TEMPO.CO, Jakarta - Once again, President Joko Widodo chose a somewhat unconventional way to inaugurate an infrastructure project, last Friday. He rode in an old Land Rover Defender to tour the newly completed Bekasi-Cawang-Kampung Melayu (Becakayu) toll road, which sat unfinished for 18 years. Previously, in May, wearing only a thick jacket without a bulletproof vest, he inspected the Trans-Papua highway riding a dirt-trail bike.
The Becakayu and Trans Papua toll roads and are just two from dozens of stalled infrastructure projects that Jokowi has brought to completion. After three years of governing together with Vice President Jusuf Kalla, several new projects have also been undertaken, despite criticism that in-depth planning and impact studies have been a shortcut. "If we don’t start now, costs will continue to soar," Jokowi, 56, reasoned.
He said his expansive plan for new roads, dams, ports and airports are aimed solely at reducing inequity, not just electoral gains. Jokowi added that people in far-flung regions have long been neglected in the development process. "If what we wanted were political gains, then we would have only had to develop the Java Island," he said.
To push these development projects, Jokowi has issued hundreds of presidential regulations and instructions and increased the infrastructure budget from Rp177 trillion in 2014 to Rp387 trillion this year.
Last Friday, Jokowi sat down with Tempo’s Arif Zulkifli, Anton Aprianto, Istman Musaharun and Raymundus Rikang at the Merdeka Palace, Central Jakarta, for a special interview. He raised his voice and repeatedly slammed his pen against the table when talking indignantly about profit-oriented projects. When the time for sunset prayer came, the President excused himself. "I got emotional just now. Let me pray the maghrib prayer a moment."
Why do you prioritize the infrastructure sector, a sector that is not politically beneficial?
I calculate all the risks before deciding to issue a policy. If I wanted political and economic gains, then I would have focused only on the island of Java, which wouldn’t need a high budget. We would only need to build economic corridors in the north and south. That would give us faster economic returns compared to the regions. But, after touring across the country, from Sabang to Merauke, I saw for myself how grave the inequality was.
Are you convinced that infrastructure can be a solution to reduce the gap?
This is a matter of equality and justice. Besides, our infrastructure development has lagged far behind our neighbors’. Infrastructure is a foundation for tackling the problem of inequality. If we want it easy, we just have to allocate the budget for subsidies and increased social assistance, so purchasing power will increase and the public is happy. But do we want to continue this kind of strategy? I took the risk by not resorting to this kind of political move, and instead diverted resources to infrastructure development. In the end, infrastructure will bring the people together. If not, we will face dreadful consequences in the future. I know that this policy is a bitter pill to swallow, but development must begin.
Even though the government has had a hard time looking for funding?
If we stick to the old monotonous funding practices, and solely rely on the state budget and state-owned enterprises, we will never be able to accomplish any project. We have to look for alternative financing schemes.
What kind of schemes?
We came up with a new financing breakthrough. If the private sector can undertake projects, we give them priority to do so. But, if the internal rate-of-return is unfavorable, then SOEs can work in partnership with the private sector. If it’s still too unfavorable, it’s a task for the SOEs. The last option is to use state budget, which now has an allocation of 20 percent for infrastructure.
Is it true that delegating SOEs to undertake infrastructure projects burden them financially?
They feel burdened because there was never any pressure to stimulate them into seeking alternative schemes. I gave them both problems and challenges to make them creative. SOEs are agents of development. That’s what sets them apart from the private sector. Yes, they should make a profit, but while being agents of development. We often overlook the duties of the SOEs.
What kind of solutions do you offer to the SOEs?
Abandon old practices. Start using asset securitization, limited concession schemes, and issue bonds. I told them that if they want to issue bonds, don’t do it here. Try overseas once in a while.
What are these old practices?
SOEs had a penchant for collecting assets. For instance, after building a toll road, they would sit back and relax. They were complacent with regular revenues generated from the toll roads. So for decades, that’s all they had. For instance, the total stretch of toll roads since 1978 was only 80 kilometers. With the new financing scheme in the past three years, it has increased by 580 kilometers and will hit 1,800 kilometers by 2019.
Read the full interview in this week's edition of Tempo English Magazine.