NATSEM Seminar Series

The Role of Government in the Provision of Roads & Road-Based Transport: Case Study in Indonesia

Thu 17 December 2015Dr Sitta Rosdaniah / 11.00am-12.00pmBuilding 23 Level B Room 5


This case study examines the consequences of various kinds of policy interventions by successive Indonesian governments in the provision of roads and road-based public transport services. The study also highlights rent-seeking activity as a key challenge from a political economy perspective. The primary data for the analysis and conclusions were gathered through site visits, interviews and focus group discussions (FGDs). Secondary data were compiled from documents detailing policies and regulations related to road infrastructure development, government and company reports, books, journals, newspapers and online resources.

There is a fact that both roads and road-based public transport at present have the characteristics of common property resources, because access is free (roads) or well below cost (public transport), resulting in the excess demand for both. The two main reasons why there is a need for government interventions in the road sector are the market failure aspect, in addition to the typical infeasibility of the private sector acquiring all the land needed for the construction of roads.

This study shows at least five main findings: 1) the key instrument of government intervention to correct the market failure is the power of eminent domain, but successive governments have failed to deploy this power appropriately, 2) the key reason why the supply of road infrastructure has been lagging so far behind the demand for it is the disconnect between what users are willing to pay and what they are actually required to pay, 3) funding roads through government budgets results in income redistribution at the expense of the poor, 4) the idea of overcoming infrastructure deficiencies through public-private partnerships (PPPs) is much to be said, but outcomes have not matched the government’s optimism, 5) while Soeharto’s family and cronies used a golden opportunity for risk-free profits in toll road development, other members of the political elite in the post-Soeharto era also extracted profit greatly from toll road businesses.



Sitta Rosdaniah is the Financial and Supporting Director of Jakarta Industrial Estate Pulogadung (JIEP) − the first industrial estate in Indonesia. Her career encompasses 18 years as the staff and the official at the Ministry of Finance and the Ministry of State-owned Enterprises, Republic of Indonesia. She has a B.Eng in Industrial Engineering from the Sepuluh Nopember Institute of Technology (ITS), an MSc in Business & Economics from the University of Strathclyde, and a PhD in Economic Public Policy from the Crawford School, ANU. She attended an Executive Education in Finance at the Harvard Business School. She also taught in several universities in the areas of business & economics, finance, and public administration. She is currently a member of the Advisory Board for the Industrial Engineering Department at ITS. She received the British Chevening Award in 1999 and the Australian Leadership Award in 2007.

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