Sabtu, 14 Maret 2015

Infrastructure – Jokowi’s Challenge (Part 2 of 2)

Infrastructure – Jokowi’s Challenge (Part 2 of 2)

Scott Younger  ;  Director of Nusantara Infrastructure Tbk.
JAKARTA POST, 12 Maret 2015

                                                                                                                                     
                                                                                                                                                           

The question of water supply and related environmental issues appears frequently in national and international media and in global discussions.

Access to fresh water is fundamental to the foundation of human habitations and endeavors and, thus, water is arguably the most important infrastructure matter to be faced in this century, especially since the population has expanded at an increasingly unsustainable rate since the 1970s.

In the case of Indonesia, which is well blessed with fresh water resources compared with many other parts of the world, it has not handled its water issues properly over the past 40 years, a period over which its population has doubled.

Three-quarters of its 131 water basins exhibit stress conditions, meaning that demand is dangerously close or exceeds supply, with those in high population density areas, quite severely.

While plans for much needed water storage have been made and some have been around for many years, there has been a continual postponement of the implementation of construction of key reservoirs for storage.

Today the availability of water per capita is one of the worst in the world, despite the resources. A decade ago, and little has been done since, Indonesia stood at 57 cubic meters per capita per annum, compared with Thailand with 1,200 cubic meters per capita per annum and the USA with 6,000 cubic meters per capita per annum.

The government estimated the funding required for water supply over the current five-year period to meet Millennium Development Goals (MDG) is $30 billion, with $35 billion the complementary figure for sanitation.

The government is expecting the private sector to come forward with about half this amount.

This means that the government — and it recognizes this — is going to have to move quickly to resolve the issues that affect private sector participation arising from the cancelation by the Constitutional Court of the 2004 Water Law, which, albeit, had flaws.

The revocation of this Water Law is a major setback to water governance reform and the bringing in of much needed investment from the private sector.

While it is evident that large coal-based power stations must provide the base load for Java and other industrial centers, such as in Sumatra, there are many suitable opportunities for developing electric power from renewable sources.

Indonesia has some of the most plentiful coal resources in the world, but is also well-supplied with significant renewable resources — hydro (76 gigawatts) and geothermal (29 GW: 40 percent of world reserves).

While there has been a number of successful developments in both hydro and geothermal fields, the risk-reward ratio has not been previously conducive to investment, although tariff structures have recently been improving for mini-hydro schemes (less than 10 megawatts), an area where the private sector has been encouraged to invest.

There are some main hydro developments on the table but, although the government would like to see today’s paltry geothermal output trebled over the next decade, many problems remain, not least concerning issues with local population sensitivities on top of the risks associated with exploration.

Work still has to be done to improve the enabling environment for private sector players.

The government has set a target for the development of 35 GW of coal-fired and geothermal power stations, a crisis call since supply is shortly to be outstripped by demand unless additional power is made available. This demand is particularly directed toward the industrial heartland of Java and locations in Sumatra.

It is unrealistic to expect this amount of new power to be added in the next five years and past experience with two 10 GW “crash” programs under the past administration, with neither completed, cannot be seen as encouraging.

However, design and construction must proceed as fast as possible and tendering processes accelerated. Several mine mouth power projects based in Sumatra have already been identified and preliminary front end work undertaken.

Efficient moving of people and goods to and from and around the country is vital for sustainable economic growth. There is a vast volume of investment required and work to be done across all modes of transportation, whether sea, air or land.

The lack of good transportation communications, with Indonesia having arguably the highest logistics costs compared with other countries in Asia, is adversely affecting growth targets. Good efficient transportation nationally could easily add 2 to 3 percentage points to the gross domestic product (GDP) as set out in a 2011 McKinsey report.

Until about 2010, the investment in ports had been minimal over the preceding two decades. There was much catching up to do and the main ports of entry, in particular Jakarta’s Tanjung Priok, were straining to cope with a steady and fast growth in sea trade. Waiting times for shipping were at an unacceptably high level.

The steps that have been taken by Pelindo II (now the Indonesian Ports Corporation) to increase berthing capacity in order to vastly increase the container handling capability at Jakarta and to take a major step in greatly reducing waiting times for container ships from more than six days to a current two to three days have to be commended (in Singapore, one day or less).

In aviation, the country has seen spectacular double-digit passenger growth over the past few years and Soekarno-Hatta International Airport is now the eighth busiest in the world with more than 60 million passengers annually.

A new runway and terminal are to be provided and Soekarno-Hatta will then be expecting to cope with at least a third more passengers and thus rank in the top three busiest globally.

In parallel with this physical expansion is the urgent need to upgrade the air traffic control systems, a matter that requires attention right across the country.

However, even with this undertaking, more airport capacity is going to be required in western Java to accommodate passenger growth and the expansion of Jakarta to a population of 50 million.

Plans to construct the 25-million-passengers per annum terminal at Kertajati in West Java must be accelerated along with the toll road link from Bandung.

Very important to the success of developments in the ports and aviation sectors, is the provision of good road and, where appropriate, rail connections.

In the latter case the decade-long project of providing a rail link to the Soekarno-Hatta airport must be seen as an urgent priority, particularly with the large growth taking place at the airport, as discussed above.

The plan is to have this $2 billion project completed under a public-private partnership (PPP) scheme, but the problem has been that the return on investment for the private sector input has not been found to be adequately attractive and this has led, along with other PPP schemes, to the introduction of Viability Gap Funding support by government. The mechanism remains to be tested.

Looking at the country as a whole, however, it is the road infrastructure that provides the main basis of land connectivity.

Overall this is a big problem and much investment is required not only to upgrade, often poor standard, regional roads, but also provide for more.

The increase in budget allocation is going to require acceleration in the release of project’s from the Public Works Public Housing Ministry, whether central or regional.

It should be remembered that some 90 percent of the national road network is in the hands of provincial or district governments, mostly the latter, which raises the other problem of the regional skills base to undertake the work properly and in a timely fashion. Too much of the national road system is in a sub-standard condition.

Considerable training and skills transfer is still required to ensure that value for money is produced in road expenditure.

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