Capital Structure of Indonesian Toll Road Investor

Abstract

The development of toll road investment in Indonesia from the year 1978 until 2008 still slowed down. Before financial crisis, before 1998, the total length of toll road in Indonesia was 532.62 km. At the same time, compared to other nations in East Asian, such as China the total length of toll road was 4,735 km, Philippines was 168 km, Malaysia was 1,127 km, and Thailand was 91 km. So, the total length of Indonesian toll road from 1978 to 2007 was 663.82 km or average growth from 1978 to 1997 was 16.36% per year; and from 1998 to 2007 was 2.26% per year. Compare with China has reached is 45,400 km, Malaysia is 1,574 km, Philippines is 198 km, and Thailand is 107 km.In investment, the total toll road investment in Indonesia from 1990 through 2006 is US$ 3,335 million, in China US$ 20,045 million, Philippines US$ 1,509 million, Malaysia US$ 7,720 million, and Thailand US$ 782 million. The Government of Indonesia (GoI) has planned to push the growth of toll road investment to reach 1099.08 km in 2009 that divided in Trans Java and Non-Trans Java. But on the contrary, there are many investors interested in toll road investment but only a few succeed to build and operate. This paper want to describe the benefit of capital structure to finance toll road investment based Modigliani-Miller (1985) theory and other researchers compare with investors’ capital structure. We can see why the investors especially have listed in stock exchange, Indonesia Stock Exchange, PT. Jasa Marga Tbk. and PT. Citra Marga Nusaphala Persada Tbk., can stay to build and operate toll road. And we can see what the problem of their capital structure.