EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

THE IMPLEMENTATION OF

INFRASTRUCTURE DEVELOPMENT POLICIES

FOR ECONOMIC FAIR DISTRIBUTION

2018 Researchers:

T. Ade Surya, Juli Panglima Saragih, Eka Budiyanti, Achmad Wirabrata, dan Rafika Sari

RESEARCH CENTER

EXPERTISE BODY OF THE HOUSE OF REPRESENTATIVES OF THE INDONESIA REPUBLIC

JAKARTA

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Infrastructure development is one of the Government's priority policies intended to push

economic growth and fair distribution across regions. The ground principle is the uneven

distribution of infrastructure development in previous era where development focused only on

Java and Sumatra or other regions in the western part of Indonesia where economic activity is

greater. Whilst, the eastern Indonesia remains less developed, resulted in a fairly high

development inequality across regions, imbalanced economic growth, and long endured high

poverty level and unemployment rate.

In previous administrations era, infrastructure development was not a priority. This is

because infrastructure development requires substantial funding and a long period of

implementation, while the Government must also serve other needs of Indonesian public.

Moreover, the circumstances faced by previous governments were also different from the

situation of current government, such as the economic crisis, which is very burdensome for the

Government, even more for infrastructure development. Therefore, previous governments put

more priority on activities that had direct impacts on people's lives such as subsidies, while

funding for infrastructure was allocated in a smaller amount.

The eagerness of the current government in giving precedence to infrastructure

development is shown in form of the reallocation of energy subsidy budget of around IDR 100

trillion to finance the development of infrastructure and other productive sectors. In three years

of Jokowi's administration, the budget for infrastructure development continues to increase.

The budget share for infrastructure development in 2015 was IDR 290.3 trillion, or 14.2% of

total state expenditure. In 2016, the budget increased to IDR 313.5 trillion or 15.2% of total

state expenditure, plus another IDR 16 trillion in the APBN-P (budget amendment) of 2016. In

APBN-P of 2017, the budget for infrastructure development raised to IDR 388.33 trillion. While

for 2018, the Government has allocated a budget amounting to IDR 410.7 trillion for

infrastructure development.1

In the effort to accelerate further accomplishment of infrastructure development, the

Government established a Committee for Acceleration of Priority Infrastructure Delivery

(KPPIP). The Committee has 6 main tasks that covers, among others, the formulation of

strategies and policies to accelerate priority infrastructure delivery. One of KPPIP's policies is to

establish a list of priority infrastructure as set out in the Regulation of the Coordinating Minister

for Economic Affairs of the Republic of Indonesia No. 12 Year 2015 concerning the Acceleration

of Priority Infrastructure Preparation. In line with the elaboration of economic policies, the role

of KPPIP was also evolved. KPPIP was then assigned to select the National Strategic Project

1 Ministry of Finance Executive Gathering 2018, https://www.kemenkeu.go.id/media/6926/menkeu-paparan-

executive-gathering.pdf, retrieved on February 2, 2018.

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(PSN) that will get the merit and acceleration facilities.2 From the PSN list, 245 Projects plus two

programs, namely the electricity infrastructure construction and the aircraft industry program

were selected. Later on, KPPIP conducted further selection to choose more projects to be

included in the list of priority infrastructure.

The results of the efforts of infrastructure construction are about to materialize. In the last

three years, numerous infrastructure developments have been finalized by the Government.

Road infrastructure development is one of the most successful. Throughout 2015 to 2017, the

Government has built 2,623 km of roads where around 2,000 km of them are located on border

areas, at the outermost and remote points of the country. This achievement has exceeded the

target set by the Government that is to build roads of 2,600 km by 2019. As for toll roads, 568

km of new toll roads have been built. In addition, the Government has succeeded in developing

81 ports, 7 new airports, and renovating and modernizing 439 airports, 9 dams, and others.3

The government expects these infrastructure developments will immediately stimulate

economic activities in the regions that are underdeveloped in earlier years.

