Beberapa waktu lalu sempat baca sepintas buku ini. Isinya tentang perubahan politikal ekonomi Indonesia khususnya pasca Suharto, dan pengaruhnya terhadap orientasi dan kontestasi kepentingan dari para aktor yang terlibat, khususnya di sektor infrastruktur, lebih khusus lagi di bidang pembangunan dan pengelolaan jalan tol.
Penulisnya, Jamie S. Davidson, menggunakan pendekatan politikal sosiologi dan political ekonomi dalam menganalisis interaksi dan dinamika dari berbagai institusi pemerintahan dan swasta yang terkait. Davidson melihat adanya tarik menarik kepentingan diantara "societal
interests, business associations, and rent-seeking." Selain itu Davidson juga melihat adanya proses "extra-parliamentary
lawmaking," di mana internal kementerian terkait (PU) membuat kebijakan tertentu yang memuluskan kepentingan perusahaan tertentu dalam program pembangunan jalan tol, yang sebagian diantaranya bertentangan dengan kebijakan perundang-undangan yang berlaku.
Saya sendiri tidak terlalu terlibat isu ini, namun barangkali ada kawan-kawan lain yang tertarik, serta berminat membeli dan membaca buku ini...
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Jamie S. Davidson (2015). Indonesia’s Changing Political Economy:
Governing the Roads. Cambridge University Press. (Pp.229-242)
Link:
http://www.amazon.com/Indonesias-Changing-Political-Economy-Governing/dp/1107086884
https://books.google.co.id/books?id=x2i8BQAAQBAJ&printsec=frontcover&dq=Amazon,+Indonesia%E2%80%99s+Changing+Political+Economy&hl=id&sa=X&ei=tF4bVZZtzLW4BLDQgsgI&ved=0CBoQ6AEwAA#v=onepage&q&f=false
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Berikut bagian kesimpulan dari buku Davidson ini:
Infrastructure investment invites controversy. Large projects can
acquire a notoriety that even their most irrepressible supporters cannot deny,
such as modern highway systems in Germany and Italy and in New York City built
by dictators and megalomaniacs; markups in the tens of millions for nuclear
reactors in the Philippines; “bridges to nowhere” in Alaska, Japan, and Russia; “white elephant” projects across Africa funded by foreign aid; Boston’s “Big Dig,” years late and billions
over budget; glitzy, prestige transportation projects in Beijing and Singapore;
the making of “ghost towns” by the opening of bypass highways; enormous dams that uproot
millions and that are “massively beneficial to the well-connected construction and engineering companies
(domestic and foreign) that build them, to the international development banks
that finance them, and to the
army of social, economic, and environmental ‘expert’ consultants who plan for and evaluate their wider impacts;”[i] and a superb highway
system in a US state (West Virginia) that remains among the country’s poorest.
This infamy, however real, can also sit askance with the
conclusions of economists who, through systematic testing, have demonstrated a
positive relationship between economic growth and infrastructure. Contrasting conclusions
do persist, but a recent state-of-the-field report finds an “increasing consensus around the notion that infrastructure
generally matters for growth and production costs, although its impact
seems higher at lower levels of income.”[ii]
If this is the case, how are developing countries supposed to go
about achieving the goal of improved infrastructure?
For the IFIs, their technocratic strategy revolves around a set of
policy guidelines putatively predicated on global success stories (typically
from developed economies) that they propose developing countries should adopt
and apply. A core feature of this “best practice” approach has been private sector participation. During the latter’s heyday in the 1980s
and 1990s, this pro-market perspective saw the state as a provider for an environment
of law and order in which property rights and contracts could be enforced
reliably. Since the great market failures of the 1997–98 Asian financial crisis, the
strategy has undergone some revision, including attempts to enhance
institutional capacity in order to regulate market transactions effectively.
This involves the implementation of the so-called second generation of reforms
with accountability and transparency – in other words, creating good governance. That said, in infrastructure investment, the “best practice” model continues to lay emphasis on engaging the private sector,
inducing competition, and allowing for beyond cost-recovery tariffs.
Although in some respects the “best practice” model is a normative and thus an unobtainable ideal, its active
promotion by IFIs makes it relevant for developing countries. As this book has
shown in considerable detail, this especially has been the case for Indonesia.
