PFS on Climate Proofing and Revitalization of Pasar Johar

Project Preparation for Livable Cities in Asia:
PFS on Climate Proofing and Revitalization of Pasar
Johar
August 2014
Executive Summary
Cities Development Initiative for Asia
A.
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Project Background and Pre-Feasibility Analysis Approach
Project History
1.
Pasar Johar is the largest of the 51 traditional markets owned by Semarang City, and
is located in Semarang Tengah sub-district in the center of Semarang City. The area is
dominated by commercial activity with some residential land use. The market is located
along Jalan Pemuda and in close vicinity of the Pandama Triangle, the center of commercial
development in Semarang. On the eastern edge, Pasar Johar borders the Old Town of
Semarang, another area that has been a focus of redevelopment efforts of the City
Government of Semarang (Figure 1).
Figure 1: Pasar Johar Location
2.
Pasar Johar is home to approximately 7,800 vendors stalls that are rented from the
city on a renewable 3-year lease. Around 6,400 vendors, mainly micro-enterprises, manage
these stalls. Almost 90% of these stalls are 5m2 or less and focused on retail rather than
wholesale activities. Based on sample interviews, annual earnings for licensed retailers
range between IDR 36,000,000 – IDR 60,000,000, depending on the product and location.
Almost 80% of these vendors are women. Despite its popularity, the market is in dilapidated
condition, highly exposed to climate elements, and lacks basic facilities needed to support
the efficient functioning of a traditional market, affecting its competitiveness.
3.
The City of Semarang is highly committed to the redevelopment of Pasar Johar. In
2008, the City prepared a feasibility study and program for the redevelopment of Pasar
Johar. This program formed the basis of a national design competition to redevelop the
traditional market in 2010. In 2011, the design was unsuccessfully put out to bid for the
private sector. A City Infrastructure Investment Prioritization and Programming (CIIPP)
workshop facilitated by CDIA in late 2012 again prioritized the project within the City’s
programs. In response, in 2013 the City requested CDIA help in preparing a pre-feasibility
study for the revitalization and climate proofing of Pasar Johar.
Project Workplan
4.
The design of the 4-month long pre-feasibility analysis responded to the multidisciplinary challenges posed by the project. The analysis used a three-pronged approach,
shown in Figure 2, which also formed the basis of the communication and consultation
workplan with the City of Semarang.
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Figure 2: Pre-Feasibility Analysis Approach
5.
The consultant team sought the support of the City agencies to form an informal
PMU, the Working Group. The working group had representation from all the relevant
agencies in the City of Semarang and was given monthly updates on the progress of the
project. The working group was supported byfour focus groups to deep-dive into the social
and institutional viability, the design and infrastructure viability and the financial viability of
the project. Dinas Pasar, the main agency responsible for building and managing traditional
markets, Bappeda (Planning) and Finance were represented in all focus groups.
Figure 3: Consultation and Communication Schedule for Pasar Johar
6.
A very intense consultative program was employed with the City agencies involved in
the focus groups, as can be seen in Figure 3. Monthly meetings were held with the various
focus groups at the start/end of every month. The outcomes of these meetings were
reported to the larger working group at its monthly meetings, which were held in the middle
of every month. Meetings were held with the Mayor at the start of the project to inform him of
the work plan and hear his concerns related to Pasar Johar and at the end of the study to
get his buy-in on the recommendations of the City and the Consultant team.
7.
The interrelationships and communication between the groups through the period of
the study are illustrated in Figure 4.
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Figure 4: Interrelationship between Pasar Johar Focus Groups
8.
The first part of the program focused on site analysis, operational and municipal
finance data collection, and relocation plan discussions with the SCG and the vendor
groups. The second part of the analysis was focused on alternative development,
infrastructure needs assessment, market sounding, and financing needs and options
analysis. The final part of the analysis was focused on alternative refinement, downstream
financing discussions and implementation strategy development.
B.
Social and Institutional Viability Assessment
9.
Pasar Johar is an integral part of Semarang’s history. It is the largest traditional
market in Central Java and, based on the social expert’s analysis, has almost 26,000 direct
beneficiaries, mainly vendors and their dependents, and 161,000 indirect beneficiaries,
including buyers/retailers from other traditional markets inside and outside of Semarang,
individual buyers, as well as pedicab drivers, porters, seasonal workers, scavengers, and
others. While not easy to assess, it is estimated that most of these direct and indirect
beneficiaries earn less than Indonesia’s median per capita income1.
10.
The Social Viability assessment focused on:
10.1.
an assessment of existing conditions;
10.2.
an assessment of institutional capability; and
10.3.
identification of relocation and redevelopment needs.
Social Conditions
11.
Pasar Johar is composed of six blocks – Yaik Baru, Yaik Permai, Johar
Utara/Tengah (heritage building), Johar Selatan, and Kanjengan, and Pungkuran – with
7,739 vendor stalls.
12.
The dominant vendor groups in the markets include clothing (27%), seasoning
(20%), glassware (11%), and fruits (10%). The vendors are organized into vendor
management associations and these associations have been an integral part of the
discussions on social analysis. An informal survey of vendor sales and income in these four
major vendor groups shows monthly net profits ranging from IDR 3-6 million for small
1
Estimated to be US$3,420 in 2013, according to Doing Business in Indonesia 2014, World Bank
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retailers to IDR 30-50 million for the wholesalers. The market is extremely crowded with
more than 100% vendor occupancy and this demand is resulting in significant rent seeking.
According to the social expert’s analysis, the vendor spaces are being sub-leased informally
for a fee of IDR 3 million – 4 million per square meter.
13.
Despite its extensive popularity and role in local trade, the market is suffering from a
significant lack of amenities and extensive deferred maintenance that are hurting its
efficiency and impacting its competitiveness.
Figure 5: Condition of Existing Amenities in Pasar Johar
14.
Inadequate drainage and climate proofing results in significant loss of income to
vendors and, on the low end, is estimated to be at least IDR 500,000/m2 annually.
Continuous discussions were held with the vendors and they want a redeveloped market
with adequate parking, good circulation, and good infrastructure.
Institutional Capability
15.
Pasar Johar is managed by Dinas Pasar, a SCG agency, under Local Regulation No
41/2008 and City Reg. 9/2013 on Traditional Market2. Dinas Pasar is responsible for 51
markets in the City of Semarang and reports directly to the Mayor of the City of Semarang.
Its main functions include license provision, revenue collection, space planning, security and
new market development.
16.
The stalls in Pasar Johar are leased to vendors for a renewable three-year period,
with no initial fee, and a daily rent of IDR 600/m2. All the fees are regulated by the above
SCG regulations and both the initial fee and daily rent are substantially lesser than charges
in neighboring cities. Neighboring cities like Solo, Surabaya, Temanggung, and Kendal
charge a lease fee between IDR 2 million – 12 million/m2 for space in a newly redeveloped
market.
Redevelopment Experience
17.
