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 significant problem , and access to
rular communities is low. Many factors contribute to poor
provision of the road network. Funding is inadequate and
unpredictable, Which is exacerbated by the fact that expenses
are misallocated. And the works that are allocated funds are
generally expensive and of low quality. Second. Use of the road
network is inefficient. Characterized by overloading, suboptimal
use and a lack of traffie safety. Lastly , institutions and the legal
framework. Especially with toll roads. Are weak.

Inadequate Provision Of The Road Network

A.Poor Condition of the network
While 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 2000 SEPM analysis medicates
that expenditures on road preservation should mercase sharpy
down then level of circa Rp. 4,5 million to finance a massive
program of betterment followed by a sharp decline in
expenditures once the major part of the network is in a stable
muntainable condition. The unconstrained 2001 budget in 2000
prices was estimated at circa Rp 21 million. With expenditures
in subsequent yeats fallingto circa Rp 13 million in 2002 and to
less than Rp 4 trillion in 2003. Over a ten-year periode. The
analysis indicates an average budged of circa Rp 6 6,5 trillion.
Efficiently allocated. Would be needed to bering the network to
an optimal condition. The computed relationship between
average road agency expenditures and road user costs for
alternative budged constraints (10-year averages) is shown in
Table 12. A further analysis of Table 12 is found in Road Annex
1.
B. Capacity Expansion Needs in Highly Congested Areas

Managing the increase in traffic demand that results from

economic growth requires a systematic investman in expansion
of network capacity and improvements in traffic management.
Deferral of a susbstantial program of upgrading at the time of
the financial crisis and the subsequent resumption of traffic
growth have resulted in very pressing needs to expand the
capacity of sections of the arterial road network. High
congestion costs are being imposed on users of some heavily
trafficked corridors. This applies particularly to Java , where it is
estimated that at least 240 km of capacity expansion per year
is ecconomucally justified through 2010 , which is 30% higher
than similar estimates in 1997.
All the major urban areas are subject severe traffic congestion
and this is a growing problem for the smaller satellite towns.
Urban traffic flowshave continued to increase rapidly, despite
the financial crisis. Private motor vehicle use has grown
particularly fats, following liberalization of motor vehicle import
regulation. Atmospheric pollution is a serious problem in the
large cities (in the 1990s Jakarta was ranked the third most
polluted mega-city in the world)- and is an rapidly emerging
concern for the next level of cities. Vehicle emissions are
considered to contribute much to local levels of pollution and
the use of leaded gasoline has been major concern.
C.Low Access for Remote Communities
Uncompetitive procurement results in high costs and poor
performance of construction and maintenance works. A survey
of preservation works on national and provincial roads carried
out during the late 1990s recently relaved that 25% were
performing significantly less well than designed and reching a
critical condition at least 30% earlier than projected

Corruption, collusion and nepotism remain pervasive in the

construction industry and contribute substantially to the
problem. Collusion between bidders and officials undermines
competition, leading to the higher initial prices and losses
estimated at 10-30%.

When this weakens supervision control ovr the quality of work,

the consequent under performance can increase losses to in the
order of 40%. The impact is even more negative when poor
supervision performance on the part of public authorities,
particularly at the kabupaten level, also significantly diminishes
the effectiveness of maintenance resulting in premature road
deterioration, excessive vehicle operating costs and a greater
need for costly rehabilitation.

Reform in the areas can give rise to substantial direct saving

together with even greater indirect benefits through reduced
vehicle operating costs as a result of the improved condition
network.

Inefficient use of the road network

a.
Vehicle overloading
The enforcement of vehicle loading and dimension
regulations in Indonesia is very weak, with between 30
100 % of heavy vehicles overloaded such vehicle is
overloading has been estimated to increase road
preservation costs by between 20-60% . as long ago as
1981 government close all roadside weighbridges due to
their being ineffective and functioning primarily as collection
points for illegal levies. Most have since been else has
changed. Visual observation confirm that the problem
remains very serious and is possibly worsening. In
sumatera trucks transport logs that overhang far beyond the
permitted the limit. In java hungry boards are used to
enable trucks to carry excessive volumes of sand ad
aggregates. Similarly in Jakarta, ready-mix concrete trucks
are fitted with drums that are much larger than the volume
stated on the vehicle documents, many overload trucks
enjoy military or police protection and indeed many are
operated by military or police cooperatives.
b.
Sub-optimal utilization of existing
road network capacity
with budget constraints limiting the scope for road capacity
expantion investments, it will be essential in the medium
term to maximize utilization of existing capacity. At present,

