that need to be refined for the purpose of administering the Project; ➢ identification of risks in the Project that may arise and determination of risk allocation to the party that is most able to bear the risk; ➢ hearings and consultations held with each related party to obtain input as needed; and ➢ preparation of reports analysis of legislation and institutions conducted in parallel with consultation activities with the Ministry of PUPR and other consultants in formulating conclusions and recommendations for analysis of legislation. By using the approach and methodology as stated above, institutional and legal studies are then described in accordance with the scope as stipulated in the Regulation of the Minister of National Planning / Head of the National Development Planning Agency Number 4 of 2015 concerning Procedures for Implementing Government Cooperation with Business Entities in Infrastructure Provision ("Bappenas Regulation No. 4/2015") as follows: A. Regulation Analysis; B. Institutional Analysis.

1.1. Regulation Analysis

The purpose of the regulation analysis is to formulate the following matters: 1. Compliance analysis with the Provisions of Laws Compliance analysis with the Provisions of Laws prepared to ensure compliance with relevant regulatory requirements that must be carried out in the implementation of the Project. The results of the identification and analysis of laws and regulations will be a reference for the parties involved in implementing the Project, especially to ensure that their implementation will be in accordance with the provisions of the laws. 2. Legal Risks and Mitigation Strategies Legal risks in the implementation of the Project will explain the identification of types of legal risks that can arise during the transaction stage. In addition, for the purpose of

MLFF feasibility study - Volume I Legal and Institutional Study

implementing the sustainability of the Project, it is necessary to prevent risks that involve identification of all risks and actions that need to be taken by the Ministry of PUPR to avoid or minimize the consequences of these risks. 3. Analysis on the Improvement of Laws and Issuance of New Laws This chapter will set out legislations that needs to be improved for the purpose of implementing the Project. The scope of the regulation to be analyzed for improvement will be related to the regulatory aspects in the implementation of the more specific MLFF held in Indonesia.

1.1.1. Provisions on the laws and regulations in MLFF business activities

Regulation analysis is made related to several legal aspects as follows: 1 Regulations related to Non-cash Transaction at Toll Roads in general and specifically in MLFF activities; 2 Establishment of Business Entity; 3 Capital investment; 4 Business competition; 5 Environment; 6 Employment; 7 Use of assets owned by the Ministry of PUPR for the implementation of the Project; 8 PPP financing, including financing and income mechanisms; 9 Licensing; 10 Taxation; 11 Construction; 12 Form of PPP; 13 Government support; and 14 Government guarantees.

1.1.2. Laws related to the Non-cash Transaction system on the Toll Road

The Non-Cash Transaction System on Toll Roads has been specifically regulated in Minister of Public Works and Public Housing Regulation Number 16 Year 2017 Regarding Non-Cash Transaction on Toll Roads ("Permen PUPR 16/2017"). Pursuant to Article 1 number 2 Permen PUPR 16/2017, Non-cash Toll Transactions are activities for collecting / payment toll rates using payment instruments other than cash. Regulatory provisions related to non-cash transactions on toll roads include: 1. Non-cash transaction tools systems on toll roads Article 1 number 4 of the Minister of Public Works Regulation 16/2007 states that the non-cash Toll Transaction Equipment is all types of equipment used to support the

MLFF feasibility study - Volume I Legal and Institutional Study

implementation of non-cash transactions on toll roads that cover the front, middle and rear systems (front-end, middle end and back-end ) and electronic money balance refill equipment. a. Front-End System The Front-End System is a part of the non-cash Toll Transaction system which consists of toll equipment directly related to road users, consisting of:

➢ control system; ➢ antenna; ➢ reader; and ➢ top up tool.

b. Middle-End System Middle-End System is the whole system that connects the front-end and back-end systems

c. Back-End System Back-End System is the whole system that completes the payment process from front- end transactions to the system provided by the bank.

2. Non-cash Transaction Implementation The non-cash transaction implementation consisting the following1: a. Management Management of the non-cash Toll Transaction consists of: ➢ provision and maintenance of non-cash Toll Transaction equipment; ➢ operation of the non-cash Toll Transaction on toll roads; ➢ implementation of reconciliation activities for the non-cash Toll Transaction; and ➢ completion of the final payment (settlement) of the non-cash Toll Transaction between Electronic Money Issuers and Toll Road Business Entities.

b. Supervision and control Supervision and control of the non-cash Toll Transaction consists of2:

➢ monitoring and evaluating the implementation of the non-cash Toll Transaction; and ➢ reporting on the results of monitoring and evaluation of the non-cash Toll Transaction

1 Article 4 of Permen PUPR 16/2017 2 Article 4 (2) of Permen PUPR 16/2017

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Implementation of the non-cash Toll Transaction based on the principle:

a. interoperability, the non-cash Toll Transaction system can function between the systems in each BUJT and / or the non-cash Toll Transaction system in other transportation sectors; b. non-exclusive, the implementation of non-toll Toll Transactions is open to all issuers of electronic money without exclusivity in accordance with the provisions of laws; and c. the payment system in the implementation of the non-cash Toll Transaction must comply with the provisions of the laws and regulations

3. Non-cash Transaction Technology The non-cash Toll Transaction on the toll road uses 2 (two) forms of technology:

a. non-cash Toll Transactions that use electronic money card-based technology, and / or; b. non-cash Toll Transactions that use non-touch based technology

4. Technical Requirements and Non-Cash Transaction Criteria The technology of the non-cash Toll Transaction, based on electronic money cards and non-touch-based technology, is issued by Electronic Money issuers, both Banks and / or non-Bank Financial Institutions that have obtained licenses as payment instruments in accordance with the laws and regulations.

Electronic money card-based technology meets at least the following criteria:

a. has a high level of reliability as a means of payment of toll rates in accordance with the characteristics of traffic on the toll road; b. has a mechanism to anticipate violations of toll transactions; c. can be operated with the entire BUJT toll transaction system; d. accommodates transaction system integration between BUJT and the non-cash transaction system in other transportation sectors; e. in accordance with the purchasing power of toll road users; f. can receive multi-issuer electronic money that is valid in accordance with the provisions of the legislation; and g. has a system that is able to adjust the toll rate as stipulated in the provisions of laws The technology of touch-based toll transactions must be approved by the BPJT and at least meet the following criteria:

a. has a high level of reliability and accuracy as a means of payment of toll rates in accordance with the characteristics of traffic on the toll road; b. data transmission and equipment must meet international standards; c. has data storage with adequate capacity;

MLFF feasibility study - Volume I Legal and Institutional Study

d. has a mechanism to anticipate violations of toll transactions; e. can be operated with the entire BUJT toll transaction system; f. accommodates transaction system integration between BUJT and non-cash transaction systems in other transportation sectors; g. has a system capable of adjusting the toll rate as stipulated in the legislation; h. has a monitoring mechanism and can be further developed in accordance with technological progress; and i. in accordance with the purchasing power of toll road users.

5. Implementer of non-cash transactions The non-cash Transaction Implementer is a non-cash Transaction Business Entity ("BUP- TN"). BUP-TN is formed by the BUJT consortium, and can cooperate with other parties in the management of the non-cash Toll Transaction.

BUP-TN must have a payment service permit and sign a cooperation agreement with BPJT on behalf of the Minister. BUP-TN is obliged to carry out the non-cash Toll Transaction with the main work indicators agreed with BPJT, as follows:

a. financially capable including providing bailout funds in the event that the final payment settlement process (settlement) cannot be completed in accordance with the Standard Operating Procedure agreed upon between the BUJT and Electronic Money Issuer; b. able to complete the settlement process with a high degree of accuracy; c. provide a monitoring system for the implementation of the non-cash Toll Transaction; d. provide facilities and infrastructure for non-cash Toll Transactions in accordance with the technical specifications stipulated in standard operational procedures; and e. Other key work indicators are specified in standard operational procedures. The Implementing Business Entity has the following obligations:

a. carry out the non-cash Toll Transaction; b. make preparations in an effort to realize Non-Stop Toll Transactions with at least conducting technology studies and trials; c. improving the technology used in the non-cash Toll Transaction from electronic money card-based technology to touch-based technology; d. carry out the implementation of the non-cash Toll Transaction in accordance with the standard operational procedures for carrying out non-cash Toll Transactions agreed upon with BUJT and / or Electronic Money Issuers; and Carry out other obligations stipulated in standard operational procedures.

MLFF feasibility study - Volume I Legal and Institutional Study

1.1.3. Laws related to the MLFF System

There are no specific regulations governing the MLFF infrastructure. However since the MLFF system is related to the electronic transaction system hence regulations on electronic transaction and electronic money are relevant to this Project.

This Project consists of the construction, development, operation and maintenance of the MLFF infrastructure, including supporting legal enforcement.

The construction, development, operation and maintenance of the MLFF system shall be subject to the requirements provided under regulations on electronic transaction. Article 5 paragraph (1) Law 11 of 2008 on Information and Electronic Transaction (Law 11/2008) provides that an electronic information and/or electronic document and/or printed document shall be valid if produced by using an electronic system which complies with the provision in this Law. Article 16 of the law provides minimum requirements for an electronic system as follows: a. can re-display electronic information and / or electronic documents in full in accordance with the retention period stipulated by the laws and regulations; b. can protect the availability, authenticity, confidentiality and accessibility of electronic information in the operation of the electronic system; c. can be operated in accordance with procedures or instructions in the operation of the electronic system; d. complete with procedures or instructions published in language, information, or symbols that can be accessed by parties related to the operation of the electronic system; and e. have a sustainable mechanism to maintain its novelty, clarity, and accountability of procedures or instructions.

Furthermore the electronic equipment used in the MLFF system shall comply with the technical requirements and licensing as required under Article 32 Law 36 of 1999 on the Telecommunication.

Since the operation of the MLFF system will require registration of the vehicles, it is considered that the MLFF system may store certain identity of the owner of vehicles which may classify as personal data. Article 82 of 2012 on Implementation of Electronic System and Transaction (GR 82/2012) provides that the operator of an electronic system shall maintain the personal data and use the personal data based on consent of the owner of the personal data.

According to Minister of Telecommunication Regulation No. 4 of 2016 on Management System of Information Security (Minister of Telecommunication Regulation 4/2016) the electronic system is divided in to 3 categories, namely: (i) strategic electronic system; (ii) high electronic system; and (iii) low electronic system. An electronic system which having serious impact on the public interest, public service, smooth administration of state, or national

MLFF feasibility study - Volume I Legal and Institutional Study defense and security shall be classified as a strategic electronic system. The strategic electronic system shall implement national standard (SNI ISO/IEC 27001) and other requirements as determined by the relevant ministry (in this case Ministry of PUPR).

Minister of Telecommunication Regulation 4/2016 also provides that the operator of an electronic system for public service shall place its data center and disaster recovery center within Indonesia area for the purpose of law enforcement, protection and enforcement of state sovereignty on the data of its citizens.

According to Minister of Telecommunication Regulation No. 36 of 2014 on Procedure for Registration of Electronic System, the operator of an electronic system for public services which having facility for payment and/or financial transaction on online basis shall register it system with Ministry of Telecommunication.

Beside of the above registration, Regulation of Bank of Indonesia No. 18/40/PBI/2016 on Implementation of Payment Transaction Processing provides that any party who acting as payment system service provider (Penyelenggara Jasa Sistem Pembayaran (PJSP)) or supporting provider (such as technology provider) shall obtain a license from Bank of Indonesia. The PJSP is consist of: (a) principal; (b) switching provider; (c) issuer; (d) acquirer; (e) payment gateway provider; (f) clearing provider; (g) final settlement provider; (h) fund transfer provider; (i) e-wallet provider; and (j) other PJSP as determined by Bank of Indonesia. The regulation provides that a principal, switching provider, clearing provider, and/or final settlement provider shall be a limited liability company which at minimum 80% of its shares shall be owned by Indonesian citizen; and/or Indonesian legal entity. The PJSP shall also provide periodic report and incidental report to Bank of Indonesia as well as report of independent auditor on the information system.

With respect to the legal enforcement, the MLFF System is expected to provide facilities to support the enforcement (enforcement gantries and mobile enforcement units). These facilities may provide evidence on violation on electronic basis.

The MLFF enforcement is expected can be conducted in cooperation with Indonesian Police for the effectiveness of the enforcement. The existing regulatory framework for the implementation of electronic traffic enforcement includes Article 5 paragraph (1) Law 11/ 2008 (as amended by Law No. 19/2016) and Article 249 paragraph (3), Article 272 paragraph (1) and (2) Law Number 22 of 2009 on Traffic and Road Transportation as well as Government Regulation Number 80 of 2012 on Procedure for Inspecting Motor Vehicles on Roads and Enforcement of Road Traffic and Transport Violations.

Article 272 paragraphs (1) and (2) Law Number 22 of 2009 provides that electronic equipment can be used to support the law enforcement on traffic violations. Furthermore, Article 12, Article 249 (3) and Article 251 of Law 22 of 2009 provide that the Police Office shall have responsibility and authority for, among others, management of the control center of the system for information and communication of traffic and road transportation (“Central

MLFF feasibility study - Volume I Legal and Institutional Study

System”). The Central System shall have the function, among others, to support electronic traffic enforcement. Article 247 Law 22 of 2009 provides that any sub system for information and communication with respect to traffic and road transportation shall be integrated with the Central System. Based on the above, the “integration” of MLFF system with the Central System developed by the Police Office is needed in order to support the law enforcement.

Under Ministry of Transportation Regulation Number 13 of 2014, the utilization of a toll road without paying the toll can be classified as a traffic violation due to failure to comply with Traffic Sign. Article 106 paragraph (4) Law 22 of 2009 provides that every person who drives a motorized vehicle on the road is obliged to comply with the order or prohibition on Traffic Signs. Furthermore, Article 287 paragraph (1) of Law 22/2009 provides that every person who drives a motorized vehicle on road violating the order or prohibition on Traffic Signs shall subject to punishment in form of (i) a maximum of 2 (two) months in prison; or (ii) a maximum fine of Rp. 500,000,00 (five hundred thousand rupiah).

Besides of the fine imposed due to violation of traffic sign under Law 22/2009, based on GR 15/2005 (as amended) a toll road user which not pays the toll may also subject to penalty 2 times of the longest distance tariff on the respective toll road section in case of: a. The toll road user cannot provide entrance evidence of the toll road; b. Provide broken entrance evidence; c. Cannot provide a correct entrance evidence or in accordance with its direction.

According to Government Regulation No. 39 of 2016 on Non State Revenue for Public Prosecution’s Office, the fine as provided under Law 22/2009 shall be non-state revenue of the Public Prosecution’s Office. This non-tax revenue shall be transferred to state account. Government may provide certain portion of the abovementioned non-state revenue to be allocated as an incentive for officers of the National Police of the Republic of Indonesia and Civil Servant Investigators who carry out law enforcement on Roads.

Based on the abovementioned matters, in the context of law enforcement in the MLFF project, the following needs to be considered: a. The developed MLFF System must be “integrated” with the Information and Communication System for Road Traffic and Transport managed by the Police Office so that the data generated by the MLFF System can be used as evidence of traffic violations. b. In the event of a toll road user who enters a toll road without paying any toll (either caused by an insufficient balance or unregistered vehicle), the toll road user may be subject to: (i) A sanction for the traffic violation in the form of a maximum fine of Rp. 500,000. This fine revenue constitutes non state revenue of the Prosecutors Office; and (ii) A fine pursuant to the provisions of the GR 15/2015 (as amended).

MLFF feasibility study - Volume I Legal and Institutional Study

In order that the fine mechanism in the GR 15/2015 (as amended) can be applied in an integrated manner with law enforcement for traffic violations by the Police Office, it is recommended:

(i) A fine imposed on a toll road user is categorized as non-state revenue (PNBP) of BLU PUPR (instead of direct revenue of TROs or CTSP);

(ii) the PNBP is collected by BLU PUPR in cooperation with the Police Office so that it can be conducted in an integrated manner with law enforcement on traffic violations. The implementation of this cooperation is based on Article 19 of Law 9/2018 regarding Non State Revenue;

(iii)The PNBP of BLU PUPR may be utilized for (1) the provision of incentives to the Police Office; (ii) fee payments to CTSP; (iii) toll revenue payments to BUJT (if the toll revenue of TROs is not covered by insurance opened by CTSP).

1.1.4. Establishment of Business Entity

The consortium of PPP auction winner (since being declared as a winner through a competitive procurement process in implementing PPP Regulations) must establish an Indonesian business entity in the form of a Limited Liability Company as a company established with a specific purpose, namely to become a party in a Cooperation Agreement with the PJPK and to run the Project in accordance with the terms and provisions in the Cooperation Agreement. The relevant provisions regarding the establishment of business entity are as follows: a. Establishment Requirement; b. Establishment Procedure; c. Composition of Shareholders; d. Post-permit Establishment; e. Legal issues with regards to the business entity (PT) establishment.

1.1.4.1. Establishment Requirement Following are the requirements for establishing a Limited Liability Company ("PT"):

1) Founder/Shareholder Pursuant to Article 7 of Law No. 40/2007, PT must be established by at least two parties. Every founder of PT must take a share when the PT is established. After PT obtained the status of a legal entity through the decision of the Minister of Law and

MLFF feasibility study - Volume I Legal and Institutional Study

Human Rights ("Menkumham") for the ratification of PT, the founders must become shareholders of PT.

2) Deed of Establishment The establishment of PT must be made with a notary deed made in Indonesian language. The Deed of Establishment must include the Articles of Association and other information in relation to the establishment of PT. Every legal act relating to the ownership and payment of shares by the founder before the PT is established must be stated in the Deed of Establishment.

3) Articles of Association According to Article 15 Paragraph (1) jo. (3) Law No. 40/2007, the Articles of Association must consist of at least:

a. Name and place of domicile of PT;

b. The purpose and objectives and business activities of PT;

c. The period of establishment of PT;

d. Amount of authorized capital, issued capital and paid up capital;

e. number of shares, classification of shares (if any), along with the number of shares for each classification, rights inherent in each share, and nominal value of each share;

f. Position and number of members of the Board of Directors and Board of Commissioners;

g. Determination of places and procedures for General Meeting of Shareholders;

h. Procedures for the appointment, replacement and dismissal of members of the Board of Directors and the Board of Commissioners;

i. Procedures for using profits and dividend distribution.

Articles of Association may not contain:

a. Provisions regarding fixed interest receipts over the shares; or

b. Provisions regarding the provision of personal benefits to the founder or other parties.

4) Capital PT PMA (foreign investment company) authorized capital must be at least Rp.10,000,000,000.00 (ten billion rupiah) and at least 25% (twenty five percent) of

MLFF feasibility study - Volume I Legal and Institutional Study

authorized capital must be placed and fully paid. The capital has been placed and fully paid must be proven by proof of a valid deposit. To open a PT Bank Account, the bank must obtain a photocopy of the PT Establishment Deed and a photocopy of the Tax Registration Number of PT.

1.1.4.2. Establishment procedure The following are the procedures for establishing PT:

5) Ordering the name of PT It is recommended to get a valid booking on behalf of PT at Menkumham.

6) Signing of the Deed of Establishment The deed of establishment of PT must be signed by the founder of PT in the presence of a Notary in Indonesian language.

7) Ratification by Menkumham The founders or Notaries must submit an application for approval of the Deed of Establishment to Menkumham within 60 (sixty) days from the day of the signing of the Deed of Establishment.

8) Registration and Announcement Menkumham will carry out registration and announcement for PT.

1.1.4.3. Shareholders Composition Law no. 40/2007 does not specify the composition of shareholders. However, Presidential Regulation No. 44/2016 regulates the list of business activities closed and open with requirements in the field of investment.

1.1.4.4. Permit After Establishment The following are permits and compliance needed to be obtained by the Company after the Company has legal status (incorporated):

1) Taxpayer Identification Number ("NPWP"), Letter of Inauguration of Taxable Entrepreneurs and Registration Statement. Based on Article 2 of Directorate Tax General Regulation No. PER-20/PJ/2018, the NPWP registration is submitted electronically through the Legal Entity Administration System or the Online Single Submission (“OSS”). The request of NPWP registration is accompanied with the required documents which have to be submitted to the nearest Tax Service Office no later than 30 (thirty) days after the date of the registration.

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The Tax Service Office of where the company registered will print the NPWP and the Registered Letter no later than 1 (one) working days after the date of the registration. 3

2) Nomor Induk Berusaha (”NIB”)4 The company that will start a business must has a NIB. In order to obtain NIB and Business Licensing, the Company must pay attention to (a) provisions concerning closed business fields and open business fields with requirements; and (b) ministerial regulations / regulations of non-ministerial government institutions, in accordance with statutory provisions. NIB is a business identity and is used by company to obtain a Business License and Commercial or Operational Permit, including for fulfilling the requirements of a Business License and Commercial or Operational Permit.

NIB also applies as:

a. TDP as referred to in laws and regulations in the field of company registration; b. API as referred to in laws and regulations in the field of trade; and c. customs access rights as referred to in legislation in the customs sector. The NIB is valid as long as the company conducts its business activities in accordance with the laws and regulations.

3) Domicile Certificate The Domicile Certificate is submitted to the District Head Office in accordance with the address of the Company's office as proof of the company's address, and the process takes 2 (two) working days after the application is submitted.

1.1.4.5. Legal Issues with regards to PT Establishment Some legal issues related to the establishment of PT are as follows: 9) PT mush be established within 6 months Bappenas Regulation No. 4/2015 requires the PPP Business Entity to be established within a period of 6 (six) months after the Bid Winner Determination Letter is issued. It has been established to mean that the PPP Business Entity must at least obtain legal entity status, with the separation of legal status. Only when the company has been established, PT is competent to make agreements independently. It should be noted that all legal actions carried out by the founders of PT with the name PT can only bind the PT after the PT obtains the status of the legal entity and those actions are regulated

3 Article 5 Directorate General Tax Regulation No. PER-20/PJ/2018

4 Government Regulation No. 24/2018

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/ recognized in the deed of establishment of PT. Article 7 of Law No. 40/2007 states that a PT obtains this status with the approval of Menkumham.

10) Provisions and Restrictions on Transfer of PPP Business Entity Shares The transfer of shares is limited by the terms and conditions set by the PPP node and must be based on law to be included in the cooperation agreement. PP No. 38/2015 and Bappenas Regulation No. 4/2015 requires the PPP node to include the following terms and conditions in the transfer of shares:

a. The PJPK will determine the criteria for the provisions for transfer of shares;

b. The PJPK will determine whether the transfer of shares can be made;

c. The recipient of the transfer of shares must meet the same pre-qualification and qualification criteria as the transfer of shares;

d. Transfer of shares may not slow down the commercial operation of the project;

e. The controlling shareholder (consortium leader) may not transfer its shares before commercial operations.

1.1.5. Foreign Capital Investment Referring to Law No. 25/2007 and its implementing regulations, what is meant by foreign investment is investment activities carried out by foreign investors in the territory of the Republic of Indonesia, both those who use foreign capital fully and those who are associated with domestic investment.

Foreign investment in Indonesia must be in the form of PT (limited liability company) and must be established under Indonesian law and domiciled in the territory of the Republic of Indonesia, unless otherwise stipulated by Law No. 40/2007. These companies are hereinafter referred to as "PT PMA." Thus, in the event that the procurement of this Project is won by a foreign investor, the PPP Business Entity will automatically be in the form of PT PMA. In this case, PT PMA must be established in accordance with the rules and procedures of foreign investment as stipulated in Law No. 25/2007 and the implementing regulations.

MLFF feasibility study - Volume I Legal and Institutional Study

1.1.6. Business Competition

Referring to Duties and Authority of the Indonesian Business Competition Supervisory Commission as outlined in Law Number 5 of 1999 concerning Prohibition of Monopolistic Practices and Unfair Business Competition ("Monopoly Law"), as follows:

Duties

a. evaluate the agreement which can lead to monopolistic practices and or unfair business competition as stipulated in Article 4 to Article 16 of the Monopoly Law; b. evaluate business activities and or actions of business actors which can lead to monopolistic practices and or unfair business competition as stipulated in Article 17 to Article 24 of the Monopoly Law; c. assessing the existence or absence of abuse of dominant positions which may result in monopolistic practices and or unfair business competition as stipulated in Article 25 to Article 28 of the Monopoly Law; d. take action in accordance with the authority of the Commission as stipulated in Article 36 of the Monopoly Law; e. provide advice and consideration of Government policies relating to monopolistic practices and or unfair business competition; f. compiling guidelines and or publications relating to this Law; g. provide regular reports on the work of the Commission to the President and the House of Representatives.

Authority a. receive reports from the public and / or business actors about alleged monopolistic practices and or unfair business competition; b. conduct research on suspected business activities and / or actions of business actors which may result in monopolistic practices and or unfair business competition; c. conduct investigations and or examinations of cases of alleged monopolistic practices and or unfair business competition reported by the public or by business actors or which are found by the Commission as a result of their research; d. conclude the results of investigations and or inspections about the existence or absence of monopolistic practices and or unfair business competition; e. call business actors suspected of having violated the provisions of this law; f. summon and present witnesses, expert witnesses, and any person deemed aware of the violation of the provisions of this law; g. asking for help from investigators to present business actors, witnesses, expert witnesses, or every person as referred to in letter e and letter f, who are not willing to fulfill the Commission's summons; h. request information from Government agencies in relation to investigations and / or examinations of business actors who violate the provisions of this law; i. obtain, examine, and or assess letters, documents, or other evidence for investigation and or examination; j. decide and determine whether or not there is a loss on the part of other business actors or the public;

MLFF feasibility study - Volume I Legal and Institutional Study k. notify the Commission's decision to business actors suspected of carrying out monopolistic practices and or unfair business competition; l. impose sanctions in the form of administrative actions for business actors who violate the provisions of this Law.

In implementing the MLFF system procurement project in Indonesia, the implementation of the Project is not included in the project that can be monopolized so that the implementation of the Project procurement must still comply with the laws and regulations in the field of Anti-Monopoly and Unfair Business Competition. In the regulation of Business Competition Commission number 02 of 2010 concerning guideline article 22 concerning the prohibition of conspiracy in tenders, it states that the Monopoly Law prohibits acts of businesses that aim to hinder or conflict with the principles of fair business competition, including restrictions on market access, collusion and other actions. aims to eliminate competition. Other actions that can result in unhealthy business are conspiracy actions to regulate and or determine the winner of the tender as regulated by Article 22 of the Monopoly Law.

1.1.7. Environment

According to Article 2 PP No. 27/2012, every business and / or activity that is required to have an Environmental Impact Analysis (AMDAL) or Environmental Management Effort and Environmental Monitoring Effort (UKL-UPL), must obtain an Environmental Permit. In relation to the Project, based on Letter I (6) Appendix I of Regulation of Minister of Environment No. 5/2012 in the classification of public works, construction activities and / or enhancement of toll roads that require the procurement of land outside road space requires an AMDAL. In addition, the construction and / or enhancement of toll roads that do not require the procurement of land outside the road space does not require UKL-UPL. 5

Based on the description above, the PPP Business Entity is not required to obtain an AMDAL or UKL-UPL to implement the Project.

1.1.8. Manpower & Work Safety 1. Work Relation a. Individual Employee

The employment relationship exists because of an employment agreement between the employer and the employee. In principle, this work agreement must be made in written form. However, Law No. 13 of 2003 regarding manpower (“Law 13/2003”) allows for an oral work agreement taking into account the diverse conditions of the community. Work agreements, which provide written requirements must be made in connection with

5 Based on the Ministry of Environment Letter No. B-5362 / Dep.I-1 / LH / 07/2010 and the Decree of the Governor of the Special Capital Region of Jakarta No. 189/2002

MLFF feasibility study - Volume I Legal and Institutional Study applicable regulations. Meanwhile, an oral agreement must be written in a letter of appointment stating the name of the employee and address, date of commencement, assignment, employee obligations and wages.

An Individual Work Agreement can be in the form of a Specified Time Work Agreement (PKWT) or an Unspecified Time Work Agreement (PKWTT), with a permanent contract that will become a default unless the contract terms with fixed term are fulfilled. b. Subcontracting and outsourcing 1) Subcontract The employer may subcontract a part of the work to another employer in the form of a legal entity, under a written agreement from the employment contract or a written agreement for labor-related provisions. This employment relationship must be regulated by a written employment agreement between the employer and the workers employed. Workers may be sub-contracted only permanent workers. This is based on the Constitutional Court Decree No. 27 / PUU-IX / 2011 which states that "Outsourcing Companies" such as sub-contractors and labor suppliers can only employ permanent workers.

Sub-contractable work must meet the following requirements: 11) Work carried out separately from the main activity; 12) Work carried out by direct or indirect instruction from the employer; 13) Work is a supporting activity of the company; and 14) The work does not directly hamper the production process.

Other important requirements that must be fulfilled by the employer are the protection and working conditions given to sub-contracted workers must be at least the same as the protection and working conditions given to the employer company or in accordance with applicable laws and regulations. Failure to meet the above provisions will automatically result in a work relationship between the worker and the recipient of a piece of work shifting to the employment relationship with the employer.

2) Utilization of Labor Suppliers Employers can use workers employed by suppliers of labor, provided that:

a) The agreement between the employer and the supplier of labor must be made in writing; b) There is a working relationship between labor suppliers and workers as stated in the written agreement;

MLFF feasibility study - Volume I Legal and Institutional Study

c) Workers are employed only for work that supports the activities of the employer; d) Workers from labor suppliers are entitled to the same conditions for salary and welfare protection, working conditions, and protection when there is a dispute as provided to the main employer of the employer, on contracts, Company Regulations or Collective Labor Agreements, but provided that is the responsibility of labor suppliers (as employers of the employee).

Failure to meet the above provisions will lead to an automatic employment relationship between employers who use the services of labor suppliers and labor supplied.

2. Foreign Worker Matters related to foreign workers includes:

a. Requirements for Foreign Workers Foreign Workers employed by employers must meet the following requirements:

1) Having education in accordance with the requirements for the position; 2) have education or work experience suitable for a position that is assumed to be a minimum of 5 (five) years; 3) Willing to make statements to transfer their expertise to Indonesian workers, specifically accompanying Indonesian workers; and 4) can communicate in Indonesian.

b. Permit and Compliance for Employing Foreign Workers Every employer who wishes to employ a Foreign Worker must obtain written permission from the Minister of Manpower and Transmigration. This written permission is in the form of a Permit to Hire a Foreign Worker (IMTA). To obtain an IMTA, the employer must also have a Foreign Workers Utilization Plan (RPTKA).

After obtaining the legalization of the RPTKA, the employer can make an application to obtain an IMTA. IMTA will be given by the Director of Controlling the Use of Foreign Workers and the extension of the IMTA can be given by the Director of Controlling the Use of Foreign Workers or the relevant Governor or Regent / Mayor.

c. Obligations of Employers in Employing Foreign Workers Employers who employ foreign workers are required to:

1) pay compensation funds for the use of foreign workers of US $ 100 (one hundred US dollars) per month for each foreign worker, which must be paid upfront; 2) appoint Indonesian workers as companion workers;

MLFF feasibility study - Volume I Legal and Institutional Study

3) carry out education and training in accordance with the qualifications of positions occupied by foreign workers; 4) report the use of foreign workers regularly, every six months, to the Director of Controlling the Use of Foreign Workers or the Governor or Regent / Mayor in connection with a copy to the Director General of Manpower Development and Placement.

d. Prohibition of Employers in Employing Foreign Workers There are several restrictions for employers in hiring foreign workers described as follows:

1) Occupying positions which are not allowable under Manpower Minister Verdict No. 228 of 2019 regarding Certain Position which can be held by foreign worker. 2) Employ foreign workers in more than 1 (one) position in the same company.

Employ foreign workers who have been employed by other employers. However, this provision cannot be applied to foreign workers who serve as Directors or Commissioners in other companies based on the General Meeting of Shareholders.

3. Wage The employer must pay workers not less than the applicable regional or district / city minimum wage. Failure to do so will result in the imposition of fines, payment of compensation and criminal sanctions. Governments can form sectoral minimum wages based on the type of industry, both nationally or regionally, but this cannot be lower than the prevailing regional minimum wage. If the employment agreement includes wages below the minimum wage, the contract is null and void unless the employer obtains an exemption from the local Manpower Office.

The amount of wages determined based on the agreement between the employer and the worker or union must not be lower than the amount of the wage determined under applicable laws and regulations, if this happens then the agreement is declared null and void.

Employers are not required to pay workers when they fail to carry out their obligations, with the following exceptions:

a. Workers get sick so they can't do work; b. Female workers who are sick on the first and second days of their menstruation; c. Workers do not come to work because they marry, marry, circumcise, baptize their children, their wives give birth or have a miscarriage, a husband or wife or child or son-in-law or parents or parents-in-law or family members in one house pass away; d. Workers carry out obligations towards the state;

MLFF feasibility study - Volume I Legal and Institutional Study

e. Workers perform worship that is ordered by their religion; f. Workers are willing to do the work that has been promised but the employer does not employ it; g. Workers exercise the right to rest; h. Workers carry out trade union duties with the approval of the employer; i. Workers carry out educational tasks from employers. The employer must also know the following conditions:

a. If wages consist of basic wages and fixed benefits, the total base wage must not be lower than 75% (seventy-five percent) of the total amount of basic wages and fixed benefits. b. Employers who pay their workers' wages late either due to will or negligence must pay a fine the amount must be in accordance with a certain percentage of the worker's wages. c. In the event that the employer is declared bankrupt or is liquidated based on the applicable laws and regulations, payment of labor wages must be prioritized over other forest payments.

4. Work Hour Provisions regarding maximum working hours include:

a. 7 (seven) hours / day and 40 (forty) hours / week for 6 (six) work days / week; b. 8 (eight) hours / day and 40 hours / week for five working days / week for 5 (five) working days / week; c. Excluded occupational categories: offshore drilling, long distance driving, long distance flight, sea work, forestry / tree cutting. Conditions related to overtime:

a. only with the approval of the workforce; b. a maximum of 3 hours / day and 14 hours / week; c. The employer must pay overtime ranging from one and a half to four times for hourly rates depending on the number or hours of overtime, weekends or holidays; d. Management workers are excluded from overtime payment requirements. Provisions regarding breaks:

a. 30 (thirty) minutes rest after working 4 (four) consecutive hours; b. Weekend: 1 (one) rest day in 6 (six) work days or 2 (two) rest days in 5 (five) work days; c. Annual leave: 12 (twelve) days of rest after working for 12 (twelve) consecutive months. Certain time workers are generally given pro rata annual leave of 1 (one) day / month of work;

MLFF feasibility study - Volume I Legal and Institutional Study

d. "Long Breaks" for certain categories of employers: 1) Not less than 2 (two) months of leave, taken in stages 1 (one) month during the 7 (seven) years and 8 (eight) years after every 6 (six) years of work in a row; 2) Replace annual leave for years 7 (seven) and year 8 (eight); 3) Compensation: ½ (half) of the monthly salary, in addition to full salary during the break; 4) Applies only to employers who have the policy before the entry into force of the Manpower law. e. The employer must provide adequate time and place of worship (musholla) in accordance with the physical and financial condition of the employer. f. Workers may not be needed to work on holidays, except for the nature of the work in need, in which case they receive overtime pay; g. Holiday Allowance (THR); 1) The employer must pay an annual THR for all workers who have been employed for more than 3 (three) months; 2) Compensation for damages: 1 (one) month salary for workers who work more than 1 (one) year proportionately for workers who work 3 (three) to 12 (twelve) months; 3) THR is paid at least 7 (seven) days before religious holidays associated with religious labor.

5. Benefit a. Social Security Every person who works in Indonesia for a minimum of 6 (six) months is required to participate in Social Security. The employer must register himself and his employees in Social Security.

The employer must register the company and employees with the Social Security Organizing Agency (BPJS), a legal entity established to operate and manage social security programs.

There are 2 (two) BPJS categories, namely Health BPJS and Employment BPJS. BPJS Employment consists of:

1) Work safety guarantee; 2) old age insurance; 3) Pension; and 4) Guaranteed death.

MLFF feasibility study - Volume I Legal and Institutional Study

The employer bears costs (except for old age savings), which is shared between the employer and the worker) through contributions to government agencies that take effect on the 15th of each month:

1) Work safety guarantee: 0.24% - 1.74% of monthly salary, depending on the level of risk associated with the employer's business area; 2) Old-age savings: 5.7% of monthly salary (3.7% by employer, 2% by workers); 3) Mortality: 0.3% of monthly salary; 4) Basic health: 3% of salary for unmarried employees, 6% for married employees. Failure to make payments on time will result in sanctions to employers.

b. Income tax The employer is responsible for deducting income tax from the salaries and profits of all permanent workers and for a specified time. Both employers and workers must register with the Tax Office to obtain a TIN.

c. Support for Families of Detained Employees If the worker is detained by the competent authority in a matter not initiated by the employer, the employer is not required to pay the worker's salary, but must provide financial assistance to the worker's family for up to 6 (six) months in the amount of 20% (twenty percent) until 50% (fifty percent) of salary, depending on the number of dependents.

d. Non-Discrimination Discrimination based on sex, ethnicity, race, religion, political views or disability, is strictly prohibited in employing or in the work environment.

6. Work Safety Employers are asked to develop a health and safety system that can control hazards, prevent and reduce injuries/diseases, and improve the health and rehabilitation of workers. The safety management system that must be followed by PPP Business Entity in building infrastructure is as follows: a. Before the project starts, the PPP Business Entity must regulate work safety and health and must be announced to workers. Work Safety and health consists of efforts to prevent accidents, fires, explosions, work related diseases, first aid in accidents and rescue actions; b. The existence of safe entrance and exit facilities at the project location; c. There is light or lighting in the area of construction; d. Cleanliness of working areas and tidiness must be applied so that scattered materials or equipment will not cause accidents or endanger workers; e. Noise and vibration in the working area cannot exceed the Threshold Value;

MLFF feasibility study - Volume I Legal and Institutional Study f. There is a sign or warning to prevent accidents in unstable or emergency construction, excavation areas, or any place that might endanger workers; g. PPP Business Entity must provide appropriate and safe scaffolding, ladders, equipment, machinery, and other supporting equipment to prevent work accidents and provide a safe working environment for workers; h. PPP Business Entity must maintain harmony between workers with equipment, environment, work methods, and processes; i. PPP Business Entity will provide protection and facilitate transportation of humans, animals, plants or goods, protect and maintain all types of buildings and protect and facilitate the loading, unloading, handling and storage of goods; j. PPP Business Entity are required to adjust and develop security measures in terms of the risk of accidents in increased work; k. PPP Business Entity will provide appropriate personal safeguards and proper protection of equipment in sufficient quantities for workers and anyone entering the construction area. l. There is a health check before the PPP Business Entity receives potential workers to ensure that potential workers do not have an infectious disease and are the right workers to carry out construction work. This check can be done within the required time. Related to work safety procedures, there are several conditions that must be carried out by the person managing the workplace: a. Must be responsible for examining the physical health, mental condition and physical abilities of workers who will be employed or transferred in accordance with the nature of the work assigned to that workers; b. must arrange periodical checks for all their subordinate workers; c. It is necessary to demonstrate and explain to each new worker: the conditions and dangers that can arise in the workplace, all safety equipment and protective equipment needed in the workplace, personal protective equipment provided for workers and safe methods and actions in implementing work; d. It is required to send written notice at the place where the notice is easily seen and readable, regarding all mandatory requirements of health and safety in the workplace; e. It is necessary to post the required safety posters and other guidance information at a place that is easily seen or readable, according to the directives of a work safety supervisor or expert, in the workplace under their management; f. It is required to provide all personal protective equipment required together with the instructions needed according to the direction of the safety supervisor or expert, to subordination of the workers and every person entering the workplace free of charge; g. It is required to report any accidents that occur in the workplace which are the responsibility of the official appointed by the Minister of Manpower and Transmigration.

MLFF feasibility study - Volume I Legal and Institutional Study

Besides that, there is special treatment to guarantee work safety for the following workers: 1. Disable

In the event that there are persons with disabilities employed by the PPP Business Entity, the PPP Business Entity must provide facilities, work aids and personal protective equipment in accordance with the disability of the workers.

2. Children

PPP Business Entity may employ children aged 13 (thirteen) to 17 (seventeen) years under the conditions of the provisions below:

1) Work only involves light work for a duration of no more than 3 (three) hours/day, at noon, and not in conjunction with school hours;

2) Children's work areas must be separated from the work area of adults;

3) Work safety rules generally also apply to child labor.

3. Woman

1) Women under 18 (eighteen) years old are not permitted to work between 23:00 and 07:00;

2) Women over 18 (eighteen) years old working between 23:00 and 07:00 must be provided:

3) Nutritious foods and drinks;

4) A decent, moral and safe workplace; and

5) Round-trip transportation when working between 23:00 and 05:00.

6) Pregnant women are not permitted to work between 23:00 and 07:00 when the doctor's certificate states that this is harmful to the baby or fetus;

7) Women who are menstruating are not required to work in the first 2 (two) days of menstruation if the worker concerned informs the employer that she is experiencing pain.

Law No. 13/2003 also stipulates sanctions for violating rules in relation to safety and health management systems. Basically, there are two types of sanctions consist of administrative and criminal sanctions. Forms of criminal sanctions consist of imprisonment and/or fines; meanwhile administrative sanctions consist of reprimands, written warnings, restrictions on business activities, suspension of business activities, cancellation of approvals, cancellation of registration, temporary suspension of all or part of the means of production, and revocation of licenses.

MLFF feasibility study - Volume I Legal and Institutional Study

Law No. 13/2003 regulates criminal sanctions from violations of the above provisions with a maximum prison sentence of 6 (six) months and / or a maximum fine of IDR. 50,000,000. - (fifty million Rupiah).

1.1.9. Asset Utilization owned by the PUPR Ministry for the Project Implementation

Directorate General of Bina Marga circular letter No. 11/SE/Db/2017 dated 22 November 2017 regarding the permit procedure of the utilization of toll road part stipulating the principle of permit process of the utilization of toll roads parts.

The utilization of the toll road space (known as Rumija Toll) are as follows:

MLFF feasibility study - Volume I Legal and Institutional Study

Figure 1: Utilisation of toll road space

MLFF feasibility study - Volume I Legal and Institutional Study

1.1.10. PPP Financing

PPP regulation stipulate that the PPP business entity to obtain the funding of the project within 12 (twelve) months after the execution of the cooperation agreement. The financing can be obtained through 2 means, which is: a. Indonesian financial institution; or b. Offshore Loan.

A. Indonesian Financial Institution

PPP Business entity may consider to obtain the fund for the Project from the Indonesian Financial institution as follows: 1. Bank PPP business entity may search for funding from Indonesian bank which provides loan and financing. To be noted that, a loan maximum limitation will be set, for every financing set out by the Bank of Indonesia (subject to the borrower status)6:

➢ If the borrower is an affiliated or related with the bank the lending limit for financing is 10% (ten per cent) from the Bank capital. ➢ If the borrower is not affiliated or related with the Bank then the lending limit for financing that can be made available is maximum 20% of Bank Capital. ➢ If the borrower in the form of a group is not affiliated or related with the Bank then the lending limit for financing that can be made available is maximum 25% of Bank Capital.

2. Financial Institution PPP business entity may search for project funding from financial institution. A financial institution is a non-bank financial body which established to conduct financial business activity.7

3. Infrastructure Financial Institution PPP business entity may search for project funding from infrastructure financial institution. Infrastructure financial institution is a business entity which specifically established for financial infrastructure projects.8

6 Bank Indonesia Regulation No. 7/3/2005 regarding The Legal Lending Limit For Commercial Banks 7 Peraturan Menteri Keuangan No. 84/PMK.012/2006 of 2006 tentang Perusahaan Pembiayaan

MLFF feasibility study - Volume I Legal and Institutional Study

Infrastructure financial institution conducting the following activities: ➢ Provisions of direct lending for infrastructure financing; ➢ Refinancing upon infrastructure which has been financed by other party; ➢ Provisions of subordinated loans with regards to the infrastructure financing. Other than the abovementioned activity the infrastructure financial institution can also conduct the following:

➢ Credit enhancement, including a guarantee for infrastructure financing ➢ Advisory services; ➢ Equity investment; ➢ Assisting in searching for swap market with regards to the infrastructure financing; and/or ➢ Other activity or other provisions related with the infrastructure financing after obtaining the Ministry of Finance approval. To date, there are 2 (two) infrastructure financing institution in Indonesia which is PT Multi Sarana Infrastruktur (Persero) (BUMN) and PT Indonesia infrastruktur Finance (a company which owned by the government, ADB, IFC and etc)

B. Offshore Loan If a PPP business entity submit an Offshore loan to fund the said project. The said company shall comply to the rules of offshore loan which issued by the Bank of Indonesia (Indonesian central bank)9, which acknowledged the offshore financing in the form of loan (based on loan agreement) in Rupiah or other foreign exchange, bonds/debt or other form of obligation. Below are several important notes with regards to the obtainment of offshore loan in Indonesia regulation.

Company wishes to obtain the long-term offshore loan, shall submit report to Bank of Indonesia regarding:10

a. Offshore loan plan report within 1 (one) year; b. Analysis report on risk management of the company; c. Ranking evaluation; d. Financial ratio; and e. Financial report.

8 Ministry of Finance Regulation No. 100/PMK.101/2009 of 2009 regarding Infrastrucure Financial institution 9 Bank Indonesia regulation No.12/1/PBI/2010 on non-bank company offshore loan jo Bank Indonesia Circular Letter on Non-Bank Offshore Loan Reporting Guidance and its financial indicator form 10 Article 5 Bank Indonesia regulation No.12/1/PBI/2010 on non-bank company offshore loan

MLFF feasibility study - Volume I Legal and Institutional Study

The said report shall be submitted no later than 10 march of the relevant year or the next working day if the said date falls on a holiday date. 1) Companies having long term and short-term offshore loan shall submit report to the Bank Indonesia regarding:11

a. Financial ratio; and b. Financial statement The said report has to be submitted per semester and no later than 10 June and 10 December of the relevant year or the next working day if the said date falls on a holiday date. Note that the submission of the annual report of the offshore loan is an important obligation for the borrower. Failure in providing accurate and true information under the report or late/failure in submitting the report may impact of sanction to the relevant borrower.

Specific Issues Related to Project Financing

Some specific issues related to project financing include:

1. Assets that can be guaranteed in connection with the Project That the project will take place on land owned by the PJPK. Based on Article 49 of Law Number 1 of 2004 concerning the State Treasury, assets owned by the State or local government, including land, cannot be guaranteed to obtain loans. This restriction applies both to private entities that currently use assets and the government entities that own these assets.

2. One year to get financing Based on the PPP Regulation, the PPP Business Entity is given a maximum period of 1 (one) year from the signing of the cooperation agreement to secure financing. This must be proven well by signing the loan agreement and the loan is ready for disbursement. Failure to obtain financing within 1 (one) year or an extension if given, means that the PJPK has the right to withdraw the bank guarantee given by the PPP Business Entity.

3. Mandatory Use of Rupiah Currency On June 1, 2015 Bank Indonesia issued Bank Indonesia Circular Number 17/11 / DKSP ("SEBI 17/11"), which is the implementing regulation of Bank Indonesia Regulation Number 17/3 / PBI / 2015 ("PBI 17/2015"). The regulation states that all financial transactions in Indonesian jurisdiction that take place on or after July 1, 2015, must be nominated and settled in rupiah exchange rates.

11 Article 6 Bank Indonesia regulation No.12/1/PBI/2010 on non-bank company offshore loan

MLFF feasibility study - Volume I Legal and Institutional Study

That based on Article 2 paragraph (1) PBI 17/2015, transactions are nominated and completed if they meet the following criteria:

a. transactions for payment purposes; b. settlement of other obligations that must be met using money; c. the transaction took place in Indonesia; and d. the transaction is not an exempt transaction. This definition includes Buy-Sell, Rent-Buy transactions, loan agreements, and service agreements.

4. Prohibition of Including Prices in Foreign Currencies SEBI 17/11 and PBI 17/2015 prohibit the inclusion of prices only in foreign currencies or double inclusion in Rupiah and Foreign Currency. Based on a written determination from Bank Indonesia, foreign exchange references for adjusting payment prices are also not allowed.

5. Exceptions Regulations and Circulars excluding transactions are given in Table 1 Transaction Exceptions.

MLFF feasibility study - Volume I Legal and Institutional Study No Transactions Description

1 Certain transactions in the a. Payment of foreign debt;

implementation of the APBN (Article 4 b. Payment of domestic debt denominated in foreign currencies;

(a) and Article 6 of BI Regulation) c. Purchase of goods from abroad; d. Capital purchases from abroad; e. State revenue from bond sales in foreign currencies; and f. Another transaction in terms of the implementation of the state budget. For all of the above, payments using foreign currencies must be approved in writing.

2 Receipt or disbursement of grants from or Foreign currency can only be used if the recipient or grantor is located abroad.

to foreign countries (Article 4 (b) and For the above, payments in foreign currencies must be approved in writing. Article 7 of Bank Indonesia Regulation)

3 International Trade Transactions (Article a. Exports from or imports to Indonesian customs areas; and or

4 (c) and Article 8 of Bank Indonesia b. International services are carried out using the following methods: Regulation) - Provision of cross borders; and

- Foreign consumption.

For the above, payments in foreign currencies must be approved in writing.

Note: value added activities in the framework of exports and imports of goods into and out of Indonesia are not categorized as international trade and are required to use rupiah.

4 Bank savings in foreign currencies For the above, payments in foreign currencies must be approved in writing.

MLFF feasibility study - Volume I Legal and Institutional Study No Transactions Description 5 International Financing Transactions a. Only permitted where one of the financing transactions is domiciled abroad; (Article 4 (d) and Article 9 of Bank b. Where the owner of a fund is a bank in Indonesia, the transaction must comply with Indonesia Regulation) regulations regarding foreign exchange transactions between a bank in Indonesia and a foreign party. For the above, payments in foreign currencies must be approved in writing. 6 Transactions in foreign currencies a. Foreign currency business activities carried out by banks based on laws governing conducted according to law (Article 5 of Islamic banking and banking; Bank Indonesia Regulation b. Securities issuance transactions by the government in foreign currencies on a primary or secondary market based on laws governing government bonds and sharia bonds; c. Other transactions in foreign currencies are based on law. For the above, payments in foreign currencies must be approved in writing 7 Transactions at a foreign currency exchange place 8 foreign banks take notes from and to Indonesia, in accordance with applicable law 9 Strategic Infrastructure Projects Requires approval from Bank Indonesia (the definition of the project is not clearly defined, which means that each component of the project may or may not be released under blanket exemption).

Table 1: Transaction exceptions

MLFF feasibility study - Volume I Legal and Institutional Study

1.1.11. Permit To operate fully, the PPP Business Entity requires several permits and approvals related to its business activities. Therefore, it is important to identify the issuer of each required permission and approval. Furthermore, determining the issuer of a permit or license at an early stage will provide a clear picture to investors during the process and the time needed to obtain the permit and approval. Table 2 List of Required Permits displays a list of several permits relating to the project together with parties / agencies that have the authority to issue these permits.

