INFRASTRUCTURE STRATEGIC PLAN TOWARDS SUSTAINABLE DEVELOPMENT IN INDONESIA

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INFRASTRUCTURE STRATEGIC PLAN TOWARDS
SUSTAINABLE DEVELOPMENT IN INDONESIA

• DR. Mochammad Amron
• m_amron_at_pu.go.id

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1. ECONOMIC OUTLOOK OF INDONESIA
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MAP OF INDONESIA
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POPULATION

• Indonesia is the fourth most populated country in
  the world (220 million at the present)

• Urban population 130 million (60 of the
  population)
• Population growth 1.92 nationally (4 in urban
  Area)
• 80 of Indonesia Population live in 2 of
  Indonesias major islands, which only account for
  30 of the total land area.

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• GDP 3.8 in 2001 5.6 in 2005
• Overall budget deficit 2.4 in 2001 0.5 in
  2005

• Ratio of external public debt to GDP 45 in 2000
  27 in 2005
• The Governments medium term Development Plan for
  2005-2009 envisages annual average GDP Growth of
  6.6.

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• Indonesian Government Reform in infrastructure
  sector
• Removing any form of monopolistic abuse and
  increasing healthy competition
• Eliminating discriminatory practices that
  obstruct the private sector to participate in
  infrastructure provision and
• Repositioning Governments role, including the
  separation of policy making from operational
  functions

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The Nature of Indonesia

• Biggest Archipelago Country with 17.000 island
• Coastal line 81.000 km
• Population 220 million with 62 of population
  living in Java (7 area of the nation)
• Uneven population distribution and natural
  resources require regional approach in
  infrastructure development to ensure
  compatibility and compromise all sector and
  spatially.

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Response to Economic Crisis

• Public planning and management of infrastructure
  need to be sharpen through better coordination
  among public authorities, especially in
  connection with recent push toward
  decentralization
• Institutional and regulatory framework should be
  developed to prepare and develop conducive
  environment to private participation in order to
  offer more predictable, secure and quicker
  returns
• Combat corruption through improve procurement
  regulations, and promoting transparent
  competitive selection of private partners for
  private infrastructure project

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Why Infrastructure is important for Indonesias

• Infrastructure as a Social overhead cost becomes
  the prerequisites for socio-economic activities
• Directly, the construction of infrastructure
  provides employment and busines opportunities
• The employment generated by 10 increase in
  Infrastructure investment contributes 0.32
  increase in GDP
• Indirectly, infrastructure brings efficiency
  improvement in related productive and indues
  investments in these sectors
• Infrastructure, can also be used as an instrument
  for reducing poverty, breaking the isolation of a
  region, and narrowing the regional gap

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2. INDONESIA INFRASTRUCTURE CONDITIONS
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MACRO ECONOMY

• Based on growth and exchange rates only, there
  are some indications that economy is going to the
  right direction.
• Growth, however, cannot be sustained on the
  consumption of public sector and consumers only.
• 7 economic growth as planned in Propenas in
  2004 is difficult to achieve without increasing
  exports and investments, including infra-
  structure investments.

PMDN (Rp billion)
Domestic investment 1995-2001 (approved) declined
over time, e.g. from Rp 120 trillion in 1997 to
Rp 61 trillion in 1998
Likewise for foreign investment 1995-2001
(approved) from USD 34 billion in 1997 to USD 14
billion in 1998. FDI in 2002 not better off
PMA (US million)
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Roads
REGIONAL INFRASTRUCTURE GAP
Clean Water
Roads

• Most development of infra-structure has been
  occurred in KBI, especially in Java.

• Western Region (KBI) consists of Java, Bali,
  and Sumatra while the rest of the archipelago
  constitutes the eastern part of Indonesia (KTI).

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REGIONAL ECONOMIC DISPARITY

• Government investment should be focused on the
  less developed regions since the developed
  economy has its own capability to finance its
  infrastructure development by presumably
  involving private sectors and by the users who
  have willingness to pay for good quality
  services. This concept of Infrastructure for
  all is crucial as infrastructure play an
  important role in creating social welfare

Local GDP Contribution Based on the Prevailing
Price

• Infrastructure gap, has been one of the factors
  triggering the regional economic disparity. This
  is understandable because the more developed
  economy will require more infrastructure.
• Infrastructure, however, can also be used as
  an instrument for reducing poverty, breaking the
  isolation of a region, and narrowing the regional
  gap.

