The infrastructure that surrounds people globally includes roads, railways, telephone lines, power lines (Hexter and Mischke 2013, p.1). Their effectiveness is dependent on how they are built and their operationalization that is a crucial factor to the growth of the economy and an arbiter of the competitive nature of different states. However, each global economy faces their own challenges on transport infrastructures. Indonesia faces the problem of increased congestion within the city, the threat of climate change and land acquisition issues. This paper seeks to identify the transport system in Indonesia with a critical analysis of the challenges. Moreover, the paper elaborates on the methods of use to propose for enactment including the Private-Public Partnerships (PPP) and the use of steeper land regulations with regards to the public interest (Khmel and Zhao 2016, p.132).
2.0 Background Information
The roads sector of transportation dominates the infrastructure of the country for passenger transportation and freight. Global Competitive Index (GCI) information for the 2012-2013 financial year indicates a deteriorating position for Indonesia in terms of infrastructure. The ranking of the country fell from position 50 to 26 between 2011 and 2013 despite the country's improvement on the macroeconomic sphere (Kannan and Nicholas 2014, p.1). The three main challenges inhibiting investment in Indonesia are inclusive of bureaucracy within the government, increased corruption and inadequate infrastructural development. Infrastructural development is characterized by poor ports, roads, inefficient railway transportation and inadequate supply of electricity.
Indonesia is characterized as an archipelago and has approximately 17,000 islands that rely heavily on connections through transport links between the regions and islands (ADB 2012, p.2). The bigger islands including Sumatra, Sulawesi, and Java have an extensive domination of roads as internal transportation in addition to the railway as a secondary mode within Sumatra and Java. Majority of the other islands are interconnected using fragmented and incomplete road systems that are poorly maintained for their internal travel. Progressively, shipping transport systems are undertaken between the islands for instance between Sumatra and Java. In several parts of Sumatra and Java, there exist congestion within the roads in the urban regions hence slagging economic development and growth.
Furthermore, costs of logistics are the most detrimentally affected by the poor transport network. The links directly have effects on the industries through inhibiting their export capabilities in addition to affecting domestic transport costs. OECD estimates that the average cost for logistics in the country is at 14 percent of the value of total sales with Medan and Jabotabek having increased costs at 15.6% and 15.3% respectively. In comparison to Japan, their costs of logistics are at an average 4.8 percent (Kannan and Nicholas 2014, p.2). Research by OECD shows that the poor city and district roads that comprise an average 80 percent of the transport network affect business operational costs.
3.0 Options
3.1 Road Network
The road network of Indonesia is mainly on land, used for transporting both goods and people at 70% and 90 percent respectively constituting the majority of the spending of the budget (GBG 2012, p.1). The national network of roads length has increased to approximately 476, 000 km from 391,000 between 2005 and 2009 (GBG 2012, p.1). Despite the increase in the length of the district and state roads, there is an increased number of auto motives that result in congestion. Between 2001 and 2009 there was an average 2% road increase in length that does not much the 11 percent ownership of vehicles that is increasing (GBG 2012, p.1).
Severe congestion of traffic is often highlighted in the central region of Jakarta and other radial highways each afternoon and morning hours. The increased demand in traffic has resulted in congestion of traffic and hence longevity in time spent moving. The issue characterizes decreased mobility and inefficiency of the economy. Economic and social activities expansion and the increased demand for travel have resulted in serious issues of urban transportation. Figure 1 below illustrates the increasing urbanization in Indonesia (Ray 2011, p.4).
Figure 1: Urbanization, Image, Ray, D. (2011).Infrastructure Problems in Indonesia: Key Lessons from Phase I of IndII. [online]
3.2 Railways
The railways are operational under a monopoly in Indonesia until 2007. A law was made in 2007 to ensure a shift in the operationalization of the railways to national development to increase competition in pricing and servicing. For industry, approximately 90% of natural resources and manufactured products are transported via the railway including coal within Sumatra and Java (GBG 2012, p.1). As at 2009, only the two islands above had passenger and cargo railway links. To enable the reduction of road burdens, more development of railways nationwide should be prioritized to ensure the provision of transport systems that are affordable and facilitated goods movement. The figure below shows the rapid increase of motorization within the country (Hakim 2017, p.1).
Figure 2: Motorization in Indonesia, Image, Hakim, I. (2017). Transport and Climate Change Week: Sustainable Urban Transport Development in Indonesia.
4.0 Requirements
4.1 Economic Requirements
After the financial crisis of Asia in 1997, the main focus of budget for Indonesia was the fiscal status of the country meaning reducing unimportant expenditure inclusive of infrastructure. The infrastructural budgets were significantly reduced to maintenance with reduced scope for bigger investments. While there has been an expansion of budgets from 2009, the backlog in infrastructure is still an issue. The success of transport development depends on efficient funding from the budget of the government and the involvement of the private sector. In the funding for the period between 2010 and 2014, there was an allocation of 91.8 billion. Out of the allocation, 44% was to be provided by the private segment of the market. Out of the 44 percent of the supply, 30 percent is to be supplied by the government as an agreement for PPP (ADB 2012, p.7).