Since the 1998 downfall of its longtime authoritarian ruler, Soeharto, the
country has embarked on wide-ranging IFI-led reform and “best practice” programs aimed at
liberalizing (and also reregulating) its economy. Nearly two decades on and some
ten years after the World Bank declared Indonesia to be post-crisis, private
sector participation in infrastructure has not fared well. Despite concerted
efforts, less than 250 km of expressways, for example, have been built in
Indonesia since 1999, equivalent to roughly 17 km per year. Even less of this
low figure has been built with
private sector capital (see Figure 4.1).
This book questioned the efficacy of promoting private sector participation and best model
programs in countries that lack key ingredients for their success. Generally
speaking, impediments to the wider liberalization of Indonesia’s economy are
inter-connected and well known: weak and fragmented state institutions captured
by predatory elite interests, ineffective bureaucratic implementation, business–government relations
that vacillate from collusive to antagonistic, an incapacitated rule of law,
rising economic nationalism, and an uncertain investment climate – in sum, a poor record of
economic governance.[iii]
These broad factors accurately depict current conditions in
Indonesia. This book argued, however, that these obstacles manifest themselves
in key sectors. In other words, analytically it has sought greater specification of the factors
that are bedeviling private sector participation in infrastructure projects. To
do so, I focused on the curiously understudied toll-road sector. Few sectors
were as publicly associated with the cronyism of Soeharto’s New Order regime as
this one. Nevertheless, post-Soeharto administrations have believed in the
completion of an expressway linking Jakarta to Surabaya, the country’s two industrial
centers, as a key component of sustainable future growth.
This book has not been a conventional transport study. It neither presented
an econometric model to assess the efficiency of building the Trans-Java Expressway nor employed an
economic geography approach to determine the reaction of firms to the toll road and
their subsequent investment and location decisions.[iv]
This study has suggested that the intensive efforts of state officials to induce private
sector participation in Indonesia’s expressway sector is principally a political endeavor that can shed
critical light on the liberalization of the country’s economy and offer a
general lessons for reforming the tollway sector in other developing countries.
The Trans-Java
Expressway
The building of the Trans-Java Expressway has been riven with inefficiencies in policymaking
and implementation. Even this indisputable conclusion requires qualification, however. The
trials and tribulations of constructing this extended inter-regional expressway
should not be used as a stick with which to beat countries like Indonesia (and
others like it) over the head for failing to reform along “best practice” lines or similarly
failing to institute strong versions of OECD-style regulatory capitalism. There
are “logical limits” to the adoption of “best practice.”[v] State officials have struggled in
the shifting of economic governance in Indonesia from being predicated on the
ruler – Soeharto as the ultimate
dispenser of patronage – to being premised on rules and procedures.[vi] In the making of
megaprojects, cost overruns, delays, and other risks (political, currency,
commercial, “acts of God,” and so on) are common, even in states with better development and
investment track records than Indonesia’s.[vii] This contextual study
has highlighted the considerable complexities that surpass the usual challenges
and risks associated with toll-road investment like large-scale immobile capital
and long payback periods.
Building a new (or “greenfield”) expressway through the densest corridor of the world’s most densely populated
island, in a country with a porous rule of law and an economy that crashed less
than two decades ago, number among the most significant of these obstacles. The division of the Trans-Java Expressway’s franchises into
mini-concessions in the 1990s
under an authoritarian regime did not aid matters. In large part Soeharto
distributed these licenses to placate pribumi contractors
(with ties to the state) as their resentment over the increasing dominance of
his children in the sector, and that of Sino-Indonesian conglomerates retained
over the economy, brewed. Even in the mid-1990s frenzy of private investment in
Indonesia, when foreign investment in tollways wasmaking its first inroads, investors partnered with the palace children (especially
Tutut) to protect their property rights. The distribution of these
licenses that were devoid of clearly defined
responsibilities and obligations made it difficult
for a more democratic state to gain control of the concessions subsequently in
order to restart construction of the toll roads. This was readily apparent
during Megawati’s government (the third
post-Soeharto administration), during which the financial
crisis’s impact waned and opportunities for
increased public and private infrastructure investment seemed possible again.
