• International Journal of Technology (IJTech)
  • Vol 10, No 6 (2019)

Life Cycle Cost Analysis of the Transit Oriented Development Concept in Indonesia

Life Cycle Cost Analysis of the Transit Oriented Development Concept in Indonesia

Title: Life Cycle Cost Analysis of the Transit Oriented Development Concept in Indonesia
Mohammed Berawi, Pradhana Listio Wicaksono, Gunawan , Perdana Miraj, Hamzah Abdul Rahman

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Cite this article as:
Berawi, M., Wicaksono, P.L., Gunawan., Miraj, P., Rahman, H.A., 2019. Life Cycle Cost Analysis of the Transit-oriented Development Concept in Indonesia. International Journal of Technology. Volume 10(6), pp. 1184-1193

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Mohammed Berawi Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok 16424, Indonesia.
Pradhana Listio Wicaksono Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok 16424, Indonesia.
Gunawan Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok 16424, Indonesia.
Perdana Miraj Department of Civil Engineering, Faculty of Engineering, Universitas Indonesia, Depok 16424, Indonesia.
Hamzah Abdul Rahman Department of Quantity Surveying, Faculty of Built Environment, University of Malaya, Malaysia
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Abstract
Life Cycle Cost Analysis of the Transit Oriented Development Concept in Indonesia

In developing countries like Indonesia, cars are still the main means of transportation. This causes several problems in metropolitan cities, such as the increase in urban population, the volume of vehicles, air pollution, and traffic congestion. The development of Transit-Oriented Development (TOD) on LRT is expected to increase public interest in using trains and reducing the numerous problems associated with the use of cars. However, LRT based on TOD development requires a huge financial investment. Therefore, a financial feasibility study is needed to determine the project was feasible or not. The initial and operation-maintenance costs were used as a case study, with the journal review utilized, where the amount needed to develop TOD in other places was analyzed. The methodology used to get the amount of revenue was the dynamic system. From this study, the initial cost of LRT and Property Development obtained were Rp28,291,200,000,000 and Rp23,617,623,459,802, while the Operation and Maintenance costs were Rp19,017,051,414,153 and Rp36,953,818,402,363 respectively. However the new revenue obtained from operating  LRT stations and properties are Rp41,109,405,822,615 and Rp150,524,288,553,165, with an  IRR value of 9.75%. The values below WACC of 11.01% indicate that the project is not financially feasible.

Financial; Internal rate of return; Net present value; Transit-oriented development

Introduction

The population of Indonesia increases yearly, and this has a significant impact on the need for an adequate transportation system, especially in the country’s more populated cities. In developing countries, cars are the main medium of transportation, and this causes several problems, such as urbanization and increases in the number of vehicles, more air pollution, and greater traffic congestion (Berawi et al., 2017).

In Indonesia, the transit-oriented development (TOD) associated with the Jakarta, Bogor, Depok, Bekasi (Jabodebek) light rail transit (LRT) line is expected to increase public interest in using trains as a mode of commuting. TOD entails the development of a high-density area by integrating several mixed-use buildings around transit stations, with an emphasis on integration and accessibility. However, the problem associated with this method is that it requires a significant financial investment. Therefore, a financial feasibility study needs to conducted to determine if the project is feasible. This study investigated the financial aspects associated with initial, operational, and maintenance costs, in addition to the revenue obtained from the projects at Bekasi Timur Station, Cibubur Station, Ciracas Station, Jaticempaka Station, and from LRT development.  Hence, the financial feasibility of  the project was analyzed  based on the internal rate of return (IRR) value using the lifecycle cost (LCC) analysis.

The definition of TOD varies, depending on the way it is practiced in the different countries in which it is applied. According to Wey and Chiu (2013), TOD is defined as the integration of a city’s land use and public transportation system, allowing the city’s citizens to achieve their daily needs without having to rely on personal transportation. Its application in the development of Jabodebek LRT affords several benefits. It avoids the occurrence of urban sprawl by controlling population growth (Wey & Chiu, 2013), it reduces the use of personal transportation (Wey & Chiu, 2013), it reduces carbon emissions, which is one of the main causes of air pollution, thereby supporting the sustainability of the surrounding environment (Tiwari et al., 2011), and it supports the financial sustainability of several businesses due to numerous factors, such as improved accessibility because the development is based on surrounding transportation facilities (La Greca et al., 2011), increasing the value of real estate property near a transportation facility so the facility becomes a source of potential income for the government and can be used to cover construction and operational costs (World Resources Institute Ross Centre for Sustainable Cities, 2018).

In the field of economics, LCC analysis is used to evaluate the cost of a project associated with its purchase, own, operation, maintenance, and dispose of an object or process. Thus, LCC is a significant consideration in the decision-making process (Fuller & Stephen, 1996). The LCC analysis is conducted over the duration of the project, from its conceptual, design, development, and operational stages to the disposal stages (Blank & Tarquin, 2011). Factors to be considered in calculating LCC are economic age, interest rate, and inflation; toward that end, the initial cost, operational and maintenance costs, and revenue are the components of the analysis (Berawi et al., 2018a). After identifying the LCC components, IRR and net present value (NPV) are calculated to determine if the project is financially feasible. NPV is the difference between income and expenses, where the two components are discounted to the present value. IRR is a discount rate that produces an NPV equal to zero.

 


Conclusion

By performing an LCC analysis of the development project for the Jabodebek LRT based on TOD, the total of the initial cost is 57 trillion rupiahs. Furthermore, a total of the project’s operational and maintenance costs are 152 trillion rupiahs and its revenue was found to be 562 trillion rupiahs for 40 years. Based on the results of the LCC analysis, IRR of the Jabodebek LRT project based on TOD is 9.75% and a total of NPV is 190 trillion rupiahs.

Acknowledgement

This research was supported by research grants from the Ministry of Research and Higher Education, Republic of Indonesia (Kemristekdikti) under grant no NKB-1784/UN2.R3.1/HKP.05.00/2019.

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