No Type of Permit Purpose Issuer Legal Basis Institution 1 Approval of the Minister Establishment of Ministry of Law Law No. of Law and Human Rights Legal Entity and Human 40/2007 regarding the Rights Regulation of establishment of the Minister of Law company and Human Rights No. 4/2014 2 Announcement of Announcement of Government Law No. approved notarial deed company Printing Office 40/2007 regarding the establishment for establishment of a PPP public Business Entity in the State Gazette by Kantor Percetakan Negara 3 Company Domicile Registered in the Head of Sub- Governed in Certificate / SKDP by domicile of the district Local Head of Sub-district company Regulations 4 Taxpayer Identification Registration as a Related Tax Regulation of Number (NPWP) and Taxpayer Office DJP No. PER- Registration Statement 20/PJ/2018 from the Directorate General of Tax, Ministry of Finance 5 Business Identification business identity BKPM GR No. 24/2018 Number (Nomor Induk Berusaha)

MLFF feasibility study - Volume I Legal and Institutional Study

No Type of Permit Purpose Issuer Legal Basis Institution 6 Business and Commercial To carry out Related Ministry GR No. 24/2018 License commercial production / activities of goods or services 7 Approval of the master list To obtain facilities BKPM BKPM of imported capital goods for exemption from Regulation No. from the Head of BKPM import duty on 6/2018 imports of machinery, goods and materials for industrial development 8 Approval relating to the Use of Foreign Ministry of GR No. 24/2018 utilization of foreign Workers Manpower and employees (if any) Transmigration Ministry of Communication and Information 9 Registration of Electronic License for Ministry of Regulation of System conducting Communication Minister of electronic systems and Information Communication and Information No. 36/2014 10 Payment System Service Processing of Bank Indonesia Circular Letter Provider payment transactions of Bank is carried out by Indonesia No. Payment System 18/41/DKSP Service Providers and Support Providers. 11 Licensing for Utilizing the Use of Toll Road Direktorat Circular Letter Toll Road Area Area Jenderal Bina of Director of Marga General of Bina Marga No. 11/SE/Db/2017

Table 2: List of required permits

MLFF feasibility study - Volume I Legal and Institutional Study

1.1.12. Taxation

Some tax related rules are as follows:

a. Business Entity Income Tax b. Employee Income Tax c. Import tax d. Withholding Tax e. Taxes on Execution of Transactions f. Tax Facilities g. Regional Tax and Retribution

1.1.13. Construction 1. Construction Services Users Construction services include construction work planning consulting services, construction work implementation services, and construction work supervision consulting services. Each of these activities is carried out separately by the construction planner, construction executive and construction supervisor.

Construction services are generally regulated under Law No. 2 of 2017 concerning Construction Services ("Construction Services Law"). In relation to the Project, the PPP Business Entity will act as a service user. Based on Article 1 paragraph (5) of the Construction Services Act, service users are the owner or employer who uses Construction Services. The PPP Business Entity will appoint another contractor to carry out the construction of the MLFF infrastructure, provided that the main responsibility for the Project rests with the PPP Business Entity.

Based on Article 55 of the Construction Services Law, it states that the PPP Business Entity as a service user must have the ability to pay the cost of construction work supported by documentary evidence from banking institutions and / or non-bank financial institutions. Proof of ability to pay can be realized in other forms agreed upon by considering the location, level of complexity, amount of cost, and / or building functions as outlined in a written agreement between the service user and service provider.

On the other hand, Article 44 of the Construction Services Law states that the selection of construction service providers must be done through a tender or selection, or electronic procurement.

In general, Construction Services tenders should only be followed by service providers who are declared to have passed the prequalification. However, construction service providers can be directly elected or appointed in certain circumstances such as in the case

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of construction work that is complex and can only be done by certain construction service providers.

Under Article 44 of the Construction Services law, service users are prohibited from providing work to affiliated service providers without going through a tender or selection, or electronic procurement

2. Construction Work Contracts Article 46 of the Construction Services Law states that the regulation of work relations between service users and service providers must be contained in a Construction Work Contract. The form of a Construction Work Contract can follow the development needs and is carried out in accordance with statutory provisions. Thus, the employment relationship between the construction service user (in this case the PPP Business Entity) and the construction service provider must be stated in the construction work contract.

That the scope of the description of the Construction Work Contract is regulated in Article 47 of the Construction Services Act. In addition, the Construction Work Contract can also contain the provision of incentives.

Whereas based on Article 50 of the Construction Services Act, Construction Work Contracts are made in Indonesian. In the event that a Construction Work Contract carried out with a foreign party must be made in Indonesian and English. In the event of a dispute with a foreign party, a Construction Work Contract is used in the Indonesian language.

1.1.14. PPP Forms (type)

The legal study of PPP form is described based on the recommended technical configuration options, and financial / commercial aspects, taking into account the following legal aspects:

a. the cooperation scheme is not limited by a specific transaction structure, so that it can be made in such a way as to accommodate the best scheme in implementing the Project; b. the granting of MLFF concession licenses becomes the main basis for rights / concessions to the PPP Business Entity; c. in the context of increasing the feasibility of the PPP and / or providing greater benefits to the community, the PPP can include commercial facilities; d. the difference in tariff is the responsibility of the Minister, Governor, or Regent / Mayor in the form of public service obligations;

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e. Consideration of risk analysis of transportation demand risk whether it will be fully borne by the PPP Business Unit; f. BPJT as a Public Service Agency has flexibility in financial management so that there will be certainty about the implementation of its financial obligations to the Project; and g. Government assets cannot be guaranteed by the PPP Business Entity for Project financing.

1.1.15. Government Support

In accordance with Presidential Regulation No. 38/2015 ("Perpres KPBU"), the project initiative must be economically and financially feasible. Projects that are economically and financially feasible do not require Government support. However, in accordance with Article 14 paragraph (9) of the PPP Regulation, the initiative project can be given a government guarantee which will be elaborated further in the next section.

1.1.16. Government Guarantee

Based on the PPP Presidential Regulation, the Government can provide infrastructure guarantees to the private sector. The Government guarantee will be given by considering the principles of financial risk management and mitigation in the State Budget carried out by the Minister of Finance.

As a consideration for guarantee provisions, the Minister of Finance is authorized to:

a. Establish criteria for the provisions of the Government guarantee to be provided for the project; b. Request and obtain data and information needed from parties related to the project; c. Approve or reject applications for guarantees; d. Determine the form and type of Government guarantees to be provided for the Project. Based on Presidential Regulation No. 78 of 2010 concerning Infrastructure Guarantees in Government Cooperation Projects with Business Entities Conducted through Infrastructure Guarantee Business Entities ("Perpres No. 78/2010") and Minister of Finance Regulation Number 260 of 2010 concerning Guidelines for Implementing Infrastructure Guarantees in Projects Government Cooperation with Business Entities including its amendment ("Permenkeu No. 260/2010"), infrastructure guarantees can only be provided for PPP projects that meet the requirements in Perpres No. 78/2010 and Permenkeu No. 260/2010.

Guarantee requirements must be determined before the auction stage. The purpose of the need for infrastructure guarantee is in the context of increasing the credit worthiness of infrastructure projects. For this reason, with the guarantee, it is hoped that there will be certainty over the provision of financing needed in the framework of PPP project development.

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Infrastructure guarantees are provided by SOEs specifically established for this purpose, namely PT. Infrastructure Guarantee Indonesia (Persero) / PT PII which can provide guarantees for PPP Business Entities to protect the obligations of the PJPK based on risk allocation as presented in Table 3.12

No Risk Description

A. Location Risk

1. Difficulties in unexpected location The utility and the difficulties of process of conditions utility relocation are not identified, resulting in delays and possible route changes. - [Construction Stage]

B. Design, Construction and Operation Test Risks

1. Unclear output specifications Delay and increase in costs due to unclear output specifications - [Pre-construction Phase]

2. Design error Causing the extra / design revision requested by the operator - [Pre- construction & Construction Stage]

3. Failed to maintain security and safety on The accident rate during system installation site work is high. - [Construction Stage]

4. Late completion of system construction / May include due to the poor quality of installation Human Resources expertise, limited availability of materials & equipment, delayed return of site access. - [Construction Stage]

12 Reference to the Allocation of Risk of Government Cooperation with Business Entities (PPP) in Indonesia 2019

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No Risk Description

5. Increase in construction costs Increase due to changes in work volume or material prices - [Construction Stage]

6. Poor contractor / subcontractor Contractor / Sub-contractor unable to carry performance out work according to contract - [Construction Phase]

7. Default contractor / subcontractor Failure of contract completion by contractor / sub-contractor due to internal & financial management factors - [Construction Stage]

8. Risk of operating tests (testing & Failure in estimating time / cost in technical commissioning) operation test - [Construction Phase]

9. Changes in scope of work after signing a Changes in CAPEX and / or OPEX due to contract changes in scope of work at the request of the Government and / or proposals of Business Entity - [All Stages]

C. Sponsor Risk

1. Business Entity Default Business Entity default that leads to termination or step-in by financier - [All Stages]

2. Project sponsor default Default sponsor (or consortium member) - [All Stages after financial close]

3. Project lenders default Default financial / banking institution (or syndication) due to changes in policy / trust towards the Business Entity or due to internal lender issues - [All Stages after financial close]

D. Financial Risk

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No Risk Description

1. Failure to reach financial close Failure to achieve financial close due to uncertain market conditions or suboptimal project capital structure - [Pre-Construction Stage]

2. Risk of delay in government fiscal The implementation of government support support (incentives, subsidies, etc.) cannot be carried out in accordance with the promised time so that it interferes with the construction and / or operational services - [Construction & Operation Stage]

3. Risk of Viability Gap Funding (VGF) Gradual VGF disbursement risks not being carried out on time - [Construction Phase]

4. Risk of returning bailouts Disbursement of land bailout funds by the Government to Business Entities late - [Construction Phase]

5. Currency exchange risk (Non extreme) exchange rate fluctuations - [All Stages]

6. Risk of inflation and interest rates Increase (non extreme) inflation rate to assumptions in life cycle costs and interest rates - [All Stages]

7. Insurance risk Insurance coverage for certain risks is no longer available on the market and a substantial increase in the premium rate to the initial estimate - [All Stages]

E. Operation Risk

1. Availability of facilities As a result the facility cannot be built - [Construction Phase]

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No Risk Description

2. Bad or unavailability of service As a result of the facility being unable to operate - [Operation Phase]

3. Industrial action Strikes, work restrictions, etc. - [Operation Stage]

4. Local social and cultural risks Risks arising from not taking into account the culture or social conditions of the local community in project implementation - [All Stages]

5. Project management failure Failure or inability of the Business Entity to manage the operation of the Cooperation Project - [Operation Phase]

6. Failure of project control and monitoring The occurrence of irregularities that are not detected due to the failure of control and monitoring by the Business Entity or the PJPK - [All Stages]

7. Increase in O&M costs Due to incorrect O&M cost estimates or unexpected increases - [Operation Stage]

8. Failure in estimating life cycle costs Cost estimation error caused by not getting fixed and up-to-date prices from suppliers - [Operation Stage]

9. Increase in energy costs - due to unit Energy costs rise due to inefficient inefficiency operating performance. - [Operation Stage]

10. Irregular availability of utilities Availability of utilities, such as electricity, internet, cannot be regulated / relied upon. - [Operation Stage]

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No Risk Description

11. Prolonged downtime Cessation of operations due to aspects of technical problems, maintenance, or other issues. - [Operation Stage]

12. Risk of latent defect Risk of loss or damage arising from hidden defects in facilities included as project assets. - [Operation Stage]

13. Risk of Technology Failure The technology used has the potential to fail in providing the required output specifications. - [Operation Stage]

14. Intellectual property (IP) risk The applied IP technology has not yet obtained a license from an IP holder or its license has expired - [Construction & Operation Stage]

15. Risk of Technology Obsolence Technological developments make the technology used becomes obsolete (risk of obsolescence of technology) - [Operation Stage]

16. Risk of interoperability The system cannot perform interbank transaction operations, thereby disrupting the smooth transportation - [Operation Stage]

F. Revenue Risk

1. Changes in project output demand The volume of output requests decreases or volume rises - [Operation Stage]

2. End customers do not pay Due to the level of ability and willingness to pay customers below the level of eligibility - [Operation Stage]

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No Risk Description

3. Failure to set initial tariff Due to the level of ability and willingness to pay consumers below the level of eligibility - [Operation Stage]

4. Delayed periodic tariff adjustments On the indexation of tariffs to the agreed inflation rate - [Operation Phase]

5. The rate of tariff adjustment is lower Especially after tariff indexation and tariff than projected rebasing - [Operation Stage]

6. Failure in estimating tariff Tariff setting is too optimistic or above the consumer's willingness to pay - [Operation Stage]

G. Risk of Network Connectivity

1. Risk of connectivity with existing Default of the authority to build and networks and connecting facilities maintain the necessary networks and build a liaison facility - [Operation Phase]

2. Risk of network development Risk that the additional network needed is not (so) built according to plan - [Operation Phase]

3. Risk of competitor / competitor facilities Default authority not to build competitor facilities - [Operation Stage]

H. Interface Risk

1. Risk of time inequality and quality of Inequality and quality of work supported by work the government and undertaken by business entity. - [Construction Stage]

2. Risk of differences in service standards / Substantial rework related to different methods standards / service methods used - [Construction Stage]

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No Risk Description

3. System transition risks The transition period allows changes in the use of payment system technology that disrupts operations - [Operation Phase]

4. Relationship risk Miscommunication in internal and external organizations, including resulting in delays / process errors due to lack of experience in PPP projects / Project Financing - [All Stages]

I. Political Risk

1. Foreign currencies cannot be converted Unavailability and / or conversion of foreign currencies to / from Rupiah - [All Steps]

2. Foreign currencies cannot be repatriated Foreign currencies cannot be transferred to the investor's home country - [All Steps]

3. Expropriation risk Nationalization / expropriation without compensation (adequate) - [Operation Phase]

4. General regulatory (and tax) changes Can be considered a business risk - [All Stages]

5. Discriminatory and specific regulatory Shaped tax policy by the relevant (and tax) changes authorities (central and / or regional) - [All Stages]

6. Delay in obtaining planning approval Only if triggered by a unilateral / unnatural decision from the relevant authority - [Pre- Construction & Construction Phase]

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No Risk Description

7. Failed / delayed in obtaining approval & Only if triggered by a unilateral / unnatural license decision from the relevant authority - [All Stages]

8. Delay in obtaining access to the project Only if triggered by a unilateral / unnatural site decision from the relevant authority - [All Stages]

9. Parastatal risk - Default of PJPK contractual obligations as an offtaker - Due to the privatization of offtaker or Default PJPK [All Stages] J. Force Majeure Risk

1. Natural disasters Natural disasters that can not operate normally - [All Stages]

2. Political force majeure War events, riots, public security disturbances - [All Stages]

3. Extreme weather Due to climate change or other factors - [All Stages]

4. Prolonged force majeure If over 6-12 months, it can disrupt the economic aspects of the affected party (especially if insurance is not available) - [All Stages]

K. Risk of Asset Ownership

1. The risk of the asset value going down Fire, explosion, etc. - [Operation Stage]

2. Transfer assets after the PPP contract The asset transfer process is constrained ends because there are different transfer or valuation mechanisms. [Operation Stage]

Table 3: Infrastructure Guarantees Based on Risk Allocation

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In order to provide guarantees, PT Penjaminan Infrastruktur Indonesia (Persero) will sign a guarantee agreement with the PPP Business Entity, which will guarantee the financial obligations of the PJPK based on a Cooperation Agreement that has been approved by PT Penjaminan Infrastruktur Indonesia (Persero). PT Penjaminan Infrastruktur Indonesia (Persero) then requires PJPK to sign a regress agreement with PT Penjaminan Infrastruktur Indonesia (Persero).

In the event that the PJPK fails to fulfill its obligations under the Cooperation Agreement, the PPP Business Entity can submit a claim to PT Penjaminan Infrastruktur Indonesia (Persero) as long as the claim meets the requirements as provided for in the guarantee agreement. Submitting a claim and evaluation process, as well as guarantee payment claims, must be regulated in a guarantee agreement. PT Penjaminan Infrastruktur Indonesia (Persero) has the right to regress against P | JPK to obtain reimbursement of guarantee claims, in accordance with the terms and conditions agreed in the regress agreement.

Requirements for guarantee claims that can be submitted by the PPP Business Entity in the event of a default by the PJPK shall be regulated in Permenkeu No. 260/2010 and Perpres 78/2010. PPP Business Entity can claim based on one of two conditions as stipulated in Perpres 78/2010, namely:

a. The PPP Business Entity has been notified by the PJPK of its inability to meet financial obligations before the grace period stipulated in the cooperation agreement; b. Within the period specified in the cooperation agreement the PJPK fails to fulfill its financial obligations to the Business Entity. Infrastructure guarantees are based on guarantee proposals submitted by the PJPK to PT PII before the commencement of the procurement of business entities. The Proposed Guarantee contains at least:

a. a complete description of the risk sharing plan based on the Risk Allocation between the Person in Charge of the Cooperation Project and the Business Entity to be stated in a Cooperation Agreement; b. a complete description of the Government Support that will be given to the Cooperation Project, if any; c. the proposed guarantee coverage includes: ➢ types of Infrastructure Risk proposed to be guaranteed; ➢ percentage of Financial Obligations of Project Responsible Personnel for Cooperation that are proposed to be guaranteed; and ➢ the proposed guarantee period, which is the whole or part of the Project Preparation Period; throughout or part of the Project Construction Period; and / or throughout or part of the Project Operating Period. The Proposed Guarantee must be accompanied by at least:

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a. Risk matrix in Cooperation Projects; b. draft Cooperation Agreement c. financial projections of the Cooperation Project Infrastructure Guarantees are provided as long as they are able to: a. issue a statement regarding the validity of the Cooperation Agreement; and b. give a written commitment to the Guarantor (PT PII) to: ➢ carry out its best efforts in controlling, managing or preventing, and reducing the impact of the occurrence of Infrastructure Risk which is its responsibility in accordance with Risk Allocation as agreed in the Cooperation Agreement for the duration of the Guarantee Agreement; ➢ meet the Regres, as outlined in the form of an agreement with the Infrastructure Guarantee Business Entity.

1.2. Legal Risk and Mitigation Strategy

Risk basically can occur at every stage of the Project, starting from Planning, Preparation and Transactions.

a. Risk Planning Phase At this stage, risks that may arise include the unavailability of the budget for PPP implementation, changes in legislation, failure or delay in preparing the documents required at the planning stage such as Preliminary Study documents and minutes of public consultation.

b. Risk of Preparation Phase At this stage, risks that may arise include the unavailability of the budget at the PPP preparation stage, failure or delay in forming the PPP Team, approval of each stakeholder has not been obtained, delays or failures in the submission of Government Support and / or Government Guarantees, delays or failures in the submission of location determination for PPP, Public Consultation and Market Interest Scoping failed or delayed, failure or delay in preparing the required documents such as the Pre-Feasibility Study Document.

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c. Transaction Phase Risks include: ➢ Risks in the Business Entity Procurement Stage At this stage the risks that may arise include changes in legislation that have a major impact on the procurement process of business entities and the failure or delay in preparing the required documents and permits. In addition to changes in legislation, in terms of stakeholders such as the replacement of officials who hold certain roles, it can hinder the implementation of the procurement of this business entity.

➢ Risk at the Implementation Stage of the PPP Agreement At this stage the risks that may arise include changes in laws and regulations that have a major impact on the implementation of the cooperation agreement, default by one of the parties in the cooperation agreement such as the project being done not on time or not in accordance with the specified specifications, the occurrence of force majeure, failure or delay in obtaining fulfillment of financing, failure or delay in preparing the required documents and permits. In addition, the risk of economic change and business competition also needs to be considered where it will affect cash flow and return on investment that has been issued by the Business Entity.

In order to mitigate the existing risks as mentioned above, a risk mitigation document specifically prepared by the PPP Node is needed based on the laws and regulations so that it can later become a risk mitigation reference used during the concession period.

1.3. Analysis of Improvement of Legislation or Issuance of New Legislation This section will outline legislation that needs to be refined for the purpose of implementing the Project. The scope of the regulations to be analyzed for refinement will be related to the more specific aspects of regulation in implementing the MLFF held in Indonesia.

Regulation issues with regards to the MLFF:

1. Revision of Minister of PUPR Regulation 16/2017 in order to allow the development of MLFF System (non cash transaction) by any qualified business entity and not limited to only consortium of TROs. The support that required from the TROs for the implementation of MLFF System shall also clearly regulate in the revision of regulation;

2. Amendment to GR 15/2005 (as amended several times) to provide for the imposition of fines in the MLFF system (both regarding the amount, evidence of violation and collection of the fine);

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3. Issuance of Regulation of the Minister of Finance regarding Establishment of BLU PUPR and stipulation of tariff applicable to BLU PUPR (along with a regulation regarding cooperation in the collection of the penalty);

4. Revision to Government Regulation on non tax revenue of PUPR to include the types and rates of non tax revenue imposed by BLU PUPR.

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2. INSTITUTIONAL ANALYSIS Institutional Analysis is prepared to confirm the legitimacy of the Project implementation. The scope of this institutional analysis will cover at least 5 (five) aspects as follows:

1. Authority of the Ministry of PUPR to Act as PJPK The general review of the authority of the Ministry of Public Works and Housing to act as a PJPK is based on the authority possessed by the Ministry of Public Works and Housing which is governed by legislation. Given that the Ministry of PUPR is a special body established by the Government which is limited by certain objectives and regions, it is necessary to explain the provisions of legislation that underlie the authority of the Ministry of Public Works and Housing to collaborate for the procurement of the Project. Thus, it is important to ascertain whether the Project will be carried out in accordance with the type of business activities that can be carried out by the Ministry of PUPR, and whether the location of the Project is part of the concession area of the Ministry of PUPR included in the KPBPB.

2. Roles and Responsibilities of Related Institutions (Stakeholder Mapping) Whereas in the preparation and implementation of the Project, there are various institutions related to the process of preparing and implementing the Project. The purpose of the activity of identifying each authority of the Agency relating to the Project is to ensure that in the stage of preparation and implementation of the Project, each of these authorities can be realized for the benefit of the Project. Thus, it is expected that the Ministry of PUPR can coordinate with the relevant agencies in the Project preparation stage. The related authorities can be in the form of licensing agreements, cooperation in the implementation of project preparation, and providing policies that are in line with the objectives of the Project.

3. Roles and Responsibilities of the PJPK Unit towards the Project Based on Minister of National Development Planning Regulation No. 4/2015, in the process of preparing and implementing the Project, the PJPK in this case the Ministry of PUPR in order to establish work units that will be responsible to the Ministry of PUPR in connection with each activity carried out in the Project preparation and transaction stages.

4. Institutional Regulation Tool In this section we will describe the set of regulations and institutions needed for the implementation of the Project. For this purpose, the scope of this study is related to whether the institutional instruments currently owned by the Ministry of Public Works and Housing have met enough to carry out the preparation and implementation of the Project, and what institutional tools might be needed to form the PUPR Ministry for the preparation and transaction stage.

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5. Decision Making Framework for the Project This section will outline the terms of reference for decision-making, both of which must be carried out by the Ministry of PUPR and by each agency related to the implementation of the Project. The description of the terms of reference will consist of what decisions must be taken, consideration of decisions, decision-making procedures, and plans regarding the steps that must be taken to make these decisions.

Furthermore, in preparing the institutional analysis, there are assumptions and limitations that are used which include that all documents provided in the form of copies in this analysis are the same as the original version, that analysis is provided within the legal framework in Indonesia and hence this analysis is not intended to be applied or translated based on law or jurisdiction other than Indonesian law, and analysis of laws and regulations is given based on the examination of documents carried out and thus it is possible that the analysis of legislation may change, in part or in full, if there are additional documents other than those already examined.

2.1. Institutional Regulations

Because the Project is implemented with a PPP scheme, the legal basis used to determine the PJPK is Presidential Regulation No. 38 of 2015 concerning Cooperation between the Government and Business Entity in the Provision of Infrastructure ("Perpres No. 38/2015") and Regulation of Minister of National Development Planning No. 4/2015. In addition, regulations from related sectors will also applies.

According to Presidential Regulation No. 38/2015, the PJPK is the Minister / Head of Institution / Regional Head or BUMN / BUMD as the provider or provider of infrastructure based on the applicable laws and regulations. Furthermore, pursuant to Regulation of Minister of National Development Planning No. 4/2015 PJPK is the Minister / Head of Institution / Regional Head and director of BUMD / BUMD as regulated based on applicable laws and regulations relating to the related sector.

Since the MLFF Project is considered as part of toll road business activities (namely, toll collection which classified as part of toll road business operation activities) under GR 15/2005 (as amended), hence the development of the Project shall be under the authority of Minister of PUPR. In this case the Minister of PUPR shall act as the PJPK. In accordance with Presidential Regulation 38/2015, Minister of PUPR may assign its authority to other officer within PUPR to act as PJPK for and on behalf of Minister of PUPR.

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Following is the description on Ministry of PUPR: a. Establishment

According to Article 4 paragraph (1) and Article 17 of the Constitution of the Republic of Indonesia 1945 and Presidential Regulation of the Republic of Indonesia Number 7 of 2015 concerning the State Ministry Organization, the State Ministry group mentioned in Article 1 point 19, namely the Ministry of Public Works and Public Housing. b. Authority, Responsibility and Organizational Structure

The Ministry of Public Works and Public Housing is under and responsible to the President and led by the Minister 13.

The Ministry of Public Works and Public Housing has the task of carrying out government affairs in the field of public works and public housing to assist the President in organizing state government.

In carrying out its duties, the Ministry of Public Works and Public Housing functions.

▪ formulation, stipulation, and implementation of policies in the field of water resources management, road management, housing provision and residential area development, infrastructure financing, structuring of buildings, drinking water supply systems, waste water management and environmental drainage systems as well as solid waste, and service development construction; ▪ coordination of the implementation of tasks, coaching, and providing administrative support to all organizational elements within the Ministry of Public Works and Public Housing; ▪ management of state property / wealth that is the responsibility of the Ministry of Public Works and Public Housing; ▪ supervision of the implementation of duties within the Ministry of Public Works and Public Housing; ▪ implementation of technical guidance and supervision of the implementation of affairs of the Ministry of Public Works and Public Housing in the local region; ▪ creation technical policies and integration strategies for the development of infrastructure of public works and public housing; ▪ conducting research and development in the field of public works and public housing; ▪ the implementation of human resource development in the field of public works and public housing;

13 Article 1 of Presidential Regulation no 15 of 2015

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▪ implementation of substantive support to all organizational elements within the Ministry of Public Works and Public Housing; and ▪ implementation of other functions given by the President. c. Organizational Structure of Ministry of PUPR

According to Article 4 of the Presidential Regulation of the Republic of Indonesia Number 135 of 2018 concerning Amendments to Presidential Regulation number 15 of 2015 concerning the Ministry of Public Works and Public Housing, the Ministry of Public Works and Public Housing consists of:

i. Secretariat General; ii. Directorate General of Water Resources; iii. Directorate General of Bina Marga; iv. Directorate General of Cipta Karya; v. Directorate General of Housing Provision; vi. Directorate General of Construction Development; vii. Directorate General of Financing Public Works and Housing Infrastructure; viii. Inspectorate General; ix. Regional Infrastructure Development Agency; x. Research and Development Agency; xi. Human Resource Development Agency; xii. Expert Staff for Integration and Development; xiii. Expert Staff for Economics and Investment; xiv. Expert Staff of Socio-Cultural and Public Roles; xv. Expert Staff for Inter-Institutional Relations; and xvi. Expert Staff for Technology, Industry and Environment.

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Figure 2: Organizational Structure of Minister of Public Works 14

As explained earlier, the PJPK for the MLFF project is the Minister of PUPR. However, in the day-to-day implementation it is very possible for the Minister of PUPR to delegate its authority to the organizational units below it. The delegation of authority can be implemented by taking into account the applicable laws and regulations relating to toll road infrastructure projects including Law 38/2004, GR 15/2005 along with all changes, PUPR 6/2018, and regulation of Minister PUPR 03/2019. After observing the provisions of the laws and regulations, it can be concluded that there are several organizational units under the Minister PUPR who have the authority to implement the MLFF.

14 Picture taken from https://www.pu.go.id/article/54/struktur-organisasi dated 11 June 2019 on 16.57

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2.2. Roles and Responsibilities of Agencies Related to the Project a. Institution related with the Toll Road

1) ITRA (Indonesia Toll Road Agency) / BPJT

ITRA / BPJT was established in accordance with the mandate of Law 38/2004 concerning the way to implement part of the Government's authority in the operation of toll roads. 15 The BPJT is formed by the Minister, under, and responsible to the Minister. The duties of the BPJT according to Law 38/2004 are as follows: 1. regulation of toll roads includes the providing recommendations on initial rates and adjustments to the Minister, as well as acquisition of toll roads at the end of the concession period and providing subsequent operating recommendations; 2. toll road concession includes preparation of toll road concessions, procurement of investment, and provision of land acquisition facilities; and 3. toll road supervision includes monitoring and evaluation of toll road concessions and supervision of toll road services.

Further description of the duties and functions of the BPJT is regulated in Article 75 GR 15/2005, namely: 1. recommend the initial tariff and toll tariff adjustment to the Minister; 2. conduct acquisition of toll road concession rights that have finished the concession period and recommend further operations to the Minister; 3. to carry out acquisition of temporary rights of toll road concessions that have failed in the implementation of concessions, then do the re-auction the concessions; 4. preparing toll road concessions which include financial feasibility analysis, feasibility studies and AMDAL preparation; 5. procuring toll road investments through a transparent and open auction; 6. assisting the process of implementing land acquisition in the event of certainty of availability of funds originating from the Business Entity and create mechanisms for its use; 7. monitor the implementation of the planning and implementation of construction and operation and maintenance of toll roads carried out by the Business Entity; and 8. supervise the Business Entity for the implementation of all toll road concession agreement obligations and report it periodically to the Minister.

15 Article 45 UU 38/2004

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As explained in the previous section, the BPJT provides recommendations to the Minister related to the toll collection system which is then determined by the Minister. This means that BPJT has the authority to carry out an analysis of the application of MLFF on the toll road and then recommend it to the BPJT. In addition, the BPJT also has duties and functions to procure toll road investments through a transparent and open auction. If the proposed MLFF project is approved by the Minister of PUPR, the BPJT is an organizational unit that can carry out the auction. This is considered quite effective considering that so far the auction has been carried out by the BPJT so that the auction committee formed is considered to have sufficient capability to carry out the auction. In addition, GR 15/2005 also stipulates that the tender committee for toll road concessions is formed by the BPJT16

2) Directorate General of Bina Marga (Ditjen Bina Marga)

The operation of toll roads in the Republic of Indonesia is organized by three Institutions namely the Directorate General of Highways, BPJT and BUJT, which in accordance with Articles 2 and 3 of Permen PU 06/2018 the implementation of Toll Roads includes: a. arrangements for the operation of Toll Roads; b. fostering the operation of Toll Roads; c. toll road concessions; and d. supervision of the operation of Toll Roads.

The following is a table of division of authority and duties from the three institutions: (a) Authority of the Ditjen Bina Marga in the Implementation of Toll Roads (i) Implementation in the Arrangement for the Implementation of Toll Roads includes: a. policy formulation b. general planning preparation c. general planning preparation (ii) Implementation in Guiding the Implementation of Toll Roads a. formulation of technical and manual standards; b. service; c. empowerment (comparative study training) in general; d. general research and development. (iii)Concession of Toll Roads 1. Toll Road Concession Preparation a. Implementation of Government Initiatives; b. Pre evaluation, evaluation, implementation and recommendations in business entity initiatives

16 Article 55 PP 15/2005

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2. implementation of Toll Road Concession a. Implementation, approval and facilitation in business by the government (except procurement of operators and supervision, operation and maintenance); b. Implementation, evaluation, control and supervision and approval of concessions by toll road business entities (except procurement of toll road investments and funding of toll road investment); c. Approval, Recommendation, Determination and dispensation in permitting utilization of parts of the Toll Road. 3. Implementation of General Supervision in Supervision of Toll Road Transfers

(b) Authority of the BPJT in the Implementation of Toll Roads (i) Guiding the Implementation of Toll Roads. Implementation of empowerment (comparative study training) & research and development for business entities.

(ii) Concession of Toll Roads 1. Toll Road Concession Preparation (business entity initiative) Pre-evaluation, evaluation, implementation, facilitation, implementation and recommendations in business entity initiatives (except application for location determination)

2. Implementation of Toll Road Concession Evaluation, implementation, recommendations, suggestions, arrangements and considerations.

(iii)Implementation of supervision of toll road concessions in the Supervision of Toll Road Implementation

(c) Authority of Toll Road Business Entity in the Implementation of Toll Roads (i) Concession of Toll Roads 1. Toll Road Concession Preparation Business entity initiative

Request permission & implementation of pre-study and implementation.

2. Implementation of Toll Road Concession Facilitate bailout funds, implementation, facilitation and negotiation, fulfillment of requirements and supervision of implementation.

(ii) Supervision of utilization of toll road parts in the Supervision of Toll Road Implementation.

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3) Directorate of Freeway and Urban Roads, Directorate General of Bina Marga

According to article 409 Regulation of Minister PUPR No. 3/2019, the task of fostering the implementation of highways, including toll roads, is in the Directorate of Freeway and Urban Roads. The Directorate of Freeways and Urban Roads consists of several subdistricts, but if you pay attention to the duties of each sub-directorate and compared to the characteristics of the planned MLFF implementation, there are two sub-directories that have direct links to this project, namely: 1) Sub-directorate of Freeway Planning and Programming The Planning and Programming Sub-directorate has the function of evaluating Toll Road Concession initiatives and preparation of permits to conduct feasibility studies and permit initiatives with business entity initiatives 17 . The MLFF investment project is a project on the initiative of a business entity, so the proposed process and evaluation based on the Regulation of Minister PUPR No 03/2019 are carried out by the Sub-directorate of Planning and Programming Freeway. In addition, the Sub-directorate is also the party that will make improvements to the legislation needed related to the MLFF implementation plan in relation to its function to carry out the preparation, development, development of standards and guidelines for planning, implementation, control, operation and maintenance, service and utilization of the space highways and toll roads18 2) Sub-directorate of Monitoring and Evaluation The Sub-directorate of Monitoring and Evaluation has the task of carrying out monitoring and evaluation of the performance of highways and urban roads including toll roads. 19 The connection of this Sub-directorate to the MLFF implementation plan is related to the implementation of this transaction which will be carried out on toll roads that are already operating. In accordance with its function, evaluation and recommendations for changes to the system and operation of highways and toll roads are in the Sub-Directorate of Monitoring and Evaluation20. The Sub-directorate of Monitoring and Evaluation will work with the Planning and Programming Sub-directorate to carry out an evaluation related to the planned implementation of the MLFF and recommend the results to the Director General of Highways to be forwarded to the Minister.

17 Article 413 Permen PUPR 03/2019 18 Article 413 (f) Permen PUPR No 03/2019 19 Article 428 Permen PUPR No 03/2019

20 Article 429 (c) Permen PUPR No 03/2019

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4) Directorate of Financing Road and Bridge Infrastructure, Directorate General of Financing Public Works and Housing Infrastructure.

The task mandated by the Regulation of Minister PUPR No. 3/2019 to the Directorate of Financing the Implementation of Road and Bridge Infrastructure is to carry out the preparation of policy formulation and implementation of policies in the field of road and bridge infrastructure financing. In carrying out this task, several functions of the Directorate of Road and Bridge Infrastructure Financing are among others compiling recommendations on joint proposals of business entity initiatives, preparing recommendations for determining winners and appointment of implementing business entity, and monitoring and evaluating targets for meeting service standards in implementing financing cooperation road and bridge infrastructure. Based on these matters, it can be seen that there are several functions of the same directorate with the BPJT and the Directorate of Freeways and Urban Roads. Similar things have also happened between BPJT and Bina Marga but the division of tasks of each organizational unit has been re-regulated through the Regulation of Minister PUPR No. 06/2018. However, the regulation was made before the existence of the Directorate General of Financing for Public Works and Housing Infrastructure. Therefore, a new regulation is needed to regulate the division of tasks and authorities related to toll road concessions so that the process of submitting initiatives becomes easier.

The Directorate General of Highways ("Ditjen Bina Marga") is a director general at the Ministry of Public Works and Public Housing who has the task of carrying out the formulation and implementation of policies in the field of road management and is under and responsible to the Minister. (Regulation of the Minister of Public Works and Public Housing of the Republic of Indonesia No. 06 / PRT / M / 2018 concerning the authority and duties of the directorate general of highways, toll road regulatory agencies, and toll road business entities in the operation of toll roads ("Permen PU 06/2018" )).

Indonesia Toll Road Authority (BPJT) is a non-structural body formed by the Minister, under, and responsible to the Minister for implementing part of the Government's authority in the operation of toll roads.

MLFF feasibility study - Volume I Legal and Institutional Study b. Institution related to Non-cash Transaction

1) Bank Indonesia Law Number 3 of 2004 concerning Bank Indonesia ("UU BI") explains that Bank Indonesia is the Central Bank of the Republic of Indonesia which is an independent state institution in carrying out its duties and authorities, free from government interference or other parties, except things that are strictly regulated in the BI Law. Bank Indonesia has the following tasks: a. establish and implement monetary policy; b. regulate and maintain a smooth payment system; c. regulate and supervise the Bank. The implementation of the task as referred to has relevance in achieving stability in the value of the rupiah. The task of establishing and implementing monetary policy carried out by Bank Indonesia includes through controlling the money supply and interest rates. The effectiveness of the implementation of this task requires the support of an efficient, fast, safe and reliable payment system, which is the target of the task of managing and maintaining the smooth payment system. This efficient, fast, secure and reliable payment system requires a sound banking system, which is the task of regulating and overseeing the Bank. Furthermore, a healthy banking system will support monetary control given that the implementation of monetary policy is mainly carried out through the banking system.

2) Financial Services Authority (Otoritas Jasa Keuangan) The Financial Services Authority (OJK) is an independent institution that has the functions, duties and authority to regulate, supervise, examine and investigate. OJK was formed based on Law Number 21 of 2011 ("OJK Law") which functions to organize an integrated regulation and supervision system for all activities in the financial services sector. Based on Article 4 of the OJK Law, OJK is formed with the aim that all activities in the financial services sector:

a) held regularly, fairly, transparently and accountably; b) able to realize a financial system that grows in a sustainable and stable manner; and c) able to protect the interests of consumers and society.

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OJK functions to organize an integrated regulatory and supervision system for all activities in the financial services sector. OJK carries out regulatory and supervisory duties on: a) financial service activities in the Banking sector; b) financial service activities in the Capital Market sector; and c) financial service activities in the Insurance sector, Pension Funds, Financing Institutions, and Other Financial Services Institutions. In connection with the regulatory task, Article 8 of the OJK Law regulates the authority of the OJK as follows: a) establish regulations for the implementation of this Law; b) establish legislation in the financial services sector; c) establish OJK regulations and decisions; d) establish regulations regarding supervision in the financial services sector; e) establish policies regarding the implementation of OJK tasks; f) establish regulations regarding the procedure for establishing written instructions on Financial Services Institutions and certain parties; g) establish regulations regarding the procedure for determining the statutory manager at the Financial Services Institution; h) establish organizational structure and infrastructure, and manage, maintain, and administer wealth and liabilities; and i) establish regulations regarding the procedures for imposing sanctions in accordance with statutory provisions in the financial services sector. In connection with the task of supervision, Article 9 of the OJK Law regulates the authority of the OJK as follows: a) establish operational oversight policies on financial service activities; b) supervise the implementation of supervisory tasks carried out by the Chief Executive; c) conduct supervision, inspection, investigation, Consumer protection, and other actions towards Financial Services Institutions, actors, and / or supporting financial service activities as referred to in legislation in the financial services sector; d) give written instructions to Financial Services Institutions and / or certain parties; e) appoint a statutory manager; f) determine the use of the statutory manager; g) establish administrative sanctions against those who violate the laws and regulations in the financial services sector; and h) give and / or revoke: ➢ Usaha business license; ➢ individual permission;

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➢ effective registration statement; ➢ registered certificate; ➢ approval to conduct business activities; ➢ authorization; ➢ approval or determination of dissolution; and ➢ other designations, as referred to in the legislation in the financial services sector. c. Institution related to law enforcement

1) Republic of Indonesia National Police Law No. 2 of 2002 concerning the National Police of the Republic of Indonesia ("National Police Law") states that the National Police of the Republic of Indonesia is a state tool that plays a role in maintaining public security and order, upholding the law, and providing protection, protection and service to the community. framework for maintaining domestic security.

The function of the police is one of the functions of the state government in the field of maintenance of security and public order, law enforcement, protection, protection, and service to the community. The National Police of the Republic of Indonesia aims to realize internal security which includes the maintenance of public security and order, orderly and upholding the law, the implementation of protection, protection and service to the community, as well as the establishment of public peace by upholding human rights.

a) The main tasks of the Republic of Indonesia National Police are: i) maintain public security and order; ii) enforce the law; and iii) provide protection, protection and service to the community.

b) In carrying out the main tasks referred to above, the Indonesian National Police is in charge of: i) implementing arrangements, safeguards, escorts and patrols community and government activities as needed; ii) organize all activities in ensuring security, order and smooth traffic on the road; iii) fostering the community to increase community participation, community legal awareness and community obedience to laws and regulations; iv) participate in fostering national law; v) maintain order and guarantee public security; vi) coordinate, supervise and technical guidance on special police, civil servant investigators, and other forms of self-defense;

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vii) conduct investigation and investigation of all criminal acts in accordance with criminal procedural law and other laws and regulations; viii) organizing police, police medical, police forensic and psychology identification for police duties; ix) protect the safety of souls, property, society and the environment from disturbances in order and / or disaster including providing assistance and assistance by upholding human rights; x) serve the interests of the community for a while before being handled by the agency and / or the authorized party; xi) provide services to the community in accordance with their interests within the scope of police duties; and xii) carry out other duties in accordance with the laws and regulations. c) in order to carry out the tasks referred to in Points a) and b) above the National Police of the Republic of Indonesia in general the authorities are: i) receive reports and / or complaints; ii) help resolve community disputes that can disrupt public order; iii) preventing and overcoming the growth of community diseases; iv) oversee the flow that can cause division or threaten the unity and unity of the nation; v) issue police regulations within the administrative authority of the police; vi) carry out special checks as part of police action in the context of prevention; vii) take the first action on the scene; viii) taking fingerprints and other identities and photographing someone; ix) seeking information and evidence; x) holding the National Criminal Information Center; xi) issue a permit and / or certificate needed in the context of community service; xii) provide security assistance in the trial and implementation of court decisions, activities of other agencies, and community activities; xiii) temporarily accept and store the items. d) The National Police of the Republic of Indonesia in accordance with other laws and regulations are authorized:

i) give permission and oversee public crowd activities and other community activities; ii) hold registration and identification of motorized vehicles; iii) provide a motorized driving license; iv) receive notifications about political activities;

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v) give permission and supervise firearms, explosives and sharp weapons; vi) provide operational permits and conduct supervision of business entities in the field of security services; vii) provide guidance, educate, and train special police officers and self-reliant security officers in the police technical field; viii) cooperate with the police of other countries in investigating and combating international crime; ix) conduct functional oversight of the police against foreigners who are in the territory of Indonesia with the coordination of relevant agencies; x) representing the government of the Republic of Indonesia in an international police organization; xi) carry out other authorities that fall within the scope of police duties. e) In order to carry out the tasks referred to in Points a) and b) in the field of criminal proceedings, the National Police of the Republic of Indonesia has the authority to: i) conduct arrests, detention, searches and seizures; ii) prohibit anyone from leaving or entering a crime scene for the purpose of investigation; iii) bring and expose people to investigators in the context of investigation; iv) order to stop the suspect and ask and check the identification; v) conduct inspection and seizure of letters; vi) call people to be heard and examined as suspects or witnesses; vii) bring in experts who are needed in conjunction with case examinations; viii) terminate the investigation; ix) submit case files to the public prosecutor; x) submit a request directly to the authorized immigration official at the immigration checkpoint in an urgent or sudden situation to prevent or deter people suspected of committing a criminal act; xi) providing guidance and investigation assistance to civil servant investigators and accepting the results of investigations of civil servant investigators to be submitted to public prosecutors; and xii) take other actions under the law that are responsible. f) Other actions as referred to in point f) letter xii) are actions of investigation and investigation carried out if they fulfill the following requirements: i) not contrary to a rule of law; ii) in line with legal obligations that require such actions to be carried out; iii) must be appropriate, reasonable, and included in the office environment; iv) reasonable consideration based on compelling circumstances; and v) respect for human rights.

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Article 259 of Law No. 22 of 2009 states that the investigation of criminal acts of Road Traffic and Transportation is carried out by: a. Republic of Indonesia National Police Investigator; and b. Certain Civil Servant Investigators are specifically authorized according to this Law. The Indonesian National Police Investigator in the field of Road Traffic and Transportation as referred to in letter a above, consists of: a. Investigator; and b. Assistant Investigator. Republic of Indonesia National Police Investigator, in terms of prosecution of violations and investigations of criminal offenses, National Police Investigators of the Republic of Indonesia in addition to those stipulated in the Criminal Procedure Code and Laws concerning the National Police of the Republic of Indonesia, in the field of Traffic and Transportation Road authorized: a. dismiss, prohibit, or suspend operations and temporarily confiscate Motorized Vehicles that are reasonably suspected of violating traffic regulations or are a tool and / or proceeds of crime; b. conduct examination of the truth of the information relating to the investigation of criminal acts in the field of Road Traffic and Transportation; c. request information from the Driver, owner of the Motor Vehicle, and / or Public Transport Company; d. confiscating a driver's license, motorized vehicle, cargo, motorized vehicle registration number, motorized vehicle license certificate, and / or test pass as evidence; e. take action against criminal offenses or traffic crimes according to the provisions of the legislation; f. make and sign the minutes of examination; g. stop the investigation if there is not enough evidence; h. conduct detention related to traffic crime; and / or i. take other actions according to the law responsibly. The Auxiliary Investigator has the authority referred to in the paragraph above, except for the detention as referred to in letter h above, which must be given with the delegation of authority from the Indonesian National Police Investigator in the field of Road Traffic and Transportation.

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Civil Servant Investigators are authorized to:

a. carry out inspections of violations of the technical and roadworthy requirements of Motorized Vehicles whose verification requires special expertise and equipment; b. conduct inspections of violations of permits for transportation of people and / or goods with Public Motor Vehicles; c. carry out inspection of violations of cargo and / or dimensions of Motorized Vehicles in a place where weighing is installed permanently; d. prohibit or delay the operation of Motor Vehicles that do not meet technical and roadworthy requirements; e. request information from the Driver, owner of the Motor Vehicle, or Public Transport Company for violations of technical and roadworthiness requirements, Motorized Vehicle testing, and licensing; and / or f. confiscating the test pass and / or license for the implementation of public transportation for violations as referred to in letter a, letter b, and letter c by making and signing the minutes of examination. The authority of the Civil Servant Investigator referred to above is carried out in the Terminal and / or the place of the weighing apparatus that is installed permanently. In the event that the authority referred to above is carried out on the Road, the Civil Servant Investigator must coordinate with and must be accompanied by the Indonesian National Police Officer.

2) Ministry of Transportation

Based on Article 4 paragraph (1) and Article 17 of the 1945 Republic of Indonesia Constitution and Presidential Regulation of the Republic of Indonesia Number 7 of 2015 concerning State Organization of the Ministry, the Ministry of State group concerned in Article 1 point 20 is the Ministry of Transportation.

In relation with the MLFF, the Ministry of Transportation oversee Roads in general, including the Toll Roads, and have the following function and task:

a) develop, establishment and execution of transportation policy b) asset management within ministry of transportation responsibility c) supervision of execution of transportation policy d) provider of technical support and supervision with regional level e) executor of national level technical assistance

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3) Court The District Court was formed by a Presidential Decree. The District Court is domiciled in the Regency / City capital, and its legal area covers the Regency / City area. And the High Court is domiciled in the capital of the Province, and its jurisdiction covers the territory of the Province. d. Relevant Ministry and Institution

1) Ministry of Finance

Should the Business Entity wishes to go with the Availability Payment scheme a coordination and obtain budgeting approval from the minister of finance who holds the state budget is required. In the implementation the budget related and determination of fee with the availability scheme shall involve the Ministry of Finance.

The Ministry of Finance shall also have the role in approving the establishment of BLU PUPR as well as approving the tariff that can be imposed by BLU PUPR for the services.

2) Ministry of Law and Human Rights

In the implementation of PPP Projects, auction-winning Business Entity must establish a Business Entity in the form of a Limited Liability Company which acts as a PPP Business Entity ("PPP Business Entity") where the duties include signing the PPP agreement with the PJPK and implementing the construction of the Project in accordance with the terms and conditions is in the PPP agreement. In establishing a PPP Business Entity, Ministry of Law and Human Rights has a role in ratifying the establishment of a PPP Business Entity, this ratification is granted through a Ministerial Decree concerning the ratification of corporate legal entities.

3) Ministry of Manpower and Transmigration

The Ministry of Manpower and Transmigration in relation to the PPP project has functions and roles, among others, ratifying the Foreign Workers Use Plan (RPTKA) and issuing a Foreign Workers Permit (IMTA) if the PPP Business Entity uses foreign workers. e. Institution Related to Guarantee

1) PT. Penjaminan Infrastruktur Indonesia (Persero)

PT. Penjaminan Infrastruktur Indonesia (Persero) (“PII”) is established based on Government Regulation No. 35 of 2009 on Republic of Indonesia State Capital

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Participation for the establishment of limited liability company (Persero) in Infrastructure Guarantee, as a government effort to accelerate infrastructure in Indonesia by providing an accountable, transparent and credible guarantee. In addition, the presence of PII as Infrastructure Guarantee Company is also expected to encourage private funds to infrastructure sector in Indonesia by increasing creditworthiness of PPP projects which can reduce the cost of infrastructure project funds.

PII is establishment for the following purpose: a. To increase creditworthiness upon the PPP infrastructure project by providing guarantee to the infrastructure risk; b. To increase the governance and transpiration upon the PPP infrastructure project with regards to the action and delay of the government; c. To facilitate the agreement for institutions/parties in collaborative projects (ministries, state owned enterprise’s, regional government) by providing guarantees to PPP projects which are well structured; d. To limit government contingency obligation and minimize sudden shock upon the government budget.

With regards to the infrastructure guarantee which will be given to this project, the PUPR Ministry as PJPK will sign the Guarantee Agreement with PII as the guarantee. If the PJPK cannot fulfill its financial obligation to the PPP Business Entity, the Guarantor will settle the PJPK financial obligation to the PPP Business Entity based on the Guarantee Agreement. If the Guarantor have fulfilled its obligation to the PPP business entity, the PJPK is obligated to fulfill the regres (recourse). Regres is the Guarantor right to invoice PJPK upon what has been paid to the PPP Business Entity in order to fulfil the financial obligations of the PJPK. To complete and regulate the terms and conditions upon the said guarantee, the PUPR Ministry as PJPK will sign the Guarantee Agreement with IIGF as the Guarantor.