Officials revoked the licenses of a
select number of politically vulnerable private concessionaires in order to
transfer them to Jasa Marga, the state toll-road corporation. However, the SOE’s management was hesitant to build these routes because of the
company’s indebtedness. The latter stemmed from
state directives to build loss-making turnpikes in Medan, Cirebon, and Semarang
(with the aim of sparking economic growth); lost revenue due to the Asian financial crisis-led downturn in traffic volume; and the KKNrampant in the sector. JasaMarga’s board needed a “push” by
Megawati’s administration to construct only
the most commercially promising (Cipularang) route outside Jakarta.
With
other revocations held up in the courts, domestic (and foreign) investors,
including Jasa Marga, balked at investing without the regulatory reforms they
and others had been seeking for some time. These reforms materialized only at
the close of Megawati’s term with the passing of the 2004
Road Act. The first notable reform was the automatic
tariff adjustment mechanism (indexed to inflation
every two years), which for investors and market liberals was an advance over
the way raises were determined under Soeharto, that is, at the president’s discretion. The second was the establishment of an independent
regulatory agency, which stripped Jasa Marga of its dual function as developer
and regulator. For market reformers, this was an essential step in levelling
the playing field for all investors. For Jasa
Marga officials, the jettisoning of the SOE’s regulatory authority would allow it to unleash the company’s commercial energies. Therefore, the passage of the 2004 Road
Act, the swift publication of its implementing regulation, and the hosting of
the 2005 Infrastructure Summit were supposed to inspire investor confidence. Nevertheless, impediments remained.
One was
the stripping of the Toll-Road Regulatory Agency’s
(BPJT) real authority via ministerial regulations. It was placed under the
auspices of a Public Works Ministry that had little interest in allowing the
new body to operate either independently or autonomously. Controversially, the Road
Act enabled such former New Order political entrepreneurs as Jusuf Kalla and
Aburizal Bakrie to retain their licenses, assuring that rent-seeking in the
sector would continue. The 2006 sale by Kalla and Soeryadjaya to PLUS
Expressways of Malaysia of their controlling interest in the Cikampek-Palimanan
franchise – the bundling of which into a single
concession was legally dubious –
brought this
realization home. Meanwhile, wary of the private sector, Megawati never
allocated state monies in support of PPP projects – for example, those in aid of land acquisition. World Bank
staffers in Jakarta seethed with frustration as they considered state financial support of PPP projects a staple of international best
practice. In other words, the Indonesian government, in their view, was passing
too much of the risk onto the private sector. Not until 2007 did Yudhoyono’s administration make government land acquisition funds (named
BLU) available. Apart from inter-ministerial disagreement over how to hold
stakeholders accountable in their use, the ability of the BLU funds to speed up
the process was constrained by the deep-seated problem of the use of eminent
domain powers in Indonesia.
Although
multifaceted, the land predicament boils down to one inescapable conclusion:
For decades the state has either used the law as a blunt instrument to enforce
its way or has resorted to extralegal means. Either way, it has run roughshod
over citizens’ concerns or rights. With the army
currently out of the picture –
and paramilitary
involvement restricted to exceptional cases – the
situation for landowners has improved but only marginally. In Yudhoyono’s 2005 eminent domain decree, the bulk of authority remained in
state hands, and his administration tried to replace the coercive use of the
army with the undemocratic strong-arming of the courts as a means to impose the
state’s will. Civil society groups mobilized
to reject the decree, but the 2006 amendments were hardly less state-heavy. It
became evident that the debate over the decrees proved pointless as their
impact on the ground was minimal. Here a primary cause stemmed from the
mismatch of governance-related incentive structures between central government
officials (in charge of toll-road
policy) and local functionaries (in charge of land acquisition under
decentralization). Cautious of being accused of corruption, alarmed at being
the face of government in negotiations with angry citizens, and knowing that in
many instances BLU funds were not available because recalcitrant license
holders had refused to apply for their use, local officials worked cautiously. Stories also circulated about their
purchases of strategic land parcels (through proxies) to drive prices up. This
was the means by which they, without any ownership in the turnpikes, would
obtain rent. A 2003 World Bank-funded “best
practice” consultancy report suggested that if
the central government ignored the interests of local officials, they could bring toll-road development to a halt. The
report proved prophetic.