Dinas Pasar has extensive experience in redeveloping traditional markets and over
the last 5 years has completed 8 redevelopments of varying scale. All of these markets have
been built through a bid-build process with the private sector, with an initial consultant
involved in the designing and socialization of the design. Currently, markets are developed
2
On Fundamental Tasks, Principal and Function of Dinas Pasar
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under a “pay-as-you-go” approach, wherein Dinas Pasar is completely dependent on
allocation and transfers from the city, province and central budgets to finance the market.
There is no formula as to how much is allocated from each level of government and, further,
the allocations/transfers are not necessarily coordinated between the different levels of
government, resulting in delays.
18.
Uncertainty in the source of financing and dependence on an annual budget has
resulted in significant delays in redevelopment varying from 1 year for a very small
rehabilitation project to 4 years for a small development project.
Finances and Opportunity to Increase User Charges
19.
Revenue collection in Pasar Johar is low, and Dinas Pasar currently collects only
60% of the collectible3. An analysis of the finances, at existing levels of retribution, shows
that even under an attainable collection rate of 80%, Pasar Johar will be able to cover its
operational expenses, but will still not be able to cover its initial capital needs for
redevelopment.
Table 1: Current and Pro-forma 2013 Expenses for Pasar Johar
20.
As a first step, an analysis was undertaken to understand the financial feasibility of
market development for Pasar Johar under the current process of market development. The
process of market development with its current methods of procurement and highly
subsidized user charges is not financially feasible or sustainable in the long run. Considering
inflation and even ignoring the opportunity costs related to the land, our analysis estimates
that the low rental fees charged to the vendors costs the city more than IDR 3 million for
construction of every new square meter of effective trading space created in Pasar Johar4.
21.
User charges are a very viable option for traditional markets as there are distinct
users, the vendors, who benefit from the improved quality of life and service from the
development of the market. The vendors eventually cover these costs through increased
patronage, improved sales, and a better quality of life. Most neighboring cities including
Solo, Kendal and Demak charge between IDR 2 million – 3.5 million/sq. m.
22.
Considering Dinas Pasar is managing 51 markets in Semarang, the development of
Pasar Johar offers a significant opportunity to take a step towards making the development
of such markets financially feasible and self-sustainable. Three options exist to increase user
charges to defray the cost of development of a new market and reduce dependence on the
city’s budget – a lease fee, increased rent, and increased parking fee. Discussions with
Dinas Pasar and Bappeda suggested that the SCG realized the tariff is extremely low and
SCG would be willing to apply a one-time lease fee of up to IDR 2.5 million/sq.m, which
would be in keeping with what is charged in neighboring cities. Given the high social impact,
the City would be willing to absorb the rest of the costs of market development.
3
4
The reasons for this low collection were unclear and attributed mainly to cashflow problems for vendors
Details of the analysis can be found in the next chapter under Alternative 1, Scenario 1 - Pay-as-you-go approach
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23.
Increasing user charges to make the development of these markets financially
feasible is also critical to scale up the program while maintaining the health of the city’s
finances.
Shift of Dinas Pasar to a Local Government Owned Enterprise (LGOE)
24.
Dinas Pasar, as with many SCG agencies, functions as a pass-through, where all the
revenue that is collected is passed to the City’s treasury and the City, in return, allocates an
annual budget for development, operations and maintenance to Dinas Pasar. Such a
structure has resulted in a significant lack of clarity in finance and operations of individual
markets and delays in implementation till budget is made available. For example, while the
revenue related to an individual market like Pasar Johar is known, the related expenses
cannot be easily estimated and, hence, have to be prorated.
25.
Dinas Pasar is currently working on a proposal to change its management structure
to an LGOE. The proposal is currently under development and approval and implementation
is expected in early 2016. A major impact of this change will be that Pasar Johar will be
managed by its own LGOE, which will be responsible for collecting its revenue, managing
operational and capital expenses, and delivering the profits to the City at the end of each
fiscal year, thereby increasing accountability of each LGOE in the areas of revenue
collection and maintenance.
26.
The Consultant team highly supports this proposal for change in management
structure to an LGOE to increase Dinas Pasar’s capability to successfully manage a
redeveloped Pasar Johar. The Consultant team also recommends that each LGOE be
provided the ability to set its retribution and lease fee in keeping with the level of facilities
and amenities provided.
Relocation Planning and Need for Certainty in Financing
27.
It is no surprise that the length of relocation remains one of the major concerns of the
vendors in Pasar Johar.
28.
Relocation is an unavoidable aspect of redevelopment of Pasar Johar and has
significant costs for the vendors. Estimates of annual losses range from IDR 5 – 10 million
for a wholesaler vendor to IDR 1 -2 million for a retail vendor. For analysis purposes, these
losses are estimated to be IDR 1.75 million/m2/year of effective trading space and
discussions with the vendor management associations indicated that for many vendors such
losses are crippling5. However, these losses can be minimized through good phasing, an
effective relocation plan, strong socialization, wide marketing and a shortened time of
construction and phasing.
29.
The consultant team worked closely with the SCG and the vendors to assess four
relocation sites and has recommended the Johar Shopping Center (SCJ) and Pasar Dargo
as the most suitable relocation sites. SCJ, located across Jalan Agus Salim from Pasar
Johar, is a BOT project currently under private ownership and will be transferred to SCG in
the year 2022. It is partly occupied by retail vendors and has almost 10,000m2 of space
available that can be used by the relocated retail vendors without much disruption in sales.
Pasar Dargo is owned and managed by Dinas Pasar and has nearly 600 empty stalls that
could be used by wholesale vendors. Discussions were held with the private owners of the
Johar Shopping Center to obtain an initial letter of intent allowing the City to lease space in
the SCJ till 2022. These discussions should be formalized in the next phase as the
redevelopment of Pasar Johar progresses.
5
Vendor discussions have indicated that substantial losses during relocation caused many retail vendors in Pasasr Dargo to
lose their livelihood. Similar fears exist about the relocation involved in the redevelopment of Pasar Bulu.
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Figure 6: Potential Relocation Sites
30.
Besides a good relocation plan, certainty of financing, addressed later in this report,
can significantly reduce the time for construction and, therefore, the length of relocation.
Under the current procurement process and given past experience6, it can be reasonably
expected that the average relocation for a vendor for a project at the scale of Pasar Johar
would be at least 5 years, resulting in significant relocation losses to the vendors. In these
conditions, certainty in financing and the resulting shortened construction period can result in
significant savings.
C.
Proposed Redevelopment for Pasar Johar
Existing Conditions: Opportunity for Redevelopment
31.
Pasar Johar has significant social, locational and cultural advantages that can be
capitalized to improve its competitiveness. A SWOT analysis was undertaken to understand
the potential of Pasar Johar, assess demand, weaknesses and opportunities for
redevelopment.
32.
Almost all weaknesses relate mainly to the current physical and managerial
conditions of the market. Low amenities, lack of climate proofing, and dilapidated
infrastructure are reducing the competitiveness of Pasar Johar. Lack of control and very low
rents are resulting in proliferation of legal and illegal traders. Many of these weaknesses can
be addressed through redevelopment and better management of the market.
