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The issues in the road transport sector fall into three broad

categories. First ,provision of the road network has been

madequate . Provincial and kabupaten roads are in poor

condition . congestion is a signicant problem , and access to

rular communities is low. Many factors contribute to poorprovision of the road network. Funding is inadequate and

unpredictable, hich is e!acerbated by the fact that e!penses

are misallocated. "nd the works that are allocated funds are

generally e!pensive and of low quality. #econd. $se of the road

network is ine%cient. &haracteri'ed by overloading, suboptimal

use and a lack of tra%e safety. (astly , institutions and the legal

framework. )specially with toll roads. "re weak.

*nadequate Provision +f The oad -etwork

".Poor &ondition of the network

hile central funding has been adequate for keeping the

national artenal network in sausfactory and sustainable

condition. There is a backlog of preservation and upgrading

needs on the provincial network and a very large backlog on the

kabupaten network . ia the absence of budget and

unplementation constraints . the /000 #)PM analysis medicates

that e!penditures on road preservation should mercase sharpy

down then level of circa p. 1,2 million to nance a massive

program of betterment followed by a sharp decline in

e!penditures once the ma3or part of the network is in a stable

muntainable condition. The unconstrained /004 budget in /000prices was estimated at circa p /4 million. ith e!penditures

in subsequent yeats fallingto circa p 45 million in /00/ and to

less than p 1 trillion in /005. +ver a ten6year periode. The

analysis indicates an average budged of circa p 7 8 7,2 trillion.

)%ciently allocated. ould be needed to bering the network to

an optimal condition. The computed relationship between

average road agency e!penditures and road user costs foralternative budged constraints 9406year averages: is shown in

Table 4/. " further analysis of Table 4/ is found in oad "nne!

4.

;. &apacity )!pansion -eeds in


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Managing the increase in tra%c demand that results from

economic growth requires a systematic investman in e!pansion

of network capacity and improvements in tra%c management.

=eferral of a susbstantial program of upgrading at the time of

the nancial crisis and the subsequent resumption of tra%cgrowth have resulted in very pressing needs to e!pand the

capacity of sections of the arterial road network. ava , where it is

estimated that at least /10 km of capacity e!pansion per year

is ecconomucally 3ustied through /040 , which is 50? higher

than similar estimates in 4@@A.

"ll the ma3or urban areas are sub3ect severe tra%c congestion

and this is a growing problem for the smaller satellite towns.

$rban tra%c Bowshave continued to increase rapidly, despite

the nancial crisis. Private motor vehicle use has grown

particularly fats, following liberali'ation of motor vehicle import

regulation. "tmospheric pollution is a serious problem in the

large cities 9in the 4@@0s >akarta was ranked the third most

polluted mega6city in the world:6 and is an rapidly emerging

concern for the ne!t level of cities. Cehicle emissions are

considered to contribute much to local levels of pollution and

the use of leaded gasoline has been ma3or concern.

&.(ow "ccess for emote &ommunities

$ncompetitive procurement results in high costs and poor

performance of construction and maintenance works. " surveyof preservation works on national and provincial roads carried

out during the late 4@@0s recently relaved that /2? were

performing signicantly less well than designed and reching a

critical condition at least 50? earlier than pro3ected

&orruption, collusion and nepotism remain pervasive in the

construction industry and contribute substantially to theproblem. &ollusion between bidders and o%cials undermines

competition, leading to the higher initial prices and losses

estimated at 40650?.


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hen this weakens supervision control ovr the quality of work,

the consequent under performance can increase losses to in the

order of 10?. The impact is even more negative when poor

supervision performance on the part of public authorities,

particularly at the kabupaten level, also signicantly diminishesthe eDectiveness of maintenance resulting in premature road

deterioration, e!cessive vehicle operating costs and a greater

need for costly rehabilitation.

eform in the areas can give rise to substantial direct saving

together with even greater indirect benets through reduced

vehicle operating costs as a result of the improved conditionnetwork.