With regards to the Regres, based on article 30 of the Permenkeu 260/2010, PT Penjaminan Infrastruktur Indonesia (Persero) may submit to the Ministry of Finance to take over the rights of the PT Penjaminan Infrastruktur Indonesia (Persero) to receive payments (related to Regres Settlement Agreement or arbitration verdict) to PJPK. The Minister of Finance will take over all PII right to PJPK. Permenkeu 260/2010 is not specifically regulates on how the mechanism of the assignment of the regres right from PII to the Ministry of Finance to be conducted.

Further based on article 31(2) of Permenkeu 260/2010, after the transfer of the regres right from PII to the Minister of Finance, the Minister of Finance may convert the

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regres right with the financial obligation which owned by the Minister of Finance to PJPK. The conversion can be in the form of deduction of Profit-Sharing Funds (“DBH”) and General allocation funds (“DAU”). DBH is funs which are sourced from the revenues from the State Revenue and Expenditure Budget (“APBN”), which allocated to the regions based on the percentages to fund the regional needs in the context of implementing decentralization. Meanwhile, DAU is funds sourced from the APBN, which are allocated with the aim of balancing the distribution of funding. Both the DBH and DAU are part of the Balancing Fund, which is allocated to the regions. Based on this provision, it can be explained that the DBH and DAU are financial obligations from the Minister of Finance to the regions.

2.3. Roles and Responsibilities of the PJPK Unit for the Project a. PPP Node The role and responsibility of the PJPK unit for the project is as the PPP node. The PPP node is formed by the Minister / Head of the Institution / Regional Head in order to carry out PPP activities. The PPP node is a work unit in the ministry / institution at the national level or work unit at the regional level, which is formed new or attached to existing work units or parts, with the tasks and functions of policy formulation and / or synchronization and / or coordination of the planning phase and the preparation phase and / or supervision and evaluation of the preparation and transaction stages, including management of PPP implementation.

The PPP node can be attached to work units that already exist within the Ministry / Institution / Region or new work units formed within the Ministry / Institution / Regional environment. The purpose of the establishment of the PPP node is to formulate policies and / or synchronization and / or coordination and / or supervision, and / or evaluation of PPP activities.

The PPP node is assisted by the PPP team in carrying out activities at the preparation phase and PPP transactions phase; and the procurement committee in carrying out the procurement activities of the Implementing Business Entity.

The PPP node have assignments, among others:

a. Forwarding reports submitted by the PPP Team to the PJPK; b. Coordinate with the PPP Team regarding the implementation of PPP duties; c. At the stage of the PPP transaction (after the PPP Agreement is signed), the PPP node helps the PJPK to monitor and control the implementation of the PPP in accordance with the provisions agreed upon and stated in the PPP agreement.

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d. At the stage of the PPP transaction (pre-construction period), the PPP node is responsible for carrying out oversight of the implementation of the PPP agreement and financial close. e. At the stage of the PPP transaction (construction period), the PPP Node implements implementation management for:: - design of new facilities or explanation of services to be provided; - incorporation of new facilities with existing facilities; - the right to convey problems related to the failure and inability of the Implementing Business Entity to fulfill the PPP agreement; - delays or changes to the construction schedule; - variations in construction design, if requested by the PJPK; - readiness for work / operations; - monitoring of the suitability of technical planning with the implementation of construction; - issues regarding labor; and - the risk borne by the PJPK. f. During the Construction period, if a transfer of shares of the Implementer entity, the Note PPP conduct the following: - stipulation of criteria for the transfer of shares by the PJPK covering: ▪ the transfer of shares may not delay the schedule for the start of the operation of the PPP; and ▪ controlling shareholders who are consortium leaders are prohibited from transferring their shares until the commencement of commercial operations of the PPP. - qualifying the prospective new shareholders of the Implementing Business Entity which at least fulfills the requirements stipulated at the time of the prequalification of the public tender of the Implementing Business Entity; - submit approval to the PJPK, if the prospective new shareholder has fulfilled all the criteria for the transfer of shares that have been determined and meets the qualification requirements; and - prepare a concept of share transfer agreement to be signed by the PJPK. g. At the PPP transaction phase (operation period 21 ), the PPP node implements the management of the implementation: - implementation of the PPP agreement; and - monitoring service / service performance standards in accordance with the PPP agreement.

21 Implementation management during operations starting from the time the PPP operates commercially until the expiration of the PPP agreement period

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- in the case of monitoring the implementation of the provision of guarantees during the operation period, the PPP node shall coordinate with the BUPI. h. At the stage of the PPP transaction (the expiration of the PPP Agreement), the PPP node shall consider the following matters: - transfer of assets back to the PJPK (if the form of the PPP uses the transfer option); - PPP agreement must specify the desired project conditions when the PPP agreement period ends and the PPP is transferred to the PJPK; and - each sector / sub-sector has different characteristics, so consideration of the situation in which the physical and economic condition of the infrastructure is no longer feasible is needed so that rehabilitation or renovation is needed. i. In connection with asset transfer, the PPP Node conducts: - Asset Valuation, which includes activities: ▪ researching and assessing all components of the facilities / systems included in the PPP agreement (assessment carried out on the condition or performance and the remaining age of each component according to agreed benchmarks); ▪ calculate the estimated costs needed for routine and non-routine operations and maintenance for the rest of the age; ▪ assessing the availability of spare parts for facilities and systems that may technically not be feasible; ▪ evaluating the availability of human resources owned by the PJPK; and ▪ evaluating the efficiency of implementation management during the collaboration. - Transfer Assets, which includes activities: ▪ preparing and submitting permission for inspection / testing of all PPP assets for the purpose of transferring assets; ▪ conduct testing and inspection of physical facilities and all equipment for the purpose of transferring assets in accordance with the PPP agreement; ▪ carrying out the necessary administrative actions in accordance with the laws and regulations so that all assets are recorded in the name of the PJPK; and ▪ preparing and making the Asset Handover Minutes signed by the Implementing Business Entity and the PJPK. b. PPP Team

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PPP team is a team formed by the PJPK to assist the management of the PPP upon the preparation and the PPP transaction phase especially after the determination of the Business Entity to obtain the financial close, and to coordinate with the PPP node in its implementation. The PPP team have been formed by the PJPK since the PPP Preparation phase. The PPP team formed the PJPK to conduct the activity upon transaction phase until the financial close, including the procurement of the Implementor Business Entity, if required.

Role and obligation of the PPP team are as follows:

a. Conduct activity upon the PPP preparation phase including, early feasibility study and the final feasibility study; b. Conduct PPP transaction activity until the financial close, except the procurement of the Implementor Business Entity; c. Submit annual report to PJPK through PPP node; and d. Conducting coordination with the PPP node in carrying its duties. c. Tender Committee Tender committee is a team formed by the PJPK, having a role and obligation to prepare and implement the tender process of Implementor Business Entity Procurement upon transaction phase. The Business Entity Procurement is conducted after completion of the Feasibility Study Document, from the prequalification, procurement, preparation and submission, evaluation and winner determination process, also the finalization of the procurement with the execution of the PPP agreement.

2.4. Institutional Regulation Tools

The instrument of institutional regulation that are considered to be issued for project of implementation are presented under Table 4.

No Type of Regulation Criteria 1 PUPR Minister Decree to form Tender Tender Committee must be determined by Committee considering the background and function of each member of the committee. As consideration the member of the committee shall have specialty in technical, financial and legal aspect.

2 PUPR Minister Decree to form PPP Under this decree a duty and authority of the node PPP node is arranged.

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3 PUPR Minister Decree to form Tender This document is expected to be the legal basis Committee for risk mitigation plan for the PUPR Ministry to have effectiveness in document. implementing risk mitigation during the Project period.

Table 4: Regulatory tools for project implementation

2.5. Terms of Reference for Decision Making

The Terms of Reference for decision making by the Ministry of PUPR as the PJPK in the PPP project include the PPP Planning Phase, the PPP Preparation Phase and the PPP Transaction Phase. a. Planning Phase

The stages included in this stage include:

1) Preparing the PPP Fund Budget Plan

The PJPK shall prepare a budget plan for the implementation of the PPP in accordance with the provisions of the laws covering each phase of the implementation of the PPP, namely the planning phase, the preparation phase and the transaction phase. The purpose of this preparation is to determine the availability of the budget.

2) PPP Identification and Determination

PPP identification is carried out by conducting a Preliminary Study which contains at least the PPP form plan, the PPP financing scheme plan and its funding sources, and the PPP bid plan that includes the schedule, process and method of evaluation. Preliminary Studies include studies of:

a) Needs analysis;

b) Compliance criteria;

c) Criteria for determining the Value of Money Benefit of business entities participation;

d) Analysis of revenue potential and project financing schemes; and

e) Recommendations and follow-up plans.

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3) Public Consultation

Public Consultation is a process of interaction between PJPK and the community including stakeholders to increase transparency, efficiency, accountability and effectiveness of PPP. Public Consultation at the PPP planning stage aims to obtain consideration of the benefits and impact of the PPP on community interests. Public Consultation will discuss the explanation and elaboration related to the PPP plan in order to obtain at least the following results:

a) Receiving responses and / or input from stakeholders attending the Public Consultation; and

b) Evaluation of the results obtained from the Public Consultation and its implementation in the PPP.

4) Making Advanced and Follow-Up Decisions on PPP's Plan

The PJPK decides whether or not to proceed with the PPP plan based on the results of identification by referring to the results of the Preliminary Study and Public Consultation. If the PPP is decided to proceed, the PJPK proposes it to the Minister of National Development Planning Agency (Bappenas).

b. PPP Preparation Phase

These phases include:

a. Preparation of Feasibility Study

Preparation of the Feasibility Study consists of preparing an initial Feasibility Study and preparing the final Feasibility Study.

b. Public Consultation

The PJPK establishes a Public Consultation that can be carried out at each phase of the PPP preparation to conduct explanations and elaborations related to the PPP and at least produce the following: 1) Acceptance of responses and / or input from stakeholders attending the Public Consultation; and 2) Evaluation of the results obtained from the Public Consultation and its implementation in the PPP.

c. Market Sounding

The PJPK conducts Market Sounding through one-on-one meetings and promotion of the PPP with potential investors, national and international financial institutions, as well as other parties who have an interest in the implementation of the PPP. Market Interest Scoping can be done more than once.

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d. Supporting Activities

Supporting activities that can be carried out at the preparation stage include activities to obtain Government Support and / or Government Guarantees, activities related to land acquisition (if any), activities related to the environment (for PPPs that are required to have an AMDAL), then at the stage preparation of the PPP, the PJPK conducts an environmental assessment process by following the AMDAL mechanism. c. PPP Transaction Phase

These phases include:

a. Market Interest Scoping

Market Interest Scoping aims to obtain input, response and find out interest in PPP. The PJPK conducts Market Interest Scrutiny, among others, through the meeting of two parties and the promotion of PPP with prospective investors, national and international financial institutions, and other parties who have the potential in implementing PPP. Scoping of Market Interest can be done more than once, based on the results of the Scoping of Market Interest, the Procurement Committee can make changes to the draft Procurement Documents.

b. Determination of the location of the PPP

The PJPK ensures the suitability of the land acquisition and resettlement planning documents related to the PPP plan to obtain a location determination and also ensures that the PPP has obtained an Environmental Permit. The PJPK shall submit a request for location determination in accordance with statutory provisions. The location determination for the PPP is carried out before the Prequalification stage of the PPP Business Entity Implementation Agency. The Procurement of Implementing Business Entity shall be carried out after the location determination for land that is not yet available, while for state / regional land for the implementation of the PPP that is already available following the mechanism of Management of State / Regional Property in accordance with the provisions of laws.

c. Procurement of PPP Business Entity

Procurement of PPP Business Entity covers the preparation and implementation of PPP Business Entity procurement. Provisions concerning Procurement of PPP Business Entity shall be regulated through the regulations of the head of the institution that conducts government affairs in the field of procurement of government goods / services.

d. Signing the PPP Agreement

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The auction winner must establish a PPP Business Entity that will sign the PPP Agreement. The PPP Business Entity shall have been legally established no later than 6 (six) months after the issuance of the Letter of Determination of Auction Winners by the PJPK. This PPP Agreement will be signed by the PJPK and the PPP Business Entity, no later than 40 (forty) working days after the PPP Business Entity is formed.

The PPP Agreement regulates the provisions concerning the management of the implementation of the PPP in four periods, namely the pre-construction, construction, commercial operation period and the expiration of the PPP Agreement. The PPP Agreement will be effective after all the preliminary requirements stipulated in the PPP Agreement have been fulfilled by each party, for example, there is a Government Guarantee agreement and there are licensing licenses required by the Implementing Business Entity to carry out its line of business. It should be noted that the fulfillment of financing (financial close) is not a preliminary requirement so that the PPP Agreement becomes effective. In the event that all preliminary requirements have been met, the PJPK will issue an official report stating that the PPP agreement has been effective.

e. Fulfillment of Financing (Financial Close)

Fulfillment Financing sourced from loans is declared to have been carried out if a loan agreement has been signed to finance all PPPs and part of the loan as can be disbursed to start construction work. In the event that the PPP is divided into several stages, the fulfillment of the financing is declared to be carried out if a loan agreement has been signed to finance one of the PPP stages and a portion of the loan can be disbursed to start construction work.

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3. ISSUES RELATED TO THE IMPLEMENTATION OF THE MLFF

1. Appointment of the competent authority for Toll Collection in the implementation of MLFF For the purpose of the implementation of the Toll Collection of the MLFF, an implementing regulation which specifically appoint the Indonesia Toll Road Authority (in the form of Public Service Agency (BLU)) as the sole entity to have the following authorization: a. Jurisdiction for toll payment collection; b. Ability to contract with third party to implement its duty; and c. Road Enforcement and sanctioning.

The appointed entity should also have the right to outsource a third party (specifically a Central Toll service Provider) for exercising the given actions and to determine the duties of the involved third party in the implementation of MLFF, it is advised that an issuance of regulation which stipulate the minimum provisions to have under the terms and conditions of the contract.

The terms and conditions under the contract shall includes among other the followings: a. The contract must contain the scope of activities granted to third party, obligation of the third party regarding to granted activities (toll collection, enforcement and sanctioning) the service level agreement, the order of financial settlements. b. Obligation of the toll service provider are the followings: - configuration, operation, and maintenance of toll collection infrastructure - sales activities, - contract with the road users - financial settlements - cooperation with other bodies: o financial service providers. o concession companies. o company responsible for enforcement and sanctioning. c. Obligations of the entity responsible for enforcement and sanctioning are the followings: - data collection by the road side equipment (characteristics data and photos), categorization of the vehicles. - visual inspection of the presumably unlawful road usage. - determination of unlawful usage of the road toll network. - roadside enforcement (stopping vehicles for road side sanctioning). - sanctioning (imposing fine, collection of fines, administration of fines).

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2. Money Collections by the Bank Upon instruction from the Central Toll service Provider (CTSP), all the collected money (which transaction have been reviewed by the CTSP) will be handled and completed by the Bank which handle all the money transacted for MLFF implementation. A communication arrangement need to be further addressed in relation with this scheme so that MLFF can be implemented smoothly, considering that the electronic money issuer is not under 1 same system.

3. Issues on Regulation which need to be addressed a. Toll Policy (regulation) A compiled regulation book regarding toll road which can explain on the determination on what type of toll road network, sections, calculation of toll rates, vehicle categories, etc. b. Registration – compulsory registration of the vehicles To further implement the MLFF, a registration (compulsory) of the vehicle is required, as without registration, a vehicle cannot gain a right to use the toll road. c. Sanctioning The principle of sanctioning the toll road users which trespass the gate without the registered vehicle or insufficient funds is not regulated, this is an example of unlawful use of the toll road system. d. Duty of the Concession companies (TROs) The cooperation from the concession companies is required in order to further implement the MLFF, considering that the concession companies are the one who oversee their own toll roads. The said cooperation can be in any form including but not limited to provide assistance and approval for the MLFF work construction. e. Data Management A further strict management of personal data by the CTSP shall be stipulated in scope of managing the personal data generated by the MLFF system.

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VOLUME II TECHNICAL STUDY

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study - Volume II Technical Study

1. OVERVIEW OF CURRENT SITUATION ...... 124 1.1. Overview of the current toll collection system ...... 124 1.1.1. Toll road network operation ...... 126 1.2. Overview of the current toll payment schemes ...... 129 1.3. Assessment of the costs of current toll collection system ...... 130 2. KEY FUTURE ASSUMPTIONS ...... 138 2.1. Toll policy, objectives of policy makers, toll regime...... 138 2.2. Forecasted network extension...... 139 2.3. Forecasted number of toll road users...... 143 3. TECHNOLOGIES ...... 148 3.1. Toll collection technologies ...... 148 3.1.1. Overview of toll collection technologies ...... 148 3.1.1.1. Distance-based toll collection ...... 148 3.1.1.2. Time-based toll collection ...... 150 3.1.2. International outlook on applied toll collection technologies ...... 151 3.1.2.1. Introduction ...... 151 3.1.2.2. Future outlook of tolling technologies ...... 155 3.1.3. Comparison of available toll collection technologies, proposed technology ...... 158 3.2. Central IT infrastructure ...... 162 3.2.1. Reliability, Scalability, Virtualization, Containerization ...... 163 3.2.2. Logical architecture ...... 163 3.2.2.1. Modules for toll road users ...... 163 3.2.2.2. Sales services module ...... 164 3.2.2.3. Compliance Check module ...... 167 3.3. Enforcement technology ...... 169 3.3.1. Equipment on gantries ...... 169 3.3.2. The process of enforcement ...... 175 3.3.3. Infrastructure of the mobile enforcement ...... 177 3.3.4. Visual inspection ...... 178 4. PROPOSED TOLL COLLECTION SYSTEM ...... 180

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4.1. Introduction of the toll collection system ...... 180 4.1.1. Service system of the toll collection system ...... 180 4.1.1.1. Determination of the service elements ...... 180 4.1.1.2. Minimum service requirements...... 181 4.1.1.3. Processes related to the provision of services ...... 182 4.1.2. The main value-creating processes of toll collection ...... 184 4.1.2.1. User registration, contracting ...... 184 4.1.2.2. Balance Management ...... 186 4.1.2.3. Management of toll declarations ...... 187 4.1.2.3.1. Route Ticket ...... 187 4.1.2.3.2. GNSS toll declaration ...... 187 4.1.2.4. Payment and settlement processes ...... 189 5. Off-site fine collection (Police) ...... 189 4.1.2.5. Tariff management ...... 191 4.1.3. Enforcement procedures ...... 192 4.1.3.1. Data collection ...... 192 4.1.3.2. The process of the declaration of the unlawful use of the toll road network .. 193 4.1.3.3. Sanctioning ...... 195 4.1.3.4. Collection of penalties ...... 197 4.1.4. Supporting processes of toll collection and enforcement ...... 199 4.1.4.1. Managing statistical data services ...... 199 4.1.4.2. Managing Customer Service Points ...... 199 4.1.4.3. Service Management ...... 199 4.1.5. Infrastructure elements of the new system ...... 201 4.1.5.1. Infrastructure elements ...... 201 4.1.5.2. Central system ...... 202 4.1.5.3. Customer Service Points ...... 202 4.1.6. Architectural elements of the tolling system ...... 203 4.1.6.1. System modules ...... 203 4.1.6.1.1. Data Collection System...... 205

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4.1.6.1.2. Central System ...... 206 4.1.6.1.3. Enforcement Module ...... 209 4.1.6.2. Internal system links ...... 212 4.1.6.3. External system links ...... 212 4.1.6.4. Registries handled by the system ...... 212 4.2. Establishment of the toll collection system ...... 215 4.2.1.1. MLFF GNSS implementation ...... 217 4.2.1.2. MLFF GNSS introduction ...... 217 4.2.1.3. MLFF GNSS operation ...... 218 4.2.1.4. Implemented services and functions ...... 218 4.2.2. Proposed Project milestones and technical acceptance ...... 219 4.2.2.1. GNSS Electronic Tolling Project schedule by Project Milestones ...... 219 4.2.2.2. Delivery and acceptance schedule ...... 221 4.2.3. Construction spots ...... 223 4.2.3.1. Central system ...... 224 4.2.3.2. On-site customer service ...... 224 4.3. Operation and maintenance of the tolling system ...... 225 4.3.1. Technological sustainability ...... 225 4.3.1.1. Lifespan of equipment ...... 225 4.3.1.2. Additional investments in case of toll policy changes ...... 225 4.3.2. Human resource aspects of operation and maintenance ...... 225 4.3.2.1. Operating aspects, competencies ...... 226 4.3.2.2. Roles of activities in operation ...... 226 4.3.2.3. Operating organization ...... 226 5. CTSP operations ...... 228 5.1. Detailed overview of organizational and operational setup ...... 230 5.2. Initial assessment of HR requirements ...... 233 6. ANNEXES ...... 234 6.1. ANNEX 1 - Detailed database of the toll road network ...... 235 6.2. ANNEX 2 - Introduction of toll collection systems in Europe and Asia ...... 241

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6.2.1.1. A short European historical background ...... 241 6.2.1.2. Croatian Road tolling system ...... 243 6.2.1.3. Spanish Road tolling system ...... 245 6.2.1.4. Greek Road tolling system ...... 246 6.2.1.5. South Korean Road tolling system ...... 247 6.2.1.6. Belgian Road tolling system ...... 249 6.2.1.7. Hungarian Road tolling system ...... 250 6.3. ANNEX 3 - Hungarian tolling history overview ...... 253 6.3.1.1. Background ...... 253 6.3.1.2. Road Concessions ...... 254 6.3.1.2.1. M1/M15 concession motorway project ...... 254 6.3.1.2.2. M5 concession motorway project ...... 255 6.3.1.3. State step in ...... 257 6.3.1.4. Road User Charge ([e-]Vignette) ...... 258 6.3.1.5. Electronic Tolling (HU-GO) ...... 262 6.3.1.6. Reasons of the changes and lessons learned ...... 267

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1. OVERVIEW OF CURRENT SITUATION

1.1. Overview of the current toll collection system

The toll road network of the Indonesian archipelago is 1,713 km in length as per the data provided by ITRA in April 2019, however with regard to road sections under preparation and under construction, the eventual network will exceed 6,000 kms in the next years. The biggest part of the toll road network (motorways and express roads) – in line with the distribution of the population – is located in the island of Java (approximately 60% of population lives in Java) and South Sumatra, but there are shorter road sections in Sulawesi, Borneo and Bali1 (detailed breakdown is indicated in Annex 1.).

Toll roads in Toll roads in Toll roads in construction preparation Total Length Islands operation phase phase (km) (km) (km) (km)

Java & Bali 1,418.25 592.2 970.4 3,361.85 Sumatra 277.24 940.0 1,713 2,549.23 Sulawesi 17.65 25.5 13.5 56.65 Borneo 0 99.6 7.6 107.20

Total 1,713.14 1,657.3 2,704.5 6,074.93

Table 1: Toll roads in Indonesia - Length (km) data per island

The toll road network consists of 48 concession companies' road sections. Tolls to be paid on 265 sections, are collected at 389 plazas, in 2,115 toll booths, located at the section borders.

The toll tariff scheme is based on six – axle-based – vehicle categories in Indonesia (sixth is for motorcycles, only applicable in Bali).

Vehicle type groups

Group I Sedan, Jeep, Pick Up / Small Truck, and Bus

Group II Truck with 2 (two) axles Group III Truck with 3 (three) axles Group IV Trucks with 4 (four) axles Group V Truck with 5 (five) axles Group VI 2-wheeled motorized vehicle (two)

Table 2: Vehicle type groups

1 map: http://gis.bpjt.pu.go.id/

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Based on transaction data provided by ITRA, approximately 85% of revenues are from passenger cars in Group I.

There are several forms of distance-based toll payment. Since 2017 – in line with government’s intention – electronic (non-cash) payments have been gradually replacing previously prevailing cash payments.

Toll road users can pay by contacless e-cards (issued by commercial banks, e.g. Bank Mandiri) on several sections operated in Sumatra, Java and Bali.

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1.1.1. Toll road network operation

The overview of the organizational structure public administration with regard to toll roads is presented below:

Ministry of Public Works and Housing

Badan Pengatur Jalan Tol (BPJT) Direktorat Jenderal Bina Marga (Indoneasian Toll Road Authority)

Figure 1: Organisation of Indonesian toll road administration

Direktorat Jenderal Bina Marga

A General Directorate at the Ministry of Public Works and Housing who have the task of organizing formulation and implementation of policies in the field the operation of the road and is under and responsible to the Minister.

Authority of the Directorate:

• policy formulation; • general planning preparation; • establishment of legislation; • formulation of technical standards and guide book; • granting permission; • toll road concession preparations for government and business entity initiatives; • control and supervision for construction; • implementation of the test technical and operations; • provide advice and consideration for the initial determination of toll rates; • evaluation and recommendations to the Minister for toll tariff adjustments approval for utilization of toll road space.

Badan Pengatur Jalan Tol (BPJT)

BPJT as the Indonesia Toll Road Authority (ITRA), a Non-structural body formed by the Ministry of Public Works and Housing who is under and responsible to the Minister.

Authority of ITRA:

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• Toll road concession preparations for business entity initiatives; • research and development for business entities; • preparation of investment procurement documents; • appoint operators for toll road; • supervision of toll road concessions; • takeover of toll road concession rights at the end of the concession period; • evaluation and recommendations to the Minister for the initial determination of toll rates; • evaluation and recommendations to the General Director of Bina Marga for toll tariff adjustments; • evaluation and recommendations to the General Director of Bina Marga for approval for utilization of toll road space.

The PPP structure in the toll road business

Since the 1970s, toll road network development has been operated in a Public-Private Partnership (PPP) scheme. The government currently manages a network of dozens of concession-contracted operators (the largest is Jasa Marga and its subsidiaries) in the toll road network, and has contracted approximately 20 further operators for the development of new sections (breakdown of sections in operating, construction and preparation phases is presented in Annex 1.)

Planning Preparation Transaction

• Budgeting • Budgeting • Budgeting • Preparations of the Preliminary • Scoping market interest • Identification and Private-Public and Final Study • Location determination determination Partnership • Public Consultations • Procurement of Business Entity • Decision on the PPP (KPBU) • Submission of Government • Contract signing scheme • Support and Government • Financing Government • PPP categorization Guarantees Guarantees

Environmental Early identification on the Preparation of environmental SKKL issuance (before Assessment technology application impacts studies (EIA, UKL and UPL) procurement of Business Entity)

Government Submission, principle approval, Final Approval of Government Identification of the need of Support and determination and value of Support and Signing of Government Support and the Government Support and Government Guarantee and/or Government Guarantees Guarantees Guarantee premiums (if any) Agreement (if any)

Figure 2: Main stages of the implementation of infrastructure through PPP

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The implementation of the infrastructure through PPP takes place in 3 major stages and presented in Figure 2.

Individual sections and corresponding tariff levels are fixed in concession contracts.

Currently, there is no unified data management system implemented by ITRA to support the review, verification and controlling of data provided by various toll operators, hence all data sources are managed on a case-by-case basis by the authority.

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1.2. Overview of the current toll payment schemes

Until 2017 cash payment was the prevailing method of payment throughout the entire toll road network. According to late 2016 data, electronic payment was only 23%2 of all payments in the entire network. The government intended to change this trend by spreading cashless payment. In order to prepare for the new system, the Ministry has commissioned Bank Indonesia in 2017 to act as a payment system authority and coordinate the extension of e-money.

In addition, Bank Indonesia continues to work closely with local commercial banks and the Indonesia Toll Road Authority (ITRA).

In order to successfully complete the program, road users' awareness was already raised in favour of electronic toll payment in 2017 in order to avoid congestion due to the time required for cash use at toll plazas. The campaign proposed to convince the population to switch to the usage of e-money cards as soon as possible. The issuance of the cards has begun in the second half of 2017. As a next step the central bank has elaborated transaction specifications and transaction fees so that road users are no longer able to pay by cash on the road.

There had been approximately 100 commercial banks having joined the electronic payment system in 2018, developed by the central bank ensuring the accessibility of electronic toll payments to customers. The model of the non-cash transaction system of the Indonesia Toll Road Authority is illustrated in the below diagram.

Figure 3: PPP Scheme for Non-cash Transaction System

2 ITRA, Jakarta, 3 March 2017

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1.3. Assessment of the costs of current toll collection system

Toll collection costs include all expenses incurring directly related to the toll collection activities (e.g. the wages of the collectors, maintenance and operation costs and any transaction fees of the toll collection system). One of the intentions of the proposed new central toll collection system is to eliminate most of such expenses of the current toll collection method. Toll collection costs in the new system would be borne by the service provider, which entity would be eligible for receiving service fees through ITRA / BLU from the Toll Road Operators for its toll collection services. The goal is to provide Toll Road Operators a lower level of payable service fees, than the level of toll collection costs they currently incur. A detailed assessment of the potential cost savings provided for Toll Road Operators by implementing the proposed system is presented in the financial feasibility volume of this study (Volume III, Chapter 5).

In order to assess potential savings related to toll collection expenses in case a new central toll collection system would be introduced, such costs that are currently directly arising from these activities have to be examined in detail to identify the basis for potential cost savings. For the purpose of assessing the overall theoretical level of toll collection costs borne by the Toll Road Operators, the additional costs arising from the development and extension of the tolled road network has to be quantified. Additional toll collection costs would arise once additional toll road sections are operational, having additional toll booths in operation.

In order to quantify such additional costs, a unified metric has to be defined to support calculations. For this analysis, the most suitable metric is the representative toll collection cost occurring during a calendar year, accountable to operating one toll booth. This chapter summarizes the estimation exercise of this unit cost based on 2017 and 2018 data.

For the analysis of the yearly unit costs of the current toll collection system, we examined the historical toll collection cost structure of two Concessionaires provided in their annual reports and consulted with a market player about its business plan of toll collection. According to the discussion and the business plan, we collected all the costs related to the toll collection, which could be eliminated by the new proposed system. This assessment provides a deeper understanding and a more in-depth breakdown of the relevant costs, than the publicly available data from annual reports.

Assessment of unit costs based on actual data

Citra Marga owns 4 operating toll roads in the Jakarta region and Java based on publicly available information. The total length of the toll roads is 81 kilometres with 33 toll gates and 123 toll booths according to its annual report and the provided document (Total Toll Plaza in Operation(10Apr2019).xls). The toll collection costs consist of all the costs related to the toll collection activity including the amortization of toll road concession rights assets, salaries of the employees, tax on land and building etc. In 2018, the total expenses of toll collection reached

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301 billion rupiah, which means 2.5 billion rupiah per booth. The following table shows the toll collection expenses structure of Citra Marga in 2018 as per their annual report. We included the amortization of toll road concession right assets in the assessment, as we assumed that these will be replaced by additional investments.

Toll collection expenses - million rupiah 2018 Amortization of Toll Road Concession Rights Assets 157,404 Salaries and Payroll 52,471 Tax on Land and Building 32,259 Toll Collection Service 39,854 Repairs and Maintenance 5,144 Electricity, Telephone and Water 2,685 Depreciation of Fixed Assets 4,753 Rent and Insurance 2,897 Fuel and Lubricants 3,317 Others 143 Total 300,927

Number of toll booths 123 Unit cost (million rupiah/booth) 2,447 Table 3: Citra Marga - Toll collection expenses Source: Annual Report 2018 of Citra Marga, Total Toll Plaza in Operation(10Apr2019).xls

Hutama Karya owns 5 operating toll roads in the Jakarta region, Lampung and in North and South Sumatra based on publicly available information. The total length of the toll roads are 198 kilometres with 40 toll gates and 165 toll booths according to the provided document (Total Toll Plaza in Operation(10Apr2019).xls). In 2017, the cost of toll collection was 273 billion rupiah, which means 1.7 billion rupiah per booth. The following table shows the calculation of the unit cost of toll collection of Hutama Karya in 2017.

Toll collection expense - billion rupiah 2017 Cost of toll revenue 273 Number of toll booths 165 Unit cost (million rupiah/booth) 1,655 Table 4: Hutama Karya - Toll collection expenses Source: Annual Report 2017 of Hutama Karya Total Toll Plaza in Operation(10Apr2019).xls

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Assessment of unit costs based on business plan figures

The business plan, which have been the basis of this analysis interprets the operating expenditures of a 25 kilometres long toll road. The toll road will have 6 toll gates and 30 toll booths. The total annual cost directly related to toll collection is 30 billion rupiah (1.0 billion rupiah per booth). The business plan consists all the costs related to the establishment and operation of the toll road section, not only costs relevant from toll collection perspectives (wages and other expenses of managers, cost of service vehicles and staff, cost of road maintenance and infrastructure and toll collection expenses). For the assessment of this toll collection unit cost analysis, only related cost items have been considered. Hence, initial investment related to the construction and maintenance of the road, patrol cars and other items not directly corresponding to toll collection activities are not considered in this calculation.

Therefore, only those cost items have been considered, which occur directly in connection with toll collection activities, in order to assess the level of toll collection costs, which could be avoided by the Toll Road Operators in case of implementing the proposed new system.

The cost of toll collection consists of the wages of the employees, the cost of routine operational, the cost of routine maintenance and the cost of periodic maintenance on an annual basis. The following tables provides a high-level breakdown of the structure of the toll collection costs, and the unit cost resulting from the calculations, while sections below interpret in-depth analysis.

Toll collection expenses - million rupiah Wages 9,918 Cost of routine operational 6,482 Cost of routine maintenance 3,512 Cost of periodic maintenance 10,240 Total 30,151

Number of toll booth 30 Unit cost (million rupiah/booth/year) 1,005 Table 5: Business plan - Toll collection expenses Source: Business plan of a 25 kilometres toll road in preparation phase

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Wages

According to the business plan, 132 employees are directly connected to the toll collection divisions: 2 managers (1 junior manager and 1 chief of toll gates), 10 office staff (chief of shift collectors), 60 collectors and 60 other employees (2 typist, 2 messenger, 8 office boy, 18 drivers and 30 security employees).

Number of Position Salary/months Salary/year employees rupiah Junior Manager 1 25,250,000 353,500,000 Chief of Toll Gate (Ass. Junior Manager) 1 20,750,000 290,500,000 Chief of Shift Collector / Patrols 8 6,772,480 758,517,760 Staff 2 4,297,920 120,341,760 Collector / Patrols Crew 60 5,665,440 4,758,969,600 Typist 2 5,665,440 158,632,320 Messenger 2 4,363,040 122,165,120 Driver 8 4,753,760 532,421,120 Office Boy 18 4,037,440 1,017,434,880 Security Crew 30 4,297,920 1,805,126,400 Total 132 9,917,608,960

Manager (Com.+ Dir.+ Man.+ Ass.Man.) 2 Staff of Office (Main office & Toll Plaza) 10 Collector + Patrols Crew 60 Other Crews 60 Total 132 Table 6: Business plan of a market player - Wages Source: Business plan of a 25 kilometres toll road in preparation phase

Cost of routine operation

The cost of routine operation consists of the costs of the main toll office and the toll plaza offices. The total costs of routine operational is approximately 6.5 billion rupiahs annually. Most of the expenses are connected to electricity, office operational and other relevant costs. Electricity costs depend on the number of toll plazas, IC and ramps and the size of the main toll office. Food supplement costs for collectors is proportionate to the number of toll collector employees. Meanwhile other relevant expenses are mostly connected to the total wages. The cost of operation of the main toll office and the toll plaza offices will respectively reach 2.7 billion rupiahs and 3.8 billion rupiahs annually.

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Cost of routine operational - rupiah

Main Toll Office Operational Support 204,000,000 Office Consumable 240,000,000 Electricity 180,000,000 Phone 60,400,000 Office Operational 84,000,000 Fuel 165,240,000 Vehicle Rental 288,000,000 Others (Insurance, Tax, Contribution) 1,487,641,344 Total 2,708,881,344

Toll Plaza Office and Operational Operational Support 300,000,000 Office Consumable 132,000,000 Electricity 2,280,000,000 Phone 66,000,000 Office Operational 800,000,000 Rental of Official house in Toll Plaza 135,000,000 Others (Insurance, Tax, Contribution) 60,000,000 Total 3,773,000,000

Total 6,481,881,344

Table 7: Business plan of a market player - Cost of routine operational Source: Business plan of a 25 kilometres toll road in preparation phase

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Cost of routine maintenance

For preserving the good conditions of the equipment, the business plan assumes 3.5 billion rupiahs maintenance cost each year. This amount does not include the maintenance costs of toll roads, bridges and traffic services, only the expenses related to the maintenance of toll gates and main toll offices. The highest maintenance cost is in connection with the toll equipment, which is 10% of the total cost of toll equipment annually.

Cost of routine maintenance - rupiah

At Toll Gate Toll Equipment 2,750,000,000 Toll Booth Furniture 120,000,000 Working Tools for Toll Gate 54,000,000 Plaza 8,640,000 Office of Toll Plaza 86,400,000 AC + M/E 30,000,000 Genset 216,000,000 Radio Communication + HT + Tower 36,000,000 Others 30,000,000 Total 3,331,040,000

Main Toll Office Office Furniture & Equipment 63,969,231 Building 14,256,000 M&E + AC 3,000,000 Pool Vehicle 43,200,000 Genset 21,600,000 Radio Communication + HT + Tower 4,800,000 Others 30,000,000 Total 180,825,231

Total 3,511,865,231

Table 8: Business plan of a market player - Cost of routine maintenance Source: Business plan of a 25 kilometres toll road in preparation phase

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Cost of periodic maintenance

The business plan considers certain maintenance expenses (or replacement costs) occurring periodically (1, 3, 5 or 10 years). Most of the maintenance expenses occur in connection with the toll equipment and the replacement of bigger traffic signs. These costs are dependent of the number of toll gates.

Cost of periodic maintenance

Maintenance/Replacement per 3 years Painting of Main Toll Gate & Plaza 1,552,706,000 Others 77,635,300 Total 1,630,341,300

Maintenance/Replacement per 5 years Toll Equipment Replacement 27,500,000,000 Replacement of Collector Chairs in The Tollbooth 225,000,000 Replacement of Computer & Printer 120,000,000 Maintenance of Hydrant Pump 53,760,000 Others (water pump) 380,000,000 Total 28,278,760,000

Maintenance/Replacement per 10 years Replacement of Collector Desk in the Tollbooth 150,000,000 Replacement of Office Furniture in the Toll Plaza 240,000,000 Replacement of Office Furniture in the Toll Main Office 825,000,000 Replacement of Bigger Traffic Sign 38,400,000,000 Others 792,300,000 Total 40,407,300,000

Total cost of periodic maintenance per year 10,239,929,100 Table 9: Business plan of a market player - Cost of periodic maintenance Source: Business plan of a 25 kilometres toll road in preparation phase

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Summary

Based on the assessment presented above, the chart below summarizes unit costs calculated by different methods on 2018 price levels. The unit cost calculated based on the business plan is below the unit costs calculated based on the annual reports. Due to the in-depth breakdown presented in the business plan, the unit cost calculated based on those figures are suggested to be applied for the purpose of financial return calculations.

Business plan Hutama Karya Citra Marga

Figure 4: Summary of the estimated toll collection expenses of the current system Source: Feasibility study team calculation

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2. KEY FUTURE ASSUMPTIONS

2.1. Toll policy, objectives of policy makers, toll regime

A solid and accepted toll policy is necessary to assure a long-term strategic background for the new tolling system. Some theoretical issues should be assessed like:

• the charge or the toll is a tax or a service fee? • the purpose of tolling is revenue generation and / or demand management? • equity and proportionality issues are substantial or not?

In case of Indonesia – taking into account the fact that concession companies are entitled to the income generated – it is fact that toll has a service fee nature.

Operating a direct tolling system means that only the “road user pays” principle is being taken into account, which is a very important circumstance to support a long--term financial sustainability of major infrastructure elements.

The next theoretical decision point is, if the charge should give only an access right to the infrastructure, or it should vindicate the “pay as you go” principle. The first choice usually means a validity time-based user charge tariff – e.g. (e-)vignette – system, while the second choice is definitely a passage / mileage / distance-based toll tariff system.

As Indonesia currently has its passage / distance-based tariff system, it is advisable to keep it as a long-term solution, because:

• its revenue generating capacity is much – depending on actual fee levels, about 5-10 times – higher, then those of the user charge system; • its income generated will be absolutely proportional with real toll multipliers published between vehicle categories and will never deteriorated from it; • its income generated will be absolutely proportional with future traffic output, which is important to finance operation and maintenance; • its income generated will be closely correlated with future network growth; • its features are optimal for both a maximum revenue generation and a flexible demand management purpose.

According to international experiences it is advisable to have a nationwide unique vehicle categorisation – which in fact is there – having not less than 4 and not more than 6 categories. To keep the equality and proportionality issues in mind, it is preferred to continue with the current 6 category distinction, as in long run it will serve better all stakeholders, than a narrowed categorisation solution (return is more painful). This axle based nationwide standard features of vehicles is perfect as it makes possible an automatic categorisation of user groups.

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Future demand management and equality considerations can be:

• incorporating other network elements like parallel / main roads into the tolling system; • introduction of congestion charging schemes in urban areas.

2.2. Forecasted network extension

One of the key factors to be considered when choosing the most suitable toll collection method for a toll road network is its main characteristics, such as the length of the network, the number of intersections and elementary sections, and the number of exits and entries. Based on the discussions with relevant authorities and Concessionaires, Indonesia's toll road network will be developed significantly during the upcoming 5 years, with more than 4,000 km of additional toll road to be operational within this timeframe. These extensions have multiple implications on the business case, most importantly on the level of road side infrastructure requirement, the number of overall toll road users accessing the network, and the theoretical number of toll booths, which would be required under the current toll collection regime.

The basis of the analysis performed in relation to the forecast of the network extension are the primary data of toll the road network received from ITRA, which provide details about the individual toll roads and their key characteristics like the lengths of the section, the anticipated start of operation in cases of toll roads under construction, the number of sections, traffic lanes and toll booths (Toll Road Data in Indonesia(Operational, Construction&Preparation) (11Apr2019).xlsx, Number of Lanes Data(11Apr2019).xls, Total Toll Plaza in Operation(10Apr2019).xls)

In several cases, the received information had missing data, which had to be populated by the study team in order to compile a solid database on the road network. Missing information related to the already operational sections have been assessed based on desktop research conducted by our team of experts, mostly related to the number of sections and toll booths in operation. These assessments are based on various map sources, including structural maps of sections provided by ITRA. In some cases, due to the contradictory data provided in such sources, the final assessments are based on the professional judgement of the team.

Regarding the toll roads currently in construction or preparation phase only the length of the road and their respective locations have been available by the time of carrying out this study. Most of these sections lack the information about the anticipated start of operation, in which cases various publicly available sources haven been used to provide a reasonable estimate. These sources include published news about the infrastructure of toll roads as well as publicly available status reports of toll road sections under construction. The complete, amended and detailed database on the toll roads considered for conducting this study is attached in Annex 1.

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Structural maps have not been available by the time of carrying out this study, therefore certain assumptions have been used for estimating the key characteristics of these sections such as number of elementary sections, traffic lanes and toll booths to be operated given the current toll collection regime. For the purpose of the estimation exercise, toll roads have been split into one of the following categories: urban toll road, rural toll road, bridge. The categorization has been carried out based on the respective location of each toll road.

The charts below summarize the development of the toll road network by length and distribution of categories, taking into account the anticipated starting dates of operation.

Network development by toll road category (ths km)

7.0 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.1 6.0 5.5 4.8 5.0 4.0 3.7 4.0 2.9 3.0 2.4 1.7 2.0

1.0

- 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Urban Bridge Rural Total

Figure 5: Network development by toll road category (ths km) Source: ITRA, desktop research, study team calculation

Network development by toll road category length breakdown

100% 90% 80% 70% 71.0% 70.5% 60% 74.2% 79.0% 80.5% 83.7% 85.7% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 86.8% 50% 40% 0.3% 0.2% 30% 0.2% 0.1% 0.3% 20% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 28.7% 29.3% 10% 25.6% 20.9% 19.1% 16.0% 14.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 0% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

Urban Bridge Rural

Figure 6: Network development by toll road category length breakdown Source: ITRA, desktop research, study team calculation

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In order to estimate the number of sections, traffic lanes and theoretical number of toll booths for each section, an extrapolation have been performed for each three of the toll road categories based on the respective data available on currently existing toll road network. These estimations are the basis of road side infrastructure requirement in cases of the section and traffic lane figures, and provide the basis for the cost saving potential in case the theoretical number of toll booths does not have to be operated and / or installed.

For the purpose of deriving these figures for the toll roads under construction or in preparation phase, the key statistical indicators have been calculated for both urban and rural toll roads. In this calculation, the highest number of traffic lanes on an individual section have been considered for each toll road. Note, that for the network forecast in case of bridges, the number of sections is one, and the number of traffic lanes and average toll booths per kilometre are equal to the figures applied for urban toll roads.

The following table presents the statistics of the operating toll road, which are used for the forecast of the network. Highlighted values have been applied for calculating the total number of toll booths, sections and traffic lanes for each toll road currently in the development phase.

Key statistics of the existing Minimum Median Average Maximum network Booth / km Urban 1.26 2.51 2.83 6.67 Rural 0.19 0.78 1.04 2.82 Average length of sections Urban 1.30 3.71 3.91 9.20 Rural 2.04 12.09 12.23 28.49 Traffic lanes Urban 4.00 6.00 5.63 9.00 Rural 4.00 4.00 4.61 8.00

Table 11: Key statistics of the existing network Source: Feasibility study team calculation

Based on the highlighted figures and the length and category of each toll road, the respective numbers of sections, traffic lanes and theoretical toll booths are calculated for toll roads in the construction or preparation phase. For a toll road by toll road detailed breakdown of the figures assumed for the preparation of this study, please refer to Annex 1. Combining the appropriate data for future toll roads, with toll roads already in operation results in the total number of sections, toll booths and lanes.

The number of traffic spots, where road side infrastructure has to be implemented in a free flow system operated by equipment deployed on steel structure installed on each section of the toll

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Depending on the number of traffic lanes, it is assumed that the construction of emergency lanes is required either only on the outer side, or on both inner and outer sides of the road. Therefore, on sections having 4 or 6 lanes (2 x 2 and 2 x 3 lanes per direction), 2 emergency lanes are assumed to be constructed (2 x 1 lanes on the outer sides). In case of more lanes, 4 emergency lanes are assumed to be constructed (2 x 2 lanes on both sides). The sum of the traffic lanes and emergency lanes results in the total number of tolled lanes per toll road.

The detailed business case provides further assessment about the related capital and operating expenditures in Volume III.

The following chart and table present the evolution of the total number of sections, tolled lanes and number of theoretical toll booths in line with the scheduled starting date of operation and the assumptions described in this subchapter. After 2025, the feasibility study does not consider further network development, hence the figures remain unchanged.

Evolution of the number of sections by the number of tolled lanes

700 643 643 643 643 643 643 643 643 594 600 539 474 500 446

400 370 330

300 232

200

100

0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

6 lanes 8 lanes 12 lanes 13 lanes Total

Figure 7: Evolution of the number of sections by the number of tolled lanes Source: Feasibility study team calculation

2018 2019 2020 2021 2022 2023 2024 2025 … 2032

Tolled lanes 1,839 2,539 2,791 3,267 3,437 3,827 4,157 4,461 … 4,461

Theoretical toll booths 2,115 3,214 3,739 4,683 5,043 5,862 6,569 7,191 … 7,191

Table 12: Evolution of number of tolled lanes and toll booths Source: Feasibility study team calculation

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2.3. Forecasted number of toll road users

For the purpose of the feasibility study, in order to have a sound foundation for the toll collection system to be proposed, the number and evolution of the toll road users has to be assessed and forecasted. As the tolled road network in Indonesia is expected to be extended rapidly and reach more than triple of its current length during the forthcoming 5 years (for details, please refer to chapter 2.2), the effect of these significant changes on the number of toll road users have to be considered in order to provide a well-founded business case of the system to be proposed. Most importantly, expenditures related to the in-vehicle devices necessary under different toll collection methods are directly correlated to the number of vehicles using the toll road network.

The number of individual vehicles currently using the existing toll road network cannot be directly assessed based on the information available by the authorities or even the toll road operators. Hence, certain estimations had to be made while constructing a forecast on the development of toll road users.

The number of vehicles registered in each of the regions is available as a breakdown by vehicle categories for the year 2017 published by the Statistics Indonesia (Badan Pusat Statistik), which provides the basis for this analysis. The databases distinguish between four categories as follows: private car, bus, heavy goods vehicle (HGV) and motorcycles. The total number of registered vehicles is approximately 25 million (without motorcycles). Since motorcycles are only allowed to use the toll road in Bali, where approximately 3.7 million motorcycles are registered, and according to the current network development plans, none of the future toll road sections will accommodate motorcycles, motorcycles are considered only on the existing section on Bali for the purpose of this analysis. The distribution of vehicles as of 2017 by region and categories are presented in the table below.

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Number of vehicles by Private car Bus HGV Motorcycle region (million units) Jawa Timur 1.45 0.0699 0.62 - Metro Jaya 3.89 0.5413 1.04 - Jawa Tengah 1.15 0.0969 0.65 - Jawa Barat 1.44 0.1851 0.80 - Sumatera Utara 0.55 0.0434 0.30 - Bali 0.90 0.0370 0.33 3.74 Lampung 0.20 0.0265 0.15 - Riau 0.72 0.0704 0.20 - Sumatera Selatan 0.93 0.0797 0.16 - Kalimantan Timur 0.29 0.0576 0.34 - Yogyakarta 0.37 0.0466 0.16 - Sulawesi Selatan 0.43 0.1439 0.38 - Sumatera Barat 0.22 0.0895 0.18 - Jambi 0.29 0.0575 0.42 - Banten 0.17 0.0266 0.12 - Nangroe Aceh Darussalam 0.17 0.0660 0.13 - Nusa Tenggara Barat 0.15 0.0702 0.09 - Kalimantan Barat 0.39 0.0629 0.17 - Kalimantan Selatan 0.26 0.1382 0.27 - Kalimantan Tengah 0.26 0.0828 0.15 - Bengkulu 0.05 0.0099 0.06 - Kepulauan Bangka Belitung 0.06 0.0218 0.04 - Kepulauan Riau 0.19 0.0154 0.05 - Sulawesi Tengah 0.19 0.0478 0.16 - Nusa Tenggara Timur 0.18 0.0595 0.09 - Sulawesi Utara 0.18 0.1003 0.09 - Sulawesi Tenggara 0.05 0.1091 0.06 - Papua 0.15 0.0475 0.04 - Gorontalo 0.10 0.0732 0.02 - Papua Barat - - - - Maluku 0.05 0.0111 0.02 - Maluku Utara 0.00 0.0031 0.00 - Sulawesi Barat - - - - TOTAL 15.42 2.49 7.28 3.74

Table 13: Number of vehicles by region Source: Statistics Indonesia (Badan Pusat Statistik) publication, 2017

The forecasting methodology of growth rates on the number of vehicles varies based on the respective vehicle category.

