A tale of two systems in city transportation

This is the second of two articles on transportation in Jakarta by Heru Dewanto, who heads the Center for Technology and Industry Development. He is also CEO of the Jakarta-based Rekainfra International company which is among the consultants involved in the city's mass transit project.

JAKARTA (JP): The subway on the other hand would rely on government subsidy and other government support. Yet, the main source of income would come from the farebox and this should cover 60 percent of total revenue. The remainder would be from government indirect subsidies.

These subsidies were planned to be achieved primarily from a road pricing scheme for private car users along the Blok M in South Jakarta to Kota in West Jakarta corridor. These revenues would be exclusively earmarked for financing the mass rapid transit (MRT) system in the form of government subsidies.

Other sources of subsidies could be obtained from other taxes: betterment tax for properties along the corridor, fuel tax, car ownership tax, parking charges. Again, these taxes would be channeled to fund the subway as government subsidies. In addition, there are land development potentials to be incorporated in the investment structure. This is different from toll roads investment, for instance, that may not include property development in their investment schemes.

On top of those subsidies, the government would still have to provide other support measures such as guarantees for soft loans, exemptions from import duties and provision of hedging against foreign currency risks. The bottom line is that a huge investment of this kind requires government involvement in many ways.

To minimize costs, the combination of three different structures was explored -- a system of underground, road surface and elevated structures. Costs were to be cut to about one-third of the funds needed for the original plan, though this meant compromising on visual intrusion, traffic distraction during construction and the other negative impacts of an elevated structure.

The political crisis added to economic turmoil has led to further uncertainty surrounding these projects. Jakarta public transportation finds itself in a dilemma -- while public transportation has been neglected and left to deteriorate due to poor maintenance, the system must nevertheless carry the city's commuters operating at only a fraction of its capacity.

Despite having completed studies and designs and obtaining all the required approvals, implementation is another story. So is the crisis solely responsible for holding up the progress?

Learning from those initiatives, it is quite obvious that the fundamental structure of mass transit investment has not been put in place. Each tries to overcome the financial shortcoming by developing its own approaches that in many cases may not be based on transportation rationales or best practices. There is no such standard policy of investment structure on mass transit yet.

What next?

The important question is whether Jakarta's mass transit development has ended with the crisis and, if not, how it can bounce back. The options are simply do-nothing or do-something.

The economic slow down actually offers an opportunity to re- assess and reformulate the structure of mass transit investment. Such a cost-minimum preparation should have been undertaken over the last three years.

The real benefit is that when the crisis is mitigated and the country starts to bounce back, the infrastructure will be ready to support growth. On the contrary, delay would lead to the transportation infrastructure further hampering economic growth. Further delay would prove to be very expensive. Obviously we have missed three valuable years in a do-nothing option.

The do-something option should have covered the following issues. There is a need to improve the balance of risk between government and private sector. There is a need to provide more equal competition between the rail and the road by, for example, internalizing the externalities. This means, for instance, road pricing and betterment tax for the landlords within the area concerned, property development, parking and telecommunications along the corridor.

A mechanism for earmarking these pricing policies and taxes needs to be prepared. What is mostly needed is a new robust and integrated pricing policy applied to the transportation sector and also to other related sectors.

Assessment of potential funding schemes should be extended to other government undertakings and multi-sources funding support from the government. Further government commitment and support in the form of policy would be required to integrate the mass transit with other public transportation services, including bus rerouting. Likewise, concurrent land use policy is badly needed.

This conducive environment should be applied to other infrastructure, whether in the form of toll roads, power and water facilities or others. The city and the country cannot afford to repeat the old approach: moving on with huge projects that are often associated with flaws, yet based on a fragile and unsustained basis.

The mass transit system and infrastructure as a whole desperately needs new approaches based on a more sustained and efficient basis. A consensus among the government, private sector, users and the public is needed to agree to a new principle of approaches in the provision of mass transit. This consensus could be achieved through the setup of a city transportation council.

This can be followed by changes in the legal and regulatory framework.

Finally, we would agree on one thing: In a few years Jakarta must begin work on its first mass transit system.