The Indonesian infrastructure dilemma

DR. Fuad Bawazier, MA
Economist and Former Finance Minister in Cabinet Development VII

IO – Ever since the New Order (1966~1998), Indonesia has faltered in terms of infrastructure development. Therefore, the measures President Jokowi has taken to build infrastructure should be appreciated, so that Indonesia can compete with other countries. Most importantly though, public infrastructure must be built with sound calculation, both in terms of benefits, quality and the source of its funding so as not to be counterproductive.

The collapse of the girder poles on the Becakayu toll road in East Jakarta on 20 February 2018 further adds to the long list of accidents in the construction of infrastructure projects both under construction and recently completed. Within these two years, there have been at least 14 accidents on infrastructure projects. These accidents also vary greatly from the collapse of cranes, the collapse of a retaining wall next to the underpass on the way to Soekarno Hatta Airport, the toll road and collapsed bridge, along with others. Beyond that, we even witnessed the new terminal 3 Soekarno Hatta Airport flooded and the drop ceiling collapsed in mid-September 2016. Altogether, infrastructure accidents claimed casualties and losses which were not inconsequential.

These infrastructure accidents give an indication of the low quality of infrastructure projects under the Jokowi Government. Another indication would be the suspicion of corrupt practices in the construction of infrastructure projects, so the quality of buildings does not meet required standards. Other factors that degrade the quality of the projects is the hasty work that does not comply with SOP (standard operating procedures), often for political reasons. These infrastructure projects are also suspected to lack adequate EIA. In addition, it is certain that the Supervisory function of overseeing the project is inadequate. The Construction Rescue Commission does not seem to be doing their job properly. Above all, it is clear that there is a lack of coordination among government institutions. These factors lead to carelessness in the execution of project work, resulting in low-quality infrastructure, ignoring safety and security factors, both during construction and after it is completed and opened to the public.

The profusion of this series of accidents has created a strong image in the community that expensive infrastructure projects partly financed with debt are of poor quality and do not meet the safety and security requirements required by users. On the other hand, these infrastructure projects are commercially-based, from companies that sell their services to the public at relatively expensive rates. It is feared that prospective users of this paid infrastructure will be hesitant to use it until they are convinced that the safety has been tested and confirmed. Consequences of such consumer behavior will impair business because of reduced income. A further effect would be project creditors’ concern regarding the project’s ability to repay the debt incurred.

Further repercussions of a low-quality project are excessive costs of repair and maintenance. In addition, as economic life of a project shortens, it lowers the value of the asset or the sale value of the infrastructure. The low value of an asset sale is potentially detrimental to investment and disrupts the policy of the Jokowi Government, which wishes to sell the completed infrastructure in order to get funding for the successive project development. Last but not least is the fall in stock prices of listed companies involved in infrastructure projects on the Indonesian Stock Exchange. On the day of the accident, PT Waskita Karya’s share price on the IDX fell almost 2%.

It is no secret that infrastructure development is a Jokowi political pledge to secure public support. On the contrary, a segment of public opinion judges that these projects are too ambitious and expensive when compared to similar projects abroad. Therefore, we can understand President Jokowi’s serious reaction to a massive accident of infrastructure that could degrade his credibility as a major sponsor of the infrastructure development. The government took dramatic measures to temporarily halt all elevated infrastructure projects in Indonesia, such as the LRT, toll roads and bridges. The Minister of Public Works has pointed out that construction errors have also occurred, so all must be dismantled, both collapsed ones and those that have not. Although it is late in the game to prevent further accidents, the government insists it will conduct a total evaluation of projects’ technical implementation.

In other countries, in such a situation, culture and political morale would call for the resignation of political officials (Ministers) responsible for a project that has claimed lives. All the while, every time a workplace accident occurs in the construction of a project, the one held accountable or prosecuted is a downstream official or responsible field officer. While studying successive work accidents that have occurred, the actual source of the failure most likely is with upstream officials or policy makers. The law must be fair and just both downwards and upwards.