In case of private cars, the forecast is based on the future growth of number of vehicles per 1000 population based on publicly available data, which is between 5% and 3% during 2018 and 2021. After 2021, the growth in the average number of passenger cars per population is assumed to remain at the 2021 level. This effect is multiplied by the anticipated growth of population in Indonesia, which is an estimated 1.5% annually based on the average growth rate observed during the past decade.

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In case of buses, heavy goods vehicles and motorcycles, the growth in number of vehicles is forecasted in line with the estimated change in population.

The forecast on the number of vehicles by categories is summarized on the following chart.

Evolution of vehicles by categories (m units)

45.0 40 41 38 39 40 37 37 38 40.0 35 36 36 34 34 35 32 33 35.0 30 31 30.0 25.0

20.0 million 15.0 10.0 5.0 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Private car Bus HGV Motorcycle Total number of vehicles

Figure 8: Evolution of vehicles by categories (million units) Source: Feasibility study team calculation

For deriving the number of vehicles using the toll road, the penetration of toll road users among all vehicles has to be assessed. Since the rapid development of the toll road network is expected to result in an overall higher toll road user penetration, in order to account for such effect, both the current penetration (initial penetration) and the increased penetration to be achieved by implementing new toll road sections (target penetration) have to be assessed. Due to the lack of existing data regarding current penetration figures as well as on the expected effect of future network developments, high level estimations have been performed, which are summarized below.

The availability and development intensity of toll roads vary significantly across regions, therefore penetration figures are estimated region by region. These assumptions are based on the assessments taking into account location specific conditions, such as the currently accessible toll road network in the region and island, future network development plans, as well as the density of the population in the given features. For example, in cases of regions where no toll roads will be directly accessible, zero percent penetration is assumed. The evolution of reaching the target penetration is based on the forecast of completion schedule of corresponding toll road sections, which are currently in the construction or preparation phase. The following table summarizes the assumptions used for the assessment of user penetration, highlighting the target and initial penetration levels by region.

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Private car Bus HGV Motorcycles Region Current Forecast Current Forecast Current Forecast Current Forecast Jawa Timur 36% 60% 48% 80% 42% 70% Metro Jaya 90% 90% 100% 100% 90% 90% Jawa Tengah 36% 60% 48% 80% 42% 70% Jawa Barat 80% 80% 100% 100% 90% 90% Sumatera Utara 48% 80% 60% 100% 54% 90% Bali 100% 100% 100% 100% 100% 100% 100% 100% Lampung 60% 80% 75% 100% 68% 90% Riau 18% 70% 23% 90% 20% 80% Sumatera Selatan 23% 70% 30% 90% 27% 80% Kalimantan Timur 0% 80% 0% 100% 0% 90% Yogyakarta 8% 30% 13% 50% 13% 50% Sulawesi Selatan 80% 80% 100% 100% 90% 90% Sumatera Barat 0% 30% 0% 50% 0% 50% Jambi 0% 60% 0% 80% 0% 70% Banten 70% 80% 85% 100% 80% 90% Nangroe Aceh Darussalam 15% 30% 25% 50% 25% 50% Nusa Tenggara Barat 0% 0% 0% 0% 0% 0% Kalimantan Barat 0% 30% 0% 50% 0% 50% Kalimantan Selatan 0% 90% 0% 100% 0% 90% Kalimantan Tengah 0% 60% 0% 80% 0% 70% Bengkulu 0% 30% 0% 50% 0% 50% Kepulauan Bangka Belitung 0% 0% 0% 0% 0% 0% Kepulauan Riau 0% 0% 0% 0% 0% 0% Sulawesi Tengah 0% 60% 0% 80% 0% 70% Nusa Tenggara Timur 0% 0% 0% 0% 0% 0% Sulawesi Utara 0% 80% 0% 100% 0% 90% Sulawesi Tenggara 0% 30% 0% 50% 0% 50% Papua 0% 0% 0% 0% 0% 0% Gorontalo 0% 0% 0% 0% 0% 0% Papua Barat 0% 0% 0% 0% 0% 0% Maluku 0% 0% 0% 0% 0% 0% Maluku Utara 0% 0% 0% 0% 0% 0% Sulawesi Barat 0% 0% 0% 0% 0% 0%

Table 14: Current and forecasted toll road user penetration by region and category Source: Feasibility study team estimation

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The forecasted number of vehicles using the toll roads in operation is calculated on a region by region basis as the multiple of the forecasted vehicle figures and the forecasted penetration of users. Overall number of toll road users is calculated by aggregating the regional figures. The following chart summarizes the forecasted evolution of the overall number of toll road users in Indonesia.

Evolution of toll road users (m units)

25.0 22 22 21 21 22 20 20 21 19 20 20 18 19 19 20.0 18 18 16 17

15.0

million 10.0

5.0

- 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Private car Bus HGV Motorcycle Total number of users

Figure 9: Evolution of toll road users by categories (million units) Source: Feasibility study team calculation

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3. TECHNOLOGIES

3.1. Toll collection technologies

3.1.1. Overview of toll collection technologies Tolling technologies differ from country to country, each country having their own toll collection system tailor-made for the purpose of meeting their specific conditions and requirements. They are not homogenous because the legislative context, the objectives of the system, the local specifications as well as the traffic and network conditions and characteristics are different in each country. However, there are some fundamental toll collection technologies, which are the basis of the implemented toll collection systems.

The implemented technology depends on numerous factors such as the costs of the system (initial investment requirement on both of the operator and the user side as well as operating expenditures), number of sections to be tolled, the density of traffic, the number and types of vehicles using the respective toll road network, the flexibility of the system and many more.

3.1.1.1. Distance-based toll collection The traditional toll collection systems divide the toll road into smaller sections, generally with deployed toll gates at the borders of the sections. The vehicles have to stop in order to handle the payments, thus the free flow of traffic is not established. Vehicles stopping at toll gates and performing time consuming payments result in queues in front of gates, which leads to congestion and increased travel time.

The goal of the modern toll collection technologies is to eliminate these congestions in an economically and socially efficient way by supporting free-flow traffic while ensuring the collection of tolls without any revenue loss. The two fundamental differences between the traditional and modern toll collection technologies are the following:

• The toll sections are virtualized under modern toll collection regimes, thus the vehicles do not require to stop or slow down for tolling transactions. • The actual financial transaction related to toll payment is also virtualized. Users pay the imposed toll using pre-paid or in some cases post-paid accounts.

There are four main modern toll collection technologies: (1) ANPR (Automatic Number Plate Recognition), (2) DSRC (Dedicated Short-Range Communication), (3) RFID (Radio Frequency Identification), and (4) GNSS/GSM (Global Navigation Satellite System / Global System for Mobile Communications).

Automatic Number Plate Recognition (ANPR) uses optical instruments for detecting license plates. This technology does not require on-board units (OBU), but the cost of road-side

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Dedicated short-range communications (DSRC) is based on the radio communication (usually 5.8 GHz ISM communication channel) between a fixed roadside equipment and a mobile device (so called on-board unit, OBU), which is installed in the vehicle. The roadside infrastructure recognizes the OBU and the vehicle and initiate the payment.

Radio Frequency Identification (RFID) as the DSRC technology is based on radio communication but uses a lower frequency bandwidth. RFID uses a so-called RFID-tag installed in the vehicle, which is identified by the readers installed on the road side infrastructure dedicated for toll collection. The RFID-tags are differentiated into two categories: active and passive. The active RFID tags have their own power source, which enables to send signals to the reader. The passive RFID tags do not have batteries, thus the reader sends electromagnetic waves, which activates the tag. The passive RFID tags are cost efficient in heavy traffic flow as they are cheaper than the active ones.

Global Navigation Satellite Systems (GNSS) uses GSM technology for communication. The system determines the location of the vehicle through the installed on-board unit (OBU) with the help of satellites. In this case, the OBU is more complex than in case of the DSRC technology as it needs to be able to communicate with satellites in order to identify the exact location of the vehicle and measure the distance-based toll road usage. The system does not need any road side infrastructure for toll collection purposes, hence it is easy and cost-effective to be extended to new segments. However, installing road side infrastructure for enforcement purposes might be necessary. Electronic OBUs (GNSS e-OBU) can provide a cheaper alternative for OBUs, where the users' mobile phones are substituting expensive regular GNSS OBUs. This solution requires a highly reliable mobile network as well as clear definition of responsibilities between the road users, system operators and various stakeholders. E-OBU solutions are currently piloted on some selected toll roads around the world.

The toll categorisation of the vehicles – in case of dynamic changes like for HGVs – should be ensured in each technology. This problem can be solved by either of the options below:

• road side infrastructure • OBU features (for example with category change buttons) • category declaration could be made through an (internet or smart phone) application feeding and adjusting the central data base records to the current ones.

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3.1.1.2. Time-based toll collection Contrary to the previously mentioned toll collection solutions, vignette-based collection provides a validity time set access charging way. In this case, users are obliged to pre-purchase vignettes prior to using toll roads, which makes them eligible to use the toll road without limitation on mileage during the corresponding time-period. Therefore, such a toll collection scheme restricts policy makers flexibility to impose dynamic traffic management measures. The price of the vignette depends on the period of time (daily, weekly, monthly or yearly) and the vehicle categories, but the cost of the vignette itself is relatively low, compared to previously presented ones. Although, the vignette scheme implies low costs for toll road users, the enforcement of such system requires the installation of certain road side infrastructure as well, therefore the overall investment is not significantly lower.

The same charging scheme can be implemented under the so called “e-vignette” systems, with a central on-line data bank, but without the warranty / safety level identical serial numbered physical stickers itself.

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3.1.2. International outlook on applied toll collection technologies

3.1.2.1. Introduction Electronic tolling is essential to build, operate and maintain major road networks because it leads to more efficient usage of the infrastructure and minimizes the impact on the traffic flow – Traffic jams on motorways cost Poland about 2% of its GDP every year. Open Road Tolling (ORT) or Multi Lane Free Flow (MLFF) are considered as the ultimate cure for toll roads traffic flow (Roehrig, Ralf & Harding, Jochen. - 2014). Digital technologies have developed rapidly over the past decades and they are increasingly being exploited for mileage-based road tolling to increase the efficiency of current and future road infrastructure. Even though nowadays MLFF systems are envisioned as the ultimate long- term goal the “how” is still a controversial topic among field experts.

Active RFID Sticker RFID CALM IR 5.8 GHz DSRC Transponders Tags Frequencies 100 THz 5.8 GHz 850-950 MHz 850-950 MHz barely sensible non- Remarks to windshield - - transferrable tinting display, audio LED, audio plus LED, audio plus User interface none plus buttons buttons switches Smart card feasible (e.g. feasible (e.g. no no interface Malaysia) Japan, Korea) active Security encryption authentication authentication authentication Features possible Tag life cycle ≥5a 2-3a (battery) 3-5a (battery) up to 10a Price range 20-50 USD 15-30 USD 10-25 USD 1-2 USD

Table 15: Which technology to choose? Source: Dr. R. Röhrig Dr. J. Harding

Each and every technology has certain advantages and disadvantages (see Table 15) and it is up to every country to decide which one can serve their needs the best. Central ETCs (Electronic Toll Collection) always require central system-based accounts (prepaid or post-paid). In theory low priced RFID stickers or tags can lead to high adoption rate

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The clear purpose of this subchapter is to compare more than a dozen of countries from the perspective of road tolling technology; what are their current level a development and their future aspirations what are the technologies that they have already adopted. Table 16. summarizes road tolling systems based on its “closeness” to MLFF and the penetration of GNSS technology.

Current Country Current technology MLFF Development areas status

Cash payments with tollbooths - Mandated the sales of RFID There are fixed charges between ETC tags for all new 4 wheeled India Immature No two toll plazas regardless of the vehicles and their use in all distance commercial vehicles There is an undergoing Closed toll gates with small development of an ETC network number of expressways with which is going to be mixed with China Immature unitary tolls. Currently there is No toll passages supporting toll card only a single lane free flow system payment or full-service in Beijing dedicated ETC lanes

DSRC based tolling for personal All electronic tolling (AET) vehicles with optional toll payment booths Multilane free flow Croatia Immature No Closed toll collection system Joining EETS-GNSS for HVG-s, mixed technology HGVs above 3,5 tonnes manual toll payment booths Interoperability Mandatory DSRC based system for HVG above 3,5 tonnes DSRC Satellite is an e-OBU solution Spain Immature No based tolling for personal vehicles which is already on the way with optional toll payment booths RFID based tolling for personal Replacement of manual payment Chile Developing vehicles with optional toll payment No booths with full ETC booths

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Current Country Current technology MLFF Development areas status RFID based tolling for personal vehicles with optional toll payment booths. The most widely used Interoperability USA (excl. RFID system is called E-Zpass. Developing No California) Even though there is no country- Country wide GNSS system for wide interoperability RFID based HGV ETC systems are optional at every toll road operator. Mainly RFID based tolling for personal vehicles. None regular Australia Developing toll road users are suggested to use Partly GNSS based MLFF LinktGO (smartphone-based toll payment app) Biggest GNSS-based RUC GNSS system for HGVs above 12 system worldwide for HGV tonnes ERA GLONASS (Russian Russian Developing No automatic emergency call Federation RFID based tolling for personal vehicles with optional toll payment system) is going to be mandatory booths for all new cars starting from 2017 DSRC tags will be mandatory GNSS based system for HGV for PC/LV (already mandatory above 3.5 tonnes for HGV) Poland Developing DSRC based tolling for personal No Possibility of adding lower class vehicles with optional toll payment roads to the current RUC scheme booths for HGVs RFID based tolling for personal vehicles with optional toll payment booths. ETC can be used with an OBU or with an e-card. Users need Japan Developing to pay manually or by a pre-paid No GNSS based MLFF Expressway card at toll booths. Optionally there are also time- based vignettes for 7 days and 14 days mainly for tourists RFID based tolling for personal South vehicles through high pass card Introduction of fully MLFF ETC Developing No Korea (rechargeable) and dedicated system until 2020 with OBUs OBUs

No tolling for personal vehicles The GNSS-based ITS solutions Developing Yes Netherlands Time based E-vignette for HGV currently in trial above 12 tonnes

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Current Country Current technology MLFF Development areas status

No tolling for personal vehicles New GNSS based payment Denmark Developing Time based E-vignette for HGV Yes system, GNSS in urban above 12 tonnes environments

"Fair and Intelligent Transport": a kilometre-based tax (GNSS- based RUC scheme) Finland Mature No toll roads in the country Yes New tax model based exclusively on vehicle use, coupled with fuel tax, GNSS system for HGVs above 3.5 tonnes - HU-GO e-OBU for passenger cars for Hungary Mature Yes Time-based e-vignette for personal better traffic management vehicles GNSS PC/LV though Viapass There is an ongoing trial of a km-based charging scheme in No tolling for personal vehicles which each participant received an OBU. System was rejected by Belgium Mature GNSS system for HGVs above 3.5 Yes 63% of the participants however, tonnes - Vlapass the trial reduced drivers' mileage by 5.5% overall and by 8% in cities+rush hour congestion fell by a significant 3.6%

Table 16: Adopted technologies and future aspirations worldwide

Note: it is worth to keep in mind that the “immature / developing” status statements are concerning the technological aspects (and not the followed tariff system / toll policy itself).

Annex 2 provides a short overview on the historical background of toll collection systems in Europe and describes a number of systems currently operated around Europe and Asia.

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3.1.2.2. Future outlook of tolling technologies Based on the international outlook the multi lane free flow ETC system is seen as the ultimate aim by every toll road operator. MLFF significantly decrease travel times, reduce the emission of pollutants into the environment, increase traveller’s safety and comfort, the flexibility in defining toll rates and the adaptability of the system to different business models. It also relatively easily enables the implementation of dynamic pricing, and hybrid systems (standard and free-flow). Therefore, step by step it is foreseen that in the long-term future it is going to be implemented by almost every toll road operator. (Aleatica Labs – 2018)

Countries with Free Flow Tolling or Open Estimate of countries with Free Flow Tolling or Road Tolling in 2005 Open Road Tolling in 2025

Figure 10: Tolling models in Europe are shifting towards free flow and open tolling Source: Ptolemus - Electronic global Study - 2018

Interoperability is another clear vision of almost all toll road operators because toll pricing can cause improper traffic diversion that may harm the overall transportation systems. For instance, if tolling on major roads causes traffic diversion onto local roads, then road pricing will have adverse effects. This problem can be minimised with appropriate controls on toll pricing, standard pricing and dynamic pricing. Alternatively, the operators can be penalised for pricing that causes traffic diversion onto local roads. It is no exaggeration to say that significant efforts are made worldwide to achieve national and international interoperability. (Bowerman - 2007)

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The development of electronic toll collection technology has been very dynamic in recent years and the deployed technology varies country by country. Nevertheless, based on Figure 11 it is clear that in the long-run GNSS based technologies will prevail.

Toll chargers and service providers are beginning to embrace a wide variety of third party devices

Smartphone (GNSS) Telematics devices OEM platform • Electronic toll payments across Video tolling • Electronic toll payments across multiple tolling domain • Electronic toll payments (GNSS) • multiple tolling domain All electronic tolling across single and multiple • Electronic toll payments • • All electronic tolling Free flow tolling tolling domain across multiple tolling • Interoperable RFID • • Free flow tolling Mobile wallet integration • All electronic tolling domain + GNSS Ready • Mobility bookings and payment • • Open road tolling • Free flow tolling All electronic tolling • Electronic toll payments • • Mobile wallet integration Free flow tolling across multiple tolling • Open road tolling • Mobility booking and payment domain • • Vehicle telematics services Vehicle telematics services • All electronic tolling • Free flow tolling • Open road tolling • Other mobility payments

Current system Target system

Figure 11: Tolling technology evolution

The ability to locate and track a vehicle in space and time is becoming more and more fundamental to road user charging. This ability enables the differentiation of a scheme regarding distance, time and place and an implementation on nationwide, high density road networks, including all vehicle and road types. GNSS-based solutions also offer possibilities to employ charging schemes, that are not available for other systems. Moreover, the low costs for expanding a GNSS-based system allow to employ area-wide tolling systems (inter-urban tolling). This is especially important as an area-wide system can help to prevent from possible traffic rerouting, which may cause serious environmental and social problems. Once a GNSS- based tolling system is established, the OBU / GNSS e-OBU can be used for additional purposes and these value-added services may create opportunities for new business projects. (Numrich, Julia & Ruja, Sascha & Voss, Stefan, 2012) Cooperative Intelligent Transportation Systems (C-ITS) are foreseen to be merged integrated with the current road tolling technologies for the benefit of the users. GNSS technology provides data and services to support C-ITS to its full extent. For example, vehicles and infrastructure equipped with C-ITS (e.g. GNSS e-OBU) enhanced GNSS OBU can communicate a warning to each other, after which the drivers are informed about the upcoming traffic situation in time for them to take the necessary actions in order to avoid potential harm.

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Other potential benefits of the use of C-ITS include reduced congestion and improved driver comfort. Therefore an example of the international commitment towards C-ITS theThe European Commission has already outlined its plan for the coordinated deployment of C-ITS in Europe in its communication, in which it also states that the full-scale deployment of C-ITS services and C- ITS enabled vehicles is expected to start in 2019. (European Transport Safety Council - 2017). GNSS technology is proposed to be used in Indonesia for tolling purposes as the foundation to the implementation of C-ITS best practices.

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3.1.3. Comparison of available toll collection technologies, proposed technology The aim of this document is to propose a new toll collection system, which replaces the existing manual toll collection method. The new toll collection system should provide economic benefits (higher traffic flow, lower capital and operational expenses). In order to identify the most suitable technology, which fits local conditions and provides economic viability, previously introduced toll collection technologies have been compared along the following factors:

• Road-side infrastructure: The cost of the initial investment for the road-side infrastructure; • Operating expenditures: Yearly cost level of the system; • Equipment installed in the vehicle: equipment requirement and potential cost of equipment; • Cost of expansion: additional investment need and operational costs in case of expanding the tolled road network; • Characteristics of suitable toll road: The type of the toll road where the system can operate in the most efficient way; • Useful lifespan: useful lifespan of system equipment; • Data communication: Technology of communication with the vehicle; • Need for central database: System requirement about database of the registered vehicles; • Primal charging schemes: Primary toll collection scheme; • Distance-based tolling capability: Applicability for distance-based charging scheme; • Dynamic traffic management capability: capability of introducing dynamic traffic management measures, such as congestion charges.

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Passive DSRC ANPR GNSS Vignette RFID

Road-side Only for Only for infrastructure Expensive Expensive Expensive enforcement enforcement Rating: 1 Rating: 1 Rating: 1 Rating: 10 Rating: 10 Operating Mid High High Low Low expenditures Rating: 5 Rating: 2 Rating: 1 Rating: 9 Rating: 10 Equipment RFID tag - OBU - mid- No OBU - high cost Vignette installed in the low cost cost Rating: 1 Rating: 10 vehicle Rating: 9 Rating: 5 Rating: 10 GNSS e-OBU - no cost Rating: 10 Cost of High High High Low Low expansion Rating: 1 Rating: 2 Rating: 1 Rating: 10 Rating: 10 Characteristics Limited Limited Middle sized Sizable Middle sized of ideal toll express road express road network, network, low network, road network, high network, high normal traffic flow normal traffic traffic flow traffic flow traffic flow flow Rating: 1 Rating: 1 Rating: 1 Rating: 1 Rating: 1 Data Radio Radio Optical GSM Optical communication frequency frequency solution communication solution Rating: 6 Rating: 6 Rating: 1 Rating: 9 Rating: 2 Need for Only for Only for Yes Only for Only for central enforcement enforcement enforcement enforcement Rating: 2 database Rating: 10 Rating: 10 Rating: 10 Rating: 10 Primal Distance- Distance- Distance- Distance-based Time-based charging based based based schemes Distance-based Yes Yes Yes Yes No tolling Rating: 10 Rating: 10 Rating: 10 Rating: 10 Rating: 1 capability Dynamic traffic Yes Yes Yes Yes No management Rating: 10 Rating: 10 Rating: 10 Rating: 10 Rating: 1 capability Overall rating 53 47 37 OBU - 70 55 e-OBU - 79

Table 17: Comparison of tolling technologies

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Various state of the art technologies are available for electronic toll collection. Based on our experience and taking into consideration the Indonesian local requirements, our recommendation as a long-term solution is a GNSS based technology in which the road users can use their own devices (e.g. smartphones) as on-board equipment.

There are several compelling reasons that justify the GNSS technology to be the most attractive one for Indonesia:

• No heavy exposure to road side infrastructure (unlike DSRC, RFID or ANPR based technologies); • Flexible and low cost for extension to further road network (unlike DSRC, RFID or ANPR based technologies); • The low costs for expanding a GNSS-based system allow to employ area-wide tolling systems, which can help to prevent from possible traffic rerouting, which may cause serious environmental and social problems; • May serve as a basis for Jakarta ERP and parking payment solution without having to construct road side infrastructure taking valuable space and potentially damaging existing underground infrastructure; • Road side infrastructure is only required for enforcement purposes • Enables continuous tracking of vehicles potentially outside the road network subject to toll as well; • May serve as a basis for dynamic pricing and additional Intelligent Transport Services including heavy vehicle control system, speed metering, emergency information system, control room, asset management.

Key disadvantage of traditional GNSS technology solutions is the high cost of on board equipment. In case the road users are allowed to use their existing devices (e.g. smartphones), the cost from the road user’s perspective is minimized. Another concern is the accuracy of GNSS positioning in dense urban areas (parallel roads and elevated highways especially), which can be mitigated with the installation of GPS signal enhancers at critical places.

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Technology Suitability Evaluation GNSS Recommended GNSS technology with implementation on toll implementation lanes at toll booths has both the advantage of controlling the traffic flow and the need of one-time socialization and education to the users. As a last resort Route Tickets shall be offered to non-frequent users. Registration and installation are easy and user friendly. No physical equipment, sticker needed. RFID Not recommended The major disadvatange is that users have to be educated two times to use two different types of toll collection technology. Logistics and distribution of the RFID tags can be organized by reseller network, without any special equipment needed at the selling point. Registration and installation is easy and user friendly. DSRC Not recommended The OBU is comparatively more expensive as the RFID tag as there is only active solution for DSRC (power from the vehicle is needed). The roadside infrastructure integration is similar to the previous solution. Logistics and distribution of the DSRC OBU is a complex process with additional equipment needed at the reseller points. Furthermore, repair and maintenance processes have to be implemented resulting in additional operational costs.

Both registration and installation at the vehicles is less user friendly.

Video tolling Not suitable Due to the low reliability of number plate reading, vehicle database and traffic situation at the toll booths video tolling is not a viable alternative.

Table 18: Potential technologies

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3.2. Central IT infrastructure The fundamental requirement towards an Electronic Toll Collection system is twofold: high availability and utmost accuracy. These requirements are the cornerstone to maximize the toll revenue collected via the system. Central IT system shall be designed and implemented around the following principles to support the service level envisaged.

The central IT system has to be very heavily layered, modularized and highly scalable. The central IT system should be implemented in a fault-tolerant environment using preferably cloud technologies. The following section is a high-level description of the requirements of key elements on the system architecture.

The system is split into many parts (both from network and application point of view). All of them shall be separated into different VLANs. Besides this, from the application point of view, all pieces are separated from each other and each of the pieces are separated again by a firewall from each other.

The following figure provides a high-level overview of the Central IT infrastructure, its key components and supported processes.

Figure 12: High-level overview of Central IT infrastructure

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3.2.1. Reliability, Scalability, Virtualization, Containerization The central IT system should be redundant and reliable at the physical hardware level, on top of that at Virtual Machines level and the components of the CS (Central System) software are suggested to be implemented on a containerization platform. Some nodes in the proposed system should run on VMs on physical compute nodes. The software components running in the container can be scaled separately and can be run in multiple instances (container). The components communicate with each other on the site and through the site, and the two sites are transparently visible to them. The Container Orchestrator ensures that, in the event of node failure, the specified service level is distributed to the remaining nodes.

3.2.2. Logical architecture The core IT system requires a modular application accommodating numerous business processes. Modules have to be designed specifically in order to meet the requirements of relevant stakeholders involved in the processes. The suggested high-level logical design of these main modules is summarized below.

3.2.2.1. Modules for toll road users Toll road users have to be able to register, configure their own settings and purchase different type of products depending on registered vehicle types. Toll road users have to be able to perform the above-mentioned functions in the following applications: • Subsystems for toll road users – implements processes and functions needed for customers. All modules have to support the following architectural layers: • Front End layer: implements user interfaces, where users are able to perform the related business processes. • Integration layer: implements SOA (service-oriented architecture) rest services used by various modules. Customer, vehicle, account, billing management and purchase related rest services are used in case of users. Thanks to SOA services, the modules are loosely coupled, the services are reusable and the architecture is able to react flexibly to changes. This architecture enables the system to perform potential additional developments at lower investment cost levels in an efficient manner. • Business Logic layer: implements the significant business logic of processes and functions related to toll road user, vehicle, account, billing and purchase management. • Data layer: ensures the data connection and data management related to processes and functions used by users.

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The following features should apply to each of the layers: • Logging framework: ensures effective error and incident management, defines and implements logging methods with a strong focus on SOA integration layer. • Authentication & authorization: ensures, that customers are only able to access their respective accounts and data.

The figure below represents the logical architecture of applications used by users.

Vehicles, RFID and GNSS based

LAYER

FRONT END

SOA (Rest-services)

LAYER

INTEGRATION

andauthorization

LoggingFramework

S LOGIC S

BUSINES Authentication

E-Toll Core Business Logic

E-Toll Core Database

DATALAYER Figure 13: Logical architecture of applications used by users

3.2.2.2. Sales services module Toll road users have to be able to request certain toll processes not only through the above- mentioned subsystems, but also personally via numerous other ways, for example in customer service offices, at business partners or via call centre.

In order to support customer service offices, business partners and administrative processes, special user service applications must be implemented:

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• Customer Service Application – implements numerous business processes, mainly sales, customer, vehicle, account management and billing related processes.

• Business Partners & Agent application – implements only sales functions (there are Business Partners and Agents who have own complex application(s) and centralized cash desk solutions). These applications and solutions are integrated with the core central IT system.

The listed applications are three-layer applications. The figure below describes the logical

architecture.

Business Partner LAYER Customer Service & Agent FRONT END Application Application

Authorization Authorization

Framework Framework

BUSINESSLOGIC LoggingFramework

SecureAppServer

Authentication & Database Connection

E-Toll Core Database DATALAYER

Figure 14: Logical architecture of three-layer applications

The layers are:

• Front End layer: user interfaces and business logic of related processes. Also, the business logic of the authorization is implemented in this layer. Using these user interfaces sales officers are able to serve customer requests: customer registration and configuration, sales and billing functions.

• Business Logic layer: component implements authentication methods and database connection to the core database.

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• Data layer: ensures data management related to administrator’s processes and functions.

Defined logging methods have to be implemented in order to ensure efficient error and incident handling.

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3.2.2.3. Compliance Check module The Compliance Check ensures the proper merging of collected traffic data (data from gantries / toll gates and mobile units as well as tolling transactions). Based on this information, the Compliance Check has to be able to identify possible unauthorized road usage (violators).

It means that Compliance Check receives huge amount of data from core central IT system and Traffic Data Collection (mobile cars, gantries, fining cars). These parts are integrated with SOA rest services to Compliance Check subsystem. It should provide a real time integration.

The recommended architecture of the Compliance Check module is a four-layer application, as

presented on the figure below.

Non-automatic Control & inspection, portable

END END Compliance Check

LAYER device, mobile units FRONT FRONT

Data Collection from Infrastructure SOA (Rest-services)

N LAYER N Roadside INTEGRATIO Enforcement

Module

SS SS

LOGIC

BUSINE Compliance Check Business Logic E-Toll Core

Business Logic

Toll Core Toll System -

Compliance Check Database E E-Toll Core Database DATA LAYER DATA

Figure 15: Compliance Check module

The layers are the following: • Front End layer: implements user interfaces where personnel, sitting in the Visual inspection offices, can perform all compliance and enforcement related business processes, as well as visual checking of the automated plate number recognition (in case the automated plate number recognition technology requires extra visual check). • Integration layer: implements SOA (service-oriented architecture) rest services used by various modules. In this case, it means services that ensure real time data transfer from core central IT system and traffic data collection. Thanks to SOA services, the

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modules are loosely coupled, the services are reusable and the architecture is able to react flexibly to changes. This architecture enables the system to perform potential additional developments at lower investment cost levels in an efficient manner. • Business Logic layer: merges the transferred data, including automatically recognized plate number of the vehicle, and based on this information can help defining vehicles possible using toll roads unauthorized. • Data layer: ensures the data connection and data management related to processes and functions.

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3.3. Enforcement technology This chapter contains the general description of possible toll system enforcement technology elements. The specific suggestions for the proposed system are in Chapter 4. There are basically three ways of data collection for enforcement purposes: - Fixed devices on the side of the road (gantries); - mobile data collection devices (devices installed on enforcement cars); - in traffic, on-the-way checks. The enforcement technology is influenced by the toll charging principles, that is, what parameters are defining the toll categories. The parameters that determine the toll category must be checked. These parameters can be checked either by picture capturing and measurement or on a record (or documentary) basis. Parameters to be checked with data capture and measurement: - vehicle identification o (license plate and nationality recognition) - ANPR, o Reading data stored in OBU (DSRC readout), o RFID reading; - Definition of toll category o differentiation of major technical vehicle categories (motorcycle, car, truck, bus), o towing and towed vehicle demarcation, o determining axle numbers. Parameters to be checked on the basis of the record (presented/scanned/photographed document): - Definition of vehicle categories (the toll category may be associated with a technical category of vehicle which cannot be determined by a measuring equipment); - vehicle environmental classification (in case Toll Policy covers environmental aspects).

3.3.1. Equipment on gantries

A gantry is a roadside equipment that supports the enforcement, which is used to check the vehicles in motion in the entire width of the road.

Parameters and elements of a gantry:

- physical body of the gantry o steel column assembly, steel beam assembly (e.g. material S235 JRG2 European standard) with surface protection,

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o the height of the gantry ensures the safe passage of every road user vehicle, o has a ground-cast body; - Power supply: o 3x400 / 230V, 40A, 50Hz, o with unmeasured cable, o consumption meter cabinet, o load capacity: 3x16 A, o measured input cable, o measured outlet cable; - Communication network (satellite – antenna, VSAT or fibreoptic - router); - uninterruptible power supply; - Endpoint processing and storage operating system; - LAN network; - Equipment cabinet.

Figure 16: A gantry with ANPR front, ANPR rear, ANPR overview, Radar (front ANPR trigger), categorization equipment, computer set, industrial switch

The system components listed below provide a theoretical possibility for several types of toll collection and enforcement technology implementation.

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Equipment Per Lane or Per Gantry 1. Camera Recording of Front Licence Plate of Passing Vehicles (ANPR per lane Camera)

2. Radar connected to the front license plate camera (in addition to speed per lane measurement, its role in creating a traffic event, it serves as a secondary trigger source.)

3. Overview camera, which takes a picture of the whole vehicle passing per lane through, and may also play an important role in determining axle numbers

4. Dedicated Short-Range Communication (DSRC) - Technology used for per gantry electronic identification of vehicles with OBU.*

5. RFID reader** per lane

6. 3D laser scanner: A laser-based vehicle categorization device that can be per lane used to create a three-dimensional model of a vehicle.

7. Pavement Loop: A solution to support the identification of axle numbers, per lane only used to identify axes in contact with the pavement

8. Camera for recording rear registration plates of vehicles passing through. per lane

9. Software modules for data processing, data evaluation, data storage and gantry data transfer, their functions: o create traffic event (duplicate filtering); o ANPR: ▪ Determining nationality, ▪ Adjust the location of the license plate inside the image, ▪ Determining the level of confidentiality: the measure of confidence in recognition; o Binding of recorded and measurement data;

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Equipment Per Lane or Per Gantry o transmission of metadata for the traffic event to a central processing system; o storing and transmitting image data to a central processing system (typically not automatically, but on a separate request).

10. Database managers that allow structured storage of data generated gantry *: based on the selected toll collection technology; **: based on the selected way of vehicle identification. Table 19: Theoretical possibility for several types of toll collection and enforcement technology implementation

License plate reader

The license plate camera (front and rear license plate reader) is installed per lane.

The license plate reader has an integrated IR illuminator.

The front license plate reader (with its associated radar) acts as a trigger on the basis of which the passage event is created.

Selecting the correct frame from the camera stream is based on measurements of the laser trigger of the primary trigger source, the laser scanner.

Type and characteristics of license plate reader used:

Characteristics Value Type digital IP (FreeWay HD) Resolution 1280 x 720 pixels Colour day colour 24 bit / night B / W Frequency of imaging 30 fps Output format MJPEG and H264 RTSP Exposure time 33 ... 2000 us (1 / 30,000 ... 1/500) Built-in IR 850 nm Operating -30 ... +55 ° C temperature. Table 20: Type and characteristics of license plate reader used

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Overview camera

Camera Type and Features: Characteristics Value Type digital IP (FreeWay HDx or FHD)

Resolution 1280 x 720 pixels Colour day colour 24 bit / night B / W Frequency of imaging 30 fps Output format MJPEG Exposure time 33 ... 2000 us (1 / 30,000 ... 1/500) Built-in IR 850 nm Operating -45 ... +70 ° C temperature. Table 21: Camera type and features

Axle counter laser scanner

Categorization and Axle Counting Device, which includes two laser-based units.

Axle counter laser

Provides triggers for the system and counts the axes of passing vehicles. Based on the towing and towed vehicle and axle number, the system is able to determine the category of the vehicle being monitored with high accuracy.

3D laser scanner

The equipment identifies the vehicle body and measures it, plus makes a 3D model of the vehicle shape.

In addition, it is able to detect vehicles changing lane in the monitoring zone, thus minimizing the number of "lost" vehicles during monitoring.

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Characteristics Value Type TIC102 / LMS51 Applied wavelength 905 nm Scanning frequency 50 / 100 Hz Laser class 1 (IEC 60825-1) Angle of view 180° / 190° Scanning distance ≤ 10 m Embedded application vehicle categorization Vehicle data direction, speed, tracking distance, lane assignment Categorization ECTN15, Swiss10, TLS2+0, TLS5+1, TLS8+1 standards Communication Ethernet TIC Information Interface protocol Table 22: Axle counter laser scanner

DSRC reader

DSRC reader is an antenna. The antenna complies with standards: CEN-5.8GHZ-DSRC (CEN / TC 278 Expert Group), EN ISO 15509, EN ISO 14906 and EN ISO 12813 EETS standards.

RFID reader

Radio Frequency Identification (RFID) consists of three basic building blocks:

- the label; - query unit; - a background database system. The process of the identification is as follows:

1. An identification tag, also called a tag or transponder, is assigned to the vehicle during registration. 2. The RFID tag comes near the scan unit, sensor. The tag is excited by the photocell query pulses. These pulses are generated in the form of an electromagnetic field. 3. The transponder will then send the ID code and the data on it. The reader receives information through its antenna and converts it into digital signals. 4. The Reading Unit forwards the information to the Data Collection Platform.

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Characteristics Value Frequency range 923-925MHz Maximum peak conducted output 2W (33dBm=1995mW) Limits of exposure to radio According to FCC Part1.1310 0.6mW/cm² frequency energy level Limits on RF power emitted outside According to FCC Part 15.247 (d) the frequency band Operations with directional 11.5 dBiC antenna gains greater than 6 dBi Table 23: RFID characteristics

Pavement loop

Oscillating electrical signal is applied to the loop. The metal content of a moving vehicle chassis changes the electrical properties of circuit. Changes are detected at a roadside unit, triggering a vehicle event. A single loop system collects flow and occupancy. The speed can be calculated by the assumptions that are made for the mean length of vehicles. Two-loop systems collect flow, occupancy, vehicle length, and speeds.

3.3.2. The process of enforcement

The following figure provides an overview of the enforcement process. Subprocesses are detailed on the next page.

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ANPR Vehicle category

Data capture and Enforcement based measurement based DSRC on vehicle registry verification

Vehicle environmental category RFID

Creation of data Video stream → Closure of Start of enforcement/ Vehicle 3D laser scan package basod on creating overview Radar detection enforcement, data Passage identification detection all of the picture transmission measured data

Axle number determination/ vehicle category determination

Figure 17: High level flowchart of the enforcement process on gantries

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- The Overview Camera generates a constant video stream (image stream) from which the preview image is generated (creating a traffic event); - vehicle identification: o License plate reading (front license plate), o DSRC readout, o RFID identification; - 3D laser scanner detection; - radar detection; - the vehicle moves under the 3D scanner continuously -> determining axle number -> vehicle categorization; - After the 3D laser uses the rear license plate camera that monitors this zone (similarly to point 1 above) to create the rear license plate. That's how the rear license plate image is made; - When the vehicle leaves the monitoring zone, all fixed measuring subsystems are completed with their own measurement, the endpoint processor has all the data to prepare the related data packet containing raw data for the vehicle that has just passed; - The endpoint processor uses the endpoint meter and analyzer application to analyze data from its subsystems, examine their content, validate all data, run ANPR, and thus record the data.

3.3.3. Infrastructure of the mobile enforcement

The mobile enforcement (as data collection endpoints) fulfil the task of vehicle identification and vehicle data recording during their operation at the assigned locations. The identification is based on images taken of the licence plate of the passing vehicles. The program running on the computer in the vehicle determines with the help of an image processing program the licence plate numbers of the passing vehicles, which, together with the measured (axle number) information, are locally stored. In order to support the above-mentioned mobile enforcement tasks, a special camera shall be placed on the enforcement vehicle, which also includes license plate reader, overview and infrared illumination functions. The camera is set up by the toll inspector who can sit in the car during this process.

The mobile enforcement’s main advantages:

- mobile, can be anywhere on the toll road where the special parking lot has to be designated for operation; - road users can’t estimate their location and so the road users are going to be more law- abiding.

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The mobile enforcement’s main disadvantages:

- In case of DSRC and EETS communication it is hard to fulfil the tasks of the mobile enforcement; - Because in this case, the categorization is based on the human workforce, resulting in a higher likelihood of error.

3.3.4. Visual inspection

If the system has detected any unauthorized road usage the vehicle’s picture and data has to be visually inspected. A vehicle can’t be penalized without visual inspection. Visual inspection is carried out by human resources of the CTSP.

After the detection of unauthorized toll road usage, the unlawful vehicle is inspected by the visual inspector as follows. The examination works on the basis of the 4-eye principle, every picture has to be checked by 2 persons, the system allows the examination to be completed if all the two persons recorded the same result.

Scope of visual inspection

- Identification of vehicle identification data: License plate, Number of axles; - Determine whether the number of axis measured is the same as the number of axles fixed in the system. Visual inspection result

If a change in the vehicle identification data occurs during the visual inspection, then

- there may be tariff differential making; - place the visually determined license plate number on the black list instead of the license plate detected by the system;

- the visual inspectors may identify a vehicle with a positive balance by correcting the automatically recognised license plate number, so that it does not have to be blacklisted. The visual inspector closes the case if a discrepancy is detected in the measured axles, in which case the vehicle being checked cannot be sanctioned.

The decisions of the visual inspector can be based on the above as follows:

- determine the vehicle identification data (license plate, axle number); - Closes the case, the reasons are:

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4. PROPOSED TOLL COLLECTION SYSTEM

4.1. Introduction of the toll collection system

4.1.1. Service system of the toll collection system The new Electronic Toll System will be used by a large number of citizens and has a wide group of stakeholders. As with any such system, there will be a great need for a proper communication campaign before and after the system starts.

This campaign will ensure that the new system’s principles and rules are clear to the users and creates acceptance among users of the system. This new MLFF system will be much easier to use, every customer system function will be available online, creates a non-stopping road usage experience. The change to the MLFF system will be effortless from the customer’s point of view after the initial registration. The system will have a high social utility (eg. less traffic congestions) therefore the users can feel and see the need of this new system. These qualities will surely satisfy the users and they will look forward to so the change between the systems will be smooth.

The services described hereby of such Electronic Tolling System shall be the subject of the PPP service contract.

4.1.1.1. Determination of the service elements The service elements of the tolling system are the basic units of operation that clearly define the functionality and goodness of the system. In defining the service elements, it was essential to have clear requirements and expectations towards the service elements to ensure objective measurements.

The most important service elements associated with toll collection of the tolling system are:

- CTSP IT System; - Providing registration at customer service points (online and on smartphone app); - Balance top-up at banks, through well-establised e-channels (such as e-wallets) and customer service points; - Balance Management; - Settlement with beneficiaries of collected toll. The most important service elements associated with enforcement in the tolling system are:

- Vehicle detection and identification by the Roadside Data Collection System; - Classification of Road Usage (legal/violator); - Sanctioning;

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- Collection. Most of the services are provided to road users, so the services’ quality basically determines the social perception of the system. It is important to define the points among the service elements where users access the tolling system.

Access points of toll services provided to road users:

- Internet customer service (website and smartphone app); - call centre; - personal customer service; - banks; - in-lane sales point; - reseller network.

4.1.1.2. Minimum service requirements The performance measurement of the service must always be determined on the basis of the service acceptance criteria, taking into account business, user and service aspects related to the operation of the tolling system.

Key Performance Indicators (KPIs) are the characteristics of each service element which KPIs can be given a clear objective rating of service quality.

The service elements listed in the previous section and the typical key performance indicators of the service elements are listed in the following table:

Technical Requirement Project Output Specification

The System shall be measured by the following Key Performance Indicators

Electronic Toll Collection system The Toll Collection system shall be available to the Road Users, which operates toll declaration and functions with 100% accuracy of toll tariffing Expected level: 99%

Effective enforcement support Roadside data collection and vehicle identification system system to capture automatically both license plate and category of all passing vehicles through enforcement points Expected level: 94%

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Technical Requirement Project Output Specification

Dense enforcement data collection On a high ratio of the tolled road segments enforcement data collection shall be operational at a 24/7 basis. Expected level: 50%

Clearing and payment settlement The system shall be able to realize settlement of Toll Road income to TROs initiating the transfer within 48 hours (two banking days) of the Toll Road usage (declaration). The calculation of this KPI is suspended on non-banking days for 24 hours. Expected level: Transfer initialization in 48 hours (banking days only).

Network extension The MLFF Electronic Toll Collection System shall be flexible. Toll Collection and Enforcement System shall be extended in short time to any new segment of Tolled Road Network. Expected level: 5 calendar days

Table 24: Service elements and respective key performance indicators

4.1.1.3. Processes related to the provision of services Provision of services is carried out through management, value creation and support processes. The control/management processes basically define the operational framework of the entire tolling system and are typically defined by legislation.

The processes that are relevant to the feasibility analysis are the value-creating and supporting processes that provide the basics of the structural and architectural structure of the tolling system, the applicable tolling and enforcement technologies, and the framework for the establishment, operation and maintenance of the tolling system.

The relationships between the service elements described in the previous section and processes are listed in the following table.

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Service Item / Access Point Main value creating, and supporting processes Toll Collection - system management, - operation, CTSP IT System; - system administration, - user registration,

Toll collection - toll declaration management - user registration, Providing registration at customer - balance management, service points - customer service point management;

- user registration, Balance top-up at customer contact - balance management, points - customer service point management;

Balance management - balance management;

Settlement with beneficiaries of - settlement of used toll; collected toll Tariff management - tariff management. Enforcement Vehicle Identification of Roadside - data recording; Data Collection System Classification of Road Usage - determination of unauthorized use of toll (legal/violator) road; Sanctioning - handling alerts;

Collection of penalties - collecting penalties. Customer Service Points - user registration, Online customer service - balance management, - customer service point management; - user registration, Call Centre - balance management, - customer service point management;

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Service Item / Access Point Main value creating, and supporting processes - user registration, Personal customer services - balance management, - customer service point management;

- user registration, In-lane customer service points - customer service point management;

- user registration, - balance management, Reseller network - customer service point management, - settlement of used toll.

Table 25: The relationship between service elements and value-creating and support processes

4.1.2. The main value-creating processes of toll collection Value-creating and supportive processes are defined to provide the services of the toll collection system. While defining the processes, the main goal is to make as many process elements and process steps as possible independent of the technology used in the tolling process, but in the case of certain elements the technology to be applied basically determines the course of the process, and in many cases the implementation of special processes are required due to the technology to be applied.

The following chapters contain a detailed description of the value-creating processes of the service system of the toll collection, paying special attention to the interrelations and possible interactions of each process.

4.1.2.1. User registration, contracting Legitimate use of the toll road network in Indonesia requires registration/joining to the tolling system. Joining the tolling system is done through a registration process, where the registration of data of the road user and the tolled vehicles is mandatory. The fundamental purpose of registration is to ensure the lawful connection (contracting) and the inclusion of any information that must later be used to determine the amount of toll, obtain the usage right, and to impose any necessary penalties.

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As a result of the registration process, a contract is created – after accepting the General Terms and Conditions – which, on the one hand, provides the opportunity for legitimate use of the toll road and determines the obligations that the user must fulfil.

It would be desirable for all users to register before the system is launched, but since this condition is unlikely to be met, it is recommended that, when paying the annual vehicle tax, the vehicle's tax authority should oblige the user to register in the system. This ensures that all vehicles and their operators / users are registered in the system within one year (vehicle tax is due annually). During registration, the following minimum information is required (mandatory fields are marked with *):

Account:

- data of the registered person: o Name of the person/legal entity (*), o TAX number (if needed), o mobile phone number (*), o e-mail address (*), o address, o image of a document certifying the identity of the person (*); » Virtual Account is created;

Vehicles are registered under the Account:

- GNSS e-OBU ID link; - vehicle data (*): o licence plate number, o towing vehicle’s category (number of axles), o vehicle make, type, o vehicle colour, o Photo of the vehicle and its licence plates; - vehicle owner details: o Name of the person/legal entity (*), o TAX number (if needed), o mobile phone number (*), o e-mail address (*), o address, o Image of a document certifying ownership (reminder shall be sent if not uploaded during registration). Registration can be done over the Internet via the tolling system’s website, the CTSP smartphone App or in person at personal customer service points.

During registration, the data of the vehicle and the related person’s data are recorded by the person or organization performing the registration, and the documentary evidence of the authenticity of the data is uploaded into the system.

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In case of online registration, to link the GNSS e-OBU ID is also the responsibility of the user. The linking is done by providing the data given by the user and the GNSS e-OBU ID will be linked on the Internet interface. The users shall be able to use dedicated OBU and link it to the account as an option.

At the time of the registration, the toll road user contract is created.

4.1.2.2. Balance Management For eligible toll road use each vehicle:

• must be assigned at the time of registration to a virtual account with balance - from which money is used to cover usage rights – and • the vehicle must be also linked to one GNSS e-OBU.

The account is created at the time of registration and the registrant determines which vehicle (GNSS e-OBU) should use the balance on the account. Several vehicles and linked GNSS e- OBUs can be registered for the same virtual account, in which case the balance will cover a specific vehicle fleet. One GNSS e-OBU can be linked only to one vehicle-account at the time.

Given that in the case of GNSS tolling technology, the payable toll amount of the toll road use is automatically determined by the system based on the data recorded by the tolling infrastructure and the axle number registered in the system. The virtual account balance is automatically reduced upon passing through the tolling infrastructure. Toll fees can also be paid through purchasing route tickets.

In the case of open toll collection scheme, when entering the toll zone, the system generates an automated alert if there is no or insufficient balance to cover the toll. (An e-mail alert is also sent to Registered user and/or Owner.) In the case of a closed toll collection scheme, it is not yet known at the time of entry where the vehicle leaves the toll zone, i.e. the toll collection claim will only arise at the exit. Upon entry, the system generates an alert if there is no or low level of balance is to cover the toll. For details on the alert process, see the enforcement chapter.

The system shall be capable to manage negative balance according to the set parameters, which means that if the coverage is insufficient for the toll road use, the system records the claim and stores it. The claim will be refunded later in time after the balance has been topped-up, which means that there is a certain amount of credit available. The credit limit, expiration date, and pay-off strategy as a parameter can be set in the system based on the decision of the policy maker and the CTSP. The pay-off strategy means that if the amount charged to the balance does not cover the receivables, then, according to what rule for the settlement of individual claims, for example, but not exclusively: the oldest in time, the highest in terms of amount, etc. will be paid-off first.

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The balance will be topped-up through the system's sales channels (multiple cards and payment methods - POS, ATM, online access, bank transfer can be used) so that any amount paid by the user will be credited to the balance linked to the user’s account, which can only be used as an amount of toll road usage rights. The amount on the balance is non-refundable (even when the contract is terminated).

The balance decreases gradually during the use of the toll road. In the case of a persistent negative balance level, the vehicles belonging to the balance are placed on a black list, which means that if it uses network elements that are subject to toll, and otherwise do not obtain any entitlement, penalties will be imposed.

4.1.2.3. Management of toll declarations One of the most important operating bases of the tolling system is the declaration. The declaration is a data group that is created when a registered vehicle is using the toll road network with a valid and ready-to-use on-board device (GNSS e-OBU) or with the pre-purchase of Route Tickets.

