INFRASTRUCTURE POLICY IN INDONESIA, 1965–2015: A SURVEY

Abstract

This survey, first, provides an overview of the main developments in the infrastructure sector in Indonesia during the past five decades and, second, considers what the main policy and management bottlenecks in infrastructure appear to be. The overview of main developments indicates that, in broad terms, most parts of the sector have expanded considerably but that the needs remain acute for further expansion and for attention to the maintenance of existing facilities. Demand for infrastructure is high, especially since the regulated prices set for infrastructure services are often low. Access is often difficult, however, because of shortages of infrastructure, and quality is often unsatisfactory because of poor maintenance and indifferent management. These problems of access are exacerbated by the regulation of prices. This overview also points to the markedly different performances of industries in which pro-competitive policies have been applied and those in which more traditional policies of close regulation have restricted the operation of markets.

Pertama-tama, survei ini memberikan tinjauan terhadap perkembangan-perkembangan penting dalam sektor infrastruktur di Indonesia dalam lima dekade terakhir. Selanjutnya survei ini menganalisis kebijakan-kebijakan utama dan hambatan manajerial di sektor infrastruktur. Secara umum, sebagian besar sektor infrastuktur telah berkembang signifikan, namun tetap dibutuhkan ekspansi baru serta juga perbaikan pada fasilitas-fasilitas yang telah ada. Permintaan terhadap infrastruktur tinggi, khususnya setelah seringkali harga yang ditetapkan untuk jasa infrastruktur bersifat rendah. Namun, ketersambungan seringkali terhambat karena buruknya infrastruktur. Selain itu, kualitas juga sering tidak memuaskan akibat pemeliharaan yang buruk dan manajemen yang tidak baik. Masalah-masalah yang terkait dengan ketersambungan ini juga sering diperparah oleh pengaturan harga. Tinjauan ini juga menunjukkan perbedaan kinerja antara industri-industri yang menerapkan kebijakan-kebijakan pro-kompetisi dan industri-industri yang harus berhadapan dengan kebijakan-kebijakan tradisional berupa peraturan yang ketat yang membatasi kegiatan mereka di pasar.

Keywords:

• infrastructure
• regulation
• law
• prices
• markets
• land
• finance

JEL classification::

• L51
• L90
• L97
• L98

Notes

1. The discussion here draws on an earlier article (McCawley 2010).

2. Small-scale consumers of infrastructure services are an important part of the overall infrastructure market in Indonesia. However, they are generally neglected by large-scale, often state-owned suppliers in the formal sector (see McCawley 2010).

3. In a survey of competition between the railways and other modes of transport at the time, Dick (2000, 187) observes that Java, by 1900, already had ‘a sophisticated agro-industrial economy integrated by overlapping networks of telegraphs, telephones, rail-ways, narrow-gauge tramways and good roads. Nowhere in Southeast Asia could boast better infrastructure. Elsewhere in East Asia, only Japan could compare’.

4. The tables in this article draw on various editions of Statistik Indonesia (BPS 1970–2013a), whose data are not always consistent or complete. All possible care has been taken to ensure accuracy of data in this article. In a few cases, to bridge gaps, extrapolation has been necessary to prepare a full data series. The data shown in the tables are taken to reflect the rising demand for better infrastructure in Indonesia.

5. In a discussion of Law 17/2008 on Shipping, Dick (2008, 404) surveyed the shipping regulations and concluded that ‘the extra costs of inefficient Indonesian-flag ships have to be borne as a tax on the nation's trade’.