KPPIP – Empowering The Coordination of Infrastructure Delivery

Despite being  a comittee, The KPPIP has been well designed with a full -time Management team in the form of the PMO

Infrastructure has been quite a hot topic for Indonesia over the past few years and the discussion surrounding infrastructure in the country is always diverse, covering pro and contra comments derived from either an optimistic or a pessimistic angle.

The majority would agree that accelerating infrastructure development is truly what Indonesia needs to grow its economy; however, with the progress of infrastructure development throughout the country, many doubt the country’s and the government’s capacity and ability to deliver these needs.

To discuss the capability and ability to deliver one must appreciate the nature of an infrastructure project. Being trained as an engineer, a key lesson I learned over my professional years is that each project is unique and there are no similar projects, regardless of how small the project is. In each project, there is always a different issue to deal with; however, for the Indonesian case, an additional complexity is introduced due to the regulatory and bureaucracy framework in the country.

With a set of laws and regulations defining the autonomy and authority of line ministries and government institutions, infrastructure investors and developers are required to face and experience complex multi-phase coordination and approval to deliver an infrastructure project in Indonesia. This results in the laments that most infrastructure investors and developers face in Indonesia – why isn’t there one agency that coordinates the delivery of infrastructure projects?

Why isn’t there one government champion who can speak with the myriad government ministries and agencies to reach a collective decision to deliver a project and, most importantly, why isn’t there one agency that can work closely with the country’s fiscal agency, the Finance Ministry, to develop proper funding schemes before the projects are taken to tender?

And, of course the very basic question of why aren’t the infrastructure projects, especially the Public Private Partnership (PPP) projects, better prepared before offering them for tender? These questions, and more, have been the bane of infrastructure investors and the PPP market for more than a decade, ultimately leading to the current condition of an infrastructure deficit across the country.

Roughly a year ago, I was offered the opportunity to be the program director leading the Program Management Office (PMO) of the newly created coordinating agency to fast-track infrastructure delivery.

This new agency, which is actually a committee, the Committee for the Acceleration of Priority Infrastructure Delivery (KPPIP), was born out of the overwhelming need for an empowered coordinating agency to deliver the government’s priority, and subsequently, strategic projects.

The Coordinating Economic Minister Darmin Nasution, leads KPPIP supported by the National Development Planning Minister and Head of the National Development Planning Board (Bappenas), the Finance Minister and the Agrarian and Spatial Planning Minister.

With the extent of recent infrastructure work assigned to the KPPIP, plans are in line to include the Coordinating Maritime Affairs Minister as the deputy and the Environment and Forestry Minister as a member of the KPPIP. Despite being a committee, the KPPIP has been well designed with a full time management team in the form of the PMO, where I, together with six project directors recruited from the private sector (and state-owned enterprises), work alongside a group of dedicated echelon one government officers from the respective infrastructure- related ministries.

The mandate of the KPPIP as articulated in Presidential Decree No.75/2014, is to coordinate the preparation and delivery of priority projects with particular focus on: coordinating timely decision inputs from the various ministries and government agencies involved, and debottlenecking any issues or concerns that may arise early in or along the process.

Additionally, the mandate also empowers the KPPIP to support the various line ministries to better prepare their projects for investments, coordinate with the Finance Ministry to determine funding schemes and, importantly, resolving the provision of credit enhancement and government support schemes for these priority projects. Furthermore, the KPPIP is also empowered to lead policy reforms and recommend new policy frameworks with the clear aim to increase infrastructure delivery in the country. To enable the achievement of these mandates, the government has empowered the KPPIP with direct APBN funding to cover its operating costs, as well as to fund costs related to developing these projects.

In simple terms, the establishment and empowerment of the KPPIP should be acknowledged as the culmination of many years of government efforts to reform for better delivery of infrastructure, together with other reform efforts, for example: the issuance of the land acquisition law; establishing infrastructure funding and guarantee institutions; as well as the issuance of key regulations, presidential decrees and economic policy packages for infrastructure delivery.