33.
A site assessment, including land ownership and conditions, was undertaken to
identify the opportunities for redevelopment and implementation of the design as proposed
by Design Competition winner. This design cannot be built for 2 reasons:
33.1. Land acquisition Issues: The footprint of the competition winning design
was compared with orthographic maps from Spatial Planning Departement and land
ownership plats from Dinas Pasar. The southern end of the proposed design extends
into privately-owned land and the City does not want to acquire this land.
33.2. Ongoing legal issues in Kanjengan: Many portion of Kanjengan area are
under legal dispute between the city and the local vendors in the area. The issues
related to Kanjengan were discussed with the Legal Division of the City of Semarang
in June, 2014. Issues related to ownership have been resolved for the Bioskop.
6
Relocation for Pasar Bulu, a project one fifth the size of Pasar Johar, laster 3 years because of budgetary delays.
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Table 2: SWOT Analysis for Pasar Johar
34.
The redevelopment of the market and increased utilization of the space also present
an opportunity to both increase rents and identify complementary uses that can increase
visitors of varying demographic and economic groups. This will allow vendors to diversify
into selling products with higher value or margins. The markets are facing threats from
supermarkets throughout Indonesia, but Semarang has limited the number and locations of
markets through the Mayor of Semarang Regulation (Peraturan Walikota) No. 5 Year.2013
article 57.
Figure 7: Site Assessment for Pasar Johar
7
Details of this regulation are included in the Social Interim Report.
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Alternatives for Redevelopment
35.
In response to the existing conditions, a series of alternate designs were developed
and socialized with the various stakeholders – the SCG, vendor groups and private
developers. These alternatives are responsive to the outstanding legal land use issues in
Pasar Johar, the City of Semarang’s redevelopment needs, vendor needs, and private
sector participation concerns.
36.
Two distinct alternatives, differing in scale, level of private sector participation, and
implementation, are being recommended by the Consultant team.
Alternative 1: Redevelopment of traditional market only;
Alternative 3: Redevelopment of traditional market with BOT for commercial
development8.
Alternative 1 - Public Traditional Market Only
37.
The smaller in terms of scale, this alternative focuses solely on the redevelopment
and climate proofing of the traditional market and associated parking with no commercial
uses. This alternative concentrates development in the Yaik Baru, Yaik Permai and Johar
Tengah and does not consider any development in the disputed Kanjegan area, except for
the footprint of the Bioskop building where land issues have been resolved9.
Figure 8: Alternative 1 – Public Traditional Market Only
38.
Pasar Johar Utara and Pasar Johar Tengah are heritage buildings, identified in the
city’s register, and will be retained. It is proposed that these buildings be brought to their
original state through removal of add-on structures, reducing intensity of uses, and
redesigning the space to only include smaller stalls (los) in keeping with the original design.
39.
While the costs of this renovation are considered in the analysis, it is proposed that
the city continue to seek international heritage funds to defray the cost of renovation.
40.
Yaik Baru, Yaik Permai, Johar Selatan and Bioskop will be redeveloped to house all
the vendors located in Yaik Permai and Yaik Baru, Pungkuran, and Kanjengan and to
absorb the kiosk vendors relocated from the heritage buildings. The original aloon aloon, or
public square, that was located in front of the mosque will be recreated.
8
Alternative 2, proposing a public traditional market and limited commercial development without the use of the Kanjegan area,
was dropped because of private sector concerns about vertical mixing of ownership between public traditional market and
commercial uses and SCG’ desire to include all the vendors in the Pasar Johar area.
9
Details on legal issues related to the Kanjegan area are discussed in more detail in the Interim Design Viability Report.
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41.
The capital costs for this level of development, assuming no financing costs, is
approximately IDR 200 billion and shown in Table 3 below. The costs for the associated
parking and infrastructure to support Alternative 1 are expected to be approximately IDR 48
billion and IDR 5 billion respectively.
Table 3: Capital Costs for Alternative 1 - Public Traditional Market only
Alternative 2 - Traditional Market with BOT for Commercial Development
42.
The redevelopment of Pasar Johar presents a significant opportunity for the City of
Semarang to not only climate proof and redevelop the traditional market, but also spur
development in the Old town area of the City.
43.
This alternative focuses on the redevelopment and climate proofing of the traditional
market and includes commercial development and associated parking.
44.
Traditional market activity is concentrated on the lower levels of Yaik Permai, and in
Selatan, Kanjengan Bioskop and SCJ. As in Alternative 1, Johar Utara and Tengah are
restored to their original condition. The aloon aloon is recreated.
45.
The vendor management association has expressed concern about 3 floors of retail
in Johar Selatan and Kanjegan buildings, and the challenges of getting patrons to the third
floors of a traditional market especially if it deals in vegetables, seasoning or wet foods.
These concerns have been alleviated through parking on the roof of the Selatan and
Kanjengan buildings, which will force patrons to walk through the third-level of the traditional
market. Design features like atrium has also been included to increase visibility of the higher
levels.
Figure 9: Alternative 3 - Redevelopment of Traditional Market with BOT for
Commercial Uses
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46.
The alternative concentrates commercial development in the higher visibility Yaik
Baru, Yaik Permai area. The type, location, and intensity of commercial development was
decided upon through a consultative process with the City, private developers, and the
vendors with an aim to incorporate uses that complement and increase patronage to the
traditional market and spur development in the area. The proposed uses, including a 4-star+
hotel (23,000m2), offices (35,500m2) and retail (8,900m2), were decided based on a highest
and best use analysis and ensure the proposed program is commercially viable and
desirable.
47.
The lower levels of Yaik Baru are commercial retail and include complementary uses
like electronics/phones, cinema hall and food courts that supplement the traditional market
and increase patronage to the area.
48.
Including infrastructure and relocation, such a project is estimated to cost
approximately IDR 731 billion. The traditional market portion is estimated to cost close to
IDR 261 billion and the commercial portion is estimated to be approximately IDR 470 billion.
Details of the associated capital costs for this level of development (assuming no financing
costs) are shown in Table 4 below.
Table 4: Capital Costs for Alternative 3 - Traditional Market with BOT for Commercial
Development
D.
Infrastructure and Environmental Assessment
49.
Pasar Johar is impacted by two kinds of concerns – site specific and regional.
Infrastructure and environmental considerations do not differ much across the two
alternatives.
50.
The main infrastructure considerations that have a significant impact on the timeline
and costs are discussed in detail below. These include the renovation of the heritage
building, the temporary relocation sites, and spatial and environmental permitting. The
design of the phasing and construction program reflects these considerations.
Requirements for Renovation of Heritage Building
51.
Decisions will need to be made as to the level of renovation and reconstruction of the
heritage buildings during the pre-development phase. Two extremes were considered, and
options between these are also viable:
51.1.
structural refurbishment to safe standard and general clean-up, or
51.2.
full heritage building renovation.