4.2 Environmental Requirements
The absence of an eminent law causes slow and sluggish land acquisition procedures. A new law for acquisition is operationally efficient but the absence of a consolidates, clear land tenure for the country and budget deficits is an ongoing challenge for the development of both railway and road networks. The law of 2012 for land acquisition limits the procedure for acquisition of land to 583 days allowing for the revocation of rights of land in relation to the interest of the public (PWC 2016, p.12). Air pollution from the increased number of vehicles on the road has significantly increased. As a result of the global warming threat to climate change, it is essential that the government of Indonesia develops regulatory laws to pollution levels. As shown in figure 3 below, in Jakarta between 2008 and 2013, the quality of air was characterized by an increase in CO by 70 percent while Nitrogen had increased by an average 350 percent (Hakim, 2017, p.1).
Figure 3: The composition of Air Pollution in Indonesia, Image, Hakim, I. (2017).Transport and Climate Change Week: Sustainable Urban Transport Development in Indonesia.
5.0 Comparison
5.1 Economic Factors
The huge majority of the transport infrastructure of Indonesia was neither operated nor designed for profitability. Therefore, the departments of the private sector avoid investment in the transport projects or services that are unsustainable at a time when regulations and policies are vague more so in relation to subsidies. Legal uncertainties, the absence of continuity, inconsistent and unclear regulation hamper public-private partnerships towards the development and growth of road and railway transport in Indonesia (Leung 2016, p.3).
Within the past two decades, the world has witnessed the rapid evolution of a global market for the provision of private, public infrastructure with partnerships. In numerous countries, the incorporation of PPP for the development of infrastructure and the improvement of social service delivery is hindered by the absence of the government’s capacity to implement successful projects. Henceforth, a majority of governments seek assistance from the private sector to ensure financing and the delivery of the projects. The figure below illustrates that Europe leads in PPP expenditure at 353.5 Billion (Ramlugan 2014, p.2). The level of infrastructure in cities like Berlin and London is essential for economic development and growth (Asri and Hidayat 2005, p.1994).
Figure 4: Congestion in Indonesia, Image, Asri, D. and Hidayat, B. (2005). Current Transportation Issues in Jakarta and Its Impacts On Environment.Proceedings of the Eastern Asia Society for Transportation Studies, [online] 5, pp.1792-1798.
It is therefore essential to note that the PPP is an essential approach to curbing the issue of increased congestion of the roads in the urban centers and cities of the country. The government cannot solely implement the projects and ensure their efficiencies. However, PPP ensures efficiency of the projects.
5.2 Environmental Factors
Increase in the development of transportation contributes to averagely 70% to 80% of the general air pollution in the environment inclusive of particulate aspects. Motorized transportation within Indonesia makes a contribution of more than 23 percent greenhouse emissions (Leung 2016, p.4).
Transport modes of infrastructure are vulnerable to the changes in precipitation levels, increasing sea levels, floods, landslide, and drought. The above factors are important contributors influencing the design and development of railways and roads. The vulnerability of the country to change in climate requires an essential adaptation strategy by the government to mitigate the challenge. Both road and railway transport would require the use of critical analysis of the country before planning the construction. The threat posed by the rapid evolution of the environment as a result of human activities results in the destruction of the land.
6.0 Conclusion
Conclusively, deficiency in the road and railway infrastructural development is a hindrance to the economic growth of a country. The challenges faced are inclusive of the legal prospective and regulations on land acquisition that have made it difficult for the government to undertake road and railway projects. Logistics in Indonesia are detrimental and make it difficult to undertake business in the country. The costs of traveling are high and hence influencing the costs of transportation that discourage people from doing business. The financial capacity of the government to facilitate a budget that ensures maximized infrastructural development is necessary. However, after the Asian crisis, and significantly the 2008 financial crisis, the government has restraints on budgeting. Climate change and the effect of greenhouse gasses affect planning and maintenance of roads.
7.0 Recommendation
Available infrastructural funding from past sources does not meet the needs of investments. However, a state should not be forced to be responsible for having solutions to issues in connection with road and railway infrastructure. The PPP is a promising method to obtain private funding. It has proven to be successful all over Europe and is practiced in many other states. The approach is executed legally with the beneficial cooperation of authorities and public bodies with private business organizations in regards to projects that have the direct interest of the state and control for a specific time. With the increase in the demands for adequate infrastructure and public services and budgetary and financial constraints, governments should gain interest in implementing projects using PPP where the private entity is responsible for the financial requirements.
References
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Ramlugan, A. (2014). Public-private partnerships (PPPs) for road infrastructure development in Mauritius: The case of small island developing states (SIDS). Stellenbosch University, [online] pp.1-5. Available at: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.833.1665"rep=rep1"type=pdf [Accessed 10 May 2018].
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Appendix
Figure 5: GBG (2012). Indonesia Transport Sector | GBG. [online]
Figure 6: Ramlugan, A. (2014). Public-private partnerships (PPPs) for road infrastructure development in Mauritius: The case of small island developing states (SIDS). Stellenbosch University, [online]