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WATER RESOURCES SECTOR
Average Rice Production 1996-2000 Java
56.1 Sumatra 23.1 Maluku and
Papua 0.2 Kalimantan 5.6 Sulawesi 9.7 Bali
and Nusatenggara 5.3
Irrigation Network Java 48 Sumatra 27
Maluku and Papua 1 Kalimantan
7 Sulawesi 12 Bali and Nusatenggara 5
Java, Sumatra, and Sulawesi constitute 89 of
total national staple food production (rice
harvest). A large part of irrigation system
network (87) is located in the three big
islands. Until early 1990s, the provision of
irrigation water has proved to be very effective
in increasing land productivity. But our food
sustainability could be in danger when our river
basins and their catchments areas keep
deteriorated.
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Irrigation system

• Challenges of our irrigation system.
• From about 6.7 million hectare irrigated
  ricefield, 1.5 million hectare has been in poor
  condition.
• About 23 of national irrigation system are in
  poor condition, out of which 73 are located in
  Java and Sumatra.
• Land conversion-from irrigated, fertile land into
  real estate, industry, and roads-has been
  occurring in the speed of between 15.000-20.000
  hectare per year, especially in Java.

• Challenges of our irrigation system.
• Only about 40-50 of total required OM cost that
  can be allocated by government, resulting in
  backlog maintenance of irrigation infrastructure
  nationwide.
• Steady and consistent degradation of 62 out of
  470 river basins.
• Deforestation in the upstream.

Irrigation Infrastructure Condition by Regions
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Implication on Food Sustainability
Direction

• Challenges
• The deterioration of irrigation infrastructure
  networks will certainly have negative impacts on
  the availability of irrigation water, will reduce
  fertile land, and finally will endanger food
  sustainability.
• The degradation of river basins due mainly to
  deforestation in the catchments areas, will also
  worsen the performance of irrigation
  infrastructure. Dams and reservoirs have
  prematurely been filled by uncontrolled
  sedimentation, significantly reduce their life
  years, and will finally reduce the water
  availability.
• The real danger of drought during dry season and
  big flood during wet season is imminent.

• Implementation of Policy Reform Agenda under the
  forthcoming new water resources law, which
  include the guarantee on the rights of every
  people for access to water as basic daily needs,
  affirmation of the formulation of water resources
  management plan based on the river basin and the
  proper combination between surface and ground
  water, affirmation of the authority of the
  different levels in the government on the
  management of water resources and the improvement
  of community participation in every stage of the
  water resources management
• Establish database and data management center for
  irrigation facilities, water buildings, dams,
  reservoirs, and river basins.
• New arrangements and redefinition of
  responsibility among government levels central,
  provinces, kabupatens, and villages according to
  decentralization and regional autonomy. This
  includes budgeting and financial arrangements and
  public accountability.
• Minimize or eliminate irrigated and fertile land
  convertion particularly in Java, Sumatra, and
  Sulawesi and develop more agricultural land in
  outer islands.

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Clean Water Current Condition

• Various problems have emerged in the provision of
  clean water in this country quantity and
  quality have declined consistently, far from
  being considered as safe drinking water limited
  infrastructure networks low management and
  technical skills of the current PDAM management
  in operating clean water corporation and limited
  investment capital.
• From 294 clean water corporations (PDAMs)
  operating in kabupaten and city levels, serving
  39 population with 4 million connections. But
  they are running the bussines with 35 avergae
  losses and 65 of the PDAMs is now having
  corporate debt of about Rp. 4.46 trillion (Rp.
  3.05 trillion principal and Rp. 1.41 trillion
  interest and penalties). Meanwhile rapid growth
  in urban population demand piped water supply
  expansion

Water Debt
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Clean Water Direction

• Restructurization, corporatization, and
  privatization of PDAMs based on watershed and
  regional optimization.
• Raw water must be protected in line with
  environment protection.
• The availability and easy access to safe
  drinking water for urban and rural people.
• Financial engineering for clean water provision,
• Improvement of technical and management
  capability of PDAM staffs
• Increase the private sector participation in
  clean water provision.

Opportunity for investment in water is opened to
34 potential location with the estimated value of
US 1.295 million
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• Drinking Water
• Service coverage is 16 percent of the total
  population, provided by more than 300 local
  utilities (PDAMs)
• Sanitation services 5 percent of the population
• Almost 5 years after the economic crisis, all
  publicly-funded water supply systems have
  deteriorated and service quality has fallen

• Tariffs are well below cost recovery levels
• Unaccounted for water is over 40.
• New investments have been postponed and the lack
  of adequate maintenance is causing systems
  throughout the country to fall into disrepair.

