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Publication Date

5-29-2014

Abstract

Indonesia faces an ongoing infrastructure crisis, which is hampering economic growth and carries severe risks for the future. This is despite substantial efforts both to design and to implement numerous infrastructure projects, through public procurement and utilising the MP3EI Masterplan process and utilising Public Private Partnerships (PPP). Slippage in implementation of projects is very frequent. Funding arrangements, land acquisition processes and other authorisations are often hindered by inter-agency confusion and from slowness in carrying out the necessary processes. These inter-agency and bureaucratic difficulties are also exacerbated by the impact of decentralisation. Unless this situation is remedied, Indonesia will continue to suffer from high logistics costs, from increasing traffic congestion, from rolling black-outs and brown-outs in the electricity system and from slower economic growth than would otherwise be possible.

This paper argues that solving this problem requires effective co-ordination of a type that is not currently available in Indonesia. A properly empowered and supported agency needs to be established which has the authority, resources and capability to implement priority infrastructure projects. This has proven successful in a significant number of overseas countries, and agencies such as the Project Management Office in Queensland, Australia provide good examples of how such an approach can be made to succeed. Indonesia established the ‘Policy Committee for the Acceleration of Infrastructure Provision (KKPPI)’ in 2001 in response to the collapse of Indonesian infrastructure spending that followed the Asian financial crisis, and it still exists (although it is largely dormant). KKPPI needs to be revitalised, and given the authority and resources to solve the crisis. Indonesia has previously used specially established agencies to solve crises, an example being the ‘Indonesian Bank Restructuring Authority (IBRA)’. In what follows, we explore the relevant history of both KKPPI and IBRA.

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