Infrastructure development policy for economic fair distribution that is adopted as one of

Government's priority policies should be supported, but supervisory efforts must be conducted

so as to ensure a proper implementation of the policy. It should start with verification on the

method used by Government to determine the priority scale for infrastructure developments

that are prodigious and spread throughout the region. Afterward, check whether the efforts

made by the Government in implementing this policy are appropriate, given the high budget

needed for the infrastructure development, while at the same time the Government also needs

to allocate budget for other programs/policies. In addition, in-depth consideration should also

be made prior to the starting of large-scale infrastructure development in areas where

economic activities are still undersized, because the utilization of the resulted infrastructure

might not be optimal. Will it better to build a small-scale infrastructure to stimulate economic

activity, and most probably more in line with the Government's budget capacity? Furthermore,

it is also necessary to pay attention to how the Government coordinates the implementation of

this development policy, because most infrastructure developments were happening far from

the supervisory of the central government.

Therefore, based on the description above, this study will focus on finding out how the

implementation of infrastructure development policies for economic fair distribution is carried

out by the Government? 2 Committee for Acceleration of Priority Infrastructure Delivery, https://kppip.go.id/tentang-kppip/, diakses 7

Februari 2018. 3 Yudhistira Dwi Putra, "Dianggap Paling Menonjol, Ini Catatan Pembangunan Infrastruktur Selama 3 Tahun

Pemerintahan Jokowi-JK", accessed February 13, 2018.

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The research is using descriptive analysis approach (qualitative) to provide an overview

and analysis of facts, circumstances, variables, and phenomena that occur related to the theme

of this research. The research methods were tailored to the research objectives that are be

answered and analyzed.

The type of data being used is including primary and secondary data. While the data in

this study were collected using the following techniques:

1) Primary data were gathered through several methods, among others:

a.Interview

b. Focus Group Discussion

2) Secondary Data

Secondary data obtained by literature study and reviews on all reports related to the

infrastructure development policies. Thus, data and information were collected from the

review of books, newspapers, website articles, and documents related to the issue.

The research sites was selected purposively or deliberately based on specific

considerations. The research conducted in North Sulawesi and South Sumatra Provinces. These

two provinces are selected as the research sample due to the numerous infrastructure

development projects of the two regions that are included in the PSN and priority infrastructure

list. Some infrastructures carried out in the two provinces have been finalized, so that in this

case the research is focusing on the development efforts have been made and the impact on the

economic equality for the community.

Based on Article 2 of Presidential Regulation No. 2 Year 2015 concerning the National

Medium Term Development Plan (RPJMN) of 2015-2019, the RPJMN shall contain national

development strategies, general policies, Ministerial/institutional (K/L) and cross

Ministries/Institutions, regional and cross-regional programs. In 2015-2019 only, there are four

thousands of projects needed by the Indonesian public. However, since the development target

is deemed unfulfilled, an acceleration for these projects is needed. The entire projects were

selected and registered into a National Strategic Project (PSN) and Priority Project list that is

part of the five-year RPJMN. To carry out the selection, an adhoc institution is formed, so called

as the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) working under the

President.

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Figure 1. RPJMN 2015-2019

The three selection criteria of PSN, that is now consisting of 245 Project + 2 Programs, are

as follows: (a) basic criteria; (b) strategic and operational criteria; and (c) supplementary

criteria. First, the basic criteria that covers (1) the compliance with the RPJMN/D & Renstra; (2)

compliance with RTRW; or (3) special arrangement on PP/Perpres. Second, strategic &

operational criteria that includes: (1) cross-sectoral alignment; (2) project distribution across

regions; (3) strategic role of the project; (4) quality feasibility of the study; (5) project value that

is greater than IDR 100 billion; and (6) period of construction (no later than 2018). Lastly, the

supplementary criteria that includes Champion Project with a positive EIRR.