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Sanitation The Lack of Access

• Currently, at least 100 million people, mostly
  the poor and rural people, have no access to
  sanitation facilities.
• In Java Bali alone, only 51.4 of villages have
  their access to sanitation, 40 do not have
  access, and the rest are using public sanitation.
• In Kalimantan, about 66 villages do not have
  their own sanitation facilities.
• People who do not have access to sanitation
  facility throw their human waste in the rivers,
  lake, or In the wood or backyard.
• This number will increase as population
  increases and government investment in sanitation
  decreases.
• To reduce the problem, at least Rp. 15 trillion
  will be required for investment and Rp. 400
  billion for annual maintenance and operating
  cost.
• Programs include infrastructure for sanitation,
  waste water facilities, solid waste, and drainage
  systems.

Piped Clean Water Condition
Drainage Facility Condition
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• Road
• Main problems worsening congestion in urban area
  and the relatively poor condition in rural.
• The provision of road infrastructure has long
  been shared between central, provincial,
  kabupaten and kota governments.

• The total length of the classified non-toll
  network is around 310,000 km
• 26,000 km of national roads (8.5),
• 39,000 km of provincial roads (12.6),
• 223,000 km of kabupaten roads (72),
• 22,000 km of secondary kota/urban roads (6.9)

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Solid Waste and Sewerage

• Until 2000, only 32 of urban people in 384
  cities (35 million people) can be served by TPA
  Sampah (either Open Dumping or Sanitary
  Landfill). Many others burns their solid waste or
  throw them to rivers resulting in sanitation
  problems everywhere.
• Government funding on solid waste program is
  still limited and professional management in
  solid waste handling is lacking.
• Future policy includes Reduction Program in Solid
  Waste through 3R (Reduce, Recycle, Reuse) with
  public-private sector partnership and the
  involvement of community and public awareness
  campaign.

• The development of Regional Solid Waste
  Management using new technology.
• Sewerage system for handling liquid waste is not
  yet developed in most of cities in Indonesia.
  About 70 of households waste has never been
  treated properly to meet minimum standard of
  clean and healthy environment.

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3. NEW APPROACHES ON INFRASTRUCTURE DEVELOPMENT
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• The fact that Government can not bear the burden
  solely to provide infrastructure, thus, the
  involvement of Private Sector is needed.

• Presidential Regulation no. 67/2006 on Public
  Private Partnership in Infrastructure, define the
  infrastructure which has the possibilities to be
  outsourcing to the private sectors.

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• The new Indonesian cabinet has committed to
  improve and to build infrastructure as a
  countrys first priorities start from 2005-2009,
  through the International Summit on
  Infrastructure (Jakarta 2005).

• Several steps taken by the Government to improve
  the infrastructure condition, both through
  physical development and regulatory reform to
  create condusive environment to involve private
  sector

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4. INFRASTRUCTURE POLICIES REFORMS
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• Spatial Planning Law (under revision of old law
  no. 24/1992)
• Regional approach areas are divided based on
  carrying capacity to ensure that appropriate
  strategies are used in the development planning
  to achieve sustainable development for different
  regions in the country.
• New Road Law no 38/2004 and Government Regulation
  no 15/2005
• Separation role of operator and regulator on
  toll road by establishment of a new toll road
  regulator called - BPJT
• New Water resources Law 7/2004 and Government
  Regulation No. 16/2005
• Reform in the management of the water sector and
  establish a new National Water Regulatory Agency
  called BPP SPAM

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• Presidential Regulation no. 67/2005 on Government
  Partnership with Private Sector in Infrastructure
  Provision
• Governments competitive and transparent
  procurement strategy for infrastructure projects
  and Governments risks guarantee.
• Presidential Decree No. 36/2005 on Land
  Acquisition
• Facilitating and fast tracking the land
  acquisition process for infrastructure projects.

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5. CONCLUDING REMARKS

• Sustainable Development in Infrastructure needs a
  good and strategic coordination with in
  infrastructure sub sectors.
• Sustainable development is in the form of
  utilization of infrastructure providing
  sufficient operation and maintenance budget.
• Sustainable here is also means take into
  consideration of carrying capacity of the
  environment and spatially maintain.
• The Strategic plan from 2005-2009 clearly
  indicated as number one priorities