Unrealistic targets and inadequate preparations for infrastructure

Rizal Ramli, Jakarta

Indonesia is a country where the condition of its infrastructure is most alarming in terms of both quantity and quality. Therefore, the construction of infrastructure is an obligation that must be placed at the top of the government's priority list. The availability of infrastructure will both speed up economic growth, enhance efficiency in business activities and eventually exert a major impact on opening up employment opportunities.

In its vision and mission the current administration has considered the construction of infrastructure as a priority in its development strategy. This spirit has inspired the organization of the Infrastructure Summit in January 2005. Unfortunately, the outcome of this summit failed to meet public or business expectations. Six months on, and not a single infrastructure project has been implemented.

The summit turned out to be no more than a mere promotion of policies rather than an optimum endeavor for the construction of infrastructure. The scanty results from the organization of this summit has once again proven the poor capability of President Susilo Bambang Yudhoyono's Economic Team to formulate and implement a polity. The quantity target was not realistic while various technical requirements failed to be met. In addition, the construction of infrastructure following the style of the coordinator minister of economic affairs contains great potential for conflicts of interest.

During the summit, investment projects that were ready for tender to the private sector were the construction of toll roads. As many as 38 toll road projects have been on offer, however not all are new ones.

In its 2005-2009 infrastructure construction plan, Susilo's United Indonesia Cabinet has set very ambitious and unrealistic targets in the construction of toll roads. Initially, in a limited cabinet meeting in November 2004, it was decided that in the next five years there would be a construction of 1,500 km of toll roads. Today the target is 1,700 km. This ambitious target shows that the Economic Team fails to understand the real problems in the construction of toll roads.

It should be understood that aside from the problem of financing, the construction of toll roads also involves other problems of greater magnitude, among others, the availability of land. During the 1978-1998 period, a total of only 520 km of toll roads was constructed (on average 25.75 km per year). Meanwhile, in the reform era, the capability of constructing toll roads stood at only 9.25 km a year, using land made available during the New Order era.

Very clearly there is a big gap between the supply capacity and the target in the construction of toll roads. The target is simply unrealistic.

Although the government has issued Presidential Regulation No. 36/2005 on land acquisition to speed up the construction of infrastructure, surely this won't be effective in spurring a significant increase in the capacity to construct toll roads in the next five years. Worse still, this regulation has met strong opposition from many quarters, including the House of Representatives.

Unfortunately, the highly optimistic targets in the construction of toll roads has not been coupled with efforts by the Economic Team to prepare the necessary pre-requisites. Quite a lot of "homework" has yet to be done because it turns out that many of the projects offered to the private sector have yet to be supplied with the supporting documents.

When a project is offered to the public, it must be administratively prepared and its technical requirements must be set as well. Even now, five months after the Infrastructure Summit, not a single toll road project has been supported with a project-specific design package. As many as 77 percent of the projects on offer have yet to be supplemented with bidding documents, and only about 70 percent of the projects have a completed feasibility study that will be ready for use during a bidding project.

In addition, it should have been understood that an infrastructure project is not a mere act of awarding a concession, but, more importantly, it is an agreement within a time-frame for the realization of a project. The positive impact of the construction of infrastructure lies not in the quantity of the concession offered but, rather, in the realization of the projects. The government must set time limits to selected investors for the realization of the projects. If the realization of the project does not conform to the agreement already made, then the investment opportunity must be offered to other investors.

Aside from the weaknesses set out above, the taking over of coordination of the construction of infrastructure by the coordinating minister of economic affairs, Aburizal Bakrie, has a number of weaknesses. In February 2005, the coordinating minister set up the a Cabinet Team for Acceleration of the Construction of Infrastructure, which comprises the finance minister, the minister of public works, the communications minister, the state minister of state-owned enterprises, the state minister of people's housing, Bank Indonesia and president directors of state-owned enterprises, and is accountable to the coordinating minister of economic affairs.

The establishment of a new team under the coordinating minister obviously will cause an overlapping of policies. Earlier, the government had two other institutions authorized to coordinate the construction of infrastructure, namely the Committee on Policies on Acceleration of the Construction of Infrastructure (KKPPI) and the Coordination Team and Technical Team for the Assessment of the Establishment of Investment Funds for Infrastructure and Toll Roads (DIIJT).

The establishment of a new team could potentially lead to a conflict of interest because most of the infrastructure projects offered turn out to draw the interest of the companies owned by members of the United Indonesia Cabinet. This is especially the case considering that the majority of toll road projects are yet to be completed with bidding documents, a feasibility study and project specs. It is very likely that the decision about who will be the investors for these projects will be made through an irrational process laden with conflicts of interest.

Another important but regrettable point is that the World Bank has lent its support to the establishment of a coordinator for the construction of infrastructure under the coordinating minister of economic affairs. This shows that this institution has not learned from past experiences and has ignored the fear of the public that coordination under the coordinator minister of economic affairs, who is also a businessman, will lead to a huge potential conflict of interest.

Given the fact that in Infrastructure Summit I an offer was made for the construction of 1,700 km-long of toll roads covering segments in Java and several regions outside Java, things will become increasingly more unrealistic if the Economic Team plans to organize Infrastructure Summit II, in which an offer will be made for investment projects worth a total of US$ 53 billion, or twice as much as the value of the projects offered in Infrastructure Summit I. It should be understood that Infrastructure Summits should not be mere promotions, but rather offer development plans that are both realistic and feasible.

The writer is a former minister of finance. The article encapsulates the ideas and visions of the Indonesia Bangkit (Indonesia Awakens) movement which the writer is a member of and includes other noted thinkers and activists such as Aviliani, Binny Buchori, Didik J. Rachbini, Dradjad Wibowo, Fadhil Hasan, Hendrawan S, Hendri Saparini, Ichsanuddin Noorsy, Iman Sugema, Ninasapti T, Revrisond Bazwir, Rina Octaviani, Ronnie H. Rusli, Said Bawazier, Sri Edi Swasono, Sunarsip, Umar Juoro, Zumrotin.