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52.
The Consultant team recommends a solution closer to full heritage building
renovation to improve conditions, improve tourism and allow the SCG to seek international
heritage funds for the renovation. Key aspects of the renovation or reconstruction are as
follows:
53.
Removal of Add-On Structures. The heritage buildings should be returned to their
original condition and structures and walls not part of the original building should be removed
or renovated.
54.
Structural Survey. Visual inspection shows extensive corrosion of the soffit of
suspended floors and of the roof ventilator covers. However, it cannot be concluded without
intrusive inspection whether internal corrosion has occurred and been masked by routine
renovation work and a structural survey is recommended.
55.
Lighting. The original building is reported to have had artificial lighting. The types and
locations of the original lighting need to be identified, from available historic documents, in
order to assess how best to renovate or reconstruct.
56.
Ventilation. A key feature of the original design was the open structure with crossventilation. Ventilation is now much more restricted by the addition of roofs over the main
aisles, by external walls, and by allowing kiosks to build up to two floors across the building.
It is envisaged that if the building is to be returned to its original state, vendors will be limited
to the use of los, and kiosk vendors will be housed in the new buildings.
57.
Drainage. As regional subsidence has taken place the ground floor level of the
building has progressively sunk in relation to the roads and surrounding newer
developments. As mitigation, parts of the ground floor aisles have been raised and new
drains installed below them, effectively reducing headroom. During renovation, these raised
walkways must be removed, and new drainage system installed below original floor system
and will require pumped discharge to the local drainage system.
Figure 10: Pasar Johar in 1950
58.
The heritage building will require an extended study before a budget and plan can be
finalized, and a two-phase redevelopment program for Pasar Johar with the heritage building
in the second phase is preferable from this perspective. This will allow more time for a
comprehensive evaluation and funds sourcing for the renovation. The city investment
program of 2010 identified a cost for the renovation of IDR 54,675 million for a building floor
area of 13,500m2. This equates to IDR 4.05 million/m2. A figure of IDR 4.4 million/m2 has
been adopted for the financial analysis.
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Renovation of Temporary Relocation Sites
59.
The relocation sites were visually assessed to evaluate conditions and identify
specific requirements for refurbishment.
60.
Johar Shopping Centre (SCJ). No evidence of any structural distress was identified in
the walk through. There is some apparent corrosion of steel in beam soffits on the fourth
floor, which would need further investigation if the building were to be used long-term. The
sub-lessee reported that all utilities are in good working order except that the escalators to
the second, third and fourth floors require replacement rubber handrails, and most probably
a full maintenance. Replacement stair handrails and repainting and floor finish are also
required prior to relocation of vendors.
61.
SCJ North, the vendor building behind Matahari, has four floors. The building is
generally in reasonable condition Table 5: Assessed Relocation Costs though there is
substantial structural cracking in stair well walls, which may indicate the building has settled.
A full-structural survey of this building should be incorporated into the market redevelopment
program.
62.
Pasar Dargo. The roof of this existing two-storey public market is in poor condition
and roof debris, which is likely to be asbestos-based, is extensive over the unused part of
the first floor.
63.
Based on the available access for inspection and information a cost estimate has
been made and is summarised in Table 5: Assessed Relocation Costs.
Table 5: Assessed Relocation Costs
Spatial Planning Codes and Regulations
64.
Semarang City Local Government Regulation No. 6 of 2004 on Detail Urban Spatial
Plan (Rencana Detail Tata Ruang Kota/RDTRK) of Semarang City, Area I, Year 2000-2010
currently regulates the use, level and intensity of development in Pasar Johar. However, this
regulation has expired, and RDTRK 2010-2020 is still to be drafted.
65.
Discussions with the Semarang City Planning and Settlement Office, suggested that
urban spatial planning guideline will be revised given the very dynamic development of
Semarang City in the last 10 years. In revising the guideline, the Office will accept inputs and
recommendations from the Consultant team for Pasar Johar.
66.
Lot height, lot coverage and FAR guidelines vary based on the use, street width and
classification fronting the lot. As such, considering that the Johar area revitalization is not a
single buildable lot but consists of several building blocks in an area of about 4.5 hectares, it
is proposed that the redevelopment be treated similar to a Planned Unit Development, and
the whole development area be considered as one lot. Table 6 compares the alternatives to
RDTRK 2000-2010 and provides guidance to the City Planning office on recommendations
that should be incorporated in RDTR 2010-2020.
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Table 6: Guidance on Spatial Planning Guidelines for RDTR 2010-2020
Parking Codes and Regulations
67.
Parking needs for Pasar Johar are accommodated based on guidance provided by
the Technical Implementation Guidelines for Parking Facility, Directorate General of Land
Transportation Ministry of Transportation Number: 272/HK.105/DRJD/96.
68.
Based on the above guidance, total parking area calculated for the alternatives was
7,385 m2 for Alternative 1 and 9,461 m2 for Alternative 2. Discussions with the vendor
management associations and the Transportation Department indicated the desire to
accommodate parking for Masjid Agung within the site. Determination of the needs of Masjid
Agung is beyond the scope of this project, but either of the alternatives have sufficient space
under the aloon-aloon to accommodate these needs, if so desired by the City.
Transport
69.
Road Improvements. Upgrading of the existing roads around the site, signal
improvements, and removal of buildings encroaching into the existing roads is proposed.
This is expected to cost approximately IDR 4 billion.
70.
Vehicular Traffic. Vehicular access around the site is proposed by a clockwise oneway road around the periphery of the development from Jalan Permuda/Agus Salim junction
to Jalan Alun Alun Barat and across to Jalan Pedamaran.
71.
Pedestrian access. The site lies close to the planned Green City Walk. Since the
Pasar Johar heritage building should be incorporated into future tourist focus, extension of
this green route down Jalan Agus Salim would be appropriate. Along the Agus Salim
frontage of the redeveloped Yaik area a wide pedestrian walkway at road level will be
incorporated, along with a pick-up point for local public transport. Strong pedestrian
connections across Agus Salim to the SCJ building should be designed to increase
pedestrian safety and easy connections.
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Utilities
72.
The utility works for the overall development are quite straightforward, and there are
no significant differences in the general requirements for either of the alternatives.
73.
Sewage. A new sewage treatment plant for Semarang is planned to be completed in
2017 and a trunk sewer system in 2018. The city master plan for installation of a foul sewer
network should be seen as linked to this project, and that investment in the city revitalization
is more likely to be forthcoming if the sewer network is installed.
74.
Waste Collection. The vendors and their waste collection contractors already
practice waste separation for reuse and recycling. Consequently the city approach of reuse
and recycling should not be imposed on the new market development. However it is
appropriate for the private sector development on the site, and a 3R transfer station has
been allowed for in that development.
75.
Electricity. Adequate electrical supply is available from the PLN grid. The use of
renewables in individual developments is not well advanced in Indonesia as a result of low
grid tariffs and a developing feed-in tariff system. Photovoltaic electrical supply generation
on the new buildings can be adopted as a pilot demonstration project and may be financially
feasible for the traditional market, considering the low cost of capital from PIP.