4.1.2.3.1. Route Ticket Route tickets are fixed section tickets valid for a pre-defined section of the toll road. Typically, popular sections can be made available through route tickets. By purchasing route tickets, the road user is purchasing the allowance in advance, instead of deducting the fee from the balance as the vehicle uses the toll road. The purchased route ticket is connected to the user’s account, the vehicle’s individual ID (such as licence plate number) and includes identification of the toll road section, the start and end points of the route and the direction in wich the ticket is used (in the open tolling scheme of Jakarta ring roads only the zone is needed). This information is stored in the central IT system and is accessible for the enforcement procedures. Route Tickets are validated as the vehicles pass the enforcement gantry and the system matches the collected information with the centrally stored information, which results in validating the route ticket. Route tickets can be purchased for a single use purpose.

4.1.2.3.2. GNSS toll declaration In the case of GNSS thin client technology, the declaration is compiled on the basis of the position information sent by the on-board device in such a way that the mapping takes place in an intermediate geographical information system, where the toll road sections affected by the road usage are determined based on position information. Knowing the vehicle category – which can be set by the user in the application running on GNSS e-OBU – the system determines the toll to be paid and, at the same time, triggers the declaration.

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Using GNSS thick client technology, the declaration is generated in the on-board device by detecting the elementary toll section, taking into account the category of vehicle set by the user on the on-board device itself. In this case also, the declaration cannot be made if the vehicle is not registered in the system or has no valid and ready-to-use on-board device. Considering that the vehicle category is set by the road user, its accuracy should be examined in the framework of toll control.

The declarations are generated in the Data Collection System and are delivered to the Central System and the Enforcement module.

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4.1.2.4. Payment and settlement processes This section summarizes the key payment processes (money flows and settlement processes) of the envisaged toll collection system in case of e-OBU usage.

Event Event description Virtual Account Money transfer

User VA increased User -> CTSP User makes a top-up to its 1. User top-up balance through POS, ATM, (in case User is not (in case User is not bank transfer, online, etc. Using 3rd party e- Using 3rd party e-

wallet provider) wallet provider)

User VA decreased 3rd party e-wallet Vehicle with an OBU linked to (in case User is not provider -> CTSP 2. Road usage (toll the User account is detected to Using 3rd party e- declaration) (in case User is using use a road section subject to toll wallet provider) 3rd party e-wallet

provider) BLU VA increased*

3. On the spot surcharge Vehicle stopped on the spot by BLU VA increased** User (Driver) -> CTSP collection mobile enforcement, and the driver pays the surcharge

Vehicle was not stopped on the 4. Off-site penalty User (Owner) spot, the user who registered the BLU VA increased collection (CTSP) -> CTSP

Continuous (whenthe event takes place) vehicle or the owner pays the surcharge or the penalty

User does not pay the surcharge User (Owner) -> 5. Off-site fine collection or the penalty to the CTSP, the Police -> BLU (25% (Police) Police is charging a fine of collected fines)

CTSP calculated the service fee 6. CTSP settlement BLU VA decreased* it is entitled to

CTSP provides the funds (toll revenues and penalties) collected on behalf of the Toll

7. BLU settlement CTSP -> BLU Road Operators to the BLU reduced by the service fee of Daily CTSP

Toll Road Operators receive the BLU VA decreased* funds (toll revenues and 8. TRO settlement BLU -> TRO penalties) collected by CTSP on TRO VA increased their behalf

* CTSP maintains up-to-date database to determine which TRO is entitled to receive or obliged to pay the corresponding amounts

Table 26: Key payment processes of the envisaged toll collection system

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1.) User top-up

In case a User makes a top-up to its balance (multiple cards and payment methods – POS, ATM, online access, e-wallets, bank transfer can be used), the corresponding amount is transferred to the bank account of the CTSP in the same bank which was used by the User (CTSP has bank account in all banks providing e-toll cards currently). Simultaneously, the virtual account of the User managed by the CTSP is increased as well by the corresponding amount.

2.) Road usage (toll declaration)

In case of a toll declaration (User driving on a road section subject to toll), based on the location data provided by the data collection system, the virtual account of the User is reduced by the tariff for the road section, and the virtual account of the BLU is increased by the same amount. The CTSP continuously maintains a database which includes allocation of toll declarations to TROs.

In the event of force majeure disruption of the electronic toll system operation, as a result of the characteristics of the GNSS e-OBU technology, toll declarations will arrive after system downtime, so there will be no loss of toll revenue.

3.) On the spot penalty collection

In case a road user evading toll is stopped on the road, the driver pays the penalty to the CTSP's bank account. Simultaneously, the virtual account of the BLU is increased as well, and the database linking the toll declarations and penalty payments to the TROs is updated too.

4.) Off-site penalty collection (CTSP)

In case penalty payment arrives to the CTSP's bank account from a User or the owner of a vehicle related to a toll violation event in the past, the virtual account of the BLU is increased, and the database linking the toll declarations and penalty payments to the TROs is updated as well. For more information on the types of penalties, please see 4.1.3.3.

5.) Off-site fine collection (Police)

In case the user does not pay the surcharge or the fine to the CTSP within the defined timeframe (to be finalized later), the data package with the evidence of the violation, is sent to the Police.

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From that point on, the Police is collecting the fine from the owner of the vehicle. 25% of the collected revenue from fines is transferred to the BLU.

6.) CTSP settlement

On a daily basis, CTSP calculates the service fee it is eligible on the basis of the daily toll revenue collected, and the virtual account of the BLU is reduced by this amount.

7.) BLU settlement

The transfer of the amount corresponding to the virtual balance of the BLU (after deducting CTSP's service fee) is initiated from the bank account of the CTSP to the bank account of the BLU once a day.

8.) TRO settlement

On a daily basis, the transfer of toll revenues and penalties collected for each TRO (reduced by the allocated CTSP service fee) is initiated by the BLU to the TRO. At the end of each daily cycle, the balance of the virtual account of the BLU shall be zero.

4.1.2.5. Tariff management In order to the tolling system be able to charge the toll on each toll network element, there is a need for a uniform tariff register and tariff management. The system must be able to handle the statutory toll uniformly and historically.

The tariff register is managed in the Central System along the processes defined by the CTSP. By applying GNSS e-OBU technology, the system can manage the current entries of the tariff register in a centralized or decentralized manner, which means that individual toll gantries will receive the relevant tariff data in real time for faster toll calculation and toll charging.

In the case of GNSS technology, when using a thin client on-board device, the toll tariff data is not downloaded to the on-board device, which means that the toll tariff is applied in the central system. If a thick client on-board device is used, the toll tariff data will be downloaded to the on-board device, resulting in the creation of tariff and toll declaration in the on-board equipment. From the point of view of tariff management, this latter solution involves more complicated processes, especially with regard to change management.

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4.1.3. Enforcement procedures

4.1.3.1. Data collection The aim of the data collection by the roadside technical equipment are the identification of the detected vehicle and gaining evidence for proofing the unlawful use of the toll road network. The category of the vehicle is checked by the roadside enforcement equipment to determine, whether the declaration is correct.

The requirement of the lawful use of the toll road network is the pre-purchase of a Route Ticket or the registration of the vehicle in which process the GNSS e-OBU and the vehicle are linked. The vehicle is identified in the process of the registration by the following data (the source of the data is the person registering the vehicle who is not necessarily the owner of the vehicle but vehicle permission and the certificate of the ownership should be presented (scanned/photographed)):

- licence plate number; - axis number (vehicle identification data); - make; - type; - colour; - picture of the vehicle (both sides of the vehicle with the visible number plate). In the process of the registration scanned/photographed picture of vehicle permission and the certificate of the ownership must be provided (STNK document).

As a consequence, it could be stated that lawful use of the toll road network is not possible without using GNSS e-OBU or a valid Route Ticket.

Data collected by the enforcement equipment:

- identification number of the case; - identification number of the roadside equipment; - the date of the case; - number plate; - category of the vehicle (axle count); - photo of the vehicle (front, rear license plate, overall photo).

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4.1.3.2. The process of the declaration of the unlawful use of the toll road network The determination of the unlawful use of the toll road network is mainly based on the comparison of the data collected by the roadside enforcement equipment (toll category/axis, licence plate number) and data registered in the system.

The comparison is carried out immediately after the detection of the vehicle.

The CTSP enforcement system should make a distinction between the use cases whether the classification of the lawful/unlawful use of the tolled road network could be made immediately or not.

For the comparison the following data are necessary from the registry of the toll declarations.

White list – data of toll declaration

White list managed by the Central Toll Service Provider contains the vehicle registered. Only the registered vehicle is suitable to gain right for road usage.

On the white list the identification number of GNSS e-OBU and the number plate are linked.

There are two types of right to use the toll road network:

- approved toll declaration; - pending toll declaration;

Approved toll declaration means that the amount of the toll fee is paid or a valid Route Ticket is purchased.

Pending toll declaration means that the amount of the toll fee is not paid until the time of the control but due to the credit option the user is allowed to arrange the amount of toll within a given time period (e.g. 30 minutes).

The following data are transmitted to the Enforcement module from the Reliable toll road usage registry:

- Vehicle identification data: o identification data of GNSS e-OBU – number plate, o category of the vehicle, o road sections covered by the toll declaration, o status of the toll declaration (approved, pending), o date of the toll declaration, o the amount of the fee.

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Black list

Black list contains the vehicles that are not suitable for gaining right to use the toll road network (e.g. the contract is suspended).

Black list is managed by the CTSP. The Enforcement module is informed by the following data:

- the reason of ordering the vehicle to the blacklist; - date and time of decision; - vehicle identification data (GNSS e-OBU identification number and license plate); - date of withdrawal.

Procedure of toll enforcement

1. Detected vehicle is checked against the valid, unused Route Tickets. If a valid, unused Route Ticket is present, that ticket is validated, and the vehicle is considered lawful user. 2. Detected vehicle is checked against the Black list. (Matching licence plate means that the vehicle is Black-listed). If the vehicle is present in the Black list, the unlawful usage of toll road network can be declared without any further investigation (alert is sent to the roadside control unit). 3. If the vehicle is not present in the Black list the data collected and data of toll declaration must be compared. a. Collected data concerned: i. number plate (base data in case of GNSS); b. data concerned relating to toll declaration: i. vehicle identification data (GNSS e-OBU, number plate), ii. road section covered by the toll declaration, iii. status of the toll declaration (approved, pending), iv. amount of the toll. If the status of the toll declaration is approved the lawful use of the toll road network can be declared. Additionally, the collected number plate is matched with the number plate stored in the GNSS e-OBU ID and account linking module. If the data are not matching, a notice should be sent to the person who registered the vehicle and the owner as well, if they are not the same person.

Pending toll declaration can be approved by paying the toll within a given period of time.

After the time passed the comparison must be repeated if the status of the toll declaration still pending the unlawful use of toll road network can be declared.

4. If the vehicle is not using GNSS e-OBU, the unlawful use of toll road network can be declared (unless valid Route Ticket is purchased and used as in point 1.)

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In this case the person who is obliged to pay the penalty is determined as follows:

- if the vehicle is stopped (immediately after the detection of the vehicle and declaration of the unlawful use of the toll road network) and the identity of the driver is clarified he is obliged to pay the penalty; - if the identity of the driver remains unknown because the vehicle is not stopped, in the GNSS e-OBU ID and account linking module should be checked if the number plate is bound to any GNSS e-OBU: o If yes, the person who registered the vehicle with the same number plate takes the responsibility, o If no GNSS e-OBU is bound to number plate the person who is obliged to pay the annual vehicle tax takes the responsibility, o If there is a difference between the detected and registered data than the detected licence plate is the default information. The identity of the person obliged to pay the annual vehicle tax can be determined by the vehicle permission, or the certificate of ownership presented at the roadside control.

Another possibility to check whether the vehicle is registered in the system. If yes, the scanned/photographed documents could be the base of the identification.

4.1.3.3. Sanctioning In case of declaration of the unlawful use of toll road network, a penalty must be paid to the CTSP. There are 3 types of the penalty, defined below. In this document, the reference ‘penalty’ includes the surcharge and the penalty, whereas fine is defined separately.

In case the user is settling the violation case with the CTSP, within 48 hours of the unlawful use of toll roads, the user needs to pay a 50% surcharge to the CTSP, based on the toll fee that should have been paid in case of a lawful use.

If the case is not settled within 48 hours, the user is to pay a penalty, that equals to 10 times the actual toll fee. In case the user is paying the penalty on site to the CTSP, 20% discount could be offered.

If the penalty is not paid by the user, the CTSP transfers the data package on violation (evidence) to the Police, and in this case, the Police is responsible for collecting the fine, that equals to 30 times the original toll fee.

Responsibility – the subjected persons who can be obliged to pay the penalty (sequential liability):

1. driver; 2. if the identity of the driver remains unknown: • the person who carried out the registration of the vehicle;

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3. in case of non-registered vehicle or if the person in the 1st and 2nd point couldn’t be charged with the penalty, the person who is obliged to pay the annual vehicle tax. Way of identifying the person obliged to pay the penalty (sequential liability):

- driver: o roadside control (stopping the vehicle); - the person who carried out the registration of the vehicle: o GNSS e-OBU ID and account linking module; - the person who is obliged to pay the annual vehicle tax: o the vehicle permission, or the certificate of ownership presented at registration or at the annual tax payment, o if the vehicle is registered in the system, the scanned/photographed documents could be the basis of the identification.

The process of collecting the fines is defined by the E-TLE process and is handled by the Police. Therefore, the process is not detailed in this document.

Determination of the amount of the penalty

The amount of the penalty should be determined in regard to being motivating:

- for paying the penalty at the sight of the roadside control; - for cooperating with the CTSP; - for avoiding to pay the penalty as a fine. In order to achieve the above-mentioned goals, the amount of the penalties should be determined differently.

The proposed amount of the surcharge is 50% in addition to the original toll fee.

The proposed amount of the penalty is 10 times of the fee of the unpaid road usage.

If the penalty is paid on site, 20% discount is applied.

20% discount also applied if a formerly declared unlawful use of the toll road network is paid on site.

The penalty of the formerly declared unlawful use of the toll road network can be paid:

- online in the user’s account at the Internet Customer Service; - at any roadside control; - by the driver even if the person who carried out the registration of the vehicle or the person who is obliged to pay the annual vehicle tax responsible for paying to penalty. If the penalty is paid at a later stage of the sanctioning procedure the amount of the penalty is 30 times of the fee of the road usage.

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4.1.3.4. Collection of penalties The CTSP notifies the registered users in case of unauthorized road usage and aims to collect the corresponding surcharge and penalty (refer to section 4.1.3.3. for more details). In case of unsuccessful collection as surcharge or penalty, the Police is responsible for collection of the corresponding fine from the user.

A representative of the CTSP is present at the roadside controls.

The CTSP is permitted to charge additional administrative costs of collection. Only exception is if the driver pays the penalty immediately after detection of the vehicle and the declaration of the unlawful use of toll road network.

An additional option to collect the penalties is to integrate Parking Lots and Buildings into the system, thus both supporting the collection of Parking Fees and the penalty of unpaid toll road usage. As these parking buildings are equipped with barriers and ANPR cameras, the identification and on the spot collection of penalties can be done while stopping the vehicle from exiting the parking area.

If the CTSP is unable to collect the penalty it will be collected as a fine by the Police. If the penalty is collected by this method the penalty becomes the part of guarantee fund. Insurance company(s) may take the responsibility to cover the loss generated by the fines not collected during the enforcement procedure towards the TROs.

I. Alerting system The aim of sending alert to the roadside control unit are the following:

- Identification of the vehicle for roadside control; - delivery of the notice of the penalty. Alert can be sent if the detected vehicle:

- is present on the Black list; - concerned by non-payment of the penalty; - no GNSS e-OBU is linked to the vehicle and no valid Route Ticket can be matched with the vehicle. Data included in alerting message:

- place and date of detection; - photo of the vehicle; - number plate (if it is recognized); - the reason of alert:

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4.1.4. Supporting processes of toll collection and enforcement In addition to the value-creating processes supported by the system, a number of support processes need to be defined to provide services. Among the supporting processes, different statistical data services have a paramount importance from the business operation’s point of view. These services are not closely related to the main value-creating processes, but they can support them at many points.

4.1.4.1. Managing statistical data services The tolling system records a large amount of data of vehicles traveling on toll network elements on toll collection and toll control functions. Data are available for CTSP along the entire process of payment and settlement processes and sanctioning of unauthorized toll road use. Data can be only used in line with the Data Privacy Policy of CTSP.

One of the most important supporting processes for toll collection and toll control is the provision of statistical data and the compilation of statistics for different CTSP’s operation purposes based on different organizing principles. Statistics can be generated from pre-defined and ad-hoc query results. Data provision and queries must also provide leadership-level information, but also serve the needs of individual organizational departments and co-operating organizations.

4.1.4.2. Managing Customer Service Points A key supporting process is the management of customer service channels, which is essential to provide services available on the customer service channels. Within the framework of the process, all IT tools, material resources and other infrastructure elements, tools, materials are provided that serve the functioning of the customer service points. The management process also includes planning and organizing the reorganization, development, and downsizing between the various stages of the development of the system, as well as the central management of the full operation. It also includes the management of the redeployment and reorganizations required for different seasonality.

4.1.4.3. Service Management The fundamental goal of service management as a supportive process is to properly operate the IT, telematics and built infrastructure elements of the tolling system to ensure that the services they support are provided at the appropriate level.

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The Service Management support process consists of the following sub-processes:

- Service provision: o Service level management, which sub-process defines, negotiates, agrees, then implements, monitors, continuously evaluates and manages the levels of service provided to the client through the goals documented in the Service Level Agreement (SLA), o Availability management, consisting of design, implementation and management processes to ensure a high level of system availability to meet business needs, o Service-continuity management, which defines risks and vulnerability to disasters and policies to ensure business continuity, o Capacity management to ensure that the tolling system always has the appropriate IT capacity, while minimizing overload and low utilization – as unsatisfactory capacity usually causes performance problems, while unnecessary costs increase the cost of the service. Its main areas are business, service and infrastructure capacity management, o Financial management of services dealing with all financial aspects related to the provision and support of IT services; - Service Support: o Internal Service Desk, providing a central single point of contact between customer and IT service management, managing incidents and needs, and it is a link to other processes: change, problem, configuration, release, service level, and IT service continuity management, o Incident management that ensures the restoration of normal service conditions in case of disruption as soon as possible, minimizing its adverse impact on business processes, ensuring the best possible quality of service standard, o Problem management that minimizes the adverse impact of incidents and problems caused by IT infrastructure errors on business processes, and prevents the recurrence of incidents related to these errors, o Change management, which ensures the use of standard methods and procedures for the rapid and efficient management of all changes in order to minimize the impact of change-related incidents on service quality and consequently to improve the daily operation of the organization, o Configuration Management, which includes the identification, recording and reporting of all system components, including their version, constituent parts and connections, information of the configuration items (CI) stored in the Configuration Manager Database (CMDB), which is used by all processes of the service management, o Release management that performs the scheduling, design, construction, configuration and testing of hardware and software components to create a set of release components for the operating environment.

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4.1.5. Infrastructure elements of the new system The infrastructure of the tolling system supporting toll collection and enforcement processes consists essentially of the central system, enforcement gantries and various customer service points.

Gantries for enforcement purposes are built-up of different infrastructure elements and are located in different geographic locations. In the case of the GNSS e-OBU system new roadside infrastructure elements will be established.

The following chapters contain the structure and key features of each infrastructure element.

4.1.5.1. Infrastructure elements During the introduction of the MLFF system, the toll collection infrastructure used currently at toll plazas is partially converted, in order to meet the needs of the new system. 50% of the existing toll booths will be equipped with ANPR cameras to open barriers for users who are eligible to access toll roads in the new system by having an e-OBU or valid Route Ticket. ANPR cameras can be later transferred (re-used) to newly built gantries.

On-site generated data are paired with the help of a local intelligence, resulting in data packages of each passage event. The quality and possible lack of data contained in data packages can itself trigger different processes.

The categorization of the vehicle and the determination of the toll to be paid are carried out by means of automatic categorization equipment. For tolling lanes where automatic categorization already exists, full data capture is achieved through the integration of the existing system. Where there is no existing automated categorization infrastructure there is a need for full deployment.

The definition of the vehicle category is synchronized with the rest of the data collection, which means that the toll to be paid is automatically determined in connection with the usage of the section and the system attempts to deduct it from the balance of vehicles or validate a Route Ticket if available.

Where the deduction is not successful because of the low level of balance and/or no valid Route Ticket is available, the payment obligation will be administered, which later the road user will have to pay to avoid sanctioning. After the payment obligation expires, an alarm is generated if the system detects the debt-affected vehicle on the tolled network again.

The complete transition to MLFF-GNSS can be implemented after installing the optimal amount of enforcement gantries along the toll road network that identify the usage of a given section, if the vehicle has a readable licence plate and/or uses a GNSS e-OBU (linked to the licence plate number in the system)

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MLFF-GNSS system will also be implemented on tolled network elements that are constructed after the project has started, which means that enforcement gantries with enforcement and traffic data collection devices will be set up on the new toll road sections.

Some new-built tolling infrastructure must be equipped with an automatic vehicle categorization equipment that is able to determine the category of tolled vehicle at the same time as the licence plate reading process without stopping the vehicle itself for enforcement purposes.

Given that the vehicle category refers to a combination of vehicles consisting of a towing vehicle and a towed vehicle where the towed vehicle may vary, the vehicle categorization must not take place during registration, but in the CTSP’s application, as it should be treated as dynamic data, which may vary during travel.

In order to detect the passage of vehicles that is not registered and does not have a GNSS e- OBU or a valid Route Ticket but are required to pay toll, there is a visual document evident produced by ANPR camera at each location that can be used for sanctioning processes later.

As far as system expansion is concerned, no roadside infrastructure is required when extending the existing toll road network with MLFF, except for enforcement purposes.

4.1.5.2. Central system Central system is any infrastructure element of the tolling system that ensures the running of background processes, is linked to the systems of the co-operational organizations and ensures the management of the registries.

4.1.5.3. Customer Service Points Customer Service Points are the infrastructure elements of the tolling system that provide registration, balancing, and customer management processes. Customer service points differ in terms of the services available through them or the channels used by the connection. Customer service points may be personal, telephone or internet connection points. In terms of processes, there are points where there is only registration, or only a balance top-up, or other customer management processes, but these are also available at customer service points by their very nature.

From the point of view of infrastructure demand, it is important to mention the customer contact points to be established in the tolling lanes of the currently operating toll plazas, where it will also be possible to register and top-up the balance.

Phone customer services are only available with balance information and other customer management processes that are supported by a client application.

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4.1.6. Architectural elements of the tolling system The most important functional units of the architectural elements of the tolling system are:

- system modules that typically implement functional elements in the management of a specific organization, which can be characterized by in- and output data group, and in many cases, management of registries in addition to business operations; - internal system connections, which are created along with the establishment of the system, their task is to implement the relations between the individual system modules, to carry out the data exchanges and to ensure compatibility for the future development; - External system connections that are created along with the establishment of the system, their task is to implement the link between the tolling system’s modules and the systems of other co-operational organizations, to carry out data exchange and to ensure compatibility for future development; - the registries managed by the system, which provide a valid basis for the business operation of the system, ensure uniform data structures and the data links and their historical retrievability associated with each event during operation. The following chapters contain details of the architectural elements planned for the functional units of the tolling system.

4.1.6.1. System modules For the renewal of the Indonesian toll collection system a platform approach is needed:

- integration of various ways (technologies) of toll declaration; - integration of several payment methods and partners (banks). Key objective of the project is to set up a system that supports different toll collection solutions in one single platform, with different tracking technologies and payment methods.

The system will be able to provide efficient enforcement support as well by gradually creating the required databases and registries in order to ensure penalization.

- Data Collection System (initially) based on roadside infrastructure; - Central System for toll distribution and clearing and enforcement functions; - Collection System that ensures the collection of the penalties; - Usage data collection integration gateway providing the data link between the roadside equipment and the Central System; - Enforcement integration gateway between the Central System and the Collection System.

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Figure 18: Overview of the system

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4.1.6.1.1. Data Collection System Tasks: Recording and collecting data which is collected by the roadside infrastructure and/or generated by the road usage regardless of the toll declaration method or tolling technology.

Parts:

- Roadside Equipment (Usage data/Enforcement data); - GNSS Toll Declarations. Interface:

- Usage data collection gateway. Affected organizations:

- None. Data input:

The data collection module receives the following input data based on the supported charging technologies:

- 1. Data captured by the Roadside Infrastructure; - 2. Receive data generated by GNSS electronic On-Board Units. Data output:

- Integrated toll road usage data regardless of the used toll declaration technology; - Categorized traffic data to calculate justified toll revenue. Money from:

This system does not manage money flow.

Money to:

This system does not manage money flow.

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Figure 19: Data Flow of the System

4.1.6.1.2. Central System Tasks:

- Reliable toll road usage registry including Route Tickets; - System supporting billing functions; - Multi interface for road usage data/roadside equipment data; - Supporting enforcement; - Sanctioning; - Identifying and managing unauthorized toll road usage events; - Construction of registries recording vehicle data and unpaid toll penalties. Parts:

- Data Collection Platform; - e-OBU ID and account linking; - Reliable toll road usage registry; - Clearing House module; - Enforcement module; - Vehicle Registry; - Unpaid Toll Penalty Registry Black List Database; - Tariff registry. Interfaces:

- Integration of balance data; - Usage data collection gateway;

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- Enforcement integration gateway. Affected organizations:

- TRO; - CTSP; - BLU. Data input:

- Toll road usage data; - Balance data; - Paid penalties data. Data output:

- Data on collected toll and penalties; - Collection support data. Money from:

- Electronic sales channels (Balances topped-up by users); - Electronic sales channels (Enforcement). Money to:

- BLU (used toll); - Toll Road Operators (used toll).

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Figure 20: Money Flow of the System

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4.1.6.1.3. Enforcement Module Tasks:

- Support the recovery of penalties. Parts:

- Enforcement and traffic data collection subsystem; - Unpaid toll penalty registry; - Vehicle registry. Interface:

- Enforcement integration gateway. Affected organizations:

- BLU; - Annual vehicle tax Authority. Data input:

- Integrated toll road usage data; - Unpaid toll penalty data; - Vehicle data; - Information on unpaid penalties. Data output:

- Information on unpaid and paid penalties. Money from:

- Road user (paid penalties and fines). Money to:

- Police (paid fines) - BLU (paid penalties as part of Toll revenue service fee part); - TRO (paid penalties as part of Collected toll revenue minus service fee part).

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2 4 TROs Notifications:low balance, unlawful usage, surcharge due, etc. Data on justified toll revenue 1 Toll road user (Registered GNSS tracking user) (e-OBU) CTSP BLU (assigned by central GCA) Route ticket Surcharge, penalty system

(Registered user) Data package Evidence of Roadside of violation violation Data flow Violator infrastructure 3 Money flow (Owner of the vehicle) State responsibility Paying 25% of collected CTSP (IBE) responsibility Fine notice penalties 1 Data collection function Police 2 Toll charging function Payment of fine 3 Enforcement function 4 Clearing function

Figure 21: Sanctioning

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Figure 22: The complete overview of the System

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4.1.6.2. Internal system links According to the supposed system architecture the internal system links are as follows:

Receiving / sending system Sending / receiving system Name of system links component component Central System Data Collection System Usage Data Collection Integration gateway Central System Collection System Enforcement Integration gateway Servers in the Banks Central System Integration of balance data

Table 27: Internal system links

4.1.6.3. External system links According to the supposed system architecture the external system links are as follows:

Receiving / sending system Sending / receiving system Name of system links component component Toll Road operators’ Central System Categorized traffic data systems gateway BLU’s system Central System Data on collected toll & penalties Police Central System Enforcement Integration gateway Bank branch real account Central System Integration of balance data system (ATM / POS / online top-up, usage)

Table 28: External system links

4.1.6.4. Registries handled by the system Tolled road network elements’ register

The tolled road network elements’ register contains each single section of the toll road, and its natural features recorded in geo information system features. In case of sections these can be start and end points, in case of zones these can be different identification points describing boundary of zone. A new record can be entered into the register, in case some parameter of

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Tolled road network elements’ register runs on historical basis. It means that all former changes can be tracked, and network section parameters can be unambiguously determined for a given moment in the past.

Tariff register

Tariff register contains toll sections tariffs by vehicle categories. Tariff register is basically a static one, a new entry is made every time if the network element’s existing tariff entry is changed, when new network elements are incorporated or already existing tolled network elements are taken out.

Changes of tariffs can be periodical or occasional ones. It means that periodicities can happen within a day or on longer time frame, which causes changes along a predetermined schedule. Single events can modify given tolled network elements’ tariffs as well, like – but not solely – temporary release of tolling, when determined sections tariffs annulled for a while.

Tariff register runs on historical basis. It means that all former changes can be tracked, and for each network elements tariffs by vehicle categories can be unambiguously determined for a given past moment.

Usage rights’ register

Among registers run by the tolling system, the most important one is the toll collection operations and in it, the toll declarations’ handling register. Based on road usage and payment transactions it can be declared unambiguously, if the road user realized a usage right for a given network element (section or zone) in a given time, or not. Each and every transaction and toll declaration is recorded into the usage rights’ register, independent from the actual status of the balance gives enough financial coverage, or not.

Road usage event register

During enforcement procedures on road usages in each and every enforcement cross section data automatically recorded into the road usage event register. This register contains visual documents and meta data linked to them. The road usage event register and usage rights’ register give the input data for differential making and for statement on unauthorized road use in this way. The road usage event register ensures the document evidences to sanction unauthorized road usages as well.

This register should record at least the following data:

- identifier of road usage event; - identifier of detection point; - time stamp of road usage event;

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- meta data of road usage event; o license plate number, o vehicle category, - testimony documents of road usage event. Virtual account database

A virtual account (VA) is created at the end of the registration process. During the road usage the virtual account’s balance is decreased with the toll amount of the toll road usage. During the toll road usage, the database is checked, whether the vehicle has a sufficient balance to pay the toll or not. We register user personal data and invoicing data to the accounts.

Vehicle registry

The registration of vehicles subject to toll shall be made at the latest by the due date of payment of the annual vehicle tax of the vehicle concerned. The data of the registered vehicles as defined in this paragraph are recorded in the vehicle registry. The vehicle registry is based on the vehicle entity defined by the vehicle's unique identifier (VIN / chassis number).

The following data must be recorded in the vehicle register as assigned to the vehicle entity

• other vehicle identification (number plate, motor code) and technical data and changes in them; • details of the vehicle owner and the registrant person and changes in them. The above described data must be recorded in a historical manner, as a result of which the technical and administrative lifecycle of the vehicle can be identified from the register.

This register should record at least the following data: - unique vehicle identification number (VIN number); - time stamp of registration; - vehicle data: o license plate number, o towing vehicle’s category (number of axles), o vehicle make, type, o vehicle colour, o photo of the vehicle and its license plate; - data of the registered person: o Name of the person/legal entity (*), o TAX number (if needed), o mobile phone number (*), o e-mail address (*), o address, o image of a document certifying the identity of the person (*); - vehicle owner details: o Name of the person/legal entity, o TAX number (if needed),

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o mobile phone number, o e-mail address, o address, o Image of a document certifying ownership (reminder).

Registry of sanctions

Central registry should be managed on the penalty ordered by the Enforcement body and on control activity carried out by roadside equipment.

A registry managed by the Enforcement body.

The aim of managing the registry:

- examination of the payment of penalty ordered; - the use of photos of non-identified vehicle (vehicle without number plate) in other administrative or criminal procedures; - investigation of GNSS e-OBU manipulation. Contact of the registry: Data on penalties: - identification of the enforcement body; - place of control; - type of penalty; - identification and address and other contact data of the person obliged to pay the penalty; - status of the person obliged to pay the penalty (driver, person who registered the vehicle, person oblige to pay annual vehicle tax); - the amount of the penalty. Data on controls: - data on non-identified vehicle: o photo, o place and date of control, o name of the enforcement body;

4.2. Establishment of the toll collection system Establishment of the new toll collection system is planned to be implemented in a single step.

The following high-level project plan is describing the planned implementation of the MLFF toll collection system.

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Figure 23: Envisaged implementation schedule

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4.2.1.1. MLFF GNSS implementation Basic conditions to arrive to system introduction from the current manual technology are as follows:

- vehicles are passing equipped enforcement gantries without stopping; - the central IT system and infrastructure is operational; - Route Tickets are available for purchase and use; - full functionality of the enforcement system is ready; - tolled vehicle registry become fully comprehensive; - solid legal base is available for post-sanctioning.

After implementing the system, road users will have the possibility to purchase Route Tickets or declaring their toll road use via their e-OBU devices. The complete functionality will be available for customers to use, meanwhile, the currently used manual (e-Toll card based) solution will become inactive, toll road allowance will not be possible to purchase through this solution. Road users will need to register their data and activate their e-OBU devices through the mobile application. It is desireable to enable the use of the mobile device before the official launch, in order to allow road users to activate their devices in advance.

From the implementation point of view, the required hardware equipment will be built and activated, software elements will be also functional. The construction of the new gantries should start right after the commercial contract is signed.

Integration with banks, e-wallet service providers, BLU and other stakeholders will be activated and the daily settlement procedure with TROs will also be launched.

Based on the solid legal base, a fully comprehensive sanctioning procedure will be effective, including the involvement of stakeholders of the collection processes.

4.2.1.2. MLFF GNSS introduction Most important elements of launching the new technology to the public:

- dedicated communication campaign is completed; - e-OBU registration is available and functional; - customer service points are supporting road users; - a complete system integration test is passed and the required fine-tuning is completed. A strong and continuous communication campaign will play a key role in successful socialization of the new technology, therefore, detailed planning and accurate implementation will be important to support the launch of the GNSS technology.

As mentioned in the implementation section, the availability of pre-registration of users and cars will help the smooth transition to the new technology.

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In case of support is needed, the activated customer service channels will be able to help requesting toll users. Before the launch and at the launch of the new technology, it is important to satisfy the additional support requests from toll road users, therefore, additional resources should be allocated to this activity.

A complete and successful system integration test will need to be carried out before the official launch date, that not only focuses on the registration, declaration, data collection and payment procedures, but also includes the back-end functions, such as settlement with BLU and TROs and among others, testing the complete enforcement procedure. Therefore, such a system test includes all stakeholders of the MLFF service and requires these stakeholders to provide the required resources.

4.2.1.3. MLFF GNSS operation Following the successful launch of the service, the following elements describe the operation:

- toll plaza deconstruction initiated; - central IT system optimized; - continuous supporting communication campaign; - additional enforcement gantries are built.

As the everyday use of the MLFF GNSS technology is adapted by the toll road users, the removal of the old infrastructure can be initiated. Although removing the existing toll plazas is beyond the scope of the MLFF project, it will further support the spread of toll declaration without decelaration, resulting in faster travel for the toll road users.

Based on the learnings of the first few months of commercial operation, an optimization in the central IT system may be required, that will not affect the availability of the system. Operational and commercial processes may also need smaller modifications, that should further improve the effectivity of the system.

In order to ensure improving customer satisfaction, the previously communication campaign is turned into a supporting campaign, that will help the orientation of toll road users.

4.2.1.4. Implemented services and functions System components securing toll collection and enforcement should be available functioning from the first day of commercial operation. Among basic conditions, the implementation of all registers got an emphasized role, as their infrastructural background should be implemented prior launching the new technology.

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4.2.2. Proposed Project milestones and technical acceptance

4.2.2.1. GNSS Electronic Tolling Project schedule by Project Milestones Nevertheless, the scope of the PPP project is a service, it is critical to understand the system elements needed to be implemented in each phase. To keep track on the advancement of the system implementation, a high-level roadmap with milestones has been created.

The proposed ETC system will be operated in a single phase. The system will be implemented on the toll road network nationwide: • Existing toll booths will not be converted to GNSS e-OBU system as the complete network will be available from the launch date; • GNSS enforcement gantries will be constructed on the designated toll road sections during implementation; • GNSS e-OBU system will be launched nationwide on the whole network; • After the start of the GNSS e-OBU system, additional gantries will be installed on toll roads in-line with the construction of the newly developed roads, financed by the respective Concessionaires.

The milestones and deliverables are planned according to the following table:

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CAPEX of the Milestone Phase Milestone Description Deadline* milestone ID (m USD)

Project initiation and M0 M0 - Project Founding Document 01/01/2021.

Implementation plan, high level system design and M0 + 2 month M1 5.5 documentation 01/03/2021.

Central IT system with Hardware and Software M0 + 6 month M2 56.6

without integration 30/06/2021

Call Center and Enforcement organization setup M0 + 10 month M3 Initial mobile enforcement equipment 32.3 01/11/2021

System integration to banks as other systems Implementation

M0 + 11 month M4 Equipment for MLFF GNSS solution purchased 91.4 30/11/2021

Construction of enforcement gantries • 117 gantries on existing toll roads M0 + 18 months M5 64.7 • 91 gantries on toll roads under construction 30/06/2022 • 28 gantries on planned toll roads

Communication campaign 11.6 M2 + 6 month M6 Mobile enforcement equipment implementation 31/12/2021 e-OBU registration and GNSS pilot

M2 + 6 months M7 10.3

Complete system integration tested and fine-tuned 31/12/2021 Introduction M0 + 12 months M8 Start of CTSP Toll Collection service 2.9 (Go live of the GNSS system) 03/01/2022

Toll Plaza deconstruction M7 + 12 months M9 Optimization of central IT infrastructure 24.3 30/12/2022 Continous supporting communication campaign

Investment Operation Additional enforcement gantries M10 • 101 gantries on planned toll roads 2022 – 2025. financed by . TROs

Total 299.6

* Deadlines are relative, fixed dates are only for informative purpose

Table 29: Milestones and deliverables

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4.2.2.2. Delivery and acceptance schedule The following chart explains the general technical acceptance procedures of the Electronic Toll Collection System Elements by the Government. We propose to use 5 different types of acceptance for different types of delivery. The technical acceptance process for each system element shall be set out in the Bill of Quantities of the relevant milestone.

Type of Handovers:

1. Documentation 2. Hardware 3. Software 4. Construction (including roadside equipment integration) 5. Service

Documentation handover

Official Handover ITRA Task CTSP Task Handover Format Documentation 1. CTSP Draft Version Review Provide Electronic Format 2. ITRA Feedback on Draft Feedback Review Electronic Version Format 3. CTSP Final Version Approval Provide Paper and Electronic Format 4. Technical Acceptance Provide - Paper and Electronic Certificate Format

Table 30: Type of handover: Documentation

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Equipment and hardware handover

Official Handover ITRA Task CTSP Task Handover Format Documentation 1. Master List Acknowledge Provide Paper and Electronic Format 2. Inspection record (quantity Provide Support Paper and Electronic check) Format 3. Equipment test record if Acknowledge Provide Electronic applicable Format 4. Delivery record Verification Provide Paper and Electronic Format 5. Technical Acceptance Provide - Paper and Electronic Certificate Format

Table 31: Type of handover: Equipment, Hardware

Software handover

Official Handover ITRA Task CTSP Task Handover Format Documentation

1. High Level System Design Acknowledge Provide Electronic document Format 2. List of Modules Acknowledge Provide Electronic Format 3. System Test Verification Provide Electronic Documentation Format

4. License Certificate Acknowledge Provide Paper and Electronic Format 5. Technical Acceptance Provide - Paper and Electronic Certificate Format

Table 32: Type of handover: Software

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Construction handover

Official Handover ITRA Task CTSP Task Handover Format Documentation

1. Construction plan Verification Provide Paper or Electronic Format 2. Construction permit if Acknowledge Provide Paper or Electronic needed Format 3. Electricity and Acknowledge Provide Paper or Electronic Communication Network Format connection plan 4. Site inspection record Provide Support Paper and Electronic Format 5. Technical Acceptance Provide - Paper and Electronic Certificate Format

Table 33: Type of handover: Construction

Service handover

Official Handover ITRA Task CTSP Task Handover Format Documentation 1. Training Attendance Sheet Verification Provide Paper and Electronic Record Format 2. Support and Warranty Verification Provide Paper and Electronic Record Format 3. Interim Payment Certificate Approval Provide Paper and Electronic Format 4. Technical Acceptance Provide - Paper and Electronic Certificate Format

Table 34: Type of handover: Service 4.2.3. Construction spots The infrastructural elements of the tolling system will be implemented on different spots in successive phases. Implementation of most important system components are described in next subchapters, paying special attention to the nature of the implementation and the limits of the (sub)systems as well.

Under the current tolling scheme, the fan-tailed rectification of tolling lanes at the toll plazas were made because of traffic engineering aspect. The reason is possibly not to restrain the total capacity – due to the stop and go caused crossing time extension of tolling booth lanes – of toll plazas.

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Such a suppose was taken that because of significantly speeding up tolling transactions altogether fewer tolling lanes will be needed compared to the current ones in operation. Congestions will ease appreciably or supposing, they will disappear, which means that released toll booths could be ceased or partially used for a while for registration like services.

The GNSS e-OBU penetration among road users will be an ongoing process, starting even before the GNSS technology is commercially launched. In order to overcome transitional challenges and satisfy different customer demands, Route Tickets shall be available from the beginning of the GNSS e-OBU service.

The zones operated currently under open tolling scheme will remain in same scheme.

On the designated road sections multifunctional roadside equipment will be implemented, which will able to detect the vehicles passing through, conduct data recording and data exchanges necessary for enforcement under multilane free flow conditions.

Special attention is needed for ensuring the energy supply and telecommunication data connections of these multifunctional roadside equipment.

During implementation traffic engineering-based diversions and system parameter setting tasks should be taken into account.

Design and implementation of multifunctional roadside equipment will be performed in a way to facilitate fully GNSS based tolling technology, without having any traditional toll booths. The enforcement aimed data recordings will be made in such a depth which will be able to facilitate the map matching based GNSS tolling technology and the accurate identification of the usage of elementary road section.

4.2.3.1. Central system All system modules of the central system itself – inclusive the toll collection and enforcement system core elements as well –, should be fully available and operable at the milestone of launching the MLFF toll collection service.

These system components should be able to fully support the GNSS toll collection in excess of serving all planned retailing channels as well.

4.2.3.2. On-site customer service Among customer service points, there will be such ones which will be placed temporarily in the disengaged tollbooths of current toll plazas. Although main functionalities of customer service channels should be available at the departure of commercial operations, these tollbooths would offer additional support to the drivers.

In case of electronic retail channels there is no need for extra infrastructural developments, since they will be formed as part of the central system.

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4.3. Operation and maintenance of the tolling system Significant emphasis was laid on technological sustainability and human resource issues in the elaboration of financial modelling. These relevant considerations are described in next subchapters.

4.3.1. Technological sustainability The technological sustainability of the tolling system is a main task during operation time. The technological outworn of the equipment should be taken into account, while its ageing as well, thus such kind of changes may happen which would influence the applied technology elements.

4.3.1.1. Lifespan of equipment During building the financial model the useful lifespan was set up for each equipment. Keeping in mind that failures can happen even within equipment’s lifespan, which would cause a necessary replacement, thus an average equipment replacement ratio was set up, which describes the necessary replacements due to the ageing of the devices. This kind of replacement ratio is relevant mainly – but not exclusively – in case of bigger contingent equipment like: categorization equipment, central IT hardware, ANPR camera, etc.

4.3.1.2. Additional investments in case of toll policy changes In case of such kind of toll policy changes will emerge during the time horizon of the financial model, which will modify the number of tolled vehicles’ pool, tolled vehicles’ categorization, network coverage or extension on other road categories or new tolling technologies should be taken into account, than additional investments should be estimated as well. For example – but not exclusively – the system itself will be prepared to receive GNSS tolling data, but the model does not take into account its OBU needs, as the project scope covers only the possibility of connecting physical OBUs, it does not include the distribution of such OBUs. The GNSS data declaration is based on the use of e-OBU solutions, such as a dedicated application on smart phones of drivers and/or vehicle owners.

4.3.2. Human resource aspects of operation and maintenance In the field of operation and maintenance duties the current roles of activities and related competences will change, in such a way the whole business organization should be reorganized.

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The new tolling system and its technical and business procedures will need a step by step reorganization of the human resources, keeping in mind both the current and the future business functionalities as well.

4.3.2.1. Operating aspects, competencies With the implementation of GNSS technology, the toll collection and enforcement cross sections’ the demand on human resources will change significantly. Not only other kind of human capacities, but different capabilities and competencies will be necessary. It is a core issue how the existing capacities and competencies can be used in the new system. With GNSS technology, the roadside equipment become fully automatic, which means that no more human interference is needed at those spots. In such a way, some workforce segment demands will disappear in the given regions nationwide. The operation and administration of the central system components will need other kind of competencies. Although the GNSS gantries will provide nationwide coverage, but local work force will only be necessary for their maintenance and not fot their everyday operation. Experience shows that these cross sections demand minimal operating capacities, which means that it can be handled centrally or regionally smoothly.

Considering ANPR technology, a visual control need emerges. Recognitions made by ANPR cameras should be validated or precised by human eyes as well. Such procedures are performed in visual enforcement centers, which are centrally or regionally organized as well.

On the spot manned mobile enforcement duties need specified competencies, with nationwide coverage, which means that those currently employed in nationwide toll collection can be retrained for these roles of activities gradually.

4.3.2.2. Roles of activities in operation It is useful to set up different roles of activities along basic management logics – for example, but not exclusively: segregation, four eyes principle, allocated roles, competencies, etc. –, which are taken into account in the model by statuses and shifts. It is worth to note, that the operation of the tolling system and the availability of customer service points is characteristically a 3 shifts activity. It means that the aggregated personal costs in different time spans should be calculated according to these conditions.

4.3.2.3. Operating organization Capacities stipulated by normalized roles, competencies, procedures and roles of activities arising from these describe the organizational units necessary to operate and maintain the tolling

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5. CTSP OPERATIONS CTSP operations are defined together with the organization context of the BLU and the Police. All roles and responsibilities of Toll Collection are shared among these organizations and the connections and interfaces are represented on the following diagram.

Figure 24: Money and dataflows of key stakeholders

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BLU CTSP Police • Contracting and • Implementation of the • Handling the database of financing the Road Side Infrastructure vehicles and owners operations of CTSP for Toll Collection under the Enforcement (Toll collection and procedure (fine • Operation and services) collection part) maintenance of the Road • Distribution of the total side infrastructure • Managing the fine Road Toll fee to the collection part of the • Providing the Toll TROs enforcement procedure, Collection IT systems based on the E-TLE • Management of • Set up and operation of process enforcement the registration and procedures, forwarded • Maintaining the register vehicle database by the CTSP (unable to for unpaid fines and collect the fines) • Customer service to road providing the data to the users vehicle taxation/ • Monitoring of the registration authority CTSP’s performance • Operation of the visual indicators control centre • Liaison with the BLU and CTSP • Management of the • Contracting the involved guarantee fund banks for electronic payments • Legislative and policy making support • Contracting and supporting the Police with data, evidence • Supporting the clearing house operation of the BLU with data and reports • Payment of the collected road toll to the BLU • Collecting the surcharges and penalties based on the data collected • Contracting the police for joint on the road operations • Management of insurance company(s) Table 35: Roles and responsibilities of toll collection

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At the INDO-GO Toll Collection System implementation phase a horizontal, project-based organization is proposed under the management of the private partner (organizational implementation plan should be required at the tender phase from the applicant). After the go live date, the operational roles will be divided as described above and the CTSP organization will be set up based on the core team of the implementation. In this chapter we focus on the operation and maintenance of the system from the organizational perspective.

5.1. Detailed overview of organizational and operational setup CTSP operator should be private company registered in Indonesia, with the contract and legal designation to be the electronic central road toll service provider. To fulfill these roles the following departments are proposed:

Management

Project Office

Legal and Technical Customer Finance division service

Customer Enforcement Marketing and Legal IT operations Center support PR

Roadside Finance Visual check Infrastructure

Backoffice Roadside (HR) enforcement

Collection

Figure 25: Overview of the organizational structure

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Management: Responsible for managing the CTSP company and operating the Toll Collection System as defined by the SLA and the KPIs. Project Office: Responsible for the new development projects, which include both introducing new services and the system upgrade needed for the road network extension. Project office works with dedicated staff from the functional departments on major projects. Minor developments are handled on the functional department level. Backoffice: Supporting the management and the operation of the CTSP company with secretariat, HR, internal communication and controlling. Legal: Responsible for contracting the BLU, the Police, Banks. Elaborating the General Terms of Agreement for Road Users. Contracting subcontractors for maintenance and operations of the infrastructure, IT equipment, licenses. Legal support of the Police on court cases, if needed. Finance: Responsible for the invoicing and payment process of the Road Toll and the corporate finance of the CTSP, including loan agreements, service contract. Operates the Clearing House function and provides the necessary data to the BLU for toll distribution to the TROs. Supports the Project Office. IT operations: Responsible for the IT operations of all elements of the CTSP Central Clearing subsystem and the Data Collection Subsystem. Tasks include system monitoring, IT infrastructure (server, network, storage, COTS licenses) maintenance and operation of the applications (Server, Database, Interfaces, Website, Mobile Apps, etc…). Shall include a division for the coordination of developments and upgrades. Infrastructure: Responsible for the operation of Roadside Infrastructure on gantries. Maintenance must be coordinated with the respective TRO. Responsibility includes the electricity and communication network of the Roadside equipment. Infrastructure department provides and operates the equipment needed for the enforcement processes. Customer Service: Responsible for all aspects of customer communication. Shall include three divisions: o Support Centre: Call Centere for Road Users to support registration, top up payments, invoicing; o Visual Control Centre: checks and confirms the results of the license plate and vehicle class recognition of the roadside data collection subsystem. Supervises the evidence data provided to the Police; o Marketing and PR: communication to the road users and public on the system and upcoming developments, changes. The customer service requires well-trained people with experience and understanding of the operations of the new toll collection system.

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Tasks of the customer service personnel may include complex tasks for example: o Remote assistance to users in terms of installing the application on their smart phones (required to use the smartphone as e-OBU or to purchase Route Tickets); o Remote assistance to users in case the application is not functioning properly on their smartphone; o General understanding of smartphones, their operating systems, location services, privacy settings etc. in order to be able to provide advice to users in case they have issues with the application; o Assistance to users related to purchase of Route Tickets, setting the pre-defined routes related to Route Ticket purchase etc.; o Assistance to users related to the various ways of providing funds to payment platforms that can be used to pay tolls; o Assistance related to registration and de-registration of vehicles (linking and de-linking number plates to user accounts etc.); o Assistance to users in case of enforcement procedures, assistance in paying the surcharge after receiving notification; Customer service personnel have to speak English as well in order to be able to serve users not speaking local language (e.g tourists). Based on the above mentioned responsibilities, customer service representatives should have the following skills and background: o complex problem solving skills; o excellent communication skills; o capability to work under pressure; o ability to understand complex systems and procedures; o ability to deal with angry and upset customers in a calm and professional manner; o multitasking; o IT skills (general office software and phone applications); o minimum intermediate level of English (both oral and written); o minimum completed secondary education.