*ne%cient use of the road network

a. Cehicle overloadingThe enforcement of vehicle loading and dimension

regulations in *ndonesia is very weak, with between 50 8400 ? of heavy vehicles overloaded 8 such vehicle is

overloading has been estimated to increase road

preservation costs by between /0670? . as long ago as

4@E4 government close all roadside weighbridges due to

their being ineDective and functioning primarily as collection

points for illegal levies. Most have since been else has

changed. Cisual observation conrm that the problem

remains very serious and is possibly worsening. *n

sumatera trucks transport logs that overhang far beyond the

permitted the limit. *n 3ava hungry boardsG are used to

enable trucks to carry e!cessive volumes of sand ad

aggregates. #imilarly in >akarta, ready6mi! concrete trucks

are tted with drums that are much larger than the volume

stated on the vehicle documents, many overload trucks

en3oy military or police protection and indeed many areoperated by military or police cooperatives.

b. #ub6optimal utili'ation of e!isting

road network capacitywith budget constraints limiting the scope for road capacity

e!pantion investments, it will be essential in the medium

term to ma!imi'e utili'ation of e!isting capacity. "t present,


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serious congestion, which greatly increases road user costs,

is commonly caused by poor tra%c engineering and tra%c

management, especially at intersections, by roadside

activities such as markets that impede tra%c Bow, by slow6

moving vehicles that are overload, under powered orunsafe, and by poor driver behavior. *n some areas,

problems are compounded by poor public transport route

licensing practices that allow the operation of e!cessive

numbers of small pick6ups and that require these to pass

through badly located and managed terminals for the

primary purpose of revenue generation.

#ome basic tra%c management measures such as tra%clights and one wayG streets are applied in most urban areas.

To date there have been rather limited attempts to introduce

more sophisticated tra%c management measures such as

segregated tra%c, tidal BowG lanes and variable geometry

at roundabouts. The very substantial needs for improved

regulation and management of urban transport as well as

for capital investment must be assessed in the comple!contect of urban management planning.

c.Poor road tra%c safetyoad tra%c accidents cause around /2 deaths per day in

*ndonesia and give rise to substantial material costs. oad

accidents impose an estimated cost of 4.2? of H=P. The

number of reported fatalities has declined in recent years,

falling from circa 44,E00 in 4@@E to E.A7/ in /00/. Thenumber of fatalities per 40.000 registered vehicles is

relatively high at 1.2. poor public and driver education

coupled with la! driver testing procedures for drivers of

public transport and heavy goods vehicles, are important

factors. They are compounded by weak enforcement of

safety related tra%c regulations, ineDectual instpection of

motor vehicle condition, which is currently required only for

commercial vehicles and poor road and intersection

geometry and signing. *n some instances, notably driver and

vehicle testing, corruption recogni'ed to be a signicant

underlying factor.


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*nformation on the causes and consequences of the tra%c

accidents is poor. *n part because it has taken more than a

decade to secure inter6agency agreement on the adoption of

an improved tra%c accident reporting and data processing

system whose implementation is only now commencing on apilot basis. +%cial statistics are believed to understate

actucal number of fatalities . in part because deaths

occurring more than /1 hours after an accident are often not

included.

*nadequate institutional and regulatory framework for toll

roads

The limited interest now being shown in the toll road sectorby serious private investors is attributable to several factors

aside from the overall investment climate. Prominent among

them are concern regarding the concessions award process

and the multiple rolcs assigned to 3asa marga 9which

operated: as a toll road developer, an agent of development

required by the government to construct roads that are not

commercially viable, and as a counter 8party for

concessions agreements with private developers or as a

3oint venture partner for such developers:, the absence of

an agreed mechanism for ad3usting tolls to reBect changes

in cost not controllable by developers, the requirement for

developers to be responsible for the costs of land acquisition

in the absence of functioning eminent domain powers, slow

progress in the resolution of e!isting concessions, and the

absence of a soundly based and update toll road master 8plan on which to prepare meaningful feasibility studies.

C**. Th) ay Forward

Hovernment has recogni'ed and has been seeking to tackle

the core problems impeding the e%cient functioning of the

road sector for more than two decades. hile some

initiatives have borne fruit, the pverall pace of progress has

been disappointingly slow.The resultant costs6 for the budget and for road users6

amount to several trillions of rupiah per year. These are real

costs that impact the performance of the economy and

impede eDorts to alleviate poverty. " fundamental


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rethinking on the way in which the sector is managed and

regulated is clearly needed.

*mprove road network provisiona. )!pand and e!tend network

managing the increase in tra%c demand that results fomeconomic growth requires a systematic investment in

e!pansion of network capacity and improvements in tra%c

and demand management. Programs of priority

investment on the core section of the network should be

identied , particularly those that may be suitable for

private investment.

" recent study for 3avaGs arterial road network indentied

the growing congestion and concluded that I6 ;y around /00A, all primary arterial and collector links of

less than A meters width should be widened to A meters6 ;y /050, the entire arterial road network should be

developed to a 16lane standard.