Meanwhile, the selection of priority projects is made by top-down strategy, complex in

terms of funding, private sector involvement, new technology, coordination, licensing,

synchronization, and quality project preparation support. As for Priority Project selection

criteria have been applied in PSN selection process, the selection of Priority Projects shall be

based on the PSN list by developing new criteria for further selection.

In the delivery of PSN, there are several obstacles encountered during the development

process, including: (a) planning and preparation; (b) land acquisition; (c) funding; (d) licensing;

and (e) construction implementation issues. The following figure presents the different issues

faced in the delivery of PSN between December 2017 and June 2018.

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Source: KPPIP, 2018.

Figure 2. Issues in the Delivery of PSN occurred between December 2017 and June 2018

One of the infrastructures prioritized by the government of North Sulawesi Province is the

construction of Manado-Bitung Toll Road. The government expects the flow of logistics from

Manado to Bitung will be smoother once the toll road ready, so that it can further spur economic

growth in North Sulawesi. Moreover, the Government is also developing Bitung Port to become

the International Hub Port of Bitung, so that the Manado-Bitung Toll Road will be needed

urgently. However, the local community believes that there are many smaller roads in the

remote areas/suburbs, even in the city that are broken. Therefore, they hope these roads in the

outskirts/suburbs will be maintained before the Government builds the toll road. These

suburban roads are part of people's access to their daily economic activities.

Infrastructure development in South Sumatra Province also has spurred economic

growth, as mentioned by the empirical study conducted by Susetyo et.al (2017), yet it has not

been able to encourage economic equality for the people living in the province. Similar results of

a study were also conveyed by Imelda Zainal, Director of Bumei Institute, that confirms a

positive impact of infrastructure development in South Sumatra Province on the increased

regional income (PDRB), Regional Sourced Revenue (PAD) and per capita Income in the long

term. The establishment of transportation infrastructure has facilitated economic activities

(distribution flow) both in the trading of goods and services, as well as human resources

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movement from the capital city, provincial capital, district capital to cities and regions around

the economic centre and vice versa.

On the other hand, the impact of infrastructure development for the much expected

economic equality eventually has also lead to inequality. For example, the construction of toll

roads, even though it has a positive impact on the improvement of economic growth, it also

resulted in a reduction in number of vehicles passing through the eastern Sumatra road. It

means less income for the people living in the areas, such as small and medium business that

generally involve in trade and services sector (local stores, restaurants, and workshops).

Therefore, the construction of toll roads must be made concurrently with the maintenance of

the existing roads such as the Eastern Sumatra Road (Palembang to Lampung and Palembang to

Jambi) which until now has not been repaired.

In national level, the Government seeks to reduce the level of inequality by increasing the

quantity of infrastructure development in eastern Indonesia, but this ideal has not been

reflected in the List of Priority Infrastructure established by KPPIP. This is reasonable

considering the limited budget of the government, thus higher priority is given to the more

developed regions in western Indonesia that contributed more revenues for the nation.

Revenues gained from these regions will later be used to develop the remote and

underdeveloped territories. However, this fact is certainly not in line with the Government's

initial concept, in which the priority of infrastructure development policies is intended for

economic equality and fairness, so that infrastructure development should be prioritized in

economically disadvantaged areas which are mostly in eastern Indonesia.

The government efforts to prioritize infrastructure development policy for economic

equality are made as a form of the state presence in development processes. The policy is

intended to spur economic growth and reduce development imbalance across regions. Some

steps taken by the Government in implementing infrastructure development policies for

economic equality are as follows:

1. Establish KPPIP to accelerate the infrastructure delivery.

KPPIP serves as a coordination unit in decision making process to encourage the

mitigation of problems arised due to the lack of effective coordination of various

stakeholders in the implementation of infrastructure development.