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5.2. Initial assessment of HR requirements The following organization chart indicates the required fix human resources of the central operation of the CTSP by each department. These figures do not include variable HR requirements that are related to the length of the toll road in operation and number of Toll Road Users, such as mobile enforcement personnel and customer service and visual inspection personnel. The forecasted FTE figures of such personnel is presented in the financial feasibility section (Volume III., chapter 3.3.2).

Management Expert White Blue Total collar collar Management 2 1 1 0 4 Project Office 1 2 2 0 5 Legal and Finance 1 1 2 Legal 3 3 Finance 5 5 Backoffice (HR) 3 5 8 Technical division 1 1 2 IT operations 6 2 8 Roadside 5 5 50 60 Infrastructure Customer service 1 1 2 Customer Centre 1 5 25 31 Enforcement support 1 3 50 54 Marketing and PR 1 3 4 Total: 6 28 29 125 188 Table 36: Manpower and HR requirements

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6. ANNEXES

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6.1. ANNEX 1 - Detailed database of the toll road network

Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths Nangroe Aceh Darussalam & 1 Belawan - Medan - Tanjung Morawa Operation Urban 42.7 Operating 6 4 54 Sumatera Utara 2 Medan - Binjai Operation Sumatera Utara Rural 10.45 Operating 3 6 23 3 Medan - Kualanamu - Tebing Tinggi Operation Sumatera Utara Rural 62.11 Operating 7 6 50 4 Palembang - Indralaya Operation Sumatera Selatan Rural 21.58 Operating 3 4 25 5 Bakauheni - Terbanggi Besar Operation Lampung Rural 140.4 Operating 6 4 49 6 Tangerang - Merak Operation Banten Rural 73 Operating 9 6 92 7 Jakarta - Tangerang Operation Banten & Metro Jaya Urban 33 Operating 8 8 86 8 Prof. Dr. Ir. Sedyatmo Operation Metro Jaya Urban 14.3 Operating 3 8 56 9 JORR W1 (Kebon Jeruk - Penjaringan) Operation Metro Jaya Urban 9.85 Operating 6 6 30 10 JORR W2 Utara (Kebon Jeruk - Ulujami) Operation Metro Jaya Urban 7.87 Operating 3 6 39 11 Pondok Aren - Bintaro Viaduct - Ulujami Operation Metro Jaya Urban 5.55 Operating 1 6 37 12 Pondok Aren - Serpong Operation Metro Jaya & Jawa Barat Urban 7.24 Operating 2 4 43 13 JORR Non S (W2S-E1-E2-E3) Operation Metro Jaya Urban 31.18 Operating 9 6 75 14 JORR S (Pd. Pinang-Ulujami) Operation Metro Jaya Urban 14.25 Operating 11 6 50 15 Akses (Access to) Tanjung Priok Operation Metro Jaya Urban 11.4 Operating 3 6 18 Cawang - Tj. Priok - Ancol Timur - 16 Operation Metro Jaya Urban 27.05 Operating 10 6 61 Jembatan Tiga / Pluit 17 Cawang - Tomang - Pluit Operation Metro Jaya Urban 23.5 Operating 13 6 77 18 Ciawi - Sukabumi Operation Jawa Barat Rural 15.34 Operating 2 4 12 19 Depok - Antasari Operation Metro Jaya & Jawa Barat Urban 5.8 Operating 2 4 20 20 Bekasi - Cawang - Kampung Melayu Operation Metro Jaya Urban 8.4 Operating 3 6 24

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Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths Cinere - Jagorawi (SS Cimanggis - SS 21 Operation Jawa Barat Urban 3.7 Operating 2 6 11 Raya Bogor) 22 Bogor Ring Road Operation Jawa Barat Urban 8.45 Operating 2 4 15 23 Jakarta - Bogor - Ciawi Operation Metro Jaya & Jawa Barat Urban 59 Operating 11 9 179 24 Jakarta - Cikampek Operation Jawa Barat Rural 83 Operating 15 8 174 25 Cikampek - Purwakarta - Padalarang Operation Jawa Barat Rural 58.5 Operating 4 4 17 26 Padalarang - Cileunyi Operation Jawa Barat Urban 64.4 Operating 7 6 98 27 Soreang - Pasir Koja Operation Jawa Barat Rural 8.15 Operating 4 4 23 28 Cikampek - Palimanan Operation Jawa Barat Rural 116.75 Operating 6 6 58 29 Palimanan - Plumbon - Kanci Operation Jawa Barat Rural 26.3 Operating 3 4 25 30 Kanci - Pejagan Operation Jawa Tengah & Jawa Timur Rural 35 Operating 3 4 20 31 Pejagan - Pemalang Operation Jawa Tengah Rural 57.5 Operating 4 4 25 32 Pemalang - Batang Operation Jawa Tengah Rural 39 Operating 3 4 12 33 Semarang - Batang Operation Jawa Tengah Rural 75 Operating 4 4 37 34 Semarang Section A, B, C Operation Jawa Tengah Urban 24.75 Operating 5 4 42 35 Semarang - Solo Seksi I, II, III Operation Jawa Tengah Rural 72.66 Operating 4 4 49 36 Solo - Ngawi Operation Jawa Tengah Rural 90.43 Operating 7 4 43 37 Ngawi - Kertosono Operation Jawa Timur Rural 85.46 Operating 3 4 16 38 Kertosono - Mojokerto Operation Jawa Timur Rural 40.23 Operating 3 4 25 39 Surabaya - Mojokerto Operation Jawa Timur Rural 36.27 Operating 3 4 47 40 Surabaya - Gempol Operation Jawa Timur Urban 49 Operating 9 6 80 Simpang Susun Waru - Bandara Juanda 41 Operation Jawa Timur Urban 12.8 Operating 3 4 22 (Airport) 42 Surabaya - Gresik Operation Jawa Timur Rural 20.7 Operating 4 4 58 43 Surabaya - Madura Bridge Operation Jawa Timur Bridge 5.4 Operating 1 4 10

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Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths 44 Gempol - Pasuruan Operation Jawa Timur Rural 35.95 Operating 2 4 29 45 Gempol - Pandaan Operation Jawa Timur Rural 12.05 Operating 2 6 24 46 Nusa Dua - Ngurah Rai - Benoa Operation Bali Urban 10.07 Operating 3 6 22 47 Makassar Section IV Operation Sulawesi Selatan Urban 11.6 Operating 3 4 23 Ujung Pandang Seksi I dan II (Edge View 48 Operation Sulawesi Selatan Urban 6.05 Operating 2 4 10 Section 1 & 2) 49 Sigli - Banda Aceh Construction Nangroe Aceh Darussalam Rural 74 3/1/2021 6 4 77 50 Medan - Binjai Construction Sumatera Utara Rural 3.25 12/1/2019 1 4 3 51 Kuala Tanjung - Tebing Tinggi - Parapat Construction Sumatera Utara Rural 143.25 7/1/2021 12 4 149 52 Indrapura - Kisaran Construction Sumatera Utara Rural 37 7/1/2021 3 4 38 53 Pekanbaru - Kandis - Dumai (I&II) Construction Riau Rural 32 12/1/2019 3 4 33 54 Pekanbaru - Kandis - Dumai (III-VI) Construction Riau Rural 99 7/1/2021 8 4 103 55 Padang - Pekanbaru Construction Riau & Sumatera Barat Rural 254.8 7/1/2023 21 4 264 56 Kayu Agung - Palembang - Betung Construction Sumatera Selatan Rural 33.5 6/1/2019 3 4 35 57 Kayu Agung - Palembang - Betung Construction Sumatera Selatan Rural 78.19 7/1/2020 6 4 81 Terbanggi Besar - Pematang Panggang 58 Construction Sumatera Selatan & Lampung Rural 185 6/1/2019 15 4 192 - Kayu Agung 59 Serang - Panimbang Construction Banten Rural 10 12/1/2019 1 4 10 60 Serang - Panimbang Construction Banten Rural 73.67 12/1/2020 6 4 76 61 Serpong - Balaraja Construction Banten Rural 37.8 7/1/2020 3 4 39 6 Inner City Tolls (Semanan - Pulo 62 Construction Metro Jaya Urban 31.1 7/1/2021 8 6 88 Gebang) 63 Cengkareng - Kunciran Section 1-4 Construction Metro Jaya Urban 14.2 11/1/2019 4 6 40 64 Kunciran - Serpong Construction Metro Jaya Urban 6.72 9/1/2019 2 6 19 65 Kunciran - Serpong Construction Metro Jaya Urban 4.42 6/1/2019 1 6 13 66 Serpong - Cinere Construction Metro Jaya Urban 6.5 6/1/2019 2 6 18

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Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths 67 Serpong - Cinere Construction Metro Jaya Urban 3.6 10/1/2019 1 6 10 68 Cimanggis - Cibitung Construction Metro Jaya Urban 3.2 6/1/2019 1 6 9 69 Cimanggis - Cibitung Construction Metro Jaya Urban 19.8 12/1/2019 5 6 56 70 Cibitung - Cilincing Construction Metro Jaya Urban 17.5 6/1/2019 4 6 50 71 Cibitung - Cilincing Construction Metro Jaya Urban 15.3 11/1/2019 4 6 43 72 Ciawi-Sukabumi Construction Jawa Barat Rural 54 12/1/2021 4 4 56 73 Depok - Antasari Construction Metro Jaya & Jawa Barat Urban 6.3 7/1/2019 2 6 18 74 Depok - Antasari Construction Metro Jaya & Jawa Barat Urban 9.5 1/1/2021 2 6 27 75 Bekasi - Cawang - Kampung Melayu Construction Metro Jaya Urban 8.1 9/1/2019 2 6 23 Cinere - Jagorawi (SS Cimanggis - SS 76 Construction Jawa Barat Urban 5.5 4/1/2019 1 6 16 Raya Bogor) Cinere - Jagorawi (SS Cimanggis - SS 77 Construction Jawa Barat Urban 5.5 7/1/2020 1 6 16 Raya Bogor) 78 Bogor Ring Road Construction Jawa Barat Urban 13 7/1/2020 3 6 37 79 Jakarta - Cikampek II Elevated Construction Metro Jaya Urban 14.19 10/1/2019 4 6 40 80 Jakarta - Cikampek II South Side Construction Metro Jaya Urban 62 7/1/2019 16 6 175 81 Cileunyi - Sumedang - Dawuan Construction Jawa Barat Rural 21.2 9/1/2019 2 4 22 82 Cileunyi - Sumedang - Dawuan Construction Jawa Barat Rural 43.8 7/1/2021 4 4 45 83 Krian - Legundi - Manyar Construction Jawa Timur Urban 10.6 12/1/2019 3 6 30 84 Krian - Legundi - Manyar Construction Jawa Timur Urban 14.7 8/1/2019 4 6 42 85 Krian - Legundi - Manyar Construction Jawa Timur Urban 9.1 8/1/2020 2 6 26 86 Pasuruan - Probolinggo Construction Jawa Timur Rural 32.4 3/1/2019 3 4 34 87 Pandaan - Malang Construction Jawa Timur Rural 36.1 4/1/2019 3 4 37 88 Pandaan - Malang Construction Jawa Timur Rural 2.4 6/1/2019 1 4 2 89 Manado - Bitung Construction Sulawesi Utara Rural 25.5 10/1/2019 2 4 26

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Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths 90 Balikpapan - Samarinda Construction Kalimantan Timur Rural 99.6 8/1/2019 8 4 103 91 Lhokseumawe - Sigli Preparation Nangroe Aceh Darussalam Rural 135 7/1/2022 11 4 140 92 Langsa - Lhokseumawe Preparation Nangroe Aceh Darussalam Rural 135 7/1/2023 11 4 140 93 Binjai - Langsa Preparation Nangroe Aceh Darussalam Rural 110 7/1/2024 9 4 114 94 Parapat - Sibolga Preparation Sumatera Utara Rural 102 7/1/2025 8 4 106 95 Rantau - Parapat - Kisaran Preparation Sumatera Utara Rural 100 7/1/2023 8 4 104 96 Dumai - Sp. Sigambal - Rantau Prapat Preparation Sumatera Utara & Riau Rural 175 7/1/2024 14 4 182 97 Rengat - Pekanbaru Preparation Riau Rural 175 7/1/2024 14 4 182 98 Jambi - Rengat Preparation Jambi Rural 190 7/1/2023 16 4 197 99 Betung - Tempino - Jambi Preparation Jambi & Sumatera Selatan Rural 191 7/1/2022 16 4 198 100 Palembang - Tanjung - Api Api Preparation Sumatera Selatan Rural 70 7/1/2021 6 4 73 101 Simpang Indralaya - Muara Enim Preparation Sumatera Selatan Rural 110 7/1/2023 9 4 114 102 Muara Enim - Lubuk Linggau Preparation Sumatera Selatan Rural 125 7/1/2024 10 4 130 103 Lubuk Linggau - Curup - Bengkulu Preparation Bengkulu Rural 95 7/1/2024 8 4 99 104 Sukabumi - Ciranjang Preparation Jawa Barat Rural 29 12/1/2021 2 4 30 105 Ciranjang - Padalarang Preparation Jawa Barat Rural 28 12/1/2021 2 4 29 106 NS Link Bandung Preparation Jawa Barat Urban 14.3 7/1/2025 4 6 40 107 SP Pettarani Preparation Jawa Barat Urban 4.3 7/1/2025 1 6 12 108 Gedebage - Tasikmalaya - Cilacap Preparation Jawa Barat & Jawa Tengah Rural 184 7/1/2025 15 4 191 109 Cilacap - Yogyakarta Preparation Jawa Tengah Rural 197 7/1/2025 16 4 204 110 Semarang - Demak Preparation Jawa Tengah Rural 25 7/1/2021 2 4 26 111 Yogyakarta - Solo Preparation Yogyakarta Rural 40 7/1/2020 3 4 42 112 Yogyakarta - Bawen Preparation Yogyakarta & Jawa Tengah Rural 104 7/1/2021 9 4 108 113 Solo - Yogya - NYIA Preparation Jawa Tengah Rural 92 7/1/2021 8 4 95 114 Kertosono - Kediri - Tulung Agung Preparation Jawa Timur Rural 66.8 7/1/2025 5 4 69

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Number Number Urban/Rural/ Start of Number # Name of toll road Status Region Length of of Bridge operation of lanes sections booths 115 Pasuruan - Probolinggo Preparation Jawa Timur Rural 14 7/1/2020 1 4 15 116 Probolinggo - Banyuwangi Preparation Jawa Timur Rural 172 7/1/2020 14 4 179 117 Manado - Bitung Preparation Sulawesi Utara Rural 13.5 7/1/2020 1 4 14 118 Balikpapan - Penajam Bridge Preparation Kalimantan Timur Bridge 7.6 7/1/2022 1 6 22 Table 37: Detailed database of the toll road newtork

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6.2. ANNEX 2 - Introduction of toll collection systems in Europe and Asia

6.2.1.1. A short European historical background The roots of classical motorway construction in Europe dates back from before the Second World War. In the 1930s Italy started with its regional concessions with toll roads, while Germany started to construct its free of charge Autobahn system. Later, in the second half of the twentieth century, the Southern / Latin countries with lower GDP followed concession business model, developing tolled motorways (like Italy from 1950s, France from 1960s, Spain and Portugal from 1970s. After a while Ireland joined to this club from the late 1990s. The Northern / partially protestant countries with higher GDP could afford to construct and run their free of charge motorways, like Germany, United Kingdom, Belgium, the Netherlands, Luxembourg, Austria, Denmark, Sweden, Norway and later Finland. With the gradual development of the international commerce among the European Economic Community countries, some of them had to deal with the international HGVs’ traffic. The Eurovignette system was elaborated by mainly continental countries like Belgium, the Netherlands, Luxemburg, Germany and Denmark + via ferry links Sweden from Scandinavia. Beside of the already mentioned solutions in the Balkan region mainly the state tolling solutions spread, like in Greece, in the former Yugoslavia and in Turkey from the 1980s. The former Yugoslavian countries like Slovenia, Croatia, Serbia and nowadays Northern Macedonia situate a bit mixed between state and private motorway company forms. The fourth distinct group in Europe followed the nationwide vignette system was born in Switzerland in 1985 for vehicles 3.5  tons. The country with Alpine Mountains as non-EU member suffered on its motorway network under bulk of international transit. The main North- South (Germany-Italy) direction summer tourist transit was a primary cause of the vignette system. In this path the next country was Austria from 1997 for all vehicle categories, with the difference, that than already as an EU member state – because of discrimination prohibition and proportionality reasons – beside of the annual the monthly and 2 weeks validity period was forced by the EU. (It should be noted that beside of the formerly free expressway network, Austria has 5 Alpine crossing motorway sections with their local open scheme tolling for a long time.) In the same year the Czech Republic and Slovakia joined to this user charge group (although they become EU members in 2004, the annual, monthly and 10 days validity was in use). Hungary introduced this system in a step by step approach between 1999 and 2004 in the same way, for all vehicle categories (see the sub chapter with details later). Its particularity was that the flat rate user charge tariff system operated in the way of vignettes was not introduced on a formerly free of charge network, like its predecessors, but after direct tolling at 3 motorway projects. Slovenia was a bit like same in 2008, but the vignettes replaced the tolling only for vehicles below 3.5 tons, while for the HGVs the manually paid road toll was kept. Romania and Bulgaria introduced their vignette system in a slightly different way in the beginning of the

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2000s, all vehicle categories have to buy the vignettes, but not only for using the expressway network, but for using any kind of national roads intercity sections (more like a road tax).

The European Union internal market has 4 basic disciplines like the free movement of goods / persons / services / capital. To facilitate them the transportation got different legislation background in its different sectors. In case of road transportation two major fields were regularized, the toll policy and the toll technology aspects received a step by step developing legislation. The so called “Eurovignette Directive” on the charging of heavy goods vehicles for the use of certain infrastructures (1999/62/EC, 17 June 1999) describes the minimum applicable goods vehicle taxes meanwhile made a distinction between the time related validity operated user charge tariff system and the mileage-based toll tariff system. To keep the equal accessibility to markets these road service fees are maximised, otherwise centrally located transit countries would raise their road user charges / tolls to push transit to other countries or earn much more income which would be unjustified based on a service level and cost. The user charges are maximised according to vehicle classes distinct by axle numbers and environmental classification of engines. It is not allocated anyhow to the size of the country or network charged (as an indirect incentive towards the policy level preferred toll tariffs). The toll rate calculation is strictly linked to the justifiable and certified cost structure of the tolled infrastructure, so no overpricing is allowed. The income born by the users has to be paid back – earmarked – on the road infrastructure considered. The so called “Interoperability Directive” on the interoperability of electronic road toll systems (2004/52/EC, 29 April 2004) describes the technologies (DSRC, GNSS, GSM) allowed for toll road industry in Europe and obliges member states to facilitate technologically interoperable free flow electronic toll collection systems as soon as possible. The so called “EETS Decision” on the definition of the European Electronic Toll Service and its technical elements (2009/750/EC, 6 October 2009) describes the legal, financial and further technical framework of an interoperable tolling system in Europe. Lawmakers’ target was to meet international road hauliers’ association demand to make able to travel all across Europe with a single toll service contract, one on-board unit and one invoice per truck/road haulier. The size of this challenge can be demonstrated that EETS could be extended on close to 30 counties’ more than 130 toll domains (state / private tolled sections / sub-networks). The above-mentioned legal background was driven of course by already toll collecting concession companies and their national and international associations as well. In such a way, as first step national level interoperability came alive in France, Spain and Ireland (in Italy and Portugal a national single solution was on national level obligatory for each companies), and in the 2010s regional interoperability incentives started to emerge (like among Portugal-Spain- France, Sweden-Norway-Denmark).

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Arriving to this point a step back is needed as after the turn of millennium unique nationwide electronic tolling systems were introduced in countries like Switzerland (2001, digital tachograph + GNSS), Austria (2004, DSRC), Germany (2005, GNSS/GSM), Czech Republic (2007, DSRC), Slovakia (2010, GNSS/GSM), Poland (2011, DSRC), Hungary (2013, GNSS/GSM), Belgium (2016, GNSS/GSM). Their regional interoperability started to come alive step by step as well. Other non-EU member countries, like Switzerland, Norway, Serbia, Turkey, Belorussia and Russia can decide to join the EETS solution in case they can offer such legal, financial and technical circumstances which can be feasible for the Service Providers. In the following sub-chapters, some case studies will introduce the colourfulness of the international stages.

6.2.1.2. Croatian Road tolling system The Croatian toll road system - managed by 4 companies on 1,300 km length - is clearly a good example of immature technological solutions. Although there are three different ways of paying distance-based road toll, the main practice is the operation of toll gates, where money is collected as road users pass through. In such toll system a toll plaza serves as both entry and exit station, and the tariff is determined based on the vehicle category and the travelled distance. On one hand, a number of these tollbooths are manned, meaning employees of toll road operators are collecting the fees. On the other hand, there are automated self-service payment gates, where it is possible to pay with a credit card or in Euros, however the main payment flow is in Croatian Kuna currency, and gates are installed at the end of each motorway section. The problem of the system is clearly the occasional traffic stoppage. During the high touristic season, it is not uncommon that drivers may have to wait several hours due to congestions. It is no question that this solution requires high labour and a considerable infrastructure that has to be maintained on the long run. As an important step, Croatia has done some action towards electronic toll collection, in the form of the so-called single lane free flow system. This means, on most of the motorway toll plazas there is at least one lane available, where drivers can pass without having to stop with the use of a wireless on board unit. This on-board unit, the so called OBU has to be bought upfront and placed behind the windshield of the car. Users can buy ETC devices for each vehicle category with a stored toll value can be topped up via SMS or internet banking. Purchase of devices is only possible at dedicated sales points in Croatia. Some of the neighbouring countries offer drivers on board units suitable for the Croatian toll road system for rent. Nevertheless, since it is a single lane free flow system only, it does not solve the problem of congestion in other lanes and may cause a certain size of congestion as well. Most of the drivers still prefer to pay at the gates. Besides the payment options mentioned above, there is a possibility of buying a monthly prepaid ticket, which allows an unlimited number of rides per month. It can be purchased by a

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6.2.1.3. Spanish Road tolling system Another example of immature technological solutions is the toll road system in Spain. Two toll collection schemes are in use on the Spanish motorways: open and closed toll collection. Open scheme makes a single lane free flow possible just like in Croatia. On motorways with several entries and exits the closed toll collection scheme is in use. In the closed toll collection scheme, the motorway user takes a toll ticket at the entry and returns it to the toll attendant at the motorway exit. Based on the submitted ticket, toll collection is charged according to the length of the travelled section and vehicle category. In case drivers want to pay cash, they present it at either a manned or an automated tollbooth when they leave the motorway, paying the required charge. If they wish to pay by credit card, there are specific lanes where they have to insert the ticket into a machine, followed by their credit card to make the payment. Some toll roads have a fixed charge regardless of the distance travelled. In these cases, it is possible to pay the fixed charge upon leaving the road, either in cash to a booth attendant or by credit card. As it can be seen, in all of the cases mentioned above, drivers have to stop at tollbooths. Nevertheless, Spain also started to move in the direction of electronic toll collection and implemented an interoperable electronic toll system in all the Spanish toll motorways of the Iberian Peninsula (the OBU providers were the local banks). The system makes it possible for drivers to drive through toll plazas without having to stop. Drivers can use dedicated lanes by using an on-board unit purchased upfront and placed on the windshield. In these lanes, an antenna reads, based on short-range microwaves, the data of the device charging a linked account or card the amount corresponding to the passage on the motorway. However, the maximum speed at which drivers are able to go through the barrier is 30 km/hour (of course in case of SLFF the danger of side obstacle collision has strict rules in many countries). In case of higher speed, the barrier will not have time to open. The system is already interoperable regionally with toll collection systems in France and Portugal. Only less than 20% of the Spanish expressway network is subject to tolls, under 23 concession companies, as classical motorways using DSRC and/or toll booths. Moreover, both the country as a whole and the individual regions struggle to maintain the non-conceded expressways, which suffer from the wear and tear of heavy good vehicle (HVG) traffic. Finally, HGV drivers frequently take advantage of alternative roads instead of using toll motorways. Among others, this situation has been the cause of numerous accidents in some regions of the country. To remediate these issues, a GNSS-based HGV tolling on both expressways and lower-class roads would be highly beneficial. Spain is also experimenting with road tolls to be paid using an application for mobile terminals using GNSS-based positioning.

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6.2.1.4. Greek Road tolling system Developing solutions, just like the current system under development in Greece focus more on homogenization the management of the current toll network in terms of the fee collection mechanism. In Greece for instance, the existing motorway network has a total length of about 2,140 km, which is managed by eleven companies. Collection of tolls is performed by each company through a mixed mechanism of funds and electronic collection. The vehicles use motorways, both light and heavy, are subject to toll payment liability. Toll payment is compulsory by law for all, in principle, the vehicles entering the motorway. Only vehicles specifically mentioned in each Concession Contract are exempt from toll payment obligation. Collection of funds and electronic toll collection made through toll booths, each concession company has its own independent electronic toll collection system. The electronic collection concessionaires’ systems based on standard DSRC 5.8 GHz. Some of the electronic collection concessionaires’ systems are interoperable with each other, but generally the feasibility of a route is not available to the entire network with a single contract and a single vehicle device for toll payment. The toll collection is currently being implemented through mainline and interchange toll stations. The main barriers covering successive sections of motorway, while between successive toll stations some free interchanges may exist. For trips along the motorway, a vehicle must pass a number of toll stations and stop at each of them. The intended result of the new road toll system currently being under installation however is a nationwide unique, single toll collection system that allows a user to travel across the entire motorway network making only electronic payments, as free flow or however without stopping of the vehicle, without manual toll collection, and without the need for different contracts and different devices for different concessions. In such an all-electronic, nationwide interoperable tolling system tollbooth are needed for control purposes only, making the successful operation of open road tolling possible. As one of the first steps, Greece introduces GNSS based solutions for heavy good vehicles. The technical solution is based on two different technologies. For Commercial Vehicles the technical solution based on the use of an onboard equipment and linked to a contract with a service provider. For non-commercial vehicles the technical solution is based on automatic optical recognition of traffic signs number, to be associated with the procedure recording and registration of the vehicle data system. Consequently, there are two different transactions models implemented as well. Commercial vehicles will be charged for the use of roads subject to toll fees based on location data provided by onboard equipment. Additionally, non-commercial vehicles will be charged at specific charging points, and subject to motorway sections.

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6.2.1.5. South Korean Road tolling system Road tolling practice in South Korea being a Single Lane Free Flow system is one of the fast- developing solutions in the world. Multi Lane Free Flow System is currently being under development, and a so called Hi-Pass system has been introduced as a pilot project. Motorway tolls can be paid using cash, major credit cards, or a so called Hi-Pass card. The Hi-Pass system allows drivers to pay tolls without having to stop at toll gates. To use it, drivers must have both an On-Board Unit (OBU) which is installed at the front of the vehicle, and a Hi-Pass card which is inserted into the OBU. A Hi-Pass card can be topped up in advance or used in conjunction with credit cards issued specifically for the toll system. Toll fees are calculated according to distance travelled, the category of roads used, and the type of vehicle. Vehicles equipped with both an OBU and a Hi-Pass can use a dedicated hi-pass lane and have to slow down near the toll gates. Drivers who do not have the Hi-Pass device are supposed to use the regular lanes at toll booths. For them, entering into the toll gates, a highway ticket is given by the highway ticket issuing machine, and vehicles are classified automatically after identification by the vehicle classification system. When arriving at the tollgate of destination, drivers pay the toll by cash or toll card manually. The tolls for the highway are discounted by 50% for light vehicles (below 800 cc) to 20% for trucks carrying goods during off-peak hours (00:00 to 06:00). Also, the toll is discounted for the user who purchases toll cards in advance and uses the facility during the peak period (06:00 to 09:00 for morning peak and 18:00 to 22:00 for evening peak hour). There are clearly contradictions for the concepts of the congestion pricing (Korea Highway Corporation, Toll collection system). The justification for the discount for trucks is that trucks carrying export/import commodities are encouraged to use the highway during the off-peak periods to ease traffic congestion. In addition, the discount for the pre-purchased toll coupons is to reduce the processing toll collection times during the morning and evening peak periods. Table 38 shows the variability of toll collection and discount methods which are specified by the “Toll Road Act of 1966” indicated that the toll classifications and the number of tolls for each classification are calculated based on the type, weight and other elements of vehicles. (CHANG, OH, KANG, JUNG, 2014) Based on this, South Korea made the first and most important steps in the direction of a Multi Lane Free Flow system to avoid congestions on its highways.

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Trucks Automobiles using toll Light Hi-Pass during off- card during peak Classification automobiles vehicles peak hours hours Vehicle Vehicles Trucks over 10 Automobiles with toll Light installed on- target tons card during peak hours automobiles board unit 06:00 ∼ 09:00 18:00 ∼ Hours 00:00 ∼ 06:00 24 hours 24 hours 22:00 Discount 20%, 30%, 15%, 30% 50% 1%, 2%, 3% rates 50% Cash and toll Method ETC Toll cards Hi-Pass card cards

Table 38: Classification of vehicle classes for tolls in South Korea

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6.2.1.6. Belgian Road tolling system In Belgium, since April 2016, HGVs with a total laden weight of over 3.5 t have to pay toll on motorways, motor roads and some local roads. The new electronic solution replaced the previous vignette-based user charging system in Belgium. At the beginning of 2018, the toll fee was extended to include class N1/BC mini semi-trailer trucks. In this kind of developing solution that Belgium represents, existing gates play a controlling role only, road users do not have to queue, as all tolls are collected electronically by overhead gantries with multi-lane free flow, not at traditional toll booths. Besides the enforcement gantries, there are flexible devices (e.g. by the side of the road) and mobile devices on vehicles in use. On board units for heavy good vehicles are mandatory. The devices use satellite positioning technology (GNSS) together with mobile (GSM) and dedicated short range communication (DSRC), making a kilometre-based charging possible. As a unique service solution, Belgium made the use of on-board units free. This means, users are obliged to pay deposit of a certain amount that by returning the device in undamaged condition, they get a full refund for. With this model, and replacing the Eurovignette system, where only heavy goods vehicles with a gross vehicle weight of minimum 12 tons had had to buy the Eurovignette to use motorways and toll motorways in the certain countries, Belgium became member of EETS, European Electronic Toll Service.

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6.2.1.7. Hungarian Road tolling system In Hungary in the first decades of the 20th century direct toll items were slowly replaced by indirect charging (public taxes) and finally the usage of the transportation infrastructure was considered as a welfare service after the First World War. The lack of funding of the necessary transport infrastructure development forced the Hungarian Government to develop the concession system, which was finally implemented in 1996. In this step-by-step approach the different motorway sections, depending on their development level and the different toll collection methodology and tariffs, were integrated into the Hungarian tolling system. This system was a kind of patchwork that created problems, whilst not solving the long-term financing needs of the transportation infrastructure. The transport expert’s recommendation was clear based on the experience gained in the mix of the different pricing and systems: one common toll policy, a free-flow technology and a centrally monitored, managed, time-based road user charging scheme would solve the occurred problems in Hungary. Finally, all the motorways were included in this motorway sticker (vignette) model between 2000 and 2004. The customer needs and the technology development pushed the state-owned operator to further develop the system by implementing new pricing categories to differentiate the vehicle categories and increase the service level of the sticker purchases by introducing the first mobile phone text message (SMS) purchase option in Europe. On top of this the RUC network extension on the major transit routes and on the public road network resulted a flattened charge income and not a real traffic proportional income into the Road Fund for the central budget. By implementing all the above-mentioned changes, Hungary in 2008 was the first European country where the all-electronic-charging was created without toll plazas and physical stickers for all vehicle categories. Even though multi lane free—flow (MLFF) distance based electronic tolling systems for commercial vehicles were implemented earlier in some European countries, like Austria and the Czech Republic, for the personal vehicles they were still using (until 2016 when Slovakia introduced the e-vignette for passenger car user charges) the physical sticker on the windscreen. Hungary is a landlocked country in the heart of Europe and plays a very important role in terms of operating some of the major east-west transit routes. This was clearly visible by analyzing the electronic purchasing data, as the nationalities of the vehicles are also submitted. The analysis showed that at least 50% of the commercial traffic was non-Hungarian registered vehicles. This fact already highlighted the need for the implementation of a distance-based tolling system; in line with tolling system implementations in the neighbouring countries. The central budget needed additional income to fulfil the financing need of the road fund. This gap could not be covered by the time-based RUC scheme any more with the EC limitations defined in the 1999/62/EC Directive (Eurovignette).

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The extensive international usage of the Hungarian road infrastructure also pushed the Government to find the best possible solution to decrease the road amortization and the complete destruction of the Hungarian road network. In 2010 the Hungarian Government announced the mid-range economic program, where the implementation of the distance-based free-flow electronic toll system was projected for 2013. The Government was looking for a solution which was easy to install, highly secure, flexible, reliable, non-dependent on suppliers, easy to adapt to local requirements and truly interoperable. The respective ministry and authorities had already spent years to evaluate the opportunities of development of the road tolling infrastructure; finally, all the circumstances indicated that only a free-flow GNSS tolling system would be flexible enough to support the local tolling requirements. The first attempt at tendering was unsuccessful by the beginning of 2013, as the winning bidder of the completed tendering procedure refused to sign the delivery contract because of very short and unchangeable deadline. Hence a very pragmatic and logical way of thinking in terms of the system development was needed. The major issue in the development was to identify all those existing technologies which could speed up a country-wide toll system implementation compared to previous examples and make it very cost effective. On top of these expectations the limited time availability encouraged the Hungarian experts to further develop the known GNSS tolling system solutions. With these innovative and cost-effective developments, the HU-GO system created a new chapter in road tolling history (Figure 26).

Figure 26: A comparison of HU-GO with other kinds of road tolling systems Source: Walker, J. (2018). Road Pricing: Technologies, Economics and Acceptability

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As a result, the HU-GO distance-based free-flow electronic toll system for commercial vehicles has been implemented and started to operate on the 6,500 km motorway and trunk road network of Hungary on July 1st, 2013. The HU-GO solution utilizes the already applied GPS positioning technology, providing a solid basis for other ITS and electronic payment solutions for a much more reasonable price than all other competitors on the market. On top of the unique technology the Hungarian solution supports the preparation of the required legal, operational and enforcement environment in advance of the technical installation of the system. (Varga – 2018) A more detailed country case study about Hungary can be found in Annex 3.

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6.3. ANNEX 3 - Hungarian tolling history overview

6.3.1.1. Background The first master plan for the motorway network development in Hungary was proposed in early 1940s. During the Second World War the country suffered a massive destruction of transportation infrastructure (practically all bridges, strategic railway stations and railway lines and about half of the road network as well). In late 1940s and following in 1950s the reconstruction of the infrastructure and the heavy industrialization of the country engaged the nation’s economic capacity. The goods and passenger long distance traffic was based mainly on – a European scale – pretty dense railway net. The motorway construction started in 1961. At that time altogether 5 personal cars, buses and goods vehicles came in for 1,000 inhabitants. A “New Socialist Economic Mechanisms” was declared in 1968, which targeted a modal shift from railways to roads. To facilitate this “modernization” a “500 km Toll Motorway Programme” was announced as a fruit of this era. After thorough technical, financial and legal preparatory works an international tender seek investors, contractors and tolling expertise even from Europe and overseas as well in early 1970s. Parallel with these project preparations the whole main road network was upgraded to that time European standard levels by the mid of 1970s. But a bit later – with many negotiations and experiments left behind – the “500 km Toll Motorway Programme” was cancelled. Matter-of- course were the two oil crises with the inference to the economy and an arid political reasoning as “no need for capitalists’ money in a socialist country”. Although the next decade arrived with slowing economic growth and step by step mounting indebtedness, the personal car ownership rate doubled (from 100 cars to 200 cars / 1,000 inhabitants) in 1980s. Road users had to experience road traffic congestions. As a financing tool a Road Fund was enacted fed by an earmarked part of the petrol tax. The motorway construction pace was wavering, averaging about 10 km / year until end of 1980s. These states financed motorways were free of charge for road users. In the second half of the decade many legal instruments were enacted to catch up market economy like solutions. Accompanied the climbing inflation the whole tax system was reformed and service sectors started to bloom. In Central-Eastern-Europe a transition from the centralised socialism to a democratic market economy took place in 1989-1990. The transition government had a last chance to earn extra money from higher service motorway users in 1989. At that time Switzerland was a sole example to charge road users via a simple annual vignette system. The road authorities prepared a Hungarian clone of this user charging method, even the stickers were printed and distributed to retailers, but finally the whole scheme was withdrawn because of political reasons.

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At that time only 350 km motorways and motor roads were in operation in Hungary (10 million inhabitants / 93 thousands km2). This underdeveloped network had to cope with an international road transportation boom, while the state budget was poor to meet these challenges. A short- and long-term solution and hope was eagerly awaited.

6.3.1.2. Road Concessions Following the first free elections in spring 1990, the new democratic Parliament speeded up the legislation to build foundations of a full market economy background. Among these efforts a best European practise consolidating law on concessions was enacted. Numerous main public works were imagined under the concession umbrella to bridge the financial constraints and serve a market economy shift as soon as possible. In such a way a concession motorway programme was pushed in front as a flagship phenomenon aiming at a 1,000 km network in 6 nominated projects.

6.3.1.2.1. M1/M15 concession motorway project The last gap on M1 motorway was called the “missing link” between the Western European and Hungarian motorways, supplemented with a short M15 motor road branch towards the Slovakian capital. The international tendering started in fall 1991, the pre-qualification, tendering and negotiations took about 1,5 years to sign the concession contract with ELMKA Rt., followed by a 9 moths debt syndication. According to the tendering requirements a 20% equity / 80% fully private debt financing founded the works. The construction started in early 1994 and the M1 motorway was opened to the traffic in January 1996. The M1 motorway in North-West between Győr - Hegyeshalom (Austrian) border (42 km) and M15 motor road (opened 2.5 years later) up to Rajka (Slovakian) border (15 km) were operated under a semi open tolling scheme (1 main toll plaza + some interchange entry / exit tolling lanes at Lébény + Mosonmagyaróvár). The toll rate escalation was formulated according to the local inflation rate plus by exchange rates (from debt denomination shares).

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Figure 27: Former main and ramp toll barrier on M1/M15 motorways at 158 kmst (Mosonmagyaróvár)

During the construction works in 1995 an economic constraint package boosted inflation. The traffic growth slowed down mainly in local traffic segment, resulting a traffic and income shortfall after opening the new sections. As a joint result of the circumstances the toll level closed up among highest in Europe. Nevertheless, most of international traffic used the new link, but most of low purchasing power parity local private purpose traffic by-passed this relatively short section. As Austria joined to the European Union exactly when the new project was inaugurated, strict border crossing rules emerged for goods transport, 80% of truck traffic kept the “good old path” on the parallel free main road, as their time saving was not in line with the queuing loss due to the border administration actions. Several suitcases tried to influence concession company to lower its toll rates, to open more and wider frequent users’ schemes to local road users. Slowly political debates started about affordability and environmental issues of such a scheme, but as M1/M15 project was a green field development, it was considered as a relief for the neighbours and motorists as well. Due to the fact that concessionaire could not met debt service cover ratios in 1999, negotiations started between banks, concessionaire and the state. A concession contract safeguarded state owned substituted entity took over the project in late August. Toll levels were cut by half, which resulted a gradual 35% traffic growth in 4 months. Bottom line was 30% income loss, which underlined that the original toll level optimization was proper. Direct tolling was ceased on December 31, 1999 and the story continued under the user charge (vignette) scheme solution.

6.3.1.2.2. M5 concession motorway project The M5 motorway was the second important international link towards Balkan region as well as the secondly tendered motorway concession project. (Meanwhile there was a main Danube bridge M9 concession project as an inclusion between M1/M15 and M5 but this Szekszárd area

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MLFF feasibility study - Volume II Technical Study fixed link – nevertheless its successful concession contract signing – was unable to reach its financial closing, so the contract was ceased and the project was implemented from state funds years later.) The international tendering started in 1992 and after the routine procedure the construction started in 1995 by AKA Rt.. The phased project got alive in 5 construction stages opening to traffic in 1996, 1997, 1998, 2005 and 2006. According to the tendering requirements a 20% equity / 80% fully private debt financing founded the works as well. The corridor is South-East from Budapest - Kecskemét - Szeged - Röszke (nowadays Serbian) border (157 km), operated under a semi open tolling scheme (2 main toll plazas + some interchange entry / exit tolling lanes at Ócsa + Újhartyán + Örkény).

Figure 28: Former main toll barrier and toll booth on M5 motorways at 43 kmst (Újhartyán)

This project followed a bit different scheme. As the new sections traffic was projected lower than the M1/M15 counterparts, already existing section were incorporated into the project as reconstruction (Budapest - Újhartyán) and widening (Újhartyán - Kecskemét) developments. Reason was to use the potential extra income generating capacity of already existing motorway traffic tolled after as well. These prerequisites made financially viable the whole project at all at the end of the day. Project environment and climate was worsened by the Yugoslavian civil war outbreak and roughen in line with the tendering and debt syndication. A United Nations’ embargo emerged on the Hungarian / that time Yugoslavian border. This ban paralysed a European level important international link, the second burdened Hungarian road border crossing station. As a result, partial of Balkan traffic diverted to Italy - Greece ferries, partial to Romania - Bulgaria longer distance with lower road quality level (latter still used M5 and Hungarian road network). Toll level is a bit higher than the European average (lower than M1/M15 due to the existing sections’ diffusing effect). Most of international traffic used, but most of low purchasing power parity local traffic still by-passed the old sections as well. The pitfall of the neighbouring civil

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MLFF feasibility study - Volume II Technical Study war was that the Romania - Bulgaria by-pass corridor was relocated to a close parallel main road no. 4, with a misadventure effect that 60% of projected truck traffic left the close to Budapest section of M5 motorway. Taking into account that the mentioned traffic deterioration took place close to the capital city Budapest, with a much higher traffic potential and inhabitation density, political debates emerged much suddenly and sharply than at the close to country border M1/M15 project. The environmental (noise, air pollution, vibration) and road safety (local vicinity pedestrian) concerns topped up with affordability issues magnetized the whole motorway financing topic into the elections campaign in 1998. Although the toll rate escalation was formulated similarly according to the local inflation rate plus by exchange rates (from debt denomination shares), the gradually emerging economic situation made it possible for the concession company to remain on the safe side of the project financing in the first half of the project completed by 1998. The next two phases extension seemed to be hopeless as the public opinion and political climate turned to hostile. After years of negotiation finally the classic Built Operate and Transfer (BOT) like project structure, financed directly from users’ payments, were restructured into a Public Private Partnership scheme, financed with an availability payment scheme guaranteed by the government in turn of finishing the project up to the Serbian border and meeting KPIs. As last of its kind the M5 direct tolling was ceased on March 12, 2004 and the story continued under the user charge (vignette) scheme solution as well. It is worth to mention that two more concession motorway projects (M3/M30 and M7) in pipeline were tendered during 1993 and 1994 but finally they were cancelled, as this North-East to South-West axis was much less attractive to investors than the M1/M15 and M5 North-West to South-East one. The sixth project from the original concession programme was never opened to competition (M8 Danube bridge at Dunaújváros area). All of these were implemented later as state (toll) projects with much longer completion deadlines.

6.3.1.3. State step in Parallel with the international tendering procedures conducted in the first half of the 1990s, an educational effect took place among technical, financial and legal professionals participating in project groups. Arriving at the 4th project in the programme schedule, professional and political lobbies started to facilitate a special purpose state company like solution. Belief in the background whispered that a cheaper solution would offer a more flexible frame in the long run. These guesses verified later only partially. As a result, the M3 international concession tendering procedure was declared as an unsuccessful one in 1995, instead a 100% state owned company called ÉKMA Rt. was established to finance the project with central budget equity and sovereign loans financing.

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The corridor is North-East from Budapest - Gödöllő - Hatvan - Gyöngyös - Füzesabony (100 km), operated under a semi closed tolling scheme (half main toll plaza + all interchange entry / exit tolling lanes at 9 spots) in the first phase. Similar to the M5 project, this one incorporated into the project a reconstruction (Budapest - Gyöngyös) section, with new built tolling facilities. Original plan was to kick off the tolling system in January 1998, but because of the spring parliamentary and fall local government elections the tolling start was delayed twice until January 1999. This income loss demanded a massive extra state subsidy to keep the project – financed by international financial institutions – alive.

Figure 29: Former half main toll barrier on M3 motorway at 26 kmst (Gödöllő) and ramp ticket machine at 70 kmst (Gyöngyös)

Although as a result of the elections a widening public opinion – based on M1/M15 and M5 cases – was accepted by the new government to prepare a unified and affordable charge level tolling solution. As the M3 motorway would have to incorporate the longest formerly free section into tolling and it passed through relatively lower purchasing power parity regions – compared to the previous ones – this project became the guinea pig of the Hungarian tolling history. 1999 lunched the charging on the M3 motorway in a mixed format, it was the road users’ choice to pay the toll according to the mileage driven or by a pre-purchased vignette was available in an annual or a monthly validity period. These vignettes were incorporated with magnetic cards which opened the toll barriers at manual toll booths.

6.3.1.4. Road User Charge ([e-]Vignette) The mixed charging system on the M3 motorway introduced the distinction in the road tariff terminology, which was driven by the accession negotiation to the European Union as well. In the EU terminology the “user charge” tariff system stands for the validity time based, access charge like systems which are usually operated by vignettes (stickers) should be fixed to the

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MLFF feasibility study - Volume II Technical Study windscreen, while the road / motorway toll tariff system stands for the passage or mileage-based payment option. The Hungarian international travellers and tourists were familiar with the vignette system. First it was introduced in Switzerland in 1985 (non-EU member, coping with bulk of international transit, only annual validity, relatively cheap), than in Austria (from 1997, as an EU member annual / monthly / 2 weeks validity was forced), than in the Czech Republic and in Slovakia (1997 summer, later as EU members, annual / monthly / 10 days validity was forced). It was a step-by-step approach to arrive to the nation-wide unique vignette system. By fall 1999 beside of the state run M3 motorway, the M1/M15 project arrived with its bought back concession rights. January 2000 dawned with an extended vignette system valid on M1 from Austrian border – charging the formerly free Győr - Budapest section as well –, across M3 at Füzesabony and further on the newly built sections via Emőd - Polgár, plus M30 up to Miskolc. In the former toll gates of M1 and M3 motorways the toll payment option was ceased, the vignette purchase was available in the entry directions (in a form of annual, monthly and 9 days validities). Subsequence of an exit direction passage without a valid vignette was an excess charge payment obligation. On the formerly free Budapest - Győr section of M21 motorway mobile patrol groups were established to enforce road users to purchase and stick vignettes according to the rules and regulations. These early times enforcement was focused only to visual kind of enforcement. Approaching to the 2002 elections the promise by governing parties to demolish former toll facilities became more and more striking. Fall 2001 arrived with noisy machines again along motorways, to fulfil the destiny of these hated structures.

Figure 30: Demolition of tolling facilities on M1 motorway in 2001

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Figure 31: Demolition of tolling facilities on M3 motorway in 2001

As the enforcement became complicated based only on visual way, a pilot project was commenced to develop a licence plate-based registration system and an ANPR like enforcement counterpart of it. From 2002 magnetic cards were cancelled to escort vignettes, but the user charge purchase was possible only with registering the vehicle’s country code and licence plate numbers. The first enforcement gantries were erected along M1 and M3 motorways. The M7 state operated motorway – after its 3 years long massive reconstruction and partial capacity extension – joined into the vignette system in January 2003. With this step the 3rd highest traffic volume, South-West corridor from Budapest - Székesfehérvár - Lake Balaton resort area (later constructed to the Croatian and Slovenian border) became part of the widening user charging system. This national resort area direction facilitated the introduction of the 4 days valid “week-end” vignette in summer 2003, which became the most popular one in the assortment. The M5 – restructured as PPP like – concession motorway arrived into the vignette system in March 2004, as mentioned earlier. With this step the flat rate, access charge vignette system became the nation-wide unique solution in Hungarian road charging history. Based on the that time widely used mobile phone-based parking solutions a test introduction of sms based e- vignette solution was started to be tested in 2004 as well.

Figure 32: Traffic sign at border crossings and the good old vignettes

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In 2005 deep analysis and data mining started on the base of the user charge registration pool, resulting valuable inputs for the new toll policy and technology shift preparatory works. In the middle on Central-Easter-Europe, after the EU accession of 8 continental countries in May 2004 the transit traffic boosted on unimaginable levels (more than 150 countries’ licence plate number vehicles purchased tens of millions Hungarian e-vignettes). A new motorway construction boom emerged, started with 3 more pure PPP project on M6 corridor South from Budapest - (DAK Zrt.) - Dunaújváros - (TAK Zrt.) - Szekszárd - (MAK Zrt.) - Mohács - M60 - Pécs. These new sections became part of the e-vignette system after putting them into operation, and the 3 concession companies (DAK / TAK / MAK Zrts) are paid on the same availability fee payment scheme as M5 AKA Zrt. as well. The later major motorway / motor road / trunk road constructions are financed mainly from EU cohesion funds. As the speeding up motorway construction could not keep pace with the international truck traffic boom, in 2007 an extension of charged network for HGVs entered into force with 42 sections of key main / trunk road links. This solution solved that about 90% of the international transit could not cross the country without purchasing at least a 1-day e-vignette to finance the Hungarian road network. To understand this need it should be noted that the small, land locked, centrally located European countries (mostly like Switzerland, Austria, Czech Republic, Slovakia, Slovenia, Hungary) can’t make a demand management like measures simply through petrol taxes for example. In Hungary the most popular transit corridors are 200 / 360 / 540 km long, which distance can be simple jumped without filling an HGV with gasoline at all. So, direct charging or tolling is an unavoidable solution. The printed / stuck vignettes were ceased in 2008, until when the nationwide unique operation of the e-vignette solution became robust and reliable enough. From July 1, 2013 the e-vignette system was limited for buses + vehicles less than 3.5 tons permissible laden weight (motorbikes, personal cars, light goods vehicles).