76.
Rain Water Harvesting. The long dry season in Semarang means that rainwater
harvesting is not very practical as an integral part of the water supply system to the
development. However a modest rooftop collection system could be of benefit for use in soft
landscaping irrigation.
Environmental Concerns
77.
A preliminary environmental assessment found no significant issues related to the
development. Most of the development is incremental and as such has an incremental but
manageable impact. The environmental concerns raised are mainly social and relate to the
pre-construction and construction phase of development.
78.
Social concerns relate to negative attitudes and perceptions of community/traders. A
good socialization during the preliminary planning process, detailed discussions with the
community and close coordination with the vendors is proposed as a part of the next stages
of the project implementation.
79.
Construction phase environmental concerns relate to lack of employment
opportunities, impact on traffic, air quality, noise and solid waste. A strong relocation plan
and attention to safety and management can mitigate many of these impacts.
80.
Post-construction, improvements in air quality, traffic, surface water quality,
hydrological, and solid waste are expected.
Climate Change Adaptation and Mitigation
81.
A major concern that is not alternative dependent or site-specific relates to climate
change adaptation and flood control in the Semarang and the associated impact on Pasar
Johar.
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Effects of Climate Change on Semarang City and Pasar Johar
82.
Regional and local1011 studies on climate change have confirmed that Semarang City
is and will be affected by significant climate change impacts including increasing
temperatures, increase in rainfall and drought extremes, and rising sea level.
83.
Increase in temperature. The increase in temperature is not of direct significance to
the alternatives. It is proposed that energy efficiency design principles be incorporated in the
detailed design of the alternatives to mitigate the negative effects of slightly higher
temperature.
84.
Rising sea level. Rising sea levels provide a significant threat to the long-term
viability of the whole of downtown Semarang, which is on an alluvial plain, less than two
metres above sea level in the Pasar Johar area. The City has developed flood prevention
measures consisting of canals, pumping systems and dikes12. These are under construction
and except for the Northern Dyke they should be complete in 201413. The Northern Dyke is
the inner ring road, under the management of Bina Marga, and they will be responsible for
raising the dike as required to maintain a freeboard on high tides and storm surges.
85.
It was therefore concluded that the Pasar Johar Redevelopment should be
considered within the context of these measures, and it assumes that the citywide flood
control measures will be completed and maintained, such that Pasar Johar is not subjected
to significant flooding.
86.
Subsidence. While not a part of climate change, the situation of vulnerability to
climate change in Semarang and Pasar Johar is exacerbated because of the ongoing
subsidence caused by groundwater extraction in the aquifer below the compressible nearsurface deposits in this alluvial plain. The present rate of subsidence of nearly 10cm/year is
an order of magnitude greater than the projected sea level rise in the future. Pasar Johar is
already reported by vendors to flood on ten days each month during the rainy season, and
other buildings in downtown Semarang have been abandoned for this or related reason.
87.
Legislation to control extraction of groundwater has been put in place14, and the City
is developing other water sources to replace groundwater. If regulations are applied in
compliance with the Acts then the rate of subsidence should eventually reduce substantially.
Climate Proofing of the Proposed Project
88.
Local flooding due to extreme rainfall or short-term capacity limitations of the main
flood control system remains a concern for Pasar Johar. It is therefore recommended that
new buildings be constructed with ground floor level above general street level. A height of
two metres is recommended and should be reviewed at the detailed design stage. This
general concept is already generally adopted in Semarang, and the SCJ Building on Jalan
Agus Salim is more than one meter above ground level.
89.
Currently car parking for the new buildings, particularly in Alternative 2, is planned to
be in basement and pumped drainage will be required; however with ground floor at two
meters above street level the pumping requirements become quite modest.
10
Building climate change resilience in Semarang, 2nd World Congress on Cities and Adaptation, Asian Cities Climate Change
Resilience Network (ACCCRN), 2011 (presentation)
11
Gunawan Wicaksono, Urban Climate Change Resilience in Semarang – Indonesia, City Engagement and Key Findings from
Vulnerability Assessments (undated presentation)
12
Further details on this can be found in Section 3.4 of the Infrastructure Viability Report.
13
Further information is based on a field visit with the Drainage Engineer after production of the Interim Report
14
Central Java Provincial Act No. 6/2002 on groundwater extraction; Central Java Provincial Act No. 7/2002 on groundwater
extraction tax.
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90.
The renovation of the heritage building will require a pumped drainage system, as the
ground floor of this building is well below existing street level.
Climate Change Proofing of Buildings
91.
Climate change proofing falls into two categories: i) regulations imposed by
government and ii) energy-efficiency measures adopted because they provide an economic
return to the investor.
92.
In Indonesia the control of development to provide climate change mitigation is still at
an early stage. However any specific requirements identified at the design stage will need to
be incorporated.
93.
Energy efficiency will be a focus in the design, and in addition to the Indonesian
Standard15, there is a developing interest in Indonesia in “green buildings” as evidenced by
the Green Buildings Council Indonesia. Guidance on improved designs may be expected
from this organization in the future, as well as from the regional center in Singapore.
Climate Change Mitigation
94.
Measures proposed to mitigate the effects of climate change, and to reduce the
environmental impact of the project, have been considered, as follows:
95.
94.1.
Use of energy efficient design in the new buildings, in accordance with
standard practices for green buildings generally and as appropriate for the
specific types of buildings.
94.2.
The possible use of solar power would be economically feasible under PIP
funding and can be provided as a demonstration project.
94.3.
Rainwater harvesting to reduce the demand on the main water network
sources.
94.4.
Continuation of waste separation in the market buildings, and better waste
management. However biomass conversion should take place at the City
landfill site where economies of scale exist, and where the site is more
appropriate for this activity.
94.5.
Provision of a waste separation facility in the new private sector building, in
accordance with City policy for waste management.
These are discussed further in following sections.
Flood Control
96.
The Master plan for flood control in Semarang is underway and the main components
that impact Pasar Johar are in various stages of implementation. The North Ring Road Dyke
is constructed, and the dredging of Kali Semarang is due to be undertaken in 201416. The
Consultant team has been advised that therefore Pasar Johar is not at risk from future
flooding. However the control of ongoing subsidence which could put flood-control measures
at risk in the long-term, will be essential.
15
16
Konservasi Energi Sistem Tata Udara Bangunan Gedung, SNI 6390: 2011
Harsono,pers comm
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97.
Locally the main storm-water sewer pipe in Jalan Agus Salim outlets into Kali
Semarang and is sufficient. Drainage Division would prefer that the storm-water system not
be pumped as the maintenance requirements are too high. However it was accepted that if
Pasar Johar Utara &Tengah are to be renovated to the original state then pumped drainage
will be required for them.
98.
Although the existing sewer along Jalan Pedamaran is reported to be in working
condition, it will be prudent to allow for replacement as a part of the redevelopment.