2. Establish PSN and List of Priority Infrastructure.

The selection process for the PSN and the determination of Priority Infrastructure List are

carried out by KPPIP based on the urgency level and community needs, as well as the

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predetermined criteria. Infrastructure projects listed in the PSN list will get facilities and

advantages, in form of easier licensing, Government’s guarantees, and priority of land

acquisition. Meanwhile, the infrastructure projects contained in the List of Priority

Infrastructure will get facilities and advantages, such as debottlenecking priority and

incentives/disincentives based on performance.

3. Budget reallocation for infrastructure development needs.

The government reallocates the budget for energy subsidies on the state budget to

increase the budget portion for infrastructure that requires exceptionally high costs,

where the estimated investment value for entire projects is amounting to IDR 4,150

trillion.

4. Utilizing PPP Schemes

PPP is an infrastructure funding scheme that combines the public and private sectors.

This scheme is used considering the government's limited budget to meet the financing

needs of a very large infrastructure development.

5. Assignment to BUMN (State Owned Enterprise)

The assignment scheme is applied to infrastructure development projects that are

economically feasible but are not financially feasible, while the Government is limited.

6. Foreign cooperation

For infrastructure that needs an extremely high budget, the Government opens the

opportunity for foreign parties to invest infrastructure development in Indonesia.

7. Develop alternative infrastructure funding

The government needs to find alternative funding sources to meet the gaps in

infrastructure delivery by optimizing the existing assets and looking for funding from

financial markets.

8. Stipulate and amend regulations

The government has issued and amended various regulations to support cross-sectoral

infrastructure development as part of the acceleration process.

The efforts made by the Government in the implementation of infrastructure

development policy for economic equality as mentioned above are considered fairly effective.

However, it is clear that the main problem for attaining this policy is the limited budget of the

Government. In addition, the number of infrastructure projects in the Government’s plan is

considerably extensive while the developments were expected to be conducted simultaneously.

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Futhermore, the government must pay more attention to the impact of infrastructure

development on economic equality that is not too significant so far, although it has contributed

in driving economic growth. The low impact may be due to partial criteria used in determining

the projects to be included in the PSN list. Most infrastructure projects listed on the PSN are in

the regions that have been developed economically, and contributed greatly to the country,

making it difficult to achieve the desired economic equality. Moreover, the projects that are

included in the Government's priority list are mostly large-scale infrastructure projects, so that

when they are built in areas where the economic activities are still underdeveloped, their

utilization is not optimal.

The implementation of infrastructure development policies for economic equality that

have proceeded so far still has some weaknesses. Therefore, the Government could take the

following policies:

1. The number of infrastructure projects included in the PSN list is tremendous. The

government needs to reduce the projects number in order to be more focused and

certainly to be more in line with the Government's budget capacity.

2. Criteria for selecting infrastructure projects to be included in the PSN list must be re-

evaluated. The ideal of fair development distribution should be considered as one of the

criteria.

3. The government should not build large-scale infrastructure projects for regions whose

economic activities have not developed, unless the infrastructure is needed by the local

community. It is better for the Government to build small-scale infrastructure first to

stimulate economic activity.

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REFERENCE

Book

Subarsono, AG. (2005). Analisis Kebijakan Publik: Konsep, Teori dan Aplikasi. Yogyakarta: Pustaka Pelajar.

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Todaro, M. P. (1992). Ekonomi Pembangunan di Dunia ke Tiga. Jakarta: Erlangga.

Journal

Atmaja dan Mahalli. (2015). “Pengaruh Peningkatan Infrastruktur terhadap Pertumbuhan Ekonomi di Kota Sibolga”. Jurnal Ekonomi dan Keuangan, 3(4).

Fathorikh, Fatnan. (2016). “Studi Deskriptif Implementasi Kebijakan Pembangunan Infrastruktur Jalan di Kabupaten Semarang Tahun 2013”. Journal of Politic and Government Studies, 5(3).