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6.3.1.5. Electronic Tolling (HU-GO) In line with the European prospects the idea of introduction the electronic toll collection came into the picture in 1998, during decision making studies, how to integrate former tolling projects. The first real step to make official preparatory works was the establishment of the Toll Policy Bureau in the State Motorway Management Co. Ltd. in 2003. This company was the integrator of the former M1/M15 substituted entity, the M3 state project company and the old state motorway operating company was responsible for example the M7 motorway, as well the operator of the (e-)vignette system and its enforcement as well. Various studies were elaborated on traffic and revenue forecast (for different tariff, road network coverage and charge level scenarios), on technological options, on financing viability and on necessary legal background changes. Tight cooperation was conducted with international bodies (like European Commission, ASECAP – the European private toll motorway companies’ association, Stockholm Group – the European state toll road administrations’ forum) to ensure the Hungarian solution will be in line and close to put into an interoperable scheme. As soon it became obvious that the revenue generating capacity of the “user charge” tariff system – proportionally compared to the network or to the traffic output charged – is between 1/10 to 1/8 to “road / motorway toll” tariff system, a well prepared, consulted and agreed shift became a must as soon as possible. Preparatory works therefore headed towards a solid and unified toll policy solution. Widespread public consultations were held among personal cars users’ clubs, road hauliers’ associations, technology suppliers and political parties to crystallize a long-term target with a step by step implementation agenda. In 2010, the Hungarian Government announced the mid-range economic program, where the implementation of the distance based free-flow electronic toll system was projected for 2013. The solution seeking focused on a system, which was easy to install, highly secured, flexible, reliable, non-dependent on suppliers, easy to adapt local requirements and interoperable. As a result, the HU-GO distance based free-flow electronic toll system for commercial vehicles has been implemented and started to operate on 6,500 km (motorway + motor road =) speedway and trunk / main road network of Hungary, on July 1st, 2013. The system brought a completely new view of the “Tolling World” with its innovative and unique technological solutions, with the open GNSS based tolling platform and in line with the EU EETS requirements. It is worth to mention that this was a long march: 10 years, 3 governments, 2 unsuccessful tender procedure, with considered to be high consultancy preparatory costs, which returned on the first week from the extra income of the new system. The distance-based electronic toll collection system nowadays refers to the designated sections of the Hungarian public road network with a length of close to 7,000 km. This designated road network is the – EU terminology – called “toll domain”. In order to determine the toll payable by the identical users, the whole toll domain has been divided into virtual toll sections, which

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Figure 33: Overview of the Hungarian road tariff distinctions (road user charge/road toll)

The rate of toll depends on the tolled road type (expressway / main road) and identical section length, the toll category and the environmental classification of the tolled motor vehicle. The toll payment is mandatory for heavy goods commercial vehicles above the maximum authorized gross weight of 3.5 tons. The time-based e-vignette user charge system applies to motorcycles, automobiles, campers and coaches and their trailers, and cargo vehicles with a maximum permissible gross weight of 3.5 tons. These vehicles are authorized to use Hungarian tolled expressways exclusively with pre-purchased road use permits, i.e. e-vignettes. The toll charges depend on the category of the motor vehicle and the validity periods. The toll category of the vehicles depends on the number of passengers and the weight of the motor vehicle. The e-vignette system had a slight refinement in 2015. Vehicle categories, their tariffs were adjusted a bit, annual vignettes valid only in specified (altogether 19) counties for mostly local users were introduced (meanwhile the personal car ownership rate reached 360 cars / 1,000 inhabitants’ level). The original target to integrate the e-vignette sale and user charge enforcement into the HU-GO system was finished as well. In such a way the “electronic charge/toll collection” covers in Hungary both tariff systems and all road users.

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Figure 34: The charged network of Hungary as of 2019

The network subject to user charge / toll in steadily growing as Hungary is developing its internationally and regionally important expressway network in a high pace thanks to EU co- financing funds. Hundred kilometres of new corridors are under construction and will be opened to traffic in next 3-5 years, doubling the international border crossing direct approaches and easing local, settlement passing through and regional traffic conditions, in such a way resulting better environmental and accident effects. These road network developments need nothing to do with tolling facilities, they will be followed only by enforcement gantry constructions in every 50-60 km density. The core system of HU-GO is the central module where all the necessary data are stored and managed. This module provides information for the back-office applications as well. The major input sources of the central module are the sales and toll declaration and the enforcement modules.

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Figure 35: HU-GO is a modular system

The sales module (left) includes the flexible route ticketing solution, the GNSS toll declaration opportunity and the EU required European Electronic Toll System (EETS) conformity. The enforcement module (right) collects and organizes the collected enforcement data from the fixed and mobile data points, validates the data in the central module and creates, provides penalty data for the Hungarian Police.

Figure 36: The Toll Declaration Operators role in the system

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The creation, implementation and the cooperation with the individual Toll Declaration Operators (TDO) is a completely new and innovative but at the same time a key element of the system. The TDOs are acting on behalf of the customer, as third-party service providers. The customers are free to choose from more than 22 TDOs to sign a 3-party agreement to manage their toll declarations. It is important to mention that the financial management of the customer accounts are with the Bound Toll Service provider. At the start of the system, back to 2013, still high numbers of the users were using the one-time pre-purchased route ticket as a toll declaration mode. As of today, more than 98% of the local and more than 75% of the foreign customers are declare their toll with the involvement of one TDO. The HU-GO system handles with equal accuracy the local and international license plates, including the nationality and the vehicle category. This is very important, especially considering that 50% of the toll income is generated by foreign vehicles.

Figure 37: The revenue generation

The past 6 years of experience of the system operation clearly shows that the planned and expected income generating ability of the system is existing. The Hungarian toll collection model also proofed that keeping in one hand the operation of a country-wide common tolling and RUC system is the most sufficient way of collecting and utilizing the toll income, what has exceeded the 649 m EUR in the first full year, was more than 798 m EUR in 2017 and crossed the 4 bEUR threshold in operation up to now. The annual income level of the HU-GO system is 8 times higher than the previously applied e-Vignette system, what was only around 68 mEUR/year. The HU-GO, distance-based electronic toll collection system is operated by the 100% state owned National Toll Payment Services PLC of Hungary (NTPS / in Hungarian: NÚSZ).

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6.3.1.6. Reasons of the changes and lessons learned It is worth to sum up a quarter century experience of the Hungarian tolling history as it could be a lesson to others in terms of geographical, generational or decision-making differences. Starting with the idea that fresh new capital and expertise is needed to speed up the expressway constructions it was considered as a fair solution to toll only the newly built structures. It helped to make local road users to understand that there is no free lunch, transportation and road services costs should be paid. The users pay principle became basically accepted, while the higher service level was inevitable tangible. It was a fact that the new constructions were needed in such regions of the country where the old, parallel 2×1 lanes main road – passing through the settlements – capacity was exhausted. Nevertheless, on a new alignment added 2×2 traffic lanes capacity was hard to be filled with traffic enough to finance the first decade of the projects itself. To take into account and put the old sections on a given corridor under the same financial bowl was a natural choice. Indisputable it helped a lot with the already existing higher traffic volume, with the cross financing dissolving the financial burdens among more road users, lowering toll levels but finally causing public resistance. Central issues were the traffic deteriorating back to old roads (causing again environmental and accident concerns) and financing the private investors profit with already existing state assets. (The forced privatisation after the socialist economic system raised many doubts on public opinion levels.) The dispute gently started on why there are differences between tolled and non-tolled sections and between different toll structures (i.e. vehicle categorisation) and levels? During professional and political debates, it was sketched that the newly to be built sections are located mostly in lower traffic and underdeveloped regions, while the older, more traffic burdened sections are located mostly in developed regions with higher purchasing power road users' background. Equity issues became a top priority. The unification wish was easier to be realised when it became obvious that the old sections need massive reconstructions (like on M1 Budapest - Győr) and capacity extensions (like on M7 on Budapest - Balaton) in different cases. It tilted the issue over the psychological limit and the solution came out as the state should be responsible to find an equilibrium solution in regulation and supervision of incomes point of view. To construct manual toll gates on all existing, formerly free sections – about 2/3 of the network – appeared not an easy to justify option, topped with the new projects under construction. The considered to be cheap vignette system started to mushroom in the neighbouring countries, so the decision followed this gravity effect. The society and road users were satisfied, public opinion polls ended with more than 80% consent with this kind of network financing solution. Although the income was higher in the first years of tariff change, the later income growth could not keep step with neither the network nor the traffic output growth. The handicaps of the flat rate user charge system turned out shortly. Traffic and revenue forecasts prove that in a longer run, this disproportionateness will be much more painful. Frequent users started to shift towards

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MLFF feasibility study - Volume II Technical Study annual vignettes as network grew, generating less income per kilometre driven compared to those used short term validity vignettes. Heavy goods vehicles vignette prices are limited by the European laws, to ease international transport and the integration of member states, so vehicle category multipliers started to shrink. Feasibility calculations alerted that the virtual charge rates (total annual income in given category divided by annual traffic output) will decrease resulting total incomes approaching a “glass ceiling”. This effect will not make possible even to finance the annual costs of the charged network, not mentioning the new developments’ capital needs. It became obvious that in a long run only a mileage based tolling tariff system can cope these challenges, like in most of the countries in Europe and in the world. A consensus was reached that more expensive sections (having tunnels, viaducts, river bridges) should be cross financed by cheaper sections in order to have nationwide unique toll levels. According to the EU requirements detailed calculations had to be made to set up individual toll levels for the different road and vehicle categories. Instead of the Swiss method – where in the same HGV category all mileages travelled are charged with the same toll level via the digital tachographs, independent from the road category – the spreading method of road category distinction was introduced. Fears about traffic deterioration from expensive expressways to cheaper main roads successfully could not verified, as long trip international HGV’s trips kept their way on expressways, because of travel time savings and predictability. Next challenge will be the EU requirement to make a distinction between clean and polluting HGVs not only with a +/- diverting of toll levels, but to calculate and build in the real external costs among tolls. Congestion management in geographical or time of day form can be handled only with demand management purpose tolling, even it can be really effective in case all vehicles pay according to distance travelled. These mentioned differentiations should be revenue neutral, so toll level calculations can be never stopped to fulfil European prerequisites. Although the existing mixed tariff system seems to be enough attractive and accepted by all user groups, an approximation towards a pure distance-based solution will be inevitable. Partially because of the already mentioned potential measures, partially because of the spreading of electronic driven vehicles which effect will considerably decrease the central state budget income from the general petrol taxes. Taking into account that the Hungarian system is built on a platform based solution, its integral part is a robust ANPR solution and a year-by-year cheaper GNSS data collection module, it can be stated that the HU-GO system will be able to be accustomed to all kind of future challenges can be predicted today.

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Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

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1. INTRODUCTION ...... 274 1.1. Methodology ...... 274 1.2. Key operational assumptions ...... 274 1.3. Macroeconomic indicators ...... 276 2. CAPITAL EXPENDITURES ...... 277 2.1. Central system ...... 277 2.2. Roadside infrastructure ...... 278 2.2.1. Conversion of existing tollbooths ...... 278 2.2.2. Enforcement gantry construction ...... 278 2.2.3. Gantry equipment ...... 280 2.2.4. Deconstruction of existing toll booths ...... 280 2.2.5. Fixed enforcement equipment summary ...... 281 2.3. On-Board Equipment ...... 282 2.4. Mobile enforcement ...... 282 2.5. Workspace equipment ...... 283 2.6. Depreciation ...... 284 2.7. CTSP CAPEX summary ...... 285 3. OPERATING EXPENDITURES ...... 286 3.1. Fixed operating expenditures ...... 286 3.2. Variable operating expenditures...... 288 3.2.1. Roadside equipment ...... 288 3.2.2. Human resources ...... 288 3.2.3. Office rental fees ...... 289 3.2.4. Enforcement units ...... 290 3.2.5. Server sites at banks ...... 290 3.3. Operating expenditures summary ...... 291 4. CTSP'S REMUNERATION AND OPERATING CASHFLOW PROJECTIONS ... 292 5. COST SAVING POTENTIAL OF TOLL ROAD OPERATORS ...... 295 6. SOCIAL BENEFITS AND ECONOMIC IRR ...... 297 7. SUMMARY ...... 299

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ANNEXES ...... 301 Annex 1 – Social cost of travel time ...... 301 Annex 2 – Past development of toll payment transactions ...... 303 Annex 3 – List of toll roads covered by lump sum service fee ...... 304 Annex 4 – Peer group companies ...... 306

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1. INTRODUCTION The following chapters provide a detailed breakdown of the financial feasibility of the implementation of multi-lane free-flow in Indonesia.

1.1. Methodology All calculations in this volume reflect the proposed operating model as presented in Chapter 4 of the Technical Study. The business plan follows a bottom-up approach, providing an outlook on the costs and revenues of the proposed solution, using forecasts on relevant naturals, applying respective unit prices and considering the envisaged implementation timeline.

The annual revenues of the CTSP are set in a way to grant an overall 12.5% annual return over the concession period in-line with the PPP regulation, current lending and equity rates and considering a 70% / 30% debt to equity ratio, covering both capital and operating expenditures of the CTSP. In order to assess the potential cost savings for Toll Road Operators, the level of annual CTSP service fee is compared to the respective level of toll collection costs of the current system.

The granularity of the financial feasibility calculation is semi-annual. Figures in this study are presented on an aggregated, annual basis.

1.2. Key operational assumptions Regarding the assumed timeline of the implementation of the project the following schedule have been considered as a base case. Note, that the timeline below is for illustrative purposes reflecting a potential implementation schedule. Actual dates and timeline are subject to the tendering process to be facilitated by relevant authorities.

• The concession period of the CTSP will be starting on 1/1/2021 and will cover 10 years, ending by 12/31/2030. During the first half of 2021 the central system is scheduled to be set up by the CTSP, including the detailed planning and design phase, operational framework, server sites and offices. • During the second half of 2021, the installation of enforcement gantries on existing network is scheduled, which will be performed by the CTSP. • The system will go live by the beginning of 2022. Toll charging is performed on solely GNSS or Route Ticket basis, therefore users not having the required equipment or a valid Route Ticket are no longer eligible to access toll road (except for a short intermediate period).

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• 50% of existing toll booths on respective toll roads are deconstructed in order to enable higher speed on roads (i.e. not having to decelerate at toll booths). • It is assumed, that the implementation of the proposed system on all toll roads that are completed by the end of 2021 will be financed by the CTSP. Concessionaires completing their respective toll roads after 2021 are required to install enforcement gantries financed by them, but they are no longer required to build toll booths, since the CTSP is assumed to be responsible for operating the new toll collection system on these sections as well, by the time they are operational. • Enforcement gantries will be operated throughout the concession period to support enforcement and maintain an updated vehicle database throughout Indonesia.

Network development by islands (ths km)

7.0 6.1 6.1 6.1 6.1 6.1 6.1 6.0 5.5 4.8 5.0 4.0 3.7 4.0 2.9 3.0 2.4 1.7 2.0 1.0 - 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Metro Jaya Java Bali Sulawesi Kalimantan Sumatra Total

Figure 1: Network development forecast by length

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Network development by islands (tolled lanes)

5,000 4,461 4,461 4,461 4,461 4,461 4,500 4,157 3,827 4,000 3,437 3,500 3,267 2,791 3,000 2,500 2,000 1,500 1,000 500 - 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Metro Jaya Java Bali Sulawesi Kalimantan Sumatra Total

Figure 2: Network development forecast by tolled lanes

1.3. Macroeconomic indicators For the purpose of indexing costs and revenues, a 3.4% average year-on-year consumer price index is applied, as the indicated guideline by relevant government authorities. The table below summarizes year-on-year CPI and derived index factors used for the calculations.

CPI forecast 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Average year-on-year CPI 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% 3.4% Index factor 103% 107% 111% 114% 118% 122% 126% 131% 135% 140%

Table 1: CPI forecast

The following chart presents exchange rates used throughout the modelled period.

Currency Rate USD / IDR 13,883

Table 2: USD / IDR exchange rate as of 12/31/2019

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2. CAPITAL EXPENDITURES The following section describes capital expenditure items, discussing useful lifespans and replacement periods as well as depreciation applied for tax base calculation purposes.

2.1. Central system In line with the timing presented in Chapter 1.2, setting up the core system elements is assumed to take place during the first half of 2021. These items are the basis of the proposed system and IT architecture.

The following table incorporates the breakdown of core system CAPEX items on 2019 price levels.

Central system CAPEX Replacement USD t (2019 price levels) period (years)

Server sites 27,206 5 Central software 51,218 n/a Sales and toll declaration modules 16,006 n/a Education and PR campaign 5,817 n/a Training, experts and project management 7,387 n/a

Table 3: Breakdown of core system CAPEX items on 2019 price levels

Server sites include 2 redundant server rooms with all necessary equipment, as well as servers installed at 4 banks in order to enhance operating efficiency and transaction time. The anticipated replacement period is 5 years.

Central software, sales and toll declaration modules cover all necessary software for the central system, including initial license fees. It is not assumed to be replaced over the 10 years concession period, since operating expenditures include the continuous maintenance and annual license fees.

An intensive education and PR campaign is scheduled to take place during the implementation period to support the engagement of toll road users with the new system.

Training, experts and project management cover all expenses related to the setup of core operation during the first half of 2021.

The following table summarizes capital expenditures adjusted by CPI in connection with the core system over a 10 years concession period including equipment replacement.

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Central CAPEX (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Server sites (28.6) - - - - (33.8) - - - - Central software (56.5) ------Sales and toll declaration modules (17.7) ------Education and PR campaign (6.1) ------Training, experts and project management (8.2) ------TOTAL (117.1) - - - - (33.8) - - - -

Table 4: Central CAPEX

2.2. Roadside infrastructure This section includes all investment costs related to the installation of roadside infrastructure in line with the transition schedule defined in the Technical Study.

2.2.1. Conversion of existing tollbooths In order to assure law-abiding behavior of Toll Road Users and therefore TROs’ revenues during the first few weeks of operation it is recommended to keep bars at tollbooths closed. Bars would only open in case Toll Road Users have the required registration with the CTSP and have an operating e-OBU linked to their vehicles or a valid Route Ticket. To achieve this, 50% of existing tollbooths will be converted during the second half of 2021. These tollbooths will be equipped with devices supporting the new toll collection system, and these devices will be integrated with the existing infrastructure of such tollbooths to allow for controlling the bars. The unit cost of converting one tollbooth is USD 8.5 t on 2019 price levels, which includes all necessary devices and the cost of integration. The following table presents capital expenditures required to convert 50% of existing toll booths in 2021 H2 (a total of 2,342 tollbooths), adjusted with CPI.

Toll booth conversion 2021 2022 2023 2024 2025 costs (USD m) Conversion costs 23.1 - - - -

Table 5: Tollbooth conversion costs

2.2.2. Enforcement gantry construction Enforcement gantries on toll roads assumed to be financed until the end of 2021 are constructed and financed by the CTSP . On toll roads to be completed after 2021, gantries are financed by the respective TROs. Enforcement gantry construction comprises of two types of costs:

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1. Costs depending on the number of unidirectional gantries to be built by the CTSP; 2. Costs depending on the number of tolled lanes to be implemented by the CTSP.

In order to calculate enforcement gantry construction and implementation costs, both of the variables above had to be forecasted. As a base case, enforcement gantries are implemented on 50% of elementary sections. The chart below summarizes the number of unidirectional gantries to be built by the CTSP.

Unidirectional gantries 2021 2022 2023 2024 2025 to be built Gantries to be built 448 - - - -

Table 6: Undirectional gantries to be built

The number of tolled lanes is the multiple of the number of elementary sections equipped with enforcement gantries and the number of traffic plus emergency lanes. The following chart presents the implementation schedule of tolled lanes. Note, that the number of emergency lanes applied is 1 lane (outer shoulder) in cases of less than 3 traffic lanes per direction, and 2 lanes (both inner and outer shoulders) in cases of 4 or more traffic lanes.

Number of tolled lanes 2021 2022 2023 2024 2025 to be implemented Tolled lanes 1 644 - - - -

Table 7: Number of tolled lanes to be implemented

On the first hand, the following costs are depending on the number of unidirectional gantries:

• Railguarding: 24.6 USD t / unidirectional gantry; • Utilities and communication ports: 6.5 USD t / unidirectional gantry; • Surveillance cameras: 1.3 USD t / unidirectional gantry.

Note, that the availability of a reliable power and fibre optics network within a reasonable distance have been assumed when calculating the cost of utilities and communication ports. The CTSP is not responsible for the development of such utility networks, since it is required from the Toll Road Operators according to the minimum service standards.

Additionally, the following costs depend on the number of lanes tolled:

• Scaffolding costs: 25.9 USD t / tolled lane; • Installing fixed enforcement devices: 2.2 USD t / tolled lane (please refer to the next subchapter for details of devices to be installed).

Since the useful lifespan of gantries (excluding fixed enforcement devices) exceed the envisaged 10 years of the concession period, the replacement of gantries is not assumed

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Gantry construction 2021 2022 2023 2024 2025 CAPEX (USD m) Construction costs 64.7 - - - -

Table 8: Gantry construction CAPEX

2.2.3. Gantry equipment During the second half of 2021, gantries are constructed and equipped with fixed enforcement devices. The number of tolled lanes to be covered by gantries and respective devices is presented in subchapter 2.2.1.

According to the proposed operating model set out in the Technical Study, each lane (including emergency lanes) on every enforcement gantry has to be equipped with the following:

• Three ANPR cameras (front, rear, overview); • One radar for ANPR camera; • One dome camera; • Categorization equipment ; • One computer set can support up to 4 lanes in the same direction (includes core license for relevant software); • One industrial switch can support up to 2 lanes in the same direction ; • One license for lane integration software.

Note, that once the system goes live (at the beginning of 2022), Toll Road Users not having an appropriate GNSS device or valid Route Ticket are no longer eligible to access toll roads.

2.2.4. Deconstruction of existing toll booths Once gantries are implemented, converted toll booths on respective toll roads are removed completely in order to enable an entirely free flow toll collection. The deconstruction schedule is presented below.

Number of toll booths to 2021 2022 2023 2024 2025 be deconstructed Tollbooth deconstruction - 2,342 - - -

Table 9: Number of toll booths to be deconstructed

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Related expenditures consist of deconstruction of toll booths to enable free flow: 7.5 USD t / toll booth (2019 price level).

Overall expenditures related to the deconstruction of existing toll plazas is summarized below, considering above mentioned unit prices, CPI indexing and the schedule.

Toll booths deconstruction costs 2021 2022 2023 2024 2025 (USD m) Deconstruction costs - 19.2 - - -

Table 10: Toll booths deconstruction costs

2.2.5. Fixed enforcement equipment summary The following table lists each system element required for the solution assessed. The average capital expenditure of an enforcement gantry having the listed equipment installed is approximately 213 t USD based on market research and preliminary, non-binding offers received from potential suppliers.

Item ANPR camera Radar for front ANPR Dome camera Categorization equipment Computer set Industrial switch Core software Software per lane Preinstall service

Table 11: Equipment to be installed on gantries

The forecast for purchasing fixed enforcement equipment has been calculated taking into account the required devices on enforcement gantries, the rollout schedule, and a replacement period of 5 years for all devices.

Fixed enforcement equipment 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 purchase (USD m) CapEx 68.3 - - - - 80.7 - - - -

Table 12: Fixed enforcement equipment purchase

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2.3. On-Board Equipment Based on the assumptions, all Toll Road Users are required to register an account at the CTSP. Toll Road Users will have the option to use their personal devices to declare tolls and all related costs will be borne by them, including data transfer expenses.

Those, who do not have the intention to use their personal devices as On-Board Equipment, will have the option to purchase Route Ticket.

2.4. Mobile enforcement The number of required mobile enforcement units is determined based on the anticipated intensity of enforcement. Every one out of four sections is assumed to be continuously monitored throughout the concession period, once the operation of the system starts in 2022. The number of sections in operation by the end of each year are summarized in the table below. Note, that CTSP operates toll collection activities on all toll roads (6100 km), regardless whether the implementation was financed by the CTSP or the TRO.

Sections in operation 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Number of sections 446 474 539 594 643 643 643 643 643 643

Table 13: Sections in operation

The estimated purchase price of the enforcement vehicles is 25.9 USD t, with an additional 19.4 USD t necessary for the appropriate in-vehicle equipment on 2019 price levels. Due to the extensive, non-stop use, vehicles have to be replaced once in every 3 years, while related equipment has a useful lifespan of 6 years. The following table presents the capital expenditure requirement during the concession period related to mobile enforcement.

Mobile enforcement unit 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 CAPEX (USD m) CapEx - 5.8 0.8 0.7 4.4 0.5 0.5 7.6 1.0 0.9

Table 14: Mobile enforcement unit CAPEX

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2.5. Workspace equipment Workspace equipment includes furniture and workspaces for employees seated in the CTSP offices, such as central employees, customer service and visual inspection personnel, as well as equipment for on-site mobile enforcement personnel. Therefore, the key cost driver is the number of FTEs. For a detailed assessment on the number of FTEs required for CTSP operations, please refer to relevant subchapters of the operating expenditures section (Chapter 3).

All workspace equipment is scheduled to be replaced every 5 years, and costs 3.9 USD t for employees seated in offices, and 0.6 USD t for mobile enforcement personnel on 2019 price levels. The table below summarizes such expenses.

Office equipment costs (USD 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 m) CapEx 0.8 0.6 0.1 0.1 0.1 0.9 0.7 0.1 0.1 0.1

Table 15: Office equipment costs

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2.6. Depreciation For the purpose of tax base calculation the following depreciation method has been applied:

• In case of assets that have a useful life shorter than the remaining time of the concession agreement by the time of their respective capitalization date, the depreciation have been applied in line with their useful life. The table below summarizes the useful life and implied depreciation rates for each asset class.

Useful life Implied Asset class (years) depreciation rate Central system tangible assets 5 20% Central system intangible assets 10 10% Enforcement devices 5 20% Enforcement unit 3 33% Enforcement unit equipment 6 17% Office equipment 5 20% Other CapEx 10 10%

Table 16: Useful life and implied depreciation rates

• In case of assets having a longer useful life at the time of their respective capitalization date then the remaining length of the concession agreement, depreciation rates have to be adjusted in order to reflect guidelines outlined in accounting standards related to concession rights. Therefore, such assets have to be fully amortized by the time the concession ends. In these cases, depreciation rates are adjusted to accommodate this principle, ensuring full amortization by the end of the concession period applying a linear amortization method.

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2.7. CTSP CAPEX summary The following chart and table provide an overview on the capital expenditure structure of the CTSP. Central system CAPEX on the chart covers the costs of server sites, central software and sales and toll declaration modules as well as education and PR campaign, training, experts and project management costs. Other CAPEX items presented on the chart include costs related to the conversion and deconstruction of toll booths.

300.0 274.0

250.0

200.0

150.0 116.0

100.0

50.0 25.6 0.9 0.8 4.4 1.2 7.6 1.1 1.0 -

Central system Enforcement devices Gantry construction Mobile enforcement & Workspaces Other TOTAL

Figure 3: Capital expenditures (includes CTSP financed CapEx only)

Table 17: Capital expenditures (includes CTSP financed CapEx only)

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3. OPERATING EXPENDITURES 3.1. Fixed operating expenditures Fixed operating expenditures of the proposed system are related to the core system, the central FTEs, transaction fees, marketing and PR costs and other operating expenditure including professional services such as independent technical audtitor, external legal support and external audit.

Annual costs of the core system are the following: • Operation costs: 3.4 USD m; • Maintenance: 6.8 USD m; • Renovation: 2.1 USD m; • Office IT: 1.2 USD m; • Call center IT related: 0.6 USD m.

Fixed, central employees, not dependant of the network coverage and extension are a total of 188 FTEs as per Chapter 5.2 of the Technical Study. Annual cost of a central employee including taxes ranges between 10.9 – 90.5 USD t per annum depending on their position. Based on the table below summarizing central FTE expenses, it is a total of USD 4.3 m per annum for 188 FTEs at 2019 price levels. Central FTE related expenses are accounted for from the second half of 2021 going forward.

HR cost breakdown of central FTEs FTE Annual cost (USD t, 2019 price level) Management 4 90.5 Project Office 5 65.1 Legal, Finance and back office 18 43.4 Technical division, IT operations 10 32.6 Infrastructure 60 21.7 Customer service support 37 16.3 Enforcement support 54 10.9

Table 18: Breakdown of central employees

Transaction fees amount to 10 USD m per annum. Ongoing marketing and PR costs are considered at 1.7 USD m, while additional expenses at 1.5 USD m per annum at 2019 price levels.

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Fixed operating expenditures are presented below year by year.

Fixed operating expenditures 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 (USD m) Central system 7.5 15.4 16.0 16.5 17.1 17.7 18.3 18.9 19.5 20.2 Central FTE 2.3 4.7 4.9 5.0 5.2 5.4 5.6 5.7 5.9 6.1 Transaction fees - 11.0 11.3 11.7 12.1 12.5 13.0 13.4 13.9 14.3 Marketing & PR - 1.9 1.9 2.0 2.1 2.1 2.2 2.3 2.4 2.4 Other fixed OpEx 0.8 1.6 1.7 1.7 1.8 1.8 1.9 2.0 2.0 2.1 Total fixed OpEx 10.6 34.6 35.8 37.0 38.2 39.5 40.9 42.3 43.7 45.2

Table 19: Fixed operating expenditures

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3.2. Variable operating expenditures Variable operating expenditures include OPEX related to the maintenance of roadside infrastructure, human resources, office rental fees and the maintenance of mobile enforcement units.

3.2.1. Roadside equipment OPEX related to roadside infrastructure is calculated based on the total number of tolled lanes operated in a period, including both lanes tolled at toll booths and on enforcement gantries operated by the CTSP (all gantries are operated by the CTSP, regardless of whether it was financed by the CTSP for toll roads completed before the end of 2021, or by the TROs in case of roll roads completed after 2021). The table below presents the number of tolled lanes operated by the CTSP by the end of respective years.

Number of tolled lanes 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 operated by the CTSP Tolled lanes - 1,644 1,736 1,934 2,102 2,258 2,258 2,258 2,258 2,258

Table 20: Number of tolled lanes operated by the CTSP

The overall annual maintenance, operational and renovation costs of a tolled lane amount to 20.8 USD t at 2019 price level. The following table summarizes total related expenses.

OPEX related to roadside 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 infrastructure (USD m) OpEx - 37.5 41.0 47.2 53.0 58.9 60.9 63.0 65.1 67.3

Table 21: Roadside infrastructure related OPEX

3.2.2. Human resources The variable part of human resources includes customer service and visual inspection personnel as well as enforcement FTEs.

In case of the first, an annual cost of 17.1 USD t has been applied (at 2019 price levels). The required number of customer service and visual inspection personnel depends on the number of Toll Road Users (for its forecast, please refer to Chapter 2.3 of the Technical Study). For every 1 million users, 10 FTE is necessary. In line with the anticipated number of Toll Road Users, the table below presents the required number of such personnel by the end of each year.

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Number of customer service and visual 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 inspection FTE FTE requirement - 215 228 238 247 251 254 258 262 266

Table 22: Customer service and visual inspection FTEs by the end of each year

In case of enforcement FTEs, the total annual cost is 22.8 USD t per FTE. The required number of personnel is calculated as 5 FTEs per enforcement unit, while enforcement unit requirement is assessed in accordance with Chapter 2.4. Resulting year-end FTE figures are presented below.

Number of enforcement 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 FTE FTE requirement - 593 674 743 804 804 804 804 804 804

Table 23: Enforcement FTEs by the end of each year

Total annual variable HR costs are summarized on the following table.

Variable HR costs (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Customer serv. & visual insp. - 4.0 4.3 4.7 5.0 5.4 5.6 5.9 6.2 6.5 Enforcement - 14.4 16.4 18.9 21.4 23.0 23.7 24.6 25.4 26.3 Total variable HR OpEx - 18.3 20.7 23.6 26.4 28.3 29.4 30.4 31.6 32.7

Table 24: Variable HR costs

3.2.3. Office rental fees Office rental fees are derived based on the total number of fix and customer service and visual inspection FTEs, who are located in the offices. 8 square meter is calculated for each fix FTE and 8 square meter for every fifth customer service and visual inspection FTE at a rental fee of 22.8 USD / month. The following table presents the related costs.

Office rental fee (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Rental fee 0.2 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.8

Table 25: Office rental OPEX

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3.2.4. Enforcement units OpEx related to mobile enforcement units is considered at 12.9 USD t per annum per unit at 2019 price level, covering maintenance, communication, fuel and other related costs. Total operating expenditures related to mobile enforcement units is calculated as the multiple of this unit cost and the number of units in operation. The following table provides an overview on OpEx related to enforcement units.

Enforcement unit 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 maintenance costs (USD m)

Enforcement unit OpEx - 1.6 1.9 2.1 2.4 2.6 2.7 2.8 2.9 3.0

Table 26: OPEX related to enforcement units

3.2.5. Server sites at banks Operating expenditures related to server sites at banks cost 7.5 USD t each, a total of 30 USD t per annum for the four banks at 2019 price levels. These costs are considered from 2021 H2, once the implementation of the central system is completed. Indexed operating expenditures related to server sites throughout the concession period is summarized below.

Bank server sites (USD t) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 OpEx 18.3 37.5 38.8 40.1 41.5 42.9 44.3 45.8 47.4 49.0

Table 27: OpEx related to server sites at banks

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3.3. Operating expenditures summary Operating expenditures are summarized in the charts and tables below. Note, that other OpEx on the chart and table below includes ongoing marketing & PR costs, office rental fees, OpEx related to server sites at banks and other OpEx.

160.0 149.0 144.0 134.5 139.2 140.0 130.1 120.8 120.0 110.6 99.9 100.0 92.7

80.0

60.0

40.0

20.0 10.8

- 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Central system Roadside infrastructure Central FTE Customer service FTE Enforcement FTE Transaction fees Mobile enforcement Other OpEx Total

Figure 4: OPEX summary

Table 28: OPEX summary

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4. CTSP'S REMUNERATION AND OPERATING CASHFLOW PROJECTIONS The annual service fee payable to the Central Toll Service Provider has been determined at a level to provide 12.5% return over the 10 years concession period for all capital and operating expenditures, as well as the corporate income tax taken into account at 25%.

The 12.5% asset level return is derived based on the following components:

• 7.05% risk free rate is applied based on the spot rate of IDR denominated 10-year government bonds as of 2019 December 31 • Adjusted unlevered beta of 0.54 is applied based on the peer goup of international traded companies involved in transport infrastructure with toll collection activities (for the list of companies included in the peer group, please refer to Appendix 4) • 66% leverage is applied based on the same peer group • 25% marginal tax rate applied in line with the statutory corporate tax rate in Indonesia • Market risk premium of 4.89% applied based on the implied equity risk premium published by Damodaran (12-months trailing) • A size risk premium of 5.22% is applied as per the study published by Duff & Phelps • 9.05% pre-tax cost of debt (2% spread over the risk free rate) is in line with Indonesian lending rate benchmarks published by the Bank Indonesia as of 2019 December The resulting weighted average cost of capital is summarized on the following chart.

Equity-to-value ratio 60.41% Peer group median Debt-to-value ratio 39.59% Peer group median

WACC 12.5%

Table 29: WACC decomposition

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CTSP service fee will be composed of the following parts:

• Lump sum service fee for existing toll roads on Java and Bali (for the list of toll roads and the respective maximum number of sections and traffic lanes included in the lump sum service fee please refer to Annex 3); • Per tolled lane based service fee for any additional lanes to be covered in line with the extension plans of the toll road network.

The CTSP will be eligible to receive its service fee once the operation of the system goes live (from the beginning of 2022).

Note, that since after 2021, Concessionaires are required to finance the implementation of enforcement gantries on their respective additional toll roads instead of building toll booths, therefore they do not have any toll collection activities related costs other than CTSP fees from their start of operation date. The level of annual CTSP service fee on 2019 price levels calculated in line with key operational assumptions set out in Chapter 1.2, based on the CapEx, OpEx and tax assumptions presented in this study are as follows:

• Lump sum service fee per annum: 104.7 USD m per annum; • Per lane service fee: 47.7 USD t per annum per tolled lane.

The following chart and table presents the aggregated cashflows of the CTSP.

300.0

200.0 64.3 68.6 69.2 77.7 73.7 82.6 85.3 100.0 35.0 - (39.8)

(100.0)

(200.0) (284.8) (300.0)

(400.0) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Total OPEX Total CAPEX Lump sum SF Per lane SF Tax Cashflow

Figure 5: CTSP cashflows

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CTSP cashflow (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Table 30: CTSP cashflows

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5. COST SAVING POTENTIAL OF TOLL ROAD OPERATORS Introduction of the free flow electronic toll collection creates cost saving opportunities to the Toll Road Operators. Based on the assessment of financial feasibility, CTSP fees granting the 12.5% return on capital and operating expenditures of the new free flow electronic toll collection system is lower than operating expenditures of the current toll collection method.

Operating costs of the current toll collection system are calculated based on the number of toll booths necessary for operation and the unit cost of operating a toll booth. The number of toll booths which would be necessary to be operated by TROs given the current toll collection system is based on the network extension forecast presented in Chapter 2.2 of the Technical Study. Required theoretical number of toll booths by the end of each year are summarized in the table below.

Theoretical number of toll 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 booths required Required tollbooths 4,683 5,043 5,862 6,569 7,191 7,191 7,191 7,191 7,191 7,191

Table 31: Theoretical number of toll booths

For the assessment of toll collection costs in the current system, the operating unit cost of a toll booth have been applied in accordance with the analysis presented in Chapter 1.3 of the Technical Study. As a conservative approach, the lowest unit cost per annual toll booth operating expenditures (1,005 IDR bn, equivalent of 72.4 USD t at 2018 price levels) have been applied for the purpose of this calculation. The following table includes the total toll collection costs, which can be avoided by implementing the new system.

Avoided TRO toll collection 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 costs (USD m) Avoided costs - 399 463 546 624 675 698 721 746 771

Table 32: Avoided toll collection OPEX

TROs’ avoided toll collection costs would be replaced by the service fees payable to the CTSP in the proposed system. Therefore, TROs' saving potential is calculated as the difference between the anticipated level of existing toll collection costs borne by them in the current system, and the service fees payable to the CTSP in the proposed system. The net present value of TROs’ overall cost saving potential over the concession period is over 1,800 USD m (over 24.84 IDR trn), calculated with at a 12.5% discount rate. The following chart presents the TROs' cost saving potential on an annual basis.

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1,000

800

524 600 474 490 506 419 458 356 400 290 239 200 - -

(200)

(400) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Avoided OPEX CTSP service fee Net savings

Figure 6: TROs' toll collection cost saving potential

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6. SOCIAL BENEFITS AND ECONOMIC IRR Time spent in urban traffic jams, as well as time spent at highway toll plazas cause losses to Indonesia.

Currently, based on highly conservative calculations, introduction of a free flow electronic toll collection system could save from 0.5 minute up to 5 minutes per transaction depending on the length of the queue at toll gates (30 seconds per transaction, maximum 10 vehicles in the queue in case of normal conditions).

Assuming 2 billion transactions per annum (based on 2018 figures, please refer to Annex 2), 60:40 split between non-working hours and working hours, and the above social cost of time, the loss caused by delays at toll plazas may amount up to USD 300 million per annum.

The value of potential social benefits achievable by implementing the MLFF system and saving time spent at toll plazas waiting in queues have been analyzed by assessing a minimum and maximum value based on the available information. The potential social benefit is calculated as the unit social cost of time multipied by the time spent at toll gates (30 seconds to 5 minutes per transaction).

For the purpose of economic IRR ("EIRR") calculations, in addition to financial cashflows, social benefits are considered throughout the concession period starting from the first year of operation in 2022.

Calculation steps

• Minimum social benefit is calculated by using the lower values of unit social cost of time for non-working and working hours (0.9 and 1.9 USD / hour respectively). As a conservative approach, the number of transactions applied for calculating the minimum social benefit assumes that traffic intensity on future toll road developments will on average reach only 25% of the traffic intensity of the current overall toll road network. The resulting forecast on minimum number of transactions projected using this approach is also presented on the summary table on the next page. The average waiting time at toll plazas is assumed to be 30 seconds per transaction. • Maximum social benefit is calculated by using the higher values of unit social cost of time for non-working and working hours (1.2 and 3.2 USD / hour respectively). The number of transactions applied for calculating the minimum social benefit is the 2 billion transactions multiplied by the proportion of the average network length in operation in a given year (6,075 km by the end of concession period) to the overall current network length (1,713). Since most of future toll roads are planned to be

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developed on more rural areas this approach represents an optimistic approach. The average waiting time at toll plazas is assumed to be 5 minutes per transaction. • Based on these assumptions, the economic IRR is estimated in a range of 25.9- 293.1%, as presented in the following table.

EIRR calculation 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total number of transactions Minimum million 2,630 2,794 3,008 3,190 3,273 3,273 3,273 3,273 3,273 Maximum million 4,518 5,174 6,032 6,761 7,093 7,093 7,093 7,093 7,093 Benefit on non-working hours (60%) Minimum social benefit USD m 12 13 14 14 15 15 15 15 15 Minimum social cost of time USD / h 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 Minimum number of transactions million 1,578 1,676 1,805 1,914 1,964 1,964 1,964 1,964 1,964 Maximum social benefit USD m 271 310 362 406 426 426 426 426 426 Maximum social cost of time USD / h 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 Maximum number of transactions million 2,711 3,104 3,619 4,057 4,256 4,256 4,256 4,256 4,256 Benefit on working hours (40%) Minimum social benefit USD m 17 18 19 20 21 21 21 21 21 Minimum social cost of time USD / h 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 Minimum number of transactions million 1,052 1,117 1,203 1,276 1,309 1,309 1,309 1,309 1,309 Maximum social benefit USD m 482 552 643 721 757 757 757 757 757 Maximum social cost of time USD / h 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 3.2 Maximum number of transactions million 1,807 2,070 2,413 2,704 2,837 2,837 2,837 2,837 2,837 Total social benefit Minimum USD m 28 30 33 35 35 35 35 35 35 Maximum USD m 753 862 1,005 1,127 1,182 1,182 1,182 1,182 1,182 Economic IRR Financial cashflows USD m (285) 35 64 69 69 (40) 78 74 83 85 Minimum social benefit USD m - 28 30 33 35 35 35 35 35 35 Minimum economic effects USD m (285) 64 95 101 104 (4) 113 109 118 121 Minimum EIRR 25.9% Financial cashflows USD m (285) 35 64 69 69 (40) 78 74 83 85 Maximum social benefit USD m - 753 862 1,005 1,127 1,182 1,182 1,182 1,182 1,182 Minimum economic effects USD m (285) 788 927 1,074 1,196 1,142 1,260 1,256 1,265 1,267 Maximum EIRR 293.1%

Table 33: EIRR calculation

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7. SUMMARY Based on the assumptions made in the Economic and Commercial Study, the recommended operational setup is financially viable from the perspective of TROs' cost savings while granting the required return of 12.5% for the CTSP.

The following table summarizes the key figures of the assessed business model.

Description No Business plan figures All figures in m USD (unless stated otherwise)

1 Length of network operated (km) 6,075 Installation financed by CTSP (km) 3,703 Installation financed by TROs (km) 2,372

2 Investment Cost Central IT infrastructure 102.8 Other central investment costs 14.3 Enforcement equipment 68.3 Gantry construction 64.7 Installation on existing tollbooths 23.1 Enforcement units 5.8 Office equipment 1.4 Deconstruction of tollbooths 19.2 Total 299.6

3 Capital Structure

- Owner's Equity (30%) 89.9

- Loan 70% 209.7

4 Loan Interest Rate 9.05%

5 Start of Operation (in case all prerequisites are met) 2022

6 Concession Period 10 years

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Description No Business plan figures All figures in m USD (unless stated otherwise)

7 Maintenance CapEx during concession period Central IT infrastructure 33.8 Enforcement equipment 80.7 Enforcement units 16.4 Office equipment 2.0 Total 133.0

8 OpEx during concession period Central system 167.0 HR costs 292.3 Roadside infrastructure 494.0 Mobile enforcement maintenance 22.0 Transaction fees 113.2 Other 43.2 Total 1,131.6

9 CTSP service fee Lump sum service fee (USD m) 104.7 Per lane service fee (USD t) 47.7

10 Viability Financial Viability - IRR 12.50% - NPV - - Payback Period 10 years

Economic Viability - EIRR 25.9% - 293.1% Table 34: Summary table

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ANNEXES Annex 1 – Social cost of travel time For determining the social cost of travel time for Indonesia, we used two data sources.

The first data source is the Transportation Cost and Benefit Analysis study (https://www.vtpi.org/tca/tca0502.pdf) published by Victoria Transport Policy Institute on March 21, 2019. According to the study, the typical value of time used for transport project evaluation in the European Union is EUR 6 per person per hour in case of commuting/private travel on road and EUR 21 per person per hour in case of business travel on road. The values are published at 2004 price levels, thus they are adjusted by the inflation of the euro area. The productivity of the European Union and Indonesia is different, which has to be reflected in the value of passenger time as well. The proportion of the GDP per capita incorporates this economic difference. Thus, in order to calculate the value of passenger time for Indonesia, we adjusted the value of passenger time for EU with the proportion of GDP per capita in Indonesia (USD 3,894) to the average GDP per capita in the EU (USD 36,532) (https://data.worldbank.org/indicator/ny.gdp.pcap.cd). According to the calculation, the value of passenger time for Indonesia in case of commuting/private travel on road is USD 0.93 per person per hour and USD 3.25 per person per hour in case of business travel on road.

The second data source is the TAG Data Book published by the British Department for Transport (https://www.gov.uk/government/publications/tag-data-book). The market price of the value of non-working passenger time in case of commuting is GBP 9.95 per person per hour and the value of working passenger time in case of car driver and passenger is GBP 17.69 per person per hour in 2010 prices. Two adjustments had to be applied in order to calculate the value of passenger time for Indonesia in 2019 terms, because the values are published at 2010 price levels and valid for the United Kingdom.

The following two approaches have been assessed for this adjustment:

First, we adjusted the market price with the UK inflation (https://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG https://www.ons.gov.uk/economy/inflationandpriceindices) in order to result in 2019 terms, and also adjusted with the proportion of GDP per capita for UK and Indonesia (https://data.worldbank.org/indicator/ny.gdp.pcap.cd) in 2018. According to this methodology, the value of non-working time in case of commuting for Indonesia is USD 1.09 per person per hour and the value of working time in case of car driver and passenger for Indonesia is USD 1.94 per person per hour.

As a second approach, we adjusted the market price with the proportion of GDP per capita for UK and Indonesia (https://data.worldbank.org/indicator/ny.gdp.pcap.cd) in 2010, then with the Indonesian inflation (https://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG) in order to result in 2019 terms https://www.ons.gov.uk/economy/inflationandpriceindices).

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According to this methodology, the value of non-working passenger time in case of commuting for Indonesia is USD 1.2 per person per hour and the value of working passenger time in case of car driver and passenger for Indonesia is USD 2.13 per person per hour.

Based on the calculations, the value of non-working passenger time for Indonesia can be reasonably estimated in the range of USD 0.93 and USD 1.2 per person per hour and the value of working passenger time for Indonesia in the range of USD 1.94 and USD 3.25 per person per hour.

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Annex 2 – Past development of toll payment transactions

2014 2015 2016 2017 2018 Toll booths # 1,610 1,709 1,734 1,926 2,115 Lanes # 1,383 1,471 1,495 1,677 1,839 Lengths kilometres 859 1,046 1,104 1,262 1,713 Toll revenue bn IDR 8,813 10,516 12,402 13,171 15,110 Toll revenue (USD) mn USD 619 739 871 925 1,061 Toll revenue (EUR) mn EUR 545 650 766 814 934 Transactions million 1,518 1,591 1,652 1,663 1,913 Table 35: Past development of toll payment transactions

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Annex 3 – List of toll roads covered by lump sum service fee

Number of Number of # Name of toll road Length traffic sections lanes 1 Tangerang - Merak 73 9 6 2 Jakarta - Tangerang 33 8 8 3 Prof. Dr. Ir. Sedyatmo 14.3 3 8 4 JORR W1 (Kebon Jeruk - Penjaringan) 9.85 6 6 5 JORR W2 Utara (Kebon Jeruk - Ulujami) 7.87 3 6 6 Pondok Aren - Bintaro Viaduct - Ulujami 5.55 1 6 7 Pondok Aren - Serpong 7.24 2 4 8 JORR Non S (W2S-E1-E2-E3) 31.18 9 6 9 JORR S (Pd. Pinang-Ulujami) 14.25 11 6 10 Akses (Access to) Tanjung Priok 11.4 3 6 Cawang - Tj. Priok - Ancol Timur - Jembatan Tiga / 11 Pluit 27.05 10 6 12 Cawang - Tomang - Pluit 23.5 13 6 13 Ciawi - Sukabumi 15.34 2 4 14 Depok - Antasari 5.8 2 4 15 Bekasi - Cawang - Kampung Melayu 8.4 3 6 16 Cinere - Jagorawi (SS Cimanggis - SS Raya Bogor) 3.7 2 6 17 Bogor Ring Road 8.45 2 4 18 Jakarta - Bogor - Ciawi 59 11 9 19 Jakarta - Cikampek 83 15 8 20 Cikampek - Purwakarta - Padalarang 58.5 4 4 21 Padalarang - Cileunyi 64.4 7 6 22 Soreang - Pasir Koja 8.15 4 4 23 Cikampek - Palimanan 116.75 6 6 24 Palimanan - Plumbon - Kanci 26.3 3 4 25 Kanci - Pejagan 35 3 4 26 Pejagan - Pemalang 57.5 4 4 27 Pemalang - Batang 39 3 4 28 Semarang - Batang 75 4 4 29 Semarang Section A, B, C 24.75 5 4 30 Semarang - Solo Seksi I, II, III 72.66 4 4 31 Solo - Ngawi 90.43 7 4 32 Ngawi - Kertosono 85.46 3 4 33 Kertosono - Mojokerto 40.23 3 4 34 Surabaya - Mojokerto 36.27 3 4 35 Surabaya - Gempol 49 9 6 36 Simpang Susun Waru - Bandara Juanda (Airport) 12.8 3 4 37 Surabaya - Gresik 20.7 4 4 38 Surabaya - Madura Bridge 5.4 1 4 39 Gempol - Pasuruan 35.95 2 4

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Number of Number of # Name of toll road Length traffic sections lanes 40 Gempol - Pandaan 12.05 2 6 41 Nusa Dua - Ngurah Rai - Benoa 10.07 3 6 Table 36: List of toll roads covered by the lump sum service fee component

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Annex 4 – Peer group companies

Adjusted Levered Unlevered Peer company Ticker / ID Country Tax rate Leverage levered Beta Beta Beta Aleatica, S.A.B. de C.V. BMV:ALEATIC * Mexico 30.0% 0.78 1.08 1.05 0.68 Anhui Expressway Company Limited SEHK:995 China 25.0% 0.40 0.56 0.71 0.54 Atlantia S.p.A. BIT:ATL Italy 24.0% 2.57 0.65 0.77 0.26 CCR S.A. BOVESPA:CCRO3 Brazil 34.0% 0.44 0.90 0.93 0.72 Guangdong Provincial Expressway Development Co., Ltd. SZSE:200429 China 25.0% 0.37 0.54 0.69 0.54 Guangxi Wuzhou Communications Co., Ltd. SHSE:600368 China 25.0% 1.23 1.46 1.31 0.68 Hunan Investment Group Co., Ltd. SZSE:000548 China 25.0% 0.00 1.40 1.27 1.27 Jiangsu Expressway Company Limited SEHK:177 China 25.0% 0.32 0.35 0.57 0.46 Jilin Expressway Co., Ltd. SHSE:601518 China 25.0% 0.64 1.20 1.13 0.77 Lingkaran Trans Kota Holdings Berhad KLSE:LITRAK Malaysia 24.0% 0.32 0.62 0.74 0.60 MEP Infrastructure Developers Limited BSE:539126 India 30.0% 2.88 0.15 0.43 0.14 PT Citra Marga Nusaphala Persada Tbk IDX:CMNP Indonesia 25.0% 0.92 1.08 1.05 0.62 PT Jasa Marga (Persero) Tbk IDX:JSMR Indonesia 25.0% 0.93 0.85 0.90 0.53 PT Nusantara Infrastructure Tbk IDX:META Indonesia 25.0% 0.29 0.78 0.85 0.70 Shenzhen Expressway Company Limited SEHK:548 China 25.0% 0.65 0.67 0.78 0.52 Shenzhen International Holdings Limited SEHK:152 Hong Kong 16.5% 0.73 0.97 0.98 0.61 Shenzhen Investment Holdings Bay Area Development Company Limited SEHK:737 Hong Kong 16.5% 0.00 0.23 0.49 0.49 Sichuan Expressway Company Limited SEHK:107 China 25.0% 2.58 0.98 0.99 0.34 Transurban Group ASX:TCL Australia 30.0% 0.46 0.58 0.72 0.54 WCE Holdings Berhad KLSE:WCEHB Malaysia 24.0% 8.08 0.95 0.97 0.14 Yuexiu Transport Infrastructure Limited SEHK:1052 Hong Kong 16.5% 0.66 0.50 0.67 0.43 Zhejiang Expressway Co., Ltd. SEHK:576 China 25.0% 0.89 1.06 1.04 0.62 Table 37: List of companies included in the peer group

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VOLUME IV ENVIRONMENTAL AND SOCIAL STUDY

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

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1. INTRODUCTION ...... 312 2. RELATION TO THE ENVIRONMENTAL LAW ...... 313 3. ENVIRONMENTAL IMPACT ANALYSIS AND IMPORTANT IMPACTS ...... 315 3.1. Potential Biological Impacts ...... 315 3.2. Chemical Physical Potential Impacts ...... 316 3.3. Socio-Economic Potential Impacts ...... 316 3.4. Potential Impact of Public Health ...... 317 3.5. Important Impact ...... 317 4. MANAGEMENT OF ENVIRONMENTAL IMPACTS ...... 318 5. MANAGEMENT OF SOCIAL AND ECONOMIC IMPACTS ...... 319 6. CONCLUSION ...... 321 7. RECOMMENDATION ...... 321

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1. INTRODUCTION According to Minister of Public Works and Housing Regulation Number 16 / PRT / M / 2017 dated September 12, 2017 on ’Non-Cash Toll Transactions on Toll Road,’ the implementation of the e-toll, as represented by the presence of electronic money readers in the toll plazas, has now reached 100 percent, where all toll roads can apply payment by electronic money cards. E-toll is the first step towards non-cash toll payments and the final stage is a non-stop or multilane free flow (MLFF) system. At current stage the automatization in the existing toll payment mechanism is done through the ’Tapping of pre-paid electronic money card to the installed readers in the toll booth’. The resulting reduction in the pre-paid card balance is then transferred to the toll road operators accounts. Toll road administration and payment automation is progressing rapidly due to availibility of new technlogy. Present payment mechanism using electronic money enables faster payment processing and allows more practical execution of the transactions execution at the toll booth. No more cash handling headaches was experienced by the toll operators, and manual works are reduced to avoid mistakes and unnecessary activities. Next step of automatization as described in this proposal will ensure even further benefits to be reaped from the proposed GNSS-based system, allowing even faster processing of transaction and payment activities. Furthermore GNSS platform is more flexible to enable swift adaptation of the toll system to new toll policies. Service parameter is one of the important things that must be considered, because service affects the convenience of toll road customers in making transactions. Queuing problems are ones of those things that often annoy customers. If the queue is too long, it means that more time will be wasted due to longer time spent in the queue. Of course this issue will decrease customer satisfaction. As stated in UUPPLH 32/2009, environmental permits are permits granted to every person conducting a business and / or activity, wherein Article 50 is explained (1) The person in charge of the business and / or activity must submit an application for changes to the environmental permit, if the business and / or activities that have obtained an Environmental Permit to be amended, which requires the re-study of the environment, which is carried out following the provisions, among others; determine potential significant impacts that will arise from PPP; establish classification of PPP in estimating the impact that will be caused to the environment in accordance with the provisions of the legislation.