Energized
by the failure of the 2005 Infrastructure Summit, the Indonesian Toll-Road
Operators Association (ATI) lobbied for sectorwide reforms. It convinced Public
Works, for example, to distribute the BLU funds to concessionaires who were
ready to use them, to lower the interest rates the Finance Ministry was
charging for their use, and to limit license holders’ exposure to rising land costs (through a policy known as “land capping”). ATI’s
composition limited its effectiveness, however. Contract signatories
outnumbered operators, which forced ATI to ally with an informal grouping of
signatories.More substantially, the association was powerless over massive
delays to key links along northern Java’s
littoral whose licenses were held by powerful insiders (and non-ATI members) such
as Kalla, Soeryadjaya, and Bakrie. With these segments stalled, a swift connection
of Jakarta and Surabaya via the Trans-Java Expressway was thwarted. Proponents
of the road’s development potential would have
to wait and see whether its vaunted multiplier effect would bear fruit. The complicated
negotiations over recentralizing the compulsory purchase of land in the public
interest via parliamentary statute extended the wait. On paper the 2012 law may
have improved compensatory procedures for affected citizens, but the National
Land Agency (BPN) has yet to instill confidence
outside a few officials in Jakarta that it has the
capacity to speed up acquisition in a fair, effective, or just manner.
Still, as
the Trans-Java Expressway (between Jakarta and Surabaya) inches closer to
completion, it provides evidence against suggestions that Indonesia is a failed
or thoroughly emasculated state. In early 2013, construction of its longest
turnpike, Cikampek–Palimanan, began in earnest (and is
targeted to open in 2015), while thankfully Bakrie had sold some of his
licenses to another Indonesian firm (owned by the tycoon Hary
Tanosoedibjo). Jasa Marga has finished sections of turnpikes in Central
and East Java; full completion is anticipated.
For the
now freed-from-regulatory-duties, partially privatized Jasa Marga, government
interference has eased, allowing the firm
more leeway in the selection of routes it finances.
Of course, certain kinds of political intervention, like handing the firm the rights in 2002 to the decidedly profitable Jakarta Outer Ring Road that helped to rescue the firm from its debt-laden burdens, have been exceptionally beneficial. However, the space created by a more profit-oriented Jasa Marga has not led to a proportionate rise in
private sector participation, as the pro-market literature
might suggest. Private investors prefer profits and many of the country’s choice routes have
been built. (Its most profitable, the Jakarta Inner Ring Road, will revert to the state, not
to Jasa Marga, in 2023.) Instead, there has been a proliferation of interest in
toll roads by SOEs other than Jasa Marga. The main investors behind Jakarta’s latest planned and exorbitantly
priced inner ring road are municipality-owned companies. For the planned
2,700-km Trans-Sumatra Highway, in 2013 the central government appointed the
construction SOE, Hutama Karya, as the primary contractor, backed by a
yet-to-be-determined government guarantee.[viii] (Not all sections of
this US$1 billion undertaking will be tolled.) Nor were private investors
represented in consortiums behind the 10-km toll-road that opened on Bali in
2013, and behind a planned turnpike outside of Medan.[ix] Finally, in mid-2014
another SOE construction firm, Waskita Karya, stepped in to build and possibly own the Pejagan-Pemalang
section of the Trans-Java Expressway.
Other toll roads have needed substantial subsidies, financed by foreign loans
in some instances, to attract private sector participation, even on traffic-dense Java (where traffic densities are, in
fact, quite uneven). This pertains to two Central Java routes (Solo–Ngawi and Ngawi–Kertosono), and will be
the case in East Java (Pandaan–Malang and Pasuruan–Probolinggo–Banyuwangi) if officials desire the Trans-Java Expressway to be a true end-to-end
turnpike one day. For “best practice” proponents, these arrangements epitomize the PPP concept – appropriate risk sharing
among key stakeholders, which includes public funding contributions, although
the majority of the financing and responsibility for the construction and maintenance of
the facility is provided by the private sector. Nevertheless, it is difficult to determine when
subsidies reach a point where it is more efficient for the state to build the road if it is capable of doing so
and subsequently receive the revenue generated from that road.
