Addressing Indonesia's urban congestion

Few visitors to Jakarta will miss its notorious traffic. Indeed, Castrol’s Magnatec Stop-Start Index recently declared the capital the world’s most congested city. A number of factors have contributed to this gridlock over the years. Land use is one: only 6% of Jakarta’s land is dedicated to roads, compared to the roughly 15% needed for a modern city. Growing car ownership is another. Net national income per capita surged from $546 in 1999 to $3010 in 2013, while Jakarta’s average income was more than twice that by 2012, at $8443. Alongside growth in income, domestic car sales went up from 1.1m in 2012 to 1.23m in 2013, although they dipped a little in 2014 to 1.21m, according to the Association of Indonesian Automotive Industries.

Vehicle Ownership Rising

As incomes increase, many people switch from motorbikes and scooters to cars, yet ownership of two-wheelers is also still extensive and expanding, as very low-income earners, who previously walked or used bicycles, also switch up. A Ministry of Transport (MoT) study on the Greater Jakarta area released in 2015 stated that while car ownership doubled between 2000 and 2010, motorcycle ownership went up by four or five times. The report also noted that while in 2002, 21% of all journeys were made by motorcycle, by 2010 this had risen to 41%, and car journeys rose from 1.2% to 9%. By contrast, the share taken by buses fell over the period, from 38% to 17%.

To tackle congestion, in late 2014 the new city administration trialled restrictions on motorcycles in certain parts of Jakarta, with fines of Rp0.5m ($41.33) being imposed for violators from January 18, 2015 onwards. The authorities called the trial a success, and decided to expand it as well as add more public buses.

One of the other major factors blamed for the congestion problems is the lack of public transport. The city does not have a mass transit rail system of the kind seen in neighbouring capitals, including Singapore, Kuala Lumpur and Bangkok, although the city’s two-line, $1.7bn Mass Rapid Transit (MRT) system – an urban railway network – broke ground in October 2013.

Urban Transport Policy

Even so, the MoT and Jakarta’s urban authorities do have an answer in the National Urban Transport Policy. This sets targets to increase the share of public transport of all kinds from 23% to 32%, while raising urban travel speeds from 8.3 km per hour to 20 km and reducing greenhouse gas emissions by 26%. Transport is Indonesia’s third-largest source of energy-related carbon dioxide emissions.

Pertinent here is the development of a major railway network over 2014-30 that will integrate the MRT with commuter railways, inner and outer circle railways lines, an airport railway and, potentially, a monorail. A busway system is also designed to dovetail with this.

Restrictions Mooted

Even so, while widely welcomed, these proposals are not entirely novel. For example, the idea of a motorcycle restriction was mooted as far back as 2007, while the MRT undertook its first feasibility study as early as the 1990s. What is new, however, is the commitment of the authorities – the president is, after all, the former governor of the city of Jakarta – and the unveiling of a larger budget, aimed at transport in particular. Some $18bn has been saved by the overhaul of the fuel subsidy system, with 60% of the savings going to investments in infrastructure. The partial removal of subsidies has also had a slowing effect on car sales, with domestic car sales falling by 7.2% year-on-year in January 2015. Moreover, the government has raised the vehicle tax, from 1.5% to 2% on first cars and progressively more on others.

Meanwhile, other public transport projects are also moving ahead. The city of Solo, for example, has been running tighter parking patrols – as well as charging higher parking fees in the city centre – since 2014, while introducing low-priced park and ride facilities. The quality of the bus service has also been improved, and this has helped to alter the popular image of buses as a slow and uncomfortable way to get around. Numerous opportunities exist for new approaches to public transport in Indonesia, covering everything from traffic systems to better bus shelters. Investors should take note.