99.
Finally, as stated earlier, new buildings will be constructed with ground floor level at
approximately 2m above street level, to further reduce risk of flooding, and to minimize
pumping from the basements.
Total Infrastructure Costs
100. The total infrastructure costs to support the relocation and redevelopment of Pasar
Johar is shown in Table 7. It is expected that the City will absorb the relocation costs. The
infrastructure costs are included as a part of the overall construction budget and funded as a
part of the redevelopment of Pasar Johar.
Table 7: Relocation and Infrastructure costs
E.
Financial Viability of Alternatives
101. SCG is highly interested in mobilizing private sector participation in the
redevelopment of the Pasar Johar for the following reasons:
101.1. Limited Fiscal Capacity and Accelerated Provision: The City is interested
in using private participation to overcome constraints on the City’s budget and
budgeting process. Currently, markets in the City have been redeveloped in a
“pay-as-you-go” fashion17, with limited budgets causing delays in project
selection and implementation.
101.2. Larger Scale of Redevelopment: Private sector participation and inclusion
of non-traditional market uses will allow the City to develop a much larger
project than a traditional market alone. A larger project could help catalyze
other development in the Old town area.
17
Please refer to the Finance Viability Report. The City has redeveloped 8 markets in the last 10 years.
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101.3. Land Value Capture and Revenue Innovation: Low density throughout Pasar
Johar provides an opportunity to increase density in the redevelopment and
capture increased value.
Project Structuring for Alt 1 - Public Traditional Market Only
102. Under the currently used “pay-as-you-go” scenario of budget funding for
redevelopment, it can reasonably be reasonably expected that completion of a project at the
scale of Pasar Johar would take 5 years for construction, resulting in significant relocation
losses to the vendors.
103. To ensure certainty of financing, three alternate funding scenarios – private sector
financing, PIP financing, and IDFI financing - are considered. Reduced dependence on the
city budget could reduce the time of construction to 2 years and substantially reduce vendor
loss. In either of these scenarios, the private sector would design and build the project as a
fee-development and transfer it to Dinas Pasar for management and operations. The City
would then repay by refinancing or from revenue from Pasar Johar operations or the city
budget. Any grants that may be available from the Centre or the Province will be used to
reduce the obligation. Discussions with the private sector indicated an increased interest in
bidding for construction allowing improvements in procurement if a guaranteed source of
financing is available and construction can be completed without annual procurement and
associated “fits and starts.”
Figure 11: PSP Options for Traditional Market Development
Discussion of Findings for Alternative 1 - Public Traditional Market Only
104. The main difference in these scenarios, as shown in Table 8, is the associated cost
of capital, which has been estimated based on market sounding and interviews with
agencies.
105. A comparison across the scenarios shows that a stand-alone market is not financially
feasible under any of the scenarios, even without considering the cost of land.
106. Second, as the figure shows, there are significant losses to vendors due to the
uncertainty of transfers and the additional years of relocation in Scenario 1, which make the
financing costs associated with the alternate scenarios viable.
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Table 8: Comparison of Project Structuring Scenarios for Alternative 1 - Traditional
Market Only
107. The difference between PIP financing and IDFI financing is not very significant.
Conversations with PIP have been very encouraging, and although more conservative than
IDFI financing, the analysis of the traditional market in the report assumes PIP financing.
Break Even Analysis for Alternative 1 - Public Traditional Market Only
108. A break-even one-time lease fee analysis and a break-even rent analysis were
performed to identify how much either of these retributions would have to be increased to
defray the costs for the market’s redevelopment.
109. One-time Lease Fee. As shown in Table 9, the fee that would have to be charged
vendors at the start of rental varies from IDR 2.25 million/m2 for Scenario 4 (IDFI financing)
to IDR 6.67 million/ m2 in Scenario 2 (private financing).
Table 9: Break Even Analysis for Scenarios for Alternative 1 – Public Traditional
Market Only
110. Break Even Rent. Assuming Dinas Pasar can improve its collection rate to 80%, the
daily tariff that would have to be charged vendors to fully absorb the cost of the traditional
market varies from IDR 752/m2 for Scenario 4 (IDFI financing) to IDR 2,994/m2 in Scenario
2 (private financing).
111. Break Even Parking Fee. The break-even parking fee of IDR 3,200/car and IDR
1,550/motorcycle for a 2-hour period is in keeping with fees being charged at private facilities
in the area.
Financing Options for Alternative 3 - Traditional Market with BOT for Commercial
Development
112. Alternative 3 is structured as a BOT, wherein the private sector would build the
project and transfer the traditional market to the City for ownership and management while
retaining the ownership and management of the commercial development for a 30-year
term. In return, the private sector would pay the City an annual stream of payments through
a land-lease and a one-time up-front payment.
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113. This one-time payment and the annual stream can be ring-fenced to reduce the debtneeds for the project and the debt-service coverage for the debt respectively. Together, this
land value capture can reduce the financial impact of the development. This reduction in
user charges increases the acceptability for the end-users, the vendors, and makes the
commercial development alternatives more politically and socially viable.
114. The City has had prior experience with BOTs and has participated in eight BOTs
since 1990, though none of the BOTs has been of this scale. Most of these BOTs have been
focused on developing offices or higher-end retail uses and the largest has involved the
development of a high-rise office building with an area of 47,643 square meters18. Table 10
shows the ownership, financing and management structures for the different components of
Alternative 3. All parking, whether publicly or privately owned, will be managed by the private
sector giving it the flexibility to set market rates.
Table 10: Proposed Ownership/Management Structure for Different Components of
Alternative 3
Discussion of Findings for Alternative 3 - Public Traditional Market with BOT for Commercial
Development
115. Commercial Uses: The commercial uses – hotel, retail and office - will be financed,
owned and managed by private sector under a 30-year BOT agreement. It is projected that
the private sector would be willing to pay an upfront payment of IDR 68 billion and an annual
payment of IDR 3.3 billion for the land use rights for the proposed program of development.
This estimate is based on cash flow projections of the proposed program of uses and
developer equity requirements for developing such uses19. It is proposed that these fees be
used to defray the debt servicing costs for the construction of the traditional market.
18
A detailed risk assessment along the life-cycle of Pasar Johar's redevelopment for its use as a mix of traditional market on
the lower floors with the commercial floors on the upper levels is discussed in Figure 2.2 of Volume 4: Financial Viability
Assessment. Mitigation of the major risks is discussed in Chapter 6 of this report.
19
Please refer to Chapter 4: Financial Analysis in Volume 4: Finance Viability Assessment for details.
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Table 11: Financial Analysis for Alternative 3
116. Traditional market. The analysis assumes that the traditional market component of
the project will be 100% financed by PIP, including infrastructure costs. The financing need
can be reduced by the above-mentioned one-time payment from the private sector,
estimated to be approximately IDR 68 billion. The proportional cost of the and, as in practice,
it is not expected
Break Even Analysis for Development
117. The user charges that should be under PIP financing are shown below.
118. One-Time Lease Fee. The break reduces to IDR 1.07 million/m2. This charging and
the lease fee of IDR 2.5
119.