To set the context of the task ahead for the KPPIP, it is important to understand how serious our infrastructure deficit is. Firstly, let us look at Indonesia’s logistics cost as a factor of GDP. The logistics cost is one of the tools used to assess the availability and efficiency of a country’s infrastructure, because every business, invariably, has to add the logistics cost to their cost of doing business in Indonesia.

Indonesia’s logistics cost is around 27 percent of GDP. Often this high number is explained away by the fact that Indonesia is an archipelago of 17,000 islands, of which 6,000 are inhabited; however, in reality, the biggest contributor to the cost of logistics is land transportation costs at over 70 percent, while sea transportation only accounts for 22 percent of the logistics cost. Based on this fact, the key bottleneck is connectivity within the major Indonesian islands, like Java, Sumatra, Kalimantan and Sulawesi, where the quality of roads are poor and land connectivity between production centres and ports and from suppliers to buyers is inefficient. The government has thus identified the logistics cost as a key bottleneck, and this has aiso been reflected in the President’s Nawa Cita manifesto, in which he has set the target of reducing the logistics cost to 19 percent of GDP by 2019.

At a more urban level, the lack of public transportation, particularly modern public transportation services like Mass Rapid Transit (MRT) services in major capital cities such as Jakarta, Surabaya, Medan, etc., has been another major cause of inefficiencies. Within Jakarta, rail-based public transportation currently only accounts for 2.3 percent of commuter traffic, whereas over 62 percent of commuter traffic is still private vehicles.

This excessive use of private vehicles is the major cause of the infamous macet total (gridlock) in Jakarta. Adding to this lack of public transportation is insufficient road space compared to that normally expected in capital cities. Generally, the land area occupied by roads as a percentage of the total area of a capital city is between 1 2 to 20 percent, yet in Jakarta only 6 percent of the city’s area is used for roads.

Despite the many government initiatives, including city government initiatives to build urban elevated roads and other intra- and inter-urban roads, these have remained non-starting for reasons ranging from land acquisition to funding issues.

In the railway sector, the percentage of double tracking is very low compared to that in neighbouring countries. For example, it is 18 percent and 13.4 percent, respectlively, in Malaysia and Thailand compared to 7.7 percent in Indonesia.

In terms of dwelling time which has become a hot subject of late, the dwelling time at Jakarta’s premier seaport Tanjung Priok has been oscillating between five to eight days, depending on the definitlon of dwelling time that is used.

In terms of airport the country’s main International gateway Soekarno-Hatta is the ninth busiest airport in the world (ahead of Singapore’s Changl airport) at 55 million passengers per annum but alas the airport itself is only designed to handle 22 million passengers a year,

The airport operator, supported by the Transportation Ministry, has been exploring expanding its current facilities to keep up with demand and improved services and bigger facilities are expected in the near future.

While the enormity of the infrastructure deficit in the country may sound daunting, the good news is that rapid changes and improvements are already in progress. Despite its embryonic status, the KPPIP is the leader in the government’s efforts to bring about positive outcomes.

First, let us look at the Jakarta MRT project. This under-construction project is one of the projects unlocked by the KPPIP in its early days, particularly to resolve various related bottlenecks including resolving disputes between the city administration and ministries whose land the project needed to acquire.

The Jakarta MRT is an official development assistance funded project involving both international and local contractors, subcontractors, engineers and suppliers. Its first phase, stretching 15.7 kilometres from Lebak Bulus to the Hotel Indonesia traffic circle, is currently under construction and involves elevated structures as well as an underground tunnel below Jl. Jend, Sudirman, The project is expected to be completed by this time next year. Phase two of this north-south alignment wlill extent an additional 8 kilometres to Kampung Bandan, The MRT project third phase, going east-west, will be around 87 kilometers.

