Infrastructure
– Jokowi’s Challenge (Part 2 of 2)
Scott Younger ; Director of
Nusantara Infrastructure Tbk.
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JAKARTA
POST, 12 Maret 2015
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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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