" preliminary screening process identied a program ofeconomically warranted upgrading pro3ects amounting

to p. 407 trillion at /000 prices over the period /0006

/050. +f this total , p.1,2 trillion is for widening to a A6

meter /6lane unseparated standard 9 uA:, p.51,7

trillion is for widening to 16lane dual camageway

standard on e!isting alignments 91=:, and p.77,A

trillion is for construction of new 16lane dual carriageway

limited access roads 9("-:. The criteria for including

investment in the program was a rst year economic

rate of return of /0? or greater, which is estimated to

equated to an )* of over 10? with the pro3ected tra%c

growth rates. "s shown in gure 1. The premilinary

screening indicated that further investments in new 16

lane dual carriageway inter6urban limited access road

would not be 3ustied prior to /042. ava massively e!ceed past levels of funding for all new


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construction works 9see Table 7:. The studyGs

recommended e!penditure program for the period /00/6

/040 was prepared on the basis that funding available

for >ava capacity e!pansion works would increase

progressively from p.0.2 trillion in /00/ to p.4.0trillionin /00A and remain at that level through /040,

with the total budged over the period being p 7.1

trillion. This necessarily involves deferring many pro3ects

with high rates of return. )quivalent studies have yet to

be conducted for other island groups. hile their

collective capacity e!pansion needs will not he as large

as those for >ava, they will nonetheless be signicant

and 3ustify substantial investment

b.*mprove "ccess to emote &ommunitiesThere is a need to e!tand the all6season road network in

order to provide reliable access for the @ ?of the rural

population which is not directly connected.


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6 )stablish criteria lot &entral Hovernment support for

e!tending the network in the conte!tof the poverty

eduction #trategy6 )nsure that decistoas to e!tend the network take

adequate account of the e!pected recurrent costumplications llost mainting the new road links6 emove Hovernment intluence from +H"-=", the

*ndonesian oad Transport +peratorGs association and

encourage the "ssociation to represent its members

interests more eDectively

*n order to eDectively implement the recommendationsabove, the following are required

a.#tabili'ed the Funding for oad "ssetsManaging road assets is an e!pensive business, and

while roads are seen as pblic good, they are competing

for public e!penditures with other sectors on the basis of

outputs which are di%cult to compare. $nder the public

e!penditure model, the road networks have beenunevenly funded or under6funded 8 the economic needs6

based estimate for preservation of satisfactory service

on the primary networks is an average of *= 7.2 trillion

annually 94@@@ values: with a gap in /000 of about *=

/./ trillion, a 426/0 ? shortfall on provincial roads and

50? shortfall on =istrict.

*nstead, if the provision and preservation of road assetsis considered as a commercial service rather than a

public good, the costs of preservation can be recovered

through a fee charged to road users for the services they

receive. oad users are playing about *= //0 trillion

annually in operating costs, and the added costs they

incur through the underfunding on roads is estimated to

be about *= 7 trillion ,or three times the funding gap. *f

the nancing of road preservation was put on a fee6for6

service basis, users may pay an additional *= /./ trillion

but they would have net savings of double that amount.

$nder a commercial service model, the full economic

costs of road preservation would be recovered from


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users and invested in the road assets, in a similar way to

the operation of unlities such as telephones or electric

power. "doption of this costs recovery model could place

the management of road assets on a fully sustainable

basis which does not impose on general publice!penditures. ;ecause the revenue would keep pace

with the e!penditure needs, provided that the funds

were invested back in the assets e%ciently. *n essence

the funds would pass through from road user revenues

to the budget for road e!penditures 8and eventually.

ith the appropriate controls, could be managed oD6

budget.

+D6 budget road funds nanced by predictable revenue

streams from user chargers have proven eDective in

many countries. Particularly where they are part of a

broader strategy for managing roads on a business6like

fee6for6service basis. oad fund revenues should be

sourced from specic road user charges. -ot from

general ta! revenue, and its claim to these revenuesshould be established in law. The level of revenues

should be su%cient to nance the works and services

needed to improve and maintain the network to a

satisfactory standard. hile the structure of users

charges should provide incentives for economically

sound vehicle purchase and operating decisions. oad

preservation works would thus be nanced entirely oD6

budget by users and without nancing from foreign

loans.

hen the subsidy on gasolinean "=+ is eliminated, road

users will start to make a substantial contribution

towards the costs of road preservation rehablition,

routine and periode maintenance and limited

betterment. evenues from the PJ; motor vehicle ta!.The P;;J; motor vehicle tuels ta!. "nd other ta!es on

road users would be broadly in line with the desirable

level of preservation e!penditures.

The present structure of the e!isting road user charges is

fas from that ideal, however

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