Where are We on Infrastructure?
GLOBE ASIA 8/9/2010
I was reminded the other day of the Glaswegian (like Betawi) dark humour name for a respectable firm of lawyers, Delay Worry and Expense, which seemed to describe the apparent inaction towards the development of Indonesia’s infrastructure. While delay and worry are easily understood ‘expense’ requires a little explanation. The context here concerns the huge cost to the nation from the inaction on building the overdue and critically needed infrastructure to support and expand economic growth, alleviating poverty on the way.
Good news stories of recent time are few but it is worth recording the signing of the Sorik Merapi, N Sumatra 320 MW geothermal contract with Origin Tata Power, who will be proceeding soon with the development, starting with drilling. N Sumatra has been one of the key areas of the country hampered by a continuing lack of electricity supply over the past decade.
It is encouraging to note that Indonesia, which has some 40% of known world reserves, is now taking seriously the expansion of its extensive renewable energy resources, and further awards in geothermal can be expected in the foreseeable future. This is in line with the pronouncement by the previous Minister of Energy and Mineral Resources that a high proportion of the second 10,000MW Crash Program would be generated from geothermal resources. But why, one may ask, is Star Energy’s Kamojang project, near Bandung, stuck when the exploration licence has been ready for several months?
Our tireless Minister of BKPM and sometime writer in GA, Gita Wirijawan, is pushing large coal-fired power in central Java as a priority, with private sector involvement through PPP. He knows this is vital to sustain the economic growth and more, turning the huge potential energy of the country into kinetic form. Will developers spend the little extra to further clean up the flue gases, reducing carbon emissions as well as the usual NOx and SOx?
Indonesia’s ports are vital to the life blood of the archipelago, and no more so than for the industrial heartland of Java. New port capacity is desperately needed, an immediate case being in the provision of additional container facilities for West Java at Tanjung Priok until such time as a new port can be brought on stream. The additional capacity is needed well within the time it will take to develop a new major port, i. e. ten years. Plans are in hand by Pelindo II to undertake a feasibility of what will be a major new container facility which can accommodate the expected impressive growth in container traffic for the latter part of this decade, until a new port (or ports) can start contributing to the expanding industrial and commercial activity of Java. Of course, it goes without saying that there will have to be commensurate attention to providing adequate land transport links!
The proposed Bali cruise terminal in Karangasem regency is to proceed under PPP arrangement, but there would seem to be a number of issues that remain to be addressed to satisfy private sector involvement. One has to ask whether the vital on-island high standard support activities that are sought by cruise passengers has been examined in proper detail?
The growth in air travel, with the domestic market perhaps particularly notable, has been impressive. The largest private airline, Lion Air, is greatly expanding its fleet of 737-900ER, and is responding to the demand for more flights. Consequently, it is not surprising that the Director General of Air Transport has been identifying the need for work at 15 airport destinations across the country. It is noted that the long overdue expansion and facelift for Bali, the second most important gateway to the country, is to get under way.
Matters on rail have been quiet, except for publicity on the new lines in central and south Kalimantan for the transport of interior coal mines. These are to be delivered on the basis of PPP, but the public sector involvement in funding is vital to make any work in this area viable, which also applies to nearly all regional requirements in infrastructure development.
The long-delayed Jakarta monorail seemed to receive a level of government commitment as the Idul Fitri holiday break approached. Will construction recommence before the year is out? Under any measure the lack of progress towards tackling this and other city transport infrastructure must be seen as an indictment of indecisiveness on the part of the current administration. The President has now put his weight behind the need to move the country’s central administration out of the city venting his frustration over the daily transport chaos that is the mark of the city.
Moving the country’s administrative centre to a more congenial site is not an unique initiative, since several other countries have already done this, in whole or in part, in the relatively recent past. Even if a new administrative capitol were approved and built, which would take time, this does not gainsay the need to deal with the frightful mess that depicts the city’s transport and inadequate control of pollution or for taking the necessary steps towards developing and preserving the city of the future.
For the target of having 887 km of toll road completed or almost so by 2014, there really must be a burst of activity as soon as possible. Unfortunately, many sections are in the hands of concessionaires without the funding to pursue the required development and, although the law now allows for concessionaires to bring in new partners with funding, very little progress can be recorded. While land acquisition is blamed for lack of progress another stumbling block concerns the lack of financial realism of concessionaires when trying to attract new funding. The asking price is too high!
It is a vexing problem because if Public Works follows through, as it has the right to do, to cancel old concessions if no progress is manifest within a given period (3 months) after due warning, it then has to retender the cancelled concession. This in itself will lead to a further delay of anything up to two years. Difficult!
Major water projects have been highlighted from time to time with the US$200 million Umbulan water supply project in East Java receiving more publicity recently under the PPP banner. It remains for the benefiting local governments to sign up to accept payment responsibility towards their proportion of the offtake. In reality nothing much has changed since the project was first studied more than two decades ago and the serious attempts that were made in the mid-1990s to push ahead with this development, led by a major British water utility company.
Despite the above generally dismaying lack of progress in some sectors there is a sense about the city that some action will be taking place. I do hope so, to further improve the competitiveness of Indonesia’s industry.
I cannot finish this overview of infrastructure today without drawing attention to the significant call there will be for more professionals with experience and skills in the workforce. These will be increasingly sought to undertake the many projects identified to an acceptable international standard, which is not always achieved, and support the investment in industry that could and should be attracted. This is a serious subject, I find, in many business-related discussions, which really needs more focus by government below top level. Of course with private sector support!