Unrealistic targets and inadequate preparations for infrastructure

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.