Jokowi is overcoming obstacles to achieve much-needed infrastructure development

In response to the lack of infrastructure that has impeded Indonesia’s economic growth, infrastructure development has become the top priority for the Widodo administration.

President Joko Widodo, known as Jokowi, revoked the oil subsidy fund in 2014 to finance infrastructure development across Indonesia. In Sumatra, the government has begun building toll roads and railroads. In Java, the entire island will be connected by toll roads by 2018.

The government has also started building a road along the Malaysian border, in Kalimantan. And in Papua, it will connect all major cities by road. Moreover, the government is developing a ‘sea toll road’ by building sea ports, purchasing ships and providing scheduled transport to connect all of Indonesia’s islands, particularly those in remote areas.

Jokowi is not the first Indonesian president to try to develop the country’s infrastructure. His predecessor, Susilo Bambang Yudhoyono (SBY), held a summit during his first term to plan for infrastructure development and, in his second term, established the Masterplan Acceleration and Expansion of Indonesia Economic Development 2011–2015 (MP3EI) plan. Unfortunately, he failed to realise his ambitions. Jokowi, however, is already showing significant progress after a short time in office.

SBY’s failure

In his book Indonesia Changing Political Economy. Governing the Road (2015), Jamie Davidson argues that lack of money has not been the most important impediment to infrastructure development in Indonesia. Some developments, such as toll roads or airports in densely populated regions, have attracted the private sector because of the profits they can bring.

Davidson points to several factors, arising from the fall of President Suharto in 1998, for SBY’s failure to achieve his goals: Indonesia’s changing political economy; decentralisation; extraparliamentary rule-making; and rent seeking.

Since Suharto’s overthrow, the national government has no longer been able to use the military to acquire land and has had to rely on the courts, which do not always strongly support the government’s projects.

With decentralisation, local governments do not always fully support the national government’s infrastructure programs because there are no political incentives for local leaders to do so, since all credit goes to the national government once the project is completed. Furthermore, competitive local elections encourage mayors and governors to support the people against national government land acquisitions in order to attract voters.

Extraparliamentary rule-making has also been a significant barrier to building new infrastructure. In Indonesia, the law is used to regulate macro issues, while the finer details are implemented through ministerial regulation. This allows the bureaucracy to play a heavy role and gives the public less oversight of programs. Bureaucracy often plays an active role in delaying projects, for example, by arranging tenders to favour certain business interests or by failing to enforce contracts.

Rent-seeking, particularly related to political elites, has been another brake on infrastructure development. Davidson gives an example of how business groups related to political elites obtained a toll-road concession but, rather than starting construction, sold the concession to other private companies, thus delaying the project’s completion.

Jokowi’s strategy

To implement his infrastructure programs, Jokowi has put several strategies in place. He is using state-owned enterprises (SOEs) to implement projects much faster by avoiding long tender processes and to dominate the market. The big four SOEs in the construction sector are public companies listed on the Indonesia Stock Exchange and have assets surpassing those of private contractors. As companies, SOEs can raise additional funds from bank credit and, as public companies, from financial markets.

Jokowi is also accelerating government spending by organising tenders for the current fiscal year in the preceding year. For example, the Ministry of Public Works and People Housing began seeking tenders, from October 2015, for projects in 2016 . Previously, most of the government budget was spent in the fourth quarter, leaving limited time to complete projects, particularly single-year infrastructure projects.

Jokowi’s strong personal interest in infrastructure development has been another important factor in his early success in getting projects moving.

The government has also revised regulations to speed up land acquisition for its infrastructure projects . The private sector had been fully responsible for this, but now that the government is taking an active role the long process required to acquire land and settle disputes is no longer the problem: the availability of funds is. In February 2016, the Ministry of Public Works had already spent its land acquisition budget for the fiscal year and required further funds to buy more land.

Jokowi issued a presidential decree to protect the bureaucracy and top SOEs involved in major government infrastructure projects from criminal investigation for corruption

Jokowi has resolved the problems resulting from lack of coordination among ministries, and from extraparliamentary rule-making, by closely monitoring the progress of ministries. He meets meets with ministers at least twice a week and closely oversees the bureaucracy and SOEs to ensure they fulfil their promises to build infrastructure.

Jokowi also issued a presidential decree to protect the bureaucracy and top SOEs involved in major government infrastructure projects from criminal investigation for corruption. Previously, government officers and SOEs that did not follow procedures carefully risked criminal investigation—and extortion—by corrupt law officers. In his decree, Jokowi listed 225 strategic projects in which any indication of corruption would be dealt with under state administration law rather than criminal law.

Jokowi’s strong personal interest in infrastructure development has been another important factor in his early success in getting projects moving. His long experience as mayor of Solo and governor of Jakarta has given him a good understanding of infrastructure development and managing bureaucracy. In addition, the incorporation of two major political parties, Golkar and the National Mandate Party, into his ruling coalition has consolidated his power and given him greater autonomy to achieve his goals.

Corruption, however, remains a persistent problem. This year the Anti-Corruption Commission arrested several members of parliament and of the bureaucracy for bribery in an infrastructure project. SOE inefficiency is another problem. The finance minister recently complained that SOEs, as government-assigned agents of development, were constantly asking for further injections of capital from the government for infrastructure projects, rather than sourcing funds on the global market.

Featured image
A diesel-hydraulic locomotive in Medan, North Sumatra. Building toll roads and railroads in Sumatra is a government priority. Photo: Wibowo Djatmiko, Wikimedia Commons.