Sahudege, C. D., Kiyai, B., dan Laloma, A. (2015). “Implementasi Kebijakan Pembangunan Infrastruktur Jalan dalam Mendukung Pengembangan Ekonomi Masyarakat di Kabupaten Sorong Provinsi Papua Barat”. Jurnal Administrasi Publik, 4(32).

Yonatan, Fitriyah, N., dan Margono, A. (2014). “Implementasi Pembangunan Infrastruktur Dalam Menunjang Kelancaran Pelayanan Pada Masyarakat Di Kecamatan Mentarang Kabupaten Malinau”. Jurnal Administrative Reform, 2(4).

Essay/Thesis

Aji, D. S. (2014). “Implementasi Kebijakan JAMPERSAL di Kota Yogyakarta Tahun 2013”. Skripsi. Yogyakarta: Fakultas Ilmu Politik, UNY.

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Presentations

Balai Besar Pelaksanaan Jalan Nasional V, dalam Materi diskusi tentang “Jalan Tol Trans Sumatera BBPJN V Palembang”, Penelitian Kelompok Badan Keahlian DPR RI, Palembang. Mei 2018.

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Balai Besar Pelaksanaan Jalan Nasional XV, dalam Materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”, Penelitian Kelompok Badan Keahlian DPR RI, Manado. Maret - April 2018.

Bastari Panji Indra (Assistant Deputy for Housing, Land and Infrastructure Financing KPPIP), dalam Materi diskusi tentang “Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”. Penelitian Kelompok Badan Keahlian DPR RI, Jakarta. 23 Agustus 2018.

Imelda Zainal, dalam materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”. Penelitian Kelompok Badan Keahlian DPR RI, Palembang, Mei 2018.

Jasamarga Manado Bitung, dalam Materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”, Penelitian Kelompok Badan Keahlian DPR RI, Manado. Maret - April 2018.

Linda Lambey, dalam materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”. Penelitian Kelompok Badan Keahlian DPR RI, Manado, Maret-April 2018.

Pelindo IV, dalam Materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”, Penelitian Kelompok Badan Keahlian DPR RI, Manado. Maret - April 2018.

Sjamsurijal, dalam Materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”. Penelitian Kelompok Badan Keahlian DPR RI, Palembang. Mei 2018.

Waskita Karya, dalam Materi diskusi tentang “Implementasi Kebijakan Pembangunan Infrastruktur untuk Pemerataan Ekonomi”. Penelitian Kelompok Badan Keahlian DPR RI, Palembang, Mei 2018.

Website/Internet Articles

“Executive Gathering Kementerian Keuangan 2018”, (https://www.kemenkeu.go.id/media/6926/menkeu-paparan-executive-gathering.pdf, diakses 2 Februari 2018).

Komite Percepatan Penyediaan Infrastruktur prioritas, (https://kppip.go.id/tentang-kppip/, diakses 7 Februari 2018).

Putra, Yudhistira Dwi. “Dianggap Paling Menonjol, Ini Catatan Pembangunan Infrastruktur Selama 3 Tahun Pemerintahan Jokowi-JK”, diakses 13 Februari 2018.

Silitonga, Desmon. “Daya Saing Ekonomi dan Infrastruktur”, (http://ekonomi.kompas.com/read/2017/08/16/095705626/daya-saing-ekonomi-dan-infrastruktur, diakses 17 Februari 2.

Internet

https://tradingeconomics.com/indonesia/gdp, diakses 2 Agustus 2018.

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https://finance.detik.com/infrastruktur/d-4167968/pemerintah-coret-29-proyek-dari-daftar-psn, diakses 16 Agustus 2018.

Regulations

Government Regulation No. 6 Year 2017 concerning the Amendment to Government Regulation No. 56 Year 2009 concerning Railroad Administration

Government Regulation No. 13 Year 2017 concerning the Amendment to Government Regulation No. 26 Year 2008 conerning National Spatial Plan

Government Regulation No. 30 Year 2017 concerning the Third Amendment to Government Regulation No. 15 Year 2005 concerning Toll road

Presidential Regulation No. 75 Year 2014 concerning the Accelerated Provision of Priority Infrastructure.