Break Even Rent. Alternatively, the the current IDR 600/m2.
120. Break Even Parking Fee. The for a 2-hour period for the traditional fees are inkeeping with the fees
Comparison of Alternate 1 and Alternate 3
121. Figure 12 compares the sources and uses for Alternative 1 and Alternative 3 with the
current “pay-as-you-go” method of market development. The figure compares the uses of
funds for the construction of the market against the possible sources for the two alternatives,
and for simplicity ignores the vendor loss related with relocation.
122. Under the current scenario, the low user tariff would result in the City spending IDR
3.3 million to build every square meter of vendor stall space in the new Pasar Johar.
123. The costs go up in Alternative 1 due to an increase in financing costs. Although
preferred by the vendors, Alternative 1 has very low financial feasibility and is not a
sustainable option for the City without the introduction of a system of user charges (either
through a one-time lease or an increase in daily tariff). Politically and socially, a one-time
lease fee would be more acceptable, and the City would as it would target only the users of
the redeveloped Pasar Johar and is shown here. The City is willing to absorb any costs
above a IDR 2.5 million lease fee, and would have to spend IDR 1.9 million to build every
square meter of vendor stall space in the new Pasar Johar.
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Figure 12: Comparison of Alternatives 1 and 3
124. In comparison, Alternative 3 is financially feasible and self-sustaining. Land value
capture will allow the city to obtain IDR 3.3 million from the private sector towards the
construction of every square meter of vendor stall space. This inflow from the private sector
removes the need for dependence on the City and reduces the one-time lease fee for the
vendors to IDR 1.1 million, thereby increasing its acceptability. Preliminary discussions on
this option have highlighted the need for more socialization of the concept. The horizontal
and vertical mix of ownership and management will require legal condominiumization and
clear output specifications for the private and public sector alike.
125. Given the private sector interest in development, the social, economic, and financial
benefits to the city from a larger scale of development, the prior experience of the City in
negotiating BOTs, and the ability of the City to manage the risks associated with a largescale BOT, the Consultant team recommends Alternative 3 for the redevelopment of Pasar
Johar.
Ability of the City to Finance Alternatives
126. An assessment of the City’s ability to repay the amount needed for the financing of
the traditional market is a critical component in assessing the financial viability of the
alternatives.
127. Based on the financial analysis and as shown in Table 12, the financing need for
Alternative 1 ranges from IDR 203 billion (if no lease-fee is charged) to IDR 138 billion (if the
City charges a lease fee of IDR 2.5million/m2). For Alternative 3, the financing need reduces
substantially due to the expected private sector contribution of approximately IDR 68 billion,
and ranges from IDR 138 billion (if no lease-fee is charged) to IDR 70 billion (at a lease fee
of IDR 2.5million/m2).
Municipal Finance Assessment of the City of Semarang
128.
An analysis of the municipal finances shows that:
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128.1. The finances of the City are turning around. The city had deficits in 2010
and 2011. But in 2012 and 2013, the City has showed surpluses of Rp. 85
billion and reached Rp.323 billion respectively. Over 2009-2013, the revenue
income has shown an average growth of 16.3% annually while expenditures
grew at 13.2% annually.
128.2. Consistent level of transfers. The City is reliant on transfers as a dominant
source of revenue, and make up 52% of the total revenue. The level of
transfers, though, has been reliably consistent over the period from 20092013.
128.3. Significant borrowing capacity. The City would have repaid all its debts by
the end of 2014, and based on 2013 financial statements has a net borrowing
capacity of IDR 895 billion. As seen in the table below, at the top-end of the
range the financing needs for Pasar Johar’s redevelopment is lesser than
15% of the total borrowing capacity of the City. This drops to less than 8% if
the City proceeds with Alternative 3 and an IDR 2.5million/m2 lease fee.
Table 12: Debt Needs for Pasar Johar as Proportion of Semarang Net Borrowing
Capacity
129. Substantial room for discretion. At an average, only 52% of the total expenditures
were nondiscretionary, providing substantial capacity to prioritize, finance, and implement
the Pasar Johar redevelopment.
130. Figure 13 compares the annual debt service needs of Alternative 1 and Alternative 3
(at different levels of one-time lease fee) as a percentage of the City’s discretionary
expense. It can be seen that the debt service for Pasar Johar is a very small component of
the discretionary expense for the City of Semarang, and ranges from 6.3% on the high end
for Alternative 1 to less than 2% on the lower end for Alternative 3.
131. In summary, the City has the financial wherewithal to finance either of the
alternatives for the development of Pasar Johar.
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Figure 13: Debt Servicing Needs for Pasar Johar as Proportion of 2013 Discretionary
Expenditure
F.
Implementation Strategy and Next Steps
132. Effectively managing the risks associated with a project of Pasar Johar’s scale and
complexity requires front ending and tackling the main risk elements. The three main risk
elements identified through the pre-feasibility of the project include:
133. Design Risk. Given the high social, economic, and planning objectives of Pasar
Johar, it is important that the City front-end the planning, design and uses of the commercial
development. On one hand, the preliminary design will allow effective socialization with the
vendors, design and environmental permitting and reduce social and environmental risk. On
the other, the design will allow more targeted market sounding and investor interest
elicitation. A preliminary design will allow procurement documents to ensure design viability,
specify and locate expected uses, PPP partner resource needs, and simplify comparison of
bids, and assist in the negotiations.
134. Social/Relocation Risk. To effectively manage the social risk, the pre-feasibility has
front-ended the finding of suitable and acceptable relocation sites. A complete structural and
design assessment of these sites should be completed and socialized to allow development
of a detailed relocation plan.
135. Financing Risk. The ability of the city to seek PIP or IDFI financing is critical to the
implementation of the project and investor interest elicitation. Managing private sector
timeline of project construction and delivery requires the city to be able to fund its portion
without delays.
136. Political Risk. While efforts were made to ensure the project development,
financing, and implementation structure are in keeping with existing regulations, the
regulatory regime is sub-optimal for PPPs for traditional markets and allowable uses/terms
are limited. The pre-feasibility study has identified the importance of a review of the local
BOT regulations and local regulations and tariffs for traditional markets to enable ringfencing of land value capture and increase the sustainability of projects like Pasar Johar for
the City of Semarang.
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137. The complete project is expected to take around 6.5-7 years for completion, and can
be divided into 3 phases: Pre-development, Phase 1 of construction, Phase 2 of
construction. The project implementation strategy aims at tackling these risks early in the
pre-development phase.
Implementation Programme
138. The proposed pre-development and construction program for the project is shown in
Figure 14.
Figure 14: Pre-Development and Construction Program for Pasar Johar
Pre-development Phase
139. The success of Pasar Johar’s redevelopment depends significantly on the ability of
the City to maintain momentum during the pre-development phase of the project. This phase
sets the stage for the success of the PPP and focuses on preliminary design development,
financing discussions, PPP structuring, partner selection, and regulation revisions in support
of the project.