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2. RELATION TO THE ENVIRONMENTAL LAW The implementation of 100% toll road automatization has been carried out in accordance with the mandate of the President of the Republic of Indonesia and has been stated in the Minister of Public Works and Housing Regulation No. 16 / PRT / M / 2017 September 12, 2017 concerning ’Non-Cash Toll Transactions on Toll Road’. Since 2017, relevant ministries and agencies have carried out the steps to prepare for implementation. The toll road automatization agenda in Indonesia is very important given the ultimate goal of toll road development in the form of the application of Multi Lane Free Flow (MLFF), which is non-stop toll payment process (toll road users do not have to stop the vehicle at the toll gate), so that payment transactions become more efficient and smooth. The stages towards MLFF development must be preceded by the realization of the behaviour of toll road users who are already accustomed to non-cash payments, including the use of electronic money and through intensive joint socialization at the national level. In addition, non-cash payment infrastructure is also needed that has been integrated between toll road segments and is interconnected (interconnected) and interoperable (interoperable) between electronic money issuers. The payment infrastructure interface in the form of an electronic money reader that has now been implemented requires harmonization between the bank and Toll Road Business Entity (BUJT) and various parties in its implementation in the field. Furthermore, coordination efforts must be made to succeed in the transition of non-cash transaction behaviour from toll road users. According to Article 1 Clause 35 of UUPPLH 32/2009, environmental permits are permits granted to every person who conducts business and / or activities that are obliged to be EIA or UKL-UPL in the context of environmental protection and management as a prerequisite for obtaining business licenses and / or activities. Related to this, in Article 36 paragraph (1), stipulates that every business and / or activity that is required to have EIA or UKL-UPL must have an environmental permit. Article 50 (1) The person in charge of the business and / or activity is obliged to submit an application for amendment to the environmental permit, if the business and / or activity that has obtained an environmental permit is planned to be amended. (2) Changes in the Business and / or Activity as referred to in paragraph (1) include: 1. change in ownership of Business and / or Activity; 2. changes in environmental management and monitoring; 3. changes that affect the environment that meet the criteria: 4. changes in the use of production tools that affect the environment; 5. additional production capacity; 6. changes to technical specifications that affect the environment; 7. changes in business facilities and / or activities; 8. expansion of land and buildings of businesses and / or activities; 9. changes in the time or duration of operations of the Business and / or Activity; 10. Businesses and / or activities within the area that have not been covered by Environmental Permits;

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11. changes in government policies aimed at enhancing environmental protection and management; and / or 12. a change in the environment that is very basic due to natural events or due to other consequences, before and at the time the Business and / or Activity concerned is carried out; 13. there is a change in the impact and / or risk to the environment based on the results of a mandatory environmental risk analysis and / or environmental audit study; and / or 14. no implementation of the Business and / or Activity plan within a period of 3 (three) years from the issuance of an Environmental Permit.

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3. ENVIRONMENTAL IMPACT ANALYSIS AND IMPORTANT IMPACTS Environmental documents are the result of environmental feasibility studies and are an integral part of the study technical and financial-economic feasibility. Furthermore, this document is a requirement that must be fulfilled to obtain a business permit from an authorized official.

Where it is known that the study of the large and important impacts of a business and / or planned activities in the environment is needed for the decision-making process regarding the operation of businesses and / or activities in Indonesia. This environmental study is made when planning a project that is expected to have an influence on the surrounding environment. What is meant by environment here are abiotic, biotic and cultural aspects. The legal basis for AMDAL in Indonesia is Government Regulation No. 27 of 2012 concerning "Environmental Permit" which is a substitute for PP 27 of 1999 concerning AMDAL.

Impact Identification Table Activity Component Environmental Components Pre Construction Operational Post Construction Operational Biology - - √ - Physical - √ √ - Chemistry Socio- √ √ √ √ Economic Public Health - √ √ √ Source: Consultant Analysis Results

Table 1: Impact identification table

3.1. Potential Biological Impacts

1) Operation At this stage the toll road MLFF system has been completed and has been used. The toll road will cause the loss of the queue of vehicles in front of the toll gate because the vehicles do not have to stop. As such, it would reduce pollution by vehicle exhaust and cause air pollution to be detrimental to flora and fauna.

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3.2. Chemical Physical Potential Impacts

1) Deconstruction At this stage the impact will be seen in the air quality which slightly decreases in the locations of the toll gates because the dust will increase due to the demolition of the existing toll gates, but this work is relatively small and takes minimal time.

2) Operations When the toll road MLFF system is implemented, there will be an impact on air quality due to the absence of a queue at the toll gate.

3.3. Socio-Economic Potential Impacts

1) Pre-Construction In planning for the construction of toll road sensor substations it may cause concerns for toll gate workers, especially at the prospect of retraining and relocation. The emergence of certain perceptions in the work environment, especially negative perceptions and suspicions could happen because of lack of information and communication. 2) Construction At this stage, there are enough job openings even if only for a short time. This could potentially improve the local economy, for example local residents open food stalls and / or start other businesses to accomodate the needs of the workers. However, there is also social impact that may arise between the work of current agencies and those from outside the region and also workers from the surrounding community. 3) Operations In carrying out its operations, the toll road will require workers who are in charge of maintaining the continuity, security and administration of toll revenues. To maintain smoothness and safety, signs and warning signs are installed. Additionally, there would be mobile enforcement patrol for 24 hours, and roadside infrastructure maintenance. In addition, the presence of toll roads will increase population mobility, increase employment opportunities and increase income for the surrounding community. Due to the ease of mobility, positive perceptions may also emerge in the surrounding communities. However, there may also be other perceptions which can arise due to the vulnerability of traffic outside of the toll roads. 4) Post Operational Reduction of workforce.

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3.4. Potential Impact of Public Health

1) Construction In the toll road construction phase, there are several impacts which may indirectly affect the health aspects of the community. Impacts that may occur in the health aspects are: transmission of diseases from unhealthy migrant workers or carriers (carriers of disease seeds), and environmental sanitation problems due to the sudden increases in population and waste produced.

2) Operations During the toll road phase a public health impact that may arise, among others, is an increase in traffic accidents, if traffic management is not carried out properly because the vehicle does not need to stop in front of the toll gate. If the traffic management is done well, it will cause a decrease in road accidents. Travel time on the toll road becomes shorter, potentially saving fuel usage for toll road users, which means it is also potentially saving on State money.

3) Post-Operation At this stage there will be reduction in air pollution and in noise caused by the absence of discontinuation of vehicles passing through the toll road, namely in particular SO2, CO2, NOx and particulates (dust).

3.5. Important Impact

1) Biology - Reduced air pollution due to the absence of a vehicle queue at the toll gate. 2) Physical Chemistry - Reduced exhaust emissions due to the absence of a queue of vehicles. 3) Socio-Economic - Community negative perceptions; - The economy of the community that is elevated; - Employees relocation. - Saving travel time, saving fuel costs and saving state money. 4) Public Health - The influence on public health is relatively small, because the construction work is relatively small.

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4. MANAGEMENT OF ENVIRONMENTAL IMPACTS Components of activities and stages of activities studied in the management of environmental impacts: a. Pre-Construction Activities Pre-construction activities include activities: 1) Dissemination of the MLFF Toll program; 2) Data collection of toll road ramp on / off location; 3) Improved administration of vehicle selection; 4) Preparation of cooperation with Ministry of Public Works’ agencies, developments in communication and information technology for the determination of MLFF. b. Construction Activities Construction activities include: 1) Acceptance of Construction Workers / contractors; 2) Demolition of the e-toll substation; 3) Installation of gantries and roadside infrastructure; 4) Making Toll IT Networks; 5) Making information signs; 6) Utilization of Information Posts. c. Operations Activities 1) Operational activities include toll payment activities; 2) Demobilization of construction workers; 3) Relocation of E-toll (Electronic Money Card) employees; 4) Create customer service center jobs d. Post-Operational Activities 1) Post operation activities in the form of periodic maintenance and repair of toll roads infrastructure if there is damage during operation; 2) Maintenance and upgrade of the sensor / MLFF system.

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5. MANAGEMENT OF SOCIAL AND ECONOMIC IMPACTS The social impact of toll road operations is the easier access to transportation between regions, which potentially allows businesses to operate faster and more smoothly, and could result in the opening of more jobs and increasing economic activity of the regions. With the plan to change toll road services from the e-toll (electronic money card) to Nirvana / MLFF, it will have an impact on the total number of employees who have been working at the toll gate as guards and toll gate supervisors. The positive impacts that are expected to result from implementation of Touchless toll System are as follow: ❖ Loss of queue at toll gate; ❖ Higher average travel speed for toll road users; ❖ Reducing air pollution due to vehicle exhaust, because there is no queue at the toll gate; ❖ Reduced congestion on toll and non-toll roads; ❖ Reduction of fuel usage, which also means saving State money; ❖ Big Data of vehicles are obtained. ❖ Full electronic fast payment ❖ Customer Service Centre employement creation

Meanwhile the negative impacts that may arise are as follows: ❖ Difficulty of relocation of employees who have been serving and overseeing the toll gate area; ❖ The changes in bureaucracy of the payment methodology may negatively influence the toll road users perceptions to the new system

There is a lot of evidence that shows toll roads contribute to advancing regional socio- economics and busy business activities, opening up employment opportunities and increasing people's economic activities and even social transactions. Economic and social growth requires fast and efficient means of transportation. If toll roads are the choice, then the community needs to be prepared to deal with the various impacts of the toll road payment service pattern, so they can properly anticipate it. Increases of toll services quality should be adjusted to the modernization expectations of current e-toll (electronic money card) Touchless toll transactions to Multilane Free Flow (MLFF) system.

Examples of Toll Employee Problem Solving Related to E-Toll Implementation

The settlement applied to toll employees affected by the toll regulation from manual to e-toll, in the implementation of non-cash transactions in addition to generating pro-contra from the

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MLFF feasibility study - Volume IV Environmental and Social Study community, also caused many positive and negative things that were obtained for the toll user community. The positive impact is reducing congestion that has been clearly felt by the toll user community, especially in rush hour such as morning and evening on weekdays. Other positive things obtained when compared to cash payments are reduced errors, such as receiving false amount of change or even fake money. The toll guard must carry out the task quickly and smoothly in accepting money from toll users, especially if the toll user pays with not exact change, which the toll guard must give change. If the change is less than actual, it will harm the toll user, and the reverse will happen if the change is more than what the toll guard calculated. Another negative impact is that there are toll road users who do not know or lack information about the application of E-Toll, so they will find it difficult to enter and choose to use public roads, and this will be detrimental to both parties. So that it is necessary to conduct socialization throughout the community to disseminate information on the application of non-cash transactions in order to reduce the occurrence of obstacles for road users who do not have an E-Toll card and do not understand how to use it. What is the condition of the employee who previously served as drivers at the toll gate, PT Jasa Marga Tbk, it will be retained as an existing employee so as not to be terminated (Termination of Employment), or transferred its function or work. As is known, Jasa Marga currently has 4,200 employees. 1,300 of them are toll gate officers. For the impact of the implementation of the electronic toll transaction. Jasa Marga offered as many as 900 new positions in other work units or subsidiaries. The remaining 400 employees could choose to become entrepreneurs who would be fostered by the company, other affected employees also received training and competency enhancements, employees affected by the electronic toll payment policy received five choices of profession.

1. The toll gate employees were transferred to the control room at the Jasa Marga branch office or main office with a new profession assigned instead of the toll gate; 2. employees were transferred to a Jasa Marga subsidiary; 3. employees had the choice to move to another subsidiary outside the toll; 4. Then the fourth choice; employees could changes professions as officers to rest area, which they could also become entrepreneurs in the rest area managed by Jasa Marga; 5. Employees of toll booths could switch professions to become independent entrepreneurs.

These options were input from employees who are members of the Jasa Marga Employee Union. Changes in technology turned out to create new needs such as Digital Inspector or Digital Developer, this new PT-PT could be a place to channel employees who are currently serving as Pultolls (toll collector officers). For toll officers managed by other Toll Road Enterprises (BUJT), they will not get termination of employment (PHK). The Head of Supervision and Monitoring of the Indonesia Toll Road Authority (BPJT) Director General of Highways, explained that currently 70 percent are employees of Jasa Marga and 30 percent of employees come from other BUJTs, where other BUJTs are committed to doing the same.

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6. CONCLUSION 1. Due to the elimination of queues at toll plazas, substantial savings in social cost arise from reduced travel time.

2. The impacted environmental components in establishing toll road infrastructure is relatively small, both in the field of physical chemistry, and public health. Only the potential reassigning works for the employees relating to toll collection must be considered from the start and the possibility of retraining and socialization cost relating to this relocation.

3. The significant positive impact of the construction of the MLFF toll infrastructure is that the reduced air pollution due to missing queues and congestion at each toll gate and reduced congestion will also lead to savings in the use of vehicle fuel which will provide savings in fuel subsidies by the state. The resulting saving in CO2 emmission would also be positively improving the quality of air in the nearby locations.

4. Based on the above, and also considering the existing regulation of LHK Republic of Indonesia Regulation P.23 / MENLHK / SETJEN / KUM.1 / 7/2018 concerning Amendment to Environmental Permits, no specific Environmental Impact Analysis need to be performed for the implementation of this proposal.

5. Small social impacts, especially for toll gate workers / employees, can be neglected because the comparison of the number of employees affected compared to the total employees in the toll road environment at that location is comparatively small, so it does not have a negative impact.

7. RECOMMENDATION Overall, the MLFF system implementation will produce enormous potential benefits. A good socialization and communication program addressed to all stakeholders, including employees, regulators, operators, and others shall be widely pursued.

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1. COOPERATION IN THE IMPLEMENTATION OF ROAD INFRASTRUCTURE ...... 326 1.1. Spectrum of Infrastructure Implementation Cooperation ...... 326 2. ALTERNATIVES IN THE FORM OF COLLABORATION FOR ORGANIZING MLFF INFRASTRUCTURE ...... 329 3. COOPERATION FORM PLAN ...... 331

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1. COOPERATION IN THE IMPLEMENTATION OF ROAD INFRASTRUCTURE

1.1. Spectrum of Infrastructure Implementation Cooperation

Government Cooperation of Business Entity does not always mean the transfer of all assets from the public to private investors. Basically privatization is the transfer of part or all of the risk that was previously borne by the Government or other public sectors in the provision of services to the public to the private sector where the private sector will receive compensation in the form of commercial operational rights. Therefore, the Business Entity Government Cooperation has a very broad spectrum which depends on the risk that must be transferred to the private sector.

The World Bank classifies infrastructure projects as projects for private sector participation if the private sector carries operational risks during the operating period or both development and operating risks during the contract period. Investors can be referred to as project sponsors if they have a minimum of 15% shares by bearing both operational and market risks. In theory, some privatization models are outlined below.

1. Management and Operation Contracts

It is carried out if the private sector takes over public management or government entities of the Public Service Agency for a certain period of time but the facilities remain owned by the public sector. These include: a. Contract Management

Conducted if the government pays a private operator to manage a facility and bears most of the risk of operations. b. Lease-Operate Contract

Conducted if the private operator pays the government for the commercial operating rights of a facility and it is the operator who will bear the majority of the operational risks.

2. M & O Contracts with Dominant Private Capital

This model is carried out if the private sector takes over management of a Public Service Agency for a certain period of time and during that time must bear a significant investment risk. These include:

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MLFF feasibility study - Volume V PPP Cooperation Form a. Build-Transfer-Operate (BTO)

It is a turn key project for a facility with the government as the owner but the private operator that will manage the facility for a certain period of time and after completion of the contract period returns the facility to the government.

b. Build-Lease atau Rent-Transfer (BLT)

Conducted if the private sector builds a new facility at its own risk, rents these facilities from the government and then operates them for a certain period of time and after the contract period is over it returns to the government. c. Rehabilitate-Operate-Transfer (ROT)

It is a contract where the private sector rehabilitates existing facilities at its own risk, rents these facilities from the government and then operates and maintains its own risks for a certain period of time and after the contract period has finished returning the facilities to the government. d. Rehabilitate-Lease atau Rent-Transfer (RLT)

It is a contract where the private sector rehabilitates a facility at its own risk, rents the facility from the government and then operates and maintains it for a certain period of time and as soon as the period of the contract returns to the government. e. Build-Rehabilitate-Operate-Transfer (BROT)

Conducted if the private sector builds an additional facility from existing facilities or completes part of the facilities and rehabilitation of existing facilities and then operates and maintains the facility for a certain period of time and returns it to the government after the contract period ends.

3. Greenfield

An infrastructure project is categorized into a greenfield project where the private sector or joint venture between the private and public establishes and operates a facility for a certain period of time and returns the facility back to the government after the contract period ends. These include: a. Build-Lease-Own (BLO)

Is a contract where the private sector builds a facility at its own risk, transfer its ownership to the government, rents these facilities from the government and operates them at their own risk for a certain period of time and after the contract period is permitted to have these facilities.

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Is a contract where the private sector builds a facility at its own risk, operates it commercially for a certain period of time and returns it to the government after the contract expires. c. Build-Own-Operate

Conducted if the private sector builds a facility, owns and operates it at its own risk. d. Merchant

Is a contract where the private sector builds a facility but the government does not provide an income guarantee at all. It is the private sector that bears the risks of the construction, operation and market of the project.

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2. ALTERNATIVES IN THE FORM OF COLLABORATION FOR ORGANIZING MLFF INFRASTRUCTURE Alternative collaboration for organizing MLFF Infrastructure is a function of the following 3 issues:

1. Implementation of Information Technology 2. Characteristics of Financial Management 3. Characteristics of data processing

Referring to the spectrum of forms of collaboration, in the (initial) analysis, (3) three alternative schemes of cooperation are discussed and their explanations are as follows:

Scheme 1: Appointment of BLU as executor of MLFF infrastructure and cooperation with BU

The government takes over management from the payment of toll roads which were originally managed by concessionaires through a BLU. Furthermore, as the holder of all toll road use activities (toll road payments from users), the BLU held a procurement for MLFF infrastructure to provide certainty and efficiency of all payment taking activities for toll road use in Indonesia.

Scheme 2: Availability Payment (AP)

The implementation of this scheme is also called the Performance Based Annuity Scheme (PBAS) scheme, because the implementation of MLFF has an impact on road traffic in general and other strategic issues. The implementation of non-toll roads aims to fulfil the minimum service standards of non-toll roads, so that the level of comfort, safety and user safety is better. In the AP structure, BU receipt is only from AP payments.

Scheme 3: Greenfield

The third scheme is in principle same as scheme no. 2 except that in this scheme the MLFF infrastructure investment costs incurred by the Government are not fully returned. This is intended to reduce the burden of operator investment costs, and maintain project feasibility financially.

In the Figure 6.1 shows how the risks faced by private investors are increasing in line with the increasing role they have. As seen the risk relatively minimal for the private sector for partnerships based on management contracts while the risk becomes maximal if assets are fully owned (or partially) by the private sector. Management contracts can be a very attractive option for the private sector when especially if the privatization of infrastructure management is still a new experience for both the government and the private sector. As experience begins to accumulate and cooperation begins to pattern well the government can transfer more risk to the private sector. But what needs to be considered is that risk allocation must be carried out

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MLFF feasibility study - Volume V PPP Cooperation Form efficiently; in the sense that only the party most capable of managing risk must bear the risk. If the market situation is possible, the government can give part or all of the ownership of assets to the private sector so that the private sector has full authority in its management.

Figure 1: Organizational Structure of Minister of Public Works1

1 Source: Badan Litbang Perhubungan, 2006

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3. COOPERATION FORM PLAN The initiator in this project proposed a form of cooperation between BUILD - OPERATE - TRANSFER, with a proposed concession period of 10 years.

In order to ensure the success of complex transportation projects similar to the MLFF project envisaged in Indonesia, most important factor is the appropriate risk allocation among the parties. Based on experiences with similar projects throughout and outside Europe as well, Design-BUILD-Finance-OPERATE-TRANSFER (DBFOT) or BUILD - OPERATE - TRANSFER (BOT) models are commonly applied to achieve this objective.

Assuming a well prepared and reputable expert supplier, the government is substantially less experienced with complex intelligent transport systems than the supplier. Appropriate design and integration of the various elements of the system in order to achieve a fully operational MLFF toll collection system is a challenging exercise and crucial for the success of the project. As a result, it is the interest of the government to push both design, construction and operating risk to the private party (the supplier) and in order to have appropriate financial incentive for performance, the financing as well. Consequently, the proposed cooperation form is a Design-BUILD-Finance-OPERATE-TRANSFER (DBFOT) or BUILD - OPERATE - TRANSFER (BOT) model.

Referring to Presidential Regulation No. 38/2015 concerning government cooperation with Business Entity in Infrastructure Provision Article 14, as well as the implementation instructions stipulated in Regulation of Minister of National Development Planning No. 4 of 2015 concerning Procedures for Implementing Government Cooperation with Business Entity in the Provision of Infrastructure that:

Business Entity or Foreign Legal Entity acting as initiator of the Cooperation Project and approved by the Minister / Head of Institution / Regional Head, will be compensated. What is given can be in the form of: a) giving an additional value of 10% (ten percent); b) granting the right to make an offer by the Business Entity Initiator to the best bidder (right to match), in accordance with the results of the assessment in the auction process; or c) purchase of PPP initiatives, including, among others, accompanying intellectual property rights by the Minister / Head of Institution / Regional Head or by auction winner.

Thus, the initiator proposes an auction process, with the compensation proposed is: The Auction Process by Right to Match.

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1. PREFACE ...... 336 2. INFRASTRUCTURE RISK ALLOCATION REFERENCE ...... 336 2.1. PPP Risk Category in the field of Road infrastructure ...... 336 2.2. PPP Risk Matrix for MLFF Infrastructure ...... 339

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1. PREFACE Cooperation between the Government and Business Entity ("BE") in the provision of infrastructure based on Presidential Regulation No. 38 of 2015 which is generally defined as a long-term contract between a private party and a government agency to provide a public asset or service, and under the contract, the private sector bears significant risks and management responsibilities with remuneration determined based on performance.

Risk allocation is one of the main characteristics in PPP, the optimal transfer of government risk to the private sector that can and is able to manage and / or bear it is one of the important things in PPP.

2. INFRASTRUCTURE RISK ALLOCATION REFERENCE In general, the Infrastructure Risk Allocation Reference consists of 1) Risk Categories and 2) Risk Allocation Matrix to be used by the PJPK in preparing risk allocation for PPP projects, which applies as a basis for the PJPK in preparing proposed guarantees to IIGF and can play a role in increasing the application of the risk management framework of a PPP project.

2.1. PPP Risk Category in the field of Road infrastructure The following points are a general list of general risks in implementing MLFF Infrastructure: A. Design, Construction and Operation Test Risk is the risk of design, construction or operation testing of a project facility or element of the process, carried out in a way that causes a negative impact on project costs and services. Thus, the risks included in this category are: 1) Planning risk: the risk that the use of the project location proposed in the PPP agreement and, in particular, the construction of facilities constructed is not in accordance with applicable regulations related to planning, land use or that licensing is late (or cannot) be obtained or, if obtained, can only be carried out at a cost that is greater than expected; 2) Design risk: the risk that the design of the BE cannot meet the specified output specifications; 3) Settlement risk: the risk that the completion of the work needed by a project can (1) be late so that the provision of infrastructure services cannot be started according to the predetermined Commercial Operation Date (COD), or (2) late, unless more costs are incurred to maintain the COD already scheduled, or (3) late because of changes / variations that occur; 4) Costs overrun: the risk that at the design and construction stage, the cost of realizing the project exceeds projected cost projections; 5) Risk of operating test: risk where the operating test is late or the results do not meet the specifications of the PJPK or other authorities.

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B. Sponsor Risk is the risk that the BE cannot fulfil its contractual obligations to the PJPK due to the actions of the private investor as the project sponsor, the failure of the BE to meet lender requirements, or the failure of the lender to provide the loan.

C. Financial Risk are risks related to the project's financial feasibility aspects. These risks can be in the form of: 1) Financial uncertainty risk: the risk that the provider of funds (debt and equity) will not or cannot continue the commitment to provide project funding; 2) Risk of financial parameters: risks caused by changes in financial parameters (e.g. inflation rates, exchange rates, market conditions) before the contractor is fully committed to this project, has the potential to adversely affect project costs; 3) Risk of financial structure: the risk that the financial structure is not good enough to provide optimal results in accordance with the portion of debt and equity during the project period and therefore can disrupt the sustainability of project feasibility; 4) Insurance risk: (i) that risks that can previously be insured on the signing date are in accordance with the agreed project insurance but then become uninsurable or (ii) remain insurable but with a significant increase in insurance premiums.

D. Revenue Risk is the risk that project revenues cannot meet the projected level of financial viability, due to unexpected changes in either service requests or agreed rates or a combination of both. In the case of risks where the BE's income is obtained from the payment of services by the PJPK (for example, BOT / Partial Concession scheme, Performance Based Availability Scheme scheme or Availability Payment scheme), the non- payment risk can be included in the political risk category (sub sovereign risk or parastatal).

E. Network Development Risk is the risk of negative impacts on service availability and project financial feasibility due to changes in current network conditions or future plans. Risks included in this category are: 1) Risk of connectivity with existing networks: the risk that access to the existing network is not (will) be built according to plan; 2) Risk of network development: the risk that additional networks needed are not (finished) built according to plan;

F. Interface Risk is the risk that the method of project implementation by related parties or service provision standards will hinder or disrupt the provision of infrastructure facilities and services carried out by the public sector or vice versa. This risk includes when the quality of work carried out by the government does not match / not match the specifications required by the BE to produce output specifications according to the PPP contract, or vice versa.

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G. Political Risk is a risk triggered by actions / absence of PJPK actions that cannot be predicted in advance that materially adversely affect the return of equity and loans. Risks included in this category are: 1) Currency risk that cannot be converted or transferred: the risk that the income / profit of the project cannot be converted to foreign currency and / or repatriated to the investor's home country; 2) Takeover risk: the risk of taking over project assets (including nationalization) by the government, either directly or indirectly, which can lead to termination of the project contract. 3) Risk of changes in regulations and legislation, which are discriminatory and specific so that they can directly reduce the project's financial feasibility (can be triggered by the actions of the PJPK or the Government outside the PJPK); 4) Sub-sovereign or parastatal risk: the risk that the PJPK is unable / willing to carry out financial obligations or other material obligations in the contract triggered by matters relating to the status of a government entity, including changes in legal status or PJPK organization referring to the relevant regulations; 5) Licensing risk: the risk that the required permits from another government authority cannot be obtained or, if obtained, greater costs than projections are needed; 6) Risk of changes in tax rates: risk of changes in applicable tax rates (income tax rates, VAT) or new taxes that can reduce expected returns on equity.

H. Force Majeure is the risk of occurrence of force majeure that is completely beyond the control of both parties (for example natural or human disasters) and will result in delay or default by the BE in implementing its contractual obligations.

I. Asset Ownership Risk is the risk of events such as events of loss (such as loss of contracts, force majeure), technological changes, etc., which cause the economic value of assets to decline, either during or at the end of the contract period.

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2.2. PPP Risk Matrix for MLFF Infrastructure

The following is the Risk Matrix in the form of a MLFF Infrastructure table

Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] 1. LOCATION The Site for location The TRO refuse Coordination and ✓ of roadside to provide the cooperation with infrastructure is not Site the TRO at the available preliminary stage Soil condition Soil condition, Soil investigation ✓ including and coordination existing utilities with the TRO in on Site, cause order to obtain delay in record on existing construction of utilities on Site the roadside infrastructure 2. RISK OF DESIGN, CONSTRUCTION AND OPERATION TEST

Design error Cause extra / Experienced and ✓ revised design good design requested by the consultants operator - [Pre- construction & Construction Stage]

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Late completion of Can be included Reliable contractor ✓ construction due to poor and standard quality of contract clause Human Resources expertise, limited availability of materials & equipment, late return of location access. - [Construction Stage] Risk of operating tests Error Communication & ✓ (testing & estimating time coordination commissioning) / cost in system of the right technical contractor, testing operation test - consultant and [Construction operator Stage] 3. SPONSOR RISK

Default of Business Default of The consortium is ✓ Entity Business Entity supported by that leads to credible and solid termination or sponsors step-in by financier - [All Stages]

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Default of project Default of PQ process to ✓ sponsor project sponsor obtain credible (or consortium sponsors member) - [All Steps after financial close] Default of the lender Default of • Credible ✓ financial / selection of banking lenders institutions (or • The syndication) performance of due to policy the BE fulfils changes / trust the contract towards BE or due to internal • Meeting lender lender issues - requirements [All Stages after financial close] 4. FINANCIAL RISK

Failure to reach Not achieving Good coordination ✓ financial close financial close and consortium due to with credible and uncertainty in reliable lenders market conditions or project capital structure that is not optimal - [Pre- Construction Phase]

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Currency exchange Exchange rate Hedging ✓ ✓ risk (non extreme) instruments; fluctuations - Financing in [All Stages] Rupiah Risk of inflation and Inflation (non- Factor indexation ✓ interest rates extreme) of rates and increase in the interest rate hedges rate of assumptions in the life-cycle cost and interest rates 5. REVENUE RISK

Failure to fullfill the As a result, the Good operating ✓ minimum required Business Entity performance; service standards is unable to Supporting meet the agreed regulations minimum standards Error calculation of Pricing is too Good operating ✓ estimated rates optimistic or performance; above the Regulations willingness to governing the level pay consumers - and period of tariff [Operation adjustments Stage] User does not pay System error Good operating ✓ performance;

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] User does not pay Violation Coordination with ✓ police or enforcement unit and establishment of enforcement regulations; Provides incentive for enforcement by police or enforcement unit 6. NETWORK CONNECTIVITY RISK

Risk of road network Default of the Good contract ✓ development authority to understanding by build and the public sector maintain the and necessary synchronization of network - construction; [Operation Provide mechanism Stage] for modification and application of Additional service fee

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Risk of managing Government Traffic regulation ✓ non-toll road limitations in by considering the networks regulating pattern of traffic on non- movement of toll roads that vehicles through affect the tolls and non-tolls performance of toll road services - [Operation Stage] 7. INTERFACE RISK

Risk of time inequality The time gap • Coordination ✓ ✓ and quality of work and the quality and integration of government of project support work implementation and what the schedules BE does. - • Repair work by [Construction parties whose Stage] work quality is lower

8. OPERATION RISK Incorrect [Operation Coordination and ✓ ✓ determination of the Stage] detailed functions of the user determination application may regarding the reduce service functions of the capability to users user application

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Due to inadequate [Operation Coordination and ✓ ✓ quality and depth of Stage] traning for system system user training users and there may be a operating problem with personnel managing some elements of the system among key users and operating personnel The delay of [Construction Coordination and ✓ ✓ [especially agreeing/contracting Stage] integration of with of the TROs, Banks, project respect to and of provision of implementation the external services schedules support related to operation from the could jeopardize the TROs] launch date of the system. The delay of the [All Stage] Implementation of ✓ launch of public public information campaign consultations and could seriously socialisation jeopardize the acceptance and success of the project 9. POLITICAL RISK

Specific change of [All Stages] • Mediation, ✓ laws and regulation negotiation (and tax) • Political Risk Insurance • Government guarantees

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Delay in obtaining Only if Clear contract ✓ approvals triggered by provisions unilateral / including unnatural compensation decisions from the relevant authorities – [Pre- construction & Construction Stage]

10. FORCE MAJEURE RISK

Natural disaster The occurrence Insurance, if ✓ ✓ of a natural possible disaster so that it cannot operate normally - [All Stages] Political force War events, Insurance, if ✓ ✓ majeure riots, public possible security disruptions - [All Stages] 11. ASSET OWNERSHIP RISK

Risk of asset value Fire, explosion, Insurance, if ✓ decreases etc. - possible [Operation Stage]

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Risk Categories and Description Appropriate Risk Allocation Risk Events [Pre- Mitigation Strategy Construction/ Best practice IBE GCA Construction / Operation] Transfer of assets on uncertainty on clear provisions on ✓ ✓ the the asset asset transfer expiration/termination transfer mechanism and of cooperation period mechanism and valuation in the value at the concession transfer date agreement

Table 1: Risk matrix

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Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study - Volume VII Government Support and/or Guarantee

1. GOVERNMENT SUPPORT ...... 352 2. GOVERNMENT ASSISTANCE ...... 352 3. GOVERNMENT GUARANTEE ...... 352 4. SUGGESTION UPON THE GOVERNMENT SUPPORT FOR MLFF INFRASTRUCUTRE ...... 353 5. WAIVER OF LICENSES FOR THE IMPLEMENTATION OF MLFF INFRASTRUCTURE BUSINESS ENTITY ...... 353

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MLFF feasibility study - Volume VII Government Support and/or Guarantee

1. GOVERNMENT SUPPORT As stipulated in Presidential Regulation No. 38 of 2015 on Public-Private Partnerships for Infrastructure Procurement (“Regulation 38/2015”), Government Institutions may offer three types of support to a given Project Company during the execution of a given PPP project, specifically:

a) Government assistance; b) Government guarantees; and c) Facilities during the preparation and implementation of any PPP.

2. GOVERNMENT ASSISTANCE Government assistance is provided in the form of feasibility support (fiscal assistance) and/or tax incentives. Feasibility support is regulated in detail under Ministry of Finance Regulation No. 143/PMK.011/2013 on Guidelines for the Provision of Government Feasibility Support in the Form of Partial Construction Costs to Infrastructure Projects under the Public-Private Partnership Scheme, which was most recently amended by Regulation No. 170/PMK.08/2015 on the same matter (collectively referred to as “Regulation 170/2015”).

The facility which can be implemented duringa given project’s preparation and implementation phase (“Preparation Facility”) is regulated in detail under Ministry of Finance Regulation No. 73/PMK.08/2018 on Facilities for the Preparation and Implementation of Public-Private Partnership Transactions for the Provisions of Infrastructure (“Regulation 73/2018”), Which consisting of the following types:

a. Project preparation facility; b. Transaction assistance facility; or c. Project preparation facility and transaction assistance facility.

3. GOVERNMENT GUARANTEE The Guarantee is specifically regulated under Presidential Regulation No. 78 of 2010 on Infrastructure Guarantees for Public-Private Partnerships through the Indonesia Infrastructure Guarantee Fund (“Regulation 78/2010”). Moreover, the Guarantee is also elaborated upon further under Ministry of Finance Regulation No. 260/PMK.011/2010on Guidelines for the Implementation of Infrastructure Guarantees in Public-Private Partnerships, which was most recently amended by Regulation No. 8/PMK.08/2016on the same matter (collectively referred to as “Regulation 260/2010”).

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Regulation 78/2010 stipulates that the type of Guarantee offered by the government can be granted if the infrastructure project in question satisfies the following criteria:

a. Any project risk is manageable, controllable or preventable by the PJPK of the PPP; b. The risk factors are sourced from the PJPK or from the PPP project itself; or c. The risk factors are sourced from the government (external to the PJPK for the given PPP project).

4. SUGGESTION UPON THE GOVERNMENT SUPPORT FOR MLFF INFRASTRUCUTRE In addition to the Government Support as stipulated above, the following are the suggested potential support in which will be required to ensure the implementation of the MLFF infrastructure to be implemented accordingly:

• Tax Holiday for maximum 5 years from corporate tax; • No or reduced import tariffs on the imported items; • Amendments of TRO contracts need to be managed by ITRA or the ministry; • the availability of the guarantee fund in case of lower than justified IRR; • fasten approval from the central for Initiative Business Entity to manage and handle virtual money.

5. WAIVER OF LICENSES FOR THE IMPLEMENTATION OF MLFF INFRASTRUCTURE BUSINESS ENTITY The implementation of the MLFF infrastructure shall require several licenses for the Implementer Business Entity as have stipulated under Volume 1 – Legal Study.

Considering that the government hold full power over the issuance of the licenses for the business entity and the time it takes to obtain the required permit for the implementer business entity so that it may promptly operate the MLFF infrastructure.

It is suggested that government to waive the licensing requirement for the business entity implementer considering the social benefits and impact which have been stipulated under this study and to further accelerate the implementation of the implementation of the MLFF infrastructure system.

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VOLUME VIII STUDY OF FOLLOW-UP ISSUES

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study - Volume VIII Study of Follow-Up Issues

1. PREFACE ...... 358 2. CASHLESS SYSTEM INFRASTRUCTURE IS NOT UNDER THE PRESIDENTIAL REGULATION NO. 38 OF 2015 ...... 358 3. CONSULTATION WITH THE RELEVANT INSTITUTION TO OBTAIN THE GOVERNMENT SUPPORT ...... 359 4. FOLLOW UP FOR INVESTMENT INCENTIVE FACILITIES...... 359

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MLFF feasibility study - Volume VIII Study of Follow-Up Issues

1. PREFACE Under this section, the below issues mentioned is an issues which required to be followed up with regards to the implementation of the MLFF in Indonesia.

2. CASHLESS SYSTEM INFRASTRUCTURE IS NOT UNDER THE PRESIDENTIAL REGULATION NO. 38 OF 2015 The Public Private Partnership for the provisions of infrastructure as stipulated under the Presidential Regulation No. 38 of 2015 (“PR 38/2015”) is economic and social infrastructure. The types of economic, infrastructure and social infrastructure as referred to in PR 38/2015 area as follows:

a) transportation infrastructure; b) road infrastructure; c) water resource and irrigation infrastructure; d) drinking water infrastructure; e) centralized wastewater management system infrastructure; f) Local wastewater management system infrastructure; g) waste management system infrastructure; h) telecommunication and informatics infrastructure; i) electricity infrastructure; j) oil and gas and renewable energy infrastructure; k) energy conservation infrastructure; l) urban facilities infrastructure; m) education facilities infrastructure; n) sports and arts facilities and infrastructure; o) regional infrastructure; p) tourism infrastructure; q) health infrastructure; r) penitentiary infrastructure s) public housing infrastructure

MLFF is categorized as a complementor from the road infrastructure, however since the MLFF will be procured to be a standalone infrastructure and be engaged with the initiative business entity, in order to enable the MLFF infrastructure to be cooperated by the Business Entity and the Government, a BAPPENAS Minister decree is required as per further stipulated under article 4(5) of the PR 38/2015.

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3. CONSULTATION WITH THE RELEVANT INSTITUTION TO OBTAIN THE GOVERNMENT SUPPORT As have been explained and addressed under the previous chapter, a government support is consisted from (a) government assistance, (b) government guarantees and (c) Facilities during the preparation and implementation of any PPP.

Further, the Business Entity have to convey its intention for request of the project preparation facility as stipulated under Ministry of Finance Regulation No. 73/PMK.08/2018 on Facilities for the Preparation and Implementation of Public-Private Partnership Transactions for the Provisions of Infrastructure (“Regulation 73/2018”).

In addition, a follow up approach have to be carried out in consideration with point 7.1 of the above with regards to the Government Guarantee which wanted to be requested during the implementation of the MLFF project. The Business entity have to make sure that whether this MLFF Project is able to be guaranteed under the Government Guarantee (which will be issued by the Indonesian Infrastructure Guarantee Fund).

In order to obtain the support as the above mentioned a consultation with the relevant institution is required to which the said institution would have known better the form of support for this MLFF Infrastructure required.

4. FOLLOW UP FOR INVESTMENT INCENTIVE FACILITIES Other than the 3 (three) option granted to the Business Entity initiative for the Public Private Partnership for the provisions of infrastructure. Law 25 of 2007 on investment (“Law 25/2007”). Article 18 of Law 25/2007 provide general statement where the Government to provide facilities. Facilities for new investment as stipulated under article 18(4) of Law 25/2007 are as follows:

a. net income tax deduction up to certain level of investment made within certain period. b. import duty holiday or reduction for imported capital goods, machinery, or equipment domestically unavailable for production; c. import duty holiday or reduction for raw materials or support materials for production within certain period and with certain conditions; d. value added tax holiday or postponement for imported capital goods or machinery or equipment domestically unavailable for production within certain period; e. accelerated depreciation or amortization; and

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f. Property Tax reduction, especially for certain business fields in certain region, area, or zone.

Noted that, Company’s income tax holiday or reduction within certain amount and period may be given to new investment in any pioneering industries, that is, any industries possessing extensive connections, providing high value added and externalities, introducing new technology, and possessing strategic value for national economy and Facilities in form of import duty reduction or holiday will be given to any existing investors that will replace their machinery or other capital goods.

The above said facility is not automatically granted when the Foreign Business Entity is established as a further consultation is required with the relevant institution.

In general, a follow up to the relevant governmental institution is to be done with regards to the request of facilities which have been discussed in the previous chapter for the implementation of the MLFF Infrastructure.

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VOLUME IX CONCLUSION

Multi Lane Free Flow Toll Collection in Indonesia Feasibility Study April 2020

MLFF feasibility study - Volume IX Conclusion

CONCLUSION The time spent at highway toll plazas causes significant losses to the GDP of Indonesia. Based on our assumptions the time loss caused by delays at toll plazas at least amount to USD 4.5 billion during the proposed 10 years of concession period which itself justifies the need for a free flow electronic toll collection system. Based on studies on institutional considerations, aspects of spatial and network suitability, technical aspects, economic and financial feasibility that have been carried out, it can be concluded that the Indonesian national Multi-Lane Free Flow Electronic Toll Collection system project is recommended to be implemented in line with the proposed business model presented in this study:

- Business Cooperation Plan in the form of an Unsolicited Project: o The project scope is Design, Build, Finance, Operate and Transfer (DBFOT) o Compensation in the form of Tender Process by Right to Match o Can get a Government Guarantee - Proposed system has the technical requirements of MLFF GNSS toll collection. - The system covers the entire toll road network throughout the country and will be implemented as follows: o GNSS enforcement gantries will be constructed during the second half of 2021 on the designated toll road sections; o A nationwide, intensive educational and PR campaign will be facilitated before the launch of the new system; o Fully GNSS based system will be launched nationwide on the whole network; o After the start of the MLFF GNSS operation additional gantries will be installed gradually on toll roads in-line with the construction of the newly developed roads. - After the implementation of the national electronic toll system Toll Road Operators (Concessionaires) will be released from the toll collection tasks. The new system will not cause any revenue loss for the Toll Road Operators. - Technology for the future: Cooperative Intelligent Transportation Systems to be integrated for the benefit of the users and the country. The system can be upgraded into metropolitan area ERP system and can support other road system and technology implementation, like parking payments. - A nationwide communicational and educational program should be carried out prior the system implementation to make sure that all of the stakeholders are aware of their rights and duties regarding toll declaration and toll road services. - Economically and financially feasible for a minimum concession period of 10 years with an EIRR value of 25.9% - 293.1% and an FIRR value of 12.50% as presented in the summary eligibility below. - Following flowchart provides an overview on the architecture of the proposed system:

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MLFF feasibility study - Volume IX Conclusion

Proposed project implementation

Project schedule 2021 H1 2022 H2 2023 - 2030

Implementation phase Operation phase . . .

Implementation phase:

➢ The central system is set up; ➢ Enforcement gantries are constructed during this phase in order to support the GNSS based toll collection system; ➢ An intensive nationwide educational and PR campaign is carried out to make sure that all of the stakeholders are aware of their rights and duties regarding toll declaration and toll road services

Operation phase:

➢ Users will need to use the GNSS e-OBU or pre-purchase a Route Ticket in the MLFF system; ➢ After the launch of GNSS based toll collection, the deconstruction of toll plazas will start; ➢ Users will no longer be able to pay their toll amount with e-Cards.

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Summary of technical and financial data

The following is a summary of technical data and financial analysis of the Indonesian Multi-Lane Free Flow Electronic Toll Collection system project:

Description Value

Total length of network covered 6,075 km (until end of 2025)

of which: CapEx financed by CTSP on 3,703 km (until end of 2021)

of which: CapEx financed by TROs on 2,372 km (until end of 2025)

Tolled lanes operated 2,258 (including emergency lanes, by 2025)

Number of enforcement gantries 224 (on toll roads operational by the end of

financed and constructed by CTSP 2021) Technical data Technical

Toll declaration technology Multi Lane Free Flow

IT infrastructure High Availability, redundant Data collection with ANPR and category Roadside equipment scanner Both open and closed tolling systems Operational system

supported

Start of operation 2022 January 1

Cost borne by road users Minimal

Toll payment methods Electronic with multiplatform

Initial road toll tariff No changes are needed in toll policy Operationalassumptions

CTSP remuneration Lump sum plus per lane based service fee

Base year price levels 2019

Loan interest 9.05%

analysis Other income 0%

Concession period 10 years Assumptions of feasibility

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Description Value

EIRR 25.9% - 293.1%

IRR 12.5%

NPV USD 0

Payback period 1 years 0 months

Viability analysis Viability 0

Discount rate 12.5%

Based on the financial analysis carried out, the cashflow of the CTSP can be projected as presented on the chart below. The CTSP service fee grants a 12.5% internal return rate over the proposed 10 years of concession period. The 12.5% is calculated based on the PPP regulation, using a debt to equity ratio of 70% / 30%, current commercial lending rates, equity rate and the applicable premium.

300.0

200.0 64.3 68.6 69.2 77.7 73.7 82.6 85.3 100.0 35.0 - (39.8)

(100.0)

(200.0) (284.8) (300.0)

(400.0) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Total OPEX Total CAPEX Lump sum SF Per lane SF Tax Cashflow

CTSP cashflow (USD m) 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

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Proposed milestones and deliverables of the project

CAPEX of the Milestone Phase Milestone Description Deadline* milestone ID (m USD)

Project initiation and M0 M0 - Project Founding Document 01/01/2021.

Implementation plan, high level system design and M0 + 2 month M1 5.5 documentation 01/03/2021.

Central IT system with Hardware and Software M0 + 6 month M2 56.6 without integration 30/06/2021

Call Center and Enforcement organization setup M0 + 10 month M3 Initial mobile enforcement equipment 32.3 01/11/2021

System integration to banks as other systems Implementation M0 + 11 month M4 Equipment for MLFF GNSS solution purchased 91.4 30/11/2021

Construction of enforcement gantries • 117 gantries on existing toll roads M0 + 18 months M5 64.7 • 91 gantries on toll roads under construction 30/06/2022 • 28 gantries on planned toll roads

Communication campaign 11.6 M2 + 6 month M6 Mobile enforcement equipment implementation 31/12/2021 e-OBU registration and GNSS pilot

M2 + 6 months M7 10.3

Complete system integration tested and fine-tuned 31/12/2021 Introduction M0 + 12 months M8 Start of CTSP Toll Collection service 2.9 (Go live of the GNSS system) 03/01/2022 Toll Plaza deconstruction M7 + 12 months M9 Optimization of central IT infrastructure 24.3 30/12/2022 Continous supporting communication campaign

Additional enforcement gantries Investment M10 Operation • 101 gantries on planned toll roads 2022 – 2025. financed by . TROs

Total 299.6

* Deadlines are relative, fixed dates are only for informative purposes

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