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Estimating general threshold traffic levels of typical build, operate, and transfer toll road projects in Indonesia

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  • Andreas Wibowo

Abstract

Applying the adjusted present value method enables the estimation of the general minimum traffic levels for the first year of operation required to make typical Indonesia's build, operate and transfer (BOT) toll road projects financially feasible. To determine the level, both average business risk as reflected by the opportunity cost of capital in the country's toll road industry, and project-specific risk as reflected by traffic risk in terms of ramp-up scale, ramp-up duration and catch-up extent are taken into consideration. Pessimistic and optimistic estimates reveal, respectively, that 18 000 vehicles per day (vhd) and 18 100 vhd are the minimum traffic levels under a low traffic risk scenario. This level increases particularly for optimistic estimate if traffic risk rises. To relax these high traffic requirements, the government should attempt to minimize traffic risk and average business risk or to provide financial supports. Sensitivity analysis results demonstrate that the threshold traffic levels are very sensitive to base tolls and construction cost.

Suggested Citation

  • Andreas Wibowo, 2005. "Estimating general threshold traffic levels of typical build, operate, and transfer toll road projects in Indonesia," Construction Management and Economics, Taylor & Francis Journals, vol. 23(6), pages 621-630.
    • Handle: RePEc:taf:conmgt:v:23:y:2005:i:6:p:621-630
    DOI: 10.1080/01446190500040901
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    References listed on IDEAS

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    1. Jeff Ruster, 1997. "A Retrospective on the Mexican Toll Road Program (1989-94)," World Bank Publications - Reports 11573, The World Bank Group.
    2. Estache, Antonio & Romero, Manuel & Strong, John, 2000. "The long and winding path to private financing and regulation of toll roads," Policy Research Working Paper Series 2387, The World Bank.
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    Cited by:

    1. Abraham Park & Chen Yu Chang, 2013. "Impacts of Construction Events on the Project Equity Value of the Channel Tunnel Project," ERES eres2013_97, European Real Estate Society (ERES).
    2. Irawan Soerodjo, 2020. "Joint Venture as a Model of Cooperation in the Infrastructure Projects in Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 396-401.

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