Presidential Regulation No. 100 Year 2014 concerning the Accelerated Construction of Sumatra Toll road.

Presidential Regulation No. 2 Year 2015 concerning RPJMN 2015-2019.

Presidential Regulation No. 38 Year 2015 concerning Government Cooperation with Business Entities in the Provision of Infrastructure.

Presidential Regulation No. 117 Year 2015 concerning the Amendment to Presidential Regulation No. 100 Year 2014 concerning the Accelerated Construction of Sumatra Toll road.

Presidential Regulation No. 3 Year 2016 concerning the Accelerated Implementation of National Strategic Projects

Presidential Regulation No. 44 Year 2016 concerning List of Business Fields that are Closed and Business Fields that are Open with Requirements in the Field of Investment.

Presidential Regulation No. 122 Year 2016 concerning the Amendment to Presidential Regulation No. 75 Year 2014 concerning the Accelerated Provision of Priority Infrastructure.

Presidential Regulation No. 14 Year 2017 concerning the Amendment to Presidential Regulation No. 4 Year 2016 concerning the Acceleration of Electricity Infrastructure Development.

Presidential Regulation No. 56 Year 2017 concerning Social and Community Impact Management in the Framework of Providing Land for National Strategic Projects.

Presidential Regulation No. 58 Year 2017 concerning the Amendment to Presidential Regulation No. 3 Year 2016 concerning the Accelerated Implementation of National Strategic Projects

Presidential Regulation No. 56 Year 2018 concerning the Second Amendment to Presidential Regulation No. 3 Year 2016 concerning the Accelerated Implementation of National Strategic Projects

Regulation of Home Affairs Minister No. 96 Year 2016 concerning Payment of Availability of Services in the Framework of Regional Government Cooperation with Business Entities in the Provision of Infrastructure in the Regions.

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Regulation of Finance Minister No. 143 Year 2013 concerning Guidelines for Providing Feasibility Support for Some of the Construction Costs on Projects for Government Cooperation with Business Entities in the Provision of Infrastructure.

Regulation of Finance Minister No. 190 Year 2015 concerning Payment of Availability of Services in the Framework of Government Cooperation with Business Entities in the Provision of Infrastructure.

Regulation of Finance Minister No. 219 Year 2015 concerning the Organization and Work Procedure of the State Asset Management Institute.

Regulation of Finance Minister No. 21 Year 2017 concerning Procedures for Land Procurement Funding for National Strategic Projects and Management of Land Acquisition Assets by the State Asset Management Institute.

Regulation of Finance Minister No. 60 Year 2017 concerning Procedures for Giving Guarantees to the Central Government to Accelerate the Implementation of National Strategic Projects.

Regulation of Finance Minister No. 35 Year 2018 concerning the Granting of Corporate Income Tax Reduction Facilities.

Regulation of the Coordinating Minister for Economic Affairs No. 12 Year 2015 about Acceleration of Preparation of Priority Infrastructure.

Regulation of the Coordinating Minister for Economic Affairs No. 5 Year 2017 concerning Amendments to the Regulation of the Coordinating Minister for Economic Affairs No. 12 Year 2015 about Acceleration of Preparation of Priority Infrastructure.

Regulation of the Minister of Public Works and Public Housing No. 19 of 2016 concerning the Provision of Support by the Central Government and / or Regional Government in the Cooperation in the Provision of Drinking Water Supply Systems.

Regulation of the Minister of Public Works and Public Housing No. 1 of 2017 concerning Procedures for Implementing Business Procurement for Toll Road Concession.

Regulation of the Minister of Transportation No. 24 of 2017 concerning Revocation of Capital Ownership Requirements for Business Entities in the Field of Sea Transportation Exploitation, Ship Agency, Exploitation and Port Business Entity.