The cost of moving goods, slowing down trade

Neil McCulloch ,  Jakarta   |  Tue, 04/15/2008 11:37 AM  |  Opinion

Truck drivers in Medan recently went on strike because of pungli or pungutan liar, illegal road charges requested by the police or preman along the road. Drivers have been demonstrating against these charges for years, but the situation has remained the same.

"We are tired of the levies demanded by officers and hoodlums along the road. Every day we have to spend millions of rupiah to pay these levies," Tengku Supe, one of the drivers, said (The Jakarta Post, Feb. 4, 2001).

In North Sumatra, this ongoing challenge has led many firms to pay routine payments to "security organizations" to avoid being stopped along the road. However, as detrimental as they are, illegal road charges make up just one part of a far bigger transportation problem throughout Indonesia. Commercial deliveries are unpredictable because of conflicting regulations, illegal payments, and poor road infrastructure.

In comparison with other countries in Asia and world-wide, the Indonesian trucking industry is high-cost and inefficient. To assess the size and nature of these road transportation issues, The Asia Foundation, in partnership with the University of Indonesia's Institute for Economic and Social Research (LPEM-FEUI), implemented a comprehensive survey of domestic trucking costs along nine routes in Indonesia (in Sulawesi, East Java, North Sumatra and NTT). Through GPS tracking and interviews with firm managers and truck drivers, the survey identifies exactly who is charging drivers, where they are being charged and how much.

On the road, drivers in Indonesia are liable for various kinds of payments, including local user charges, legal and illegal payments at weigh stations, and payments to police or preman (criminal organizations). User charges set by local governments for transporting goods along surveyed routes are often illegal, yet make up almost 50 percent of total driver payments along some routes.

For example, route permits are intended