Beyond tollways, the government has sought to move on from the failures
of the 2005 Infrastructure Summit. With multilateral and bilateral support, in
2009 and 2010 it established two investment and guarantee funds that, among
others, aimed to lower the cost of infrastructure financing. At about US$230
million, these funds’ capitalization has fallen short of expectations.[x] However, this did not
deter the government from launching amid much fanfare its Master Plan for the
Acceleration and Expansion of Economic Development in Indonesia (MP3EI)[xi]
in 2011. An ambitious plan of some ninety PPP projects valued at Rp. 536 trillion
(nearly US$47 billion), MP3EI was intended to signal the government’s commitment to upgrade
infrastructure and, importantly, coordinate efforts at the national level as a
means to generate growth and improve the economy’s global competitiveness. Not surprisingly, lapses in financing and
institutional capacities have dogged project implementation; the year 2014 may
witness the groundbreaking of a mere three projects.[xii] MP3EI has sparked
discussions about forming a specialized infrastructure bank that would help
overcome weaknesses in Indonesia’s capital markets thatmake, for example, securitizing toll-road
assets difficult, in contrast to China.
Without “fixing” Indonesia’s eminent domain
predicament, questions over the need for the bank have been raised. In all,
despite the extensive lip service President Yudhoyono paid to infrastructure development
as a priority, he had little to show for his efforts after two terms. To leave
behind some type of concrete legacy, he had pinned his hopes on at least officiating the
groundbreaking ceremony for the 30-km, US$25 billion Sunda Strait Bridge that
will connect Sumatra to Java.[xiii] Instead, this task will
be bequeathed to Jokowi, Yudhoyono’s successor.
Political sociology of
infrastructure development and its lessons
In part,
this book was an attempt to put politics back into the study of infrastructure,
a topic that has been dominated by econometric or technocratic approaches. The
institutionalists contributed by helping us to
understand institutions as the political products of conflict and compromise. With conflict
contained and compromise locked in, investor confidence
over their property right protections is boosted. However, their approach did
not go far enough. Plenty of conflict and compromise takes place outside
of formal institutional arrangements and therefore exhibit considerable impact
on the quantity and quality of a country’s
physical stock of infrastructure. Put differently, while the institutionalists
showed that we needed to move beyond “getting
the prices right” to understand the levels of infrastructure investment, this book
has endeavored to demonstrate that we need to move beyond “getting the institutions” right. “Getting the politics
right,” which includes state–society and center–local relations,
especially in large, sprawling democracies, is of equal importance. As such, I
emphasized power relations, history, social conflict, and informal institutions, paying them more heed than
mainstream accounts of infrastructure investment do.
There has been an upsurge in interest within comparative politics
in explaining which informal institutions matter and why. Two leading proponents
note: “Good institutional
analysis requires rigorous attention to both formal and informal rules. Careful
attention to informal institutions is critical to understanding the incentives
that enable and constrain political behavior.”[xiv] In order to show how
political “actors respond to a mix
of formal and informal incentives, and [that] in some instances, informal
incentives trump the formal ones,”[xv] I adopted what I term a political-sociological
approach to infrastructure development. To give this framework empirical
weight, this study identified three crucial areas where informal institutions have played key
roles in the political economy of expressway building in Indonesia.
The first concerned the relationship among societal interests, business associations,
and rent-seeking. Consistent with expectations of a sectoral-based association,
ATI sought efficiency enhancing reforms. But the mainstream literature less often
recognizes that rent-seeking outcomes can vary within a given sector. For
starters, there are positive and negative outcomes. The cases of Kalla and
Bakrie represent the latter, and Jasa Marga the former. Combining a focus on firm-level incentive
structures and that of broader power relations, we saw that Jasa Marga receives
almost all of its revenue from tolls, unlike the companies of Bakrie, Kalla,
and even Soeryadjaya. This helps to explain why Jasa Marga has proven to be a
reasonable builder of turnpikes (although its operational service record for
these roads is patchier). While Kalla and Soeryadjaya’s sale to PLUS was a
main cause of their route’s delay, this inefficient outcome pales in comparison to the mess Bakrie’s toll-road firm made of its licenses.
This difference reflects a second variation – within negative outcomes. After years of delay, construction on
the Cikampek–Palimanan turnpike began in early 2013, in part a result of PLUS’s determination to earn
long-term revenue from its investment. Bakrie’s toll-road entity lacked such commitment. After hardly making
progress with land purchases,
and with BPJT powerless to do much about it, Bakrie first resold his licenses in late 2012. If his toll-road firm was (understandably) waiting for through-traffic from an adjacent section (Cikampek–Palimanan) before investing in its own routes, construction
could have started in 2013. Construction of only one of these licenses (Pejagan–Pemalang) first began in mid-2014.