The KPPIP has also played a key role in unlocking the Central Java Power Plant (CJPP) project, initially in resolving permit issues for coal offloading facilities for the plant, The KPPIP was involved in assisting the government with land aquisitlon issues, resolving currency related issues and leading intensive coordination of all stakeholders, culminating in a recent ceremony at the State Palace signifying the financial closure of the US54 billion project.

The President himself, who should be credited with convincing the last handful of landowners to sell, witnessed the event. The CJPP is the largest power plant PPP project in Asia, and will be one of the most environmentally friendly coal power plants utillizing ultra-super critical boiler technology.

The CJPP also serves as a success story of PPP projects using rupiah for payments by state electricity firm PLN and receiving a government guarantee. Last, the project is one of the early projects to successfully use the new Law No.2/2012 on land to acquire the necessary land.

Another recent successful coordination effort by the KPPIP was the development of the Umbulan Water Supply project, where again the KPPIP led the government’s efforts to unlock the contract awarding process, which was an effort over 36 years from its initiation.

In supporting improved project preparations, the KPPIP has been at the forefront of supporting the various line ministries with their priority projects.The KPPIP recently supported the Public Works and Public Housing Ministry on the Serang Panimbang tollroad project.

The KPPIP coordinated a series of meeting with the Indonesia Toll Road Authority (BPJT) and the Finance Ministry from a technical level to ministerial level to discuss the funding scheme.The KPPIP also provided a project preparation facillty in the form of “value for money” study.

Through these coordination efforts, the government recently resolved the funding scheme for the project involving fiscal support from the ministry.

Currently the KPPIP is coordinating the development of the high economic value trans-Sumatra highway, partlcularly in ensuring that the project receives sufficient government funding and government supported funding via borrowing from development finance institutions.

While the KPPIP has been very effective within its limited lifespan, the road ahead is long and I am very concious that in the order for the KPPIP to achieve the President’s vision of delivering or at the least starting the 30-odd priority projects, which comprise 225 projects and one electricity program, by 2019, the KPPIP would need greater clarity and capacity in its ability to deliver its mandate,

I understand there have been some discussions in the media surrounding the need for another project delivery institution reporting directly to the President. While the idea itself is not new, the establishment of another institution to coordinate infrastructure project delivery is perhaps not prudent at this stage and it has potential to confuse the market regarding the government’s efforts to deliver infrastructure. That said, there is definitely a benefit in greater empowerment and increased resourcing of the existing institutions involved in infrastructure delivery.

On key agency that needs empowerment and increased capacity is the new PPP unit at the Finance Ministry. In addition, the country’s lead planning agency Bappenas has also been exploring expanding its programming and budgeting capabilities for infrastructure projects and again a well-run PMO resourced by a dedicated team could be a step in the right direction.

The notion of overt public private partnership in program coordination and project preparation mar be new to Indonesia but given its effectiveness so far at the KPPIP, it is worth exploring for both the new PPP unit at the ministry and for the unit envisaged at Bappenas.

In the 12 months I have been fortunate to lead the KPPIP’s PMO, I am grateful to the dedicated public service officers with whom my team and I work on a daily basis, and the support we have received from the various line ministries and stakeholders at central government as well as regional administration levels.

All of these have been instrumental in enabling the KPPIP to perform to present and more importantly to continue to perform amid the challenging project delivery environment and the many conflicting priorities for the government’s limited funding.

I am enthused, however that the KPPIP will continue to play a significant role in coordinating the resolution of these conflicting priorities, manage the interactions between government contracting agencies and private sector investors and importantly ensure that the country consistently takes a step forward in its path to become the ninth largest economy in the world by 2030.
The writer is the program director of the KPPIP’s Program Management Office (PMO). He was formerly the regional manager for Southeast Asia 2 at SMEC International Pty Ltd (SMEC) and prior to that he was SMEC’s Indonesia country manager. He can be contacted at rainer.haryanto@kppip.go.id

Sumber: Majalah Jakarta Post Edisi Agustus 2016