serious congestion, which greatly increases road user costs,

is commonly caused by poor traffic engineering and traffic
management, especially at intersections, by roadside
activities such as markets that impede traffic flow, by slowmoving vehicles that are overload, under powered or
unsafe, and by poor driver behavior. In some areas,
problems are compounded by poor public transport route
licensing practices that allow the operation of excessive
numbers of small pick-ups and that require these to pass
through badly located and managed terminals for the
primary purpose of revenue generation.
Some basic traffic management measures such as traffic
lights and one way streets are applied in most urban areas.
To date there have been rather limited attempts to introduce
more sophisticated traffic management measures such as
segregated traffic, tidal flow 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 complex
contect of urban management planning.
c.Poor road traffic safety
Road traffic accidents cause around 25 deaths per day in
Indonesia and give rise to substantial material costs. Road
accidents impose an estimated cost of 1.5% of GDP. The
number of reported fatalities has declined in recent years,
falling from circa 11,800 in 1998 to 8.762 in 2002. The
number of fatalities per 10.000 registered vehicles is
relatively high at 4.5. poor public and driver education
coupled with lax driver testing procedures for drivers of
public transport and heavy goods vehicles, are important
factors. They are compounded by weak enforcement of
safety related traffic regulations, ineffectual instpection of
motor vehicle condition, which is currently required only for
commercial vehicles and poor road and intersection
geometry and signing. In some instances, notably driver and
vehicle testing, corruption recognized to be a significant
underlying factor.

Information on the causes and consequences of the traffic

accidents is poor. In part because it has taken more than a
decade to secure inter-agency agreement on the adoption of
an improved traffic accident reporting and data processing
system whose implementation is only now commencing on a
pilot basis. Official statistics are believed to understate
actucal number of fatalities . in part because deaths
occurring more than 24 hours after an accident are often not
included.
Inadequate institutional and regulatory framework for toll
roads
The limited interest now being shown in the toll road sector
by 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 jasa marga (which
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 party for
concessions agreements with private developers or as a
joint venture partner for such developers), the absence of
an agreed mechanism for adjusting tolls to reflect 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 existing concessions, and the
absence of a soundly based and update toll road master
plan on which to prepare meaningful feasibility studies.
VII. ThE Way Forward
Government has recognized and has been seeking to tackle
the core problems impeding the efficient functioning of the
road sector for more than two decades. While some
initiatives have borne fruit, the pverall pace of progress has
been disappointingly slow.
The resultant costs- for the budget and for road usersamount to several trillions of rupiah per year. These are real
costs that impact the performance of the economy and
impede efforts to alleviate poverty. A fundamental

rethinking on the way in which the sector is managed and

regulated is clearly needed.
Improve road network provision
a.
Expand and extend network
managing the increase in traffic demand that results fom
economic growth requires a systematic investment in
expansion of network capacity and improvements in traffic
and demand management. Programs of priority
investment on the core section of the network should be
identified , particularly those that may be suitable for
private investment.
A recent study for javas arterial road network indentified
the growing congestion and concluded that :
- By around 2007, all primary arterial and collector links of
less than 7 meters width should be widened to 7 meters
- By 2030, the entire arterial road network should be
developed to a 4-lane standard.
A preliminary screening process identified a program of
economically warranted upgrading projects amounting
to Rp. 106 trillion at 2000 prices over the period 20002030. Of this total , Rp.4,5 trillion is for widening to a 7meter 2-lane unseparated standard ( u7), Rp.34,6
trillion is for widening to 4-lane dual camageway
standard on existing alignments (4D), and Rp.66,7
trillion is for construction of new 4-lane dual carriageway
limited access roads (LAN). The criteria for including
investment in the program was a first year economic
rate of return of 20% or greater, which is estimated to
equated to an EIRR of over 40% with the projected traffic
growth rates. As shown in figure 4. The premilinary
screening indicated that further investments in new 4lane dual carriageway inter-urban limited access road
would not be justified prior to 2015. However, the
studys subsequent more detailed analyses identified
some promising candidates for toll road development
prior to 2015.
The identified capacity expansion investman needs for
Java massively exceed past levels of funding for all new