Second,
using a political sociology approach, I underscored the importance of
extra-parliamentary lawmaking in an expansive account of infrastructure politics.
I set the regulation-making within ministries, for example, against that of
parliament. Even in Indonesia, the latter is a more rational and publically
known rule-bound institution compared to ministries. Out of the spotlight of
the press and the reach of nosy reformers, arenas within and among ministries – less constrained by formal rules and less influenced by political parties, civil society, or IFIs – are where hard bargaining among powerful vested interests is
often conducted. This frequently results in the reinterpretation or watering
down of parliamentary statutes. The behind-the-scenes negotiations that produce
decrees may lead to suboptimal outcomes, but it does not mean they matter any
less for analysis. To the contrary, it makes their very prominence essential.
From the undermining of the authority of BPJT from its inception and tussles with
the Finance Ministry over allocation of BLU monies to the questionable handling
of recalcitrant investors, the (redundant) reevaluation of concession
agreements, and the postponing of putatively automatic tariff hikes,
ministerial politics and related decrees matter. In Indonesia, this arena of
post-statutory enactment, regulation-making is a critical missing link between
studies that seek analytical purchase in the variation of policy outcomes and
that of implementation in the field (or lack thereof).
Third,
the contested nature of eminent domain is a prominent issue where formal and
informal institutions intersect in critical ways. Complicated land tenure laws,
infused with locally situated customs and norms, and overlapping governmental
jurisdictions make the matter messy and cumbersome. From New York City and
Tokyo to China’s metropolises, agreeably grounded
treatments of infrastructure attest to the contestation intrinsic to the
application of eminent domain powers. Because the problem pervades democracies
and non-democracies alike, it brings other governance structures, such as
central–local government relations, to the
fore. As a result of Indonesia’s decentralization program, misalignment
of incentive structures between central and local officials have greatly hampered land acquisition in the public
interest. Running a national-level project through dozens of newly autonomous
districts in charge of land acquisition without providing those local officials with legal and
tangible incentives was misguided. After years of frustration, instead of providing those incentives, central officials simply
recentralized the authority, placing its responsibility in the hands of a body
(BPN) that, as currently constituted, is ill-equipped to handle this gargantuan
task. Equally ill-equipped to adjudicate competing claims impartially are Indonesia’s notorious courts.
After years of hesitation, state officials are now increasingly relying on them to enforce eminent
domain claims. However, the courts are weaker at enforcing the state’s will than the army
under the New Order, to the advantage of affected citizens. This has allowed
for some –
albeit
limited –
deliberation
and negotiation. As long as affected citizens deem compensation to be fair,
they continue to express a willingness to release their land rights for a
project with developmental benefits, although the Trans-Java Expressway will certainly hasten the deagrarianization of Java.[xvi] But citizen support does
waver when assets are transferred to private entities and when compulsory acquisition
requires the demolition of occupied houses. Still, land acquisition can proceed
at a reasonable pace provided that officials conform to the law. Whether the courts prove to be effective
venues or mechanisms to rein in arbitrary actions of state officials remains to be
seen. They have not inspired much confidence thus far.
The focus on the land question leads us to consider the policy
implications of this study of infrastructure investment in Indonesia. Unlike in
industrialized countries where exceptional comparative studies of regulation take
institutional capacity as a given,[xvii] most studies of
developing economies, almost by fiat, recommend enhancing institutional capacities. While
parliamentarians and investors may seethe over BPJT’s weakness, and
negotiations are underway to reform the body, the powers-that-be designed BPJT
(in post-enactment fashion) to be that way – subservient to state interests. Indeed, feebleness may hold BPJT’s key to survival. Consider
the fate of the Upstream Oil and Gas Regulatory Agency (BPMigas), the IRA upon
which BPJT was modeled. In late 2012, the country’s Constitutional Court controversially declared it
unconstitutional, it is widely believed, for acting how an IRA, in theory, is
supposed to act, that is, independently and autonomously. (In this case BPMigas
was accused of pandering to foreign firms.)[xviii]
Beyond platitudinous recommendations to shore up institutional capacity,
there is also the issue of the timing of reforms. Research has demonstrated the
positive effect on private investment when institutional reforms precede
privatization.[xix] For toll roads, similar
steps should occur with respect to compulsory land acquisition. Laws and the
agency in charge of land acquisition need to be in place before private (or
even public) investment is sought. Indonesia’s land predicament has kept foreign investment in its toll-road
industry to a minimum. Although the bleak commercial outlook of the
Trans-Sumatra Highway – divided into seven main sections – has also kept private interest low, we should expect a smoother
land acquisition process for this endeavor than for the Trans-Java Expressway,
especially now that the 2012 law on the matter, and its attendant regulations,
are in place (not to mention Sumatra’s lower population densities).[xx]
The timely acquisition of land can be better achieved if state officials are more willing
to pay near-market rates. The argument that paying such rates will lead to a
prohibitive escalation in costs is understandable but short sighted. Long
delays caused by negotiations over well below market rates cause their own
interruptions that compound problems down the line. Moreover, foreign investors
in the sector have suggested to me that they consider land prices in Java to be
reasonable, unlike land costs in their home countries. Paying near-market rates
will allow officials to acquire land more quickly, which in turn leads to
subsequent efficiencies – for example, the affordability of time to build quality, safe
roads. The practice in Indonesia of slow land acquisition and swift road
construction must be reversed.