Project Management Unit
140. The Consultant team recommends the formation of a PMU to manage the project. A
draft local regulation (SK) requesting authorization of a PMU has been submitted to the
Mayor of Semarang. It is envisioned that the steering committee will include Bappeda, Dinas
Pasar, Finance and Legal Departments as key members. This PMU will have the
responsibilities and the rights to:
140.1. Prioritize Pasar Johar in the Medium Term Infrastructure Investment Plan
140.2. Revise and approve designs,
140.3. Recommend legal document revision, and
140.4. Seek, negotiate and recommend private partner for selection.
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141. This Committee will be supported by a social working group, a financial/legal working
group and a Design/Infrastructure working group; very similar to the focus group structures
that have been used in this pre-feasibility approach.
Supporting Consultant Team
142. Each of these working groups will be supported by a group of consultants. The
Consultant team should be comprised of:
142.1. An international Team leader/PPP expert to support the Finance and Legal
group and to lead the overall coordination between the Team, City, PIP and Private
Sector. His main duties, initially, will include overall project planning, debt-financing
discussions, market sounding, investor interest elicitation, PPP detailed structuring
and document preparation for bidding, and, later, partner selection, and negotiations.
142.2. A local architectural/engineering team to support the Design/Infrastructure
group and lead the preliminary design and engineering, relocation site assessment
and renovation planning.
142.3. A local NGO to support the Social Working group to socialize the preliminary
design with the vendors, lead the space programming for vendor groups, and
manage relocation.
142.4. A local legal expert to support the Finance and Legal group to review/revise
local laws related to raising tariffs for traditional markets, BOT regulations for
apartments, and land value capture ring fencing, and for PPP bid documentation
review.
142.5. A
local
environmental
consulting
company
to
support
the
Design/Infrastructure group to lead the environmental assessment and transportation
analysis.
143. A budget to obtain these resources in FY 2015, shown in Table 13, has been
proposed and preliminarily approved by the Mayor.
Table 13: Proposed Pasar Johar Pre-Development Budget for FY 2015
Debt Financing
144. Removing dependence on the annual budgeting process and obtaining debtfinancing from alternate sources like the Indonesia Investment Agency (PIP) or IDFI is
critical for the implementation of the project. Preliminary conversations have been held with
PIP and have been highly encouraging.
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145. PIP is a government agency under the Ministry of Finance focused on financing local
government investments in prioritized multi-year projects that provide direct benefits to the
public including hospitals, roads, and traditional markets.
146. Discussions with PIP indicate that requirements for the qualification of the City of
Semarang for a loan for Pasar Johar will include the following:
146.1. The total amount of outstanding loan of the City of Semarang and the
proposed loan for Pasar Johar does not exceed 75% of 2013 budget total
income.
146.2. Semarang’s minimum debt service coverage ratio equals 2.5 times the annual
projection of loan principal, interest, as well as any borrowing cost incurred.
146.3. Semarang has no arrears for loans given by the Central Government.
146.4. Semarang should submit audited financial reports for the last 3 consecutive
years.
146.5. Semarang should have a budget deficit lower than that benched by the
Finance Minister.
147. The City meets all of the requirements to seek financing from PIP for the
redevelopment of Pasar Johar. The first step for seeking funding from PIP requires the
Mayor of Semarang to submit a proposal letter indicating the purpose and need for the loan.
Post due-diligence and if approved, PIP will provide a letter-of-intent showing its willingness
to finance 100% of the hard costs for the construction of the traditional market portion of the
project.
148. Such a letter-of-intent will alleviate any private sector concerns about the ability of the
City to provide uninterrupted funding for the project.
149.
At the end of the Pre-development phase, it is expected that the city would have:
149.1. Prepared and socialized preliminary design with the stakeholders.
149.2. Obtained a letter-of-intent from PIP or an IDFI showing willingness to fund the
traditional market.
149.3. Procured
a
PPP
partner
that
is
comprised
of
a
developer/investor/architect/contractor team to lead the construction phases
of the project.
149.4. Completed assessment and renovation of the relocation sites.
149.5. Obtained/processed environmental and planning permits
149.6. Completed review/revision of local regulations related to traditional markets
and ring-fencing of land value capture for BOTs.
Construction Phase 1
150. Phase I of the project deals with the construction of the commercial development
component in Yaik Baru and Yaik Permai and the traditional market in Kanjengan Bioskop
and Johar Selatan and the associated relocation.
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Relocation for Phase 1
151. During this phase, the City will relocate the affected vendors in Yaik Baru, Permai,
Pungkuran, Kanjengan Bioskop and Johar Selatan to the renovated SCJ and Pasar Dargo. It
is expected that this relocation can be completed in three months. Preliminary conversations
with the stakeholders suggest that SCJ will be used for vendors of dry commodities such as
textile/clothing, glassware and Pasar will be Dargo used for wet commodities and seasoning.
Construction for Phase 1
152. Demolition and construction of traditional market in Selatan and Kanjengan as
traditional concrete frame and block infill buildings will require some 18 months for
construction. The demolition of the existing buildings would normally be undertaken with
substantial manual input and an initial six months has been allowed, leading to a 2-year
contract period.
153. For the fifteen-storey buildings in Yaik Baru and Permai a three-year construction
program using traditional build, plus six months for demolition, is appropriate if managed by
the private sector. A six-month reduction in the overall program may be achieved with
through use of precast materials.
154. Faster methods of construction such as steel-frame with proprietary cladding, or
precast concrete and precast panels, could shorten the overall period by six months and
should be investigated further in the pre-development phase. At the end of construction, all
of the relocated vendors in Pasar Dargo will be moved back to the new Kanjengan and
Selatan. The relocated dry commodity vendors in SCJ will be moved to the new Yaik
Permai.
Construction Phase 2
155. Phase 2 of the project deals with the renovation of the heritage buildings, Johar Utara
and Johar Tengah, and the associated relocation. Moving the renovation to the end of the
implementation allows SCG to continue its efforts to seek international donor funding for
conservation.
Relocation for Phase 2
156. During this phase, the City will relocate the affected vendors in Johar Utara and
Tengah to SCJ and Pasar Dargo. It is expected that the relocation to SCJ will be permanent
to reduce density and allow rehabilitation of Johar Utara and Tengah to its original
conditions. If space permits, many of these vendors (mainly dealing in clothing) can also be
accommodated in the remaining space in the new Yaik Permai.
Construction for Phase 2
157. For the renovation of the heritage building, a detailed survey of the structural
condition, and the requirements for removal of later additions, will be required and a year
should be allowed for survey and renovation design, and this can be done only after the
vendors have been relocated from these buildings. Renovation of the building is expected to
take 18 months.
158. At the completion of construction, the vendors relocated to Pasar Dargo will be
moved back to the renovated Utara and Tengah buildings.