construction works (see Table 6). The studys

recommended expenditure program for the period 20022010 was prepared on the basis that funding available
for Java capacity expansion works would increase
progressively from Rp.0.5 trillion in 2002 to Rp.1.0
trillionin 2007 and remain at that level through 2010,
with the total budged over the period being Rp 6.4
trillion. This necessarily involves deferring many projects
with high rates of return. Equivalent studies have yet to
be conducted for other island groups. While their
collective capacity expansion needs will not he as large
as those for Java, they will nonetheless be significant
and justify substantial investment
b.Improve Access to Remote Communities
There is a need to extand the all-season road network in
order to provide reliable access for the 9 %of the rural
population which is not directly connected. However ,
the marginal costs of reaching the more isolated
communities and of sustaining effective links to them
are increasinglyhigh. It will be important to make careful
choices to keep design standards consistent with
expectedlevels and types of traffic. The aim will be to
draw on local and regional experience to keep the
construction and maintenance of new roads costs
effective and consistent with local capacity. There may
be opportunities to directly generate local employment
in poor areas by adopting labour-based technologies
Given the high costs, these development investments
require a strong political commitment. Such new roads
cannot compete with other investments in the road
network in terms of economic returns. Resources must
be allocated on the basis of other local or national
criteria regional coherence. Social inclusion, proverty
reduction erc Additionally. The following steps should be
taken
- Clarty a process for identifying provincial priorities for
extending the road network to desa which arestudy not
connected

- Establish criteria lot Central Government support for

extending the network in the contextof the poverty
Reduction Strategy
- Ensure that decistoas to extend the network take
adequate account of the expected recurrent cost
umplications llost mainting the new road links
- Remove Government intluence from ORGANDA, the
Indonesian Road Transport Operators association and
encourage the Association to represent its members
interests more effectively
In order to effectively implement the recommendations
above, the following are required
a.Stabilized the Funding for Road Assets
Managing road assets is an expensive business, and
while roads are seen as pblic good, they are competing
for public expenditures with other sectors on the basis of
outputs which are difficult to compare. Under the public
expenditure model, the road networks have been
unevenly funded or under-funded the economic needsbased estimate for preservation of satisfactory service
on the primary networks is an average of IDR 6.5 trillion
annually (1999 values) with a gap in 2000 of about IDR
2.2 trillion, a 15-20 % shortfall on provincial roads and
30% shortfall on District.
Instead, if the provision and preservation of road assets
is 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. Road users are playing about IDR 220 trillion
annually in operating costs, and the added costs they
incur through the underfunding on roads is estimated to
be about IDR 6 trillion ,or three times the funding gap. If
the financing of road preservation was put on a fee-forservice basis, users may pay an additional IDR 2.2 trillion
but they would have net savings of double that amount.
Under a commercial service model, the full economic
costs of road preservation would be recovered from

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

the operation of unlities such as telephones or electric
power. Adoption of this costs recovery model could place
the management of road assets on a fully sustainable
basis which does not impose on general public
expenditures. Because the revenue would keep pace
with the expenditure needs, provided that the funds
were invested back in the assets efficiently. In essence
the funds would pass through from road user revenues
to the budget for road expenditures and eventually.
With the appropriate controls, could be managed offbudget.
Off- budget road funds financed by predictable revenue
streams from user chargers have proven effective in
many countries. Particularly where they are part of a
broader strategy for managing roads on a business-like
fee-for-service basis. Road fund revenues should be
sourced from specific road user charges. Not from
general tax revenue, and its claim to these revenues
should be established in law. The level of revenues
should be sufficient to finance the works and services
needed to improve and maintain the network to a
satisfactory standard. While the structure of users
charges should provide incentives for economically
sound vehicle purchase and operating decisions. Road
preservation works would thus be financed entirely offbudget by users and without financing from foreign
loans.
When the subsidy on gasolinean ADO 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. Revenues from the PKB motor vehicle tax.
The PBBKB motor vehicle tuels tax. And other taxes on
road users would be broadly in line with the desirable
level of preservation expenditures.
The present structure of the existing road user charges is
fas from that ideal, however