Not divorced from the land dilemma, the interests of central and
local government officials need alignment, given the pervasiveness of decentralization programs
worldwide. Even for national-level projects, local officials must be given
meaningful input into the decision-making process when these projects “trespass” on local terrain.
Otherwise, these functionaries can create unwanted headaches when they are
expected to act as mindless implementers of national policy. Notwithstanding
attendant
inefficiencies, China’s phenomenal expressway growth in part has been due to the fact
that provincial officials have been in charge of the process.[xxi]
Expectations about private sector participation in infrastructure
also need to be tempered. This is especially so in countries where the main ingredients
for these programs’ success – power of eminent domain, rule of law, strong regulatory authority,
and fiscal space – are lacking. Decades of
disappointment, featuring high social and fiscal costs, has characterized privatized toll-road programs in
Latin America and in Europe, including Spain – the continent’s longest and largest user in terms of capital value – and the UK.[xxii] Tollway construction
does not require the sophisticated technological innovation or needs of the
telecommunications sector. Thus, foreign or domestic private investment cannot
be expected to bring large gains in efficiency. Moreover, the cost-of-funding argument has been proven to
be misguided, as the state can collect tolls and thus gain revenue as easily as
private entities.[xxiii]
Efforts must also be made to ensure the financial soundness of
winning bids. Intent to build rather than sell on the license must be demonstrated,
especially among the private sector. Putting a new regulatory regime on paper
is insufficient to gauge investor
sincerity. While some may see its actions as belligerent, the 70 percent
state-owned Jasa Marga has decades of experience in building toll roads and has
improved its corporate governance (even if its road maintenance record lags).
If it continues to build its routes at a reasonable cost, inducing more private
sector participation for the sake of it must be questioned. There must be gains
in efficiency, not just
distribution.
This point, combined with heavy state bank investment construction
in the Trans-Java Expressway, should not lead one to consider that Indonesia is
approaching the East Asian developmental state model. The influence of this model – characterized by
collaborative government–business relations, dense policy networks, technocratic
bureaucracies, control over labor, visionary leadership, and state-led
mobilization and direction of resources – has in large part eroded. For some, its fundamentals rested on a
peculiar combination of historical contingencies and contextual factors that
made its export impractical.[xxiv] For others, the concept
became reified, as scholars glossed
over missteps, inefficiencies, and tensions within the development state edifice.[xxv] Neither do many pretend
that low-income countries today, many of them vibrant but flawed democracies, have
the capacity to build the strong state institutions that underpin the model.
This is glaringly the case in Indonesia.
That said, if we lower by some margin our expectations of the
model, Indonesia’s experience has been and continues to be broadly consistent with
Asian economies that exhibit high degrees of state intervention and guidance.[xxvi] The state sector remains
robust, and efforts to pare its size have been met with stubborn resistance.
The recent upswing in economic nationalism is not wholly restricted to concerns
about profits accruing to the
state. Rather, profits (and rent) may fill the coffers of private firms, as long as they are Indonesian (and their owners have close
working relations with state officials, if they are not state officials themselves). As the case of the Trans-Java Expressway
demonstrates, Indonesia can display a kind of a state-led, if not haphazard,
developmentalism by default. The state strives to fill the gaps generated by
the lack of private sector interest, although not always successfully.
Ideological differences among Indonesian political parties may
lead to policy differences on some issues.[xxvii] However, this has been
less so for bigticket economic or development ideas and policymaking.
Illustratively, parties have neither opposed the building of the Trans-Java
Expressway nor have devised implementation or financing alternatives (let alone debate the road’s merits or costs).
Instead, they uniformly have seethed over its interminable delays. Even so, in
a democratically flawed Indonesia, without the pressures generated by a domestic or
foreign threat, state leaders remain sufficiently motivated to produce a policy regime, and oversee its
admittedly checkered implementation, where rents, patronage, profits, and pro-growth
prescriptions are woven together, albeit uneasily and inefficiently.[xxviii] Foremost is a glaring
inability to discipline the business class that will keep an appreciably firm rule of law at bay.[xxix] This creates an
environment where the structure of power collides with “best practice” reforms, producing
outcomes that are neither singular nor predictable. We can garner evidence to
support a range of results, from regulatory progress to policy failure, from
impressive growth rates compared with global averages to the phenomenon of “jobless growth,”[xxx] from positive to
negative rent-seeking, or from coercive enforcement of state policy to democratic
deliberation. The building of the Trans-Java Expressway has been vividly
illustrative of these conflicting and complimentary processes and outcomes. This is
irrespective of whether the megaproject succeeds in the long term, especially
given the social (and environmental) costs it generates and its expense to
travel.[xxxi] The expressway in its entirety may or may not be completed, but if
it is realized, it is unlikely to be along the lines market reformers or their detractors
had envisioned.
[i]
Hall, Hirsch, and Li 2011, p. 138.
[ii]
Estache and Fay 2007, p. 6. Emphasis added.
[iii]
Aspinall 2013a; Robison and Hadiz 2004; Hamilton-Hart 2007; Lindblad and Thee 2007; Manning and Purnagunawan 2011; Blunt et al. 2012; McLeod 2005a.
[vi]
MacIntyre 2000; McLeod 2005a.
[vii]
Flyvbjerg et al. 2003; Delmon 2005 and 2011.
[viii]
It will be Widodo’s administration’s
prerogative whether to honor this designation (Sari 2014).
[ix]
For the Bali turnpike consortium, Jasa Marga owns 55
percent, while six other SOE’s own another 29 percent (the
remaining 16 percent is divided equally between the provincial government and
the Bandung district government (see Chapter 4, note 97]). For the 72-km Medan–Kualanaum–Tebing
Tinggi route, a Jasa Marga-led consortium with three other SOEs was the only
bidder to submit tender papers (Amin 2014).
[x]
Business Monitor International 2012 (Q4), pp. 7–8.
[xi]
In Indonesian: Masterplan Percepatan
dan Perluasan Pembangunan Ekonomi Indonesia.
[xii]
Djauhar 2012; Kusumawardhani 2013. An airport outside Medan opened in March 2014 was retroactively classified as a MP3EI project. Its construction began in
2008, well before the MP3EI was launched (Natahadibrata and Gunawan 2014).
[xiv]
Helmke and Levitsky 2004 p. 726. Emphasis added.
[xvi]
On deagrarianization in Southeast Asia, see Rigg (2003, pp. 291–95).
[xviii]
“Opini:
BP Migas Tamat,” Tempo, November 2011, p. 31.
[xx]
However, progress is stagnant. Widodo will have to sign the
presidential decree that gives the go ahead for land acquisition (and
construction).
[xxii]
Engel et al. 2003; Acerete et al. 2010.
[xxvi]
I thank Mark Thompson for stressing this point.
[xxvii]
Mietzner 2013; Horowitz 2013.
[xxviii]
On these points more conceptually, see Bertrand (1998) and Doner, Ritchie, and Slater (2005).
[xxix]
Aspinall 2013b, p. 240.
[xxx]
Saich et al. 2010, vi–vii.
[xxxi]
If average initial tariffs are Rp. 700 per kilometer, the
twelve-hour or so drive from Jakarta to Surabaya will cost approximately Rp.
430,400 (US$38) for passenger cars. This excludes fuel costs and vehicular
depreciation. Tariffs are considerably higher for freight trucks. In early
2014, a one-way ticket for the hour-and-a-half flight between these two cities could be bought for as low as Rp.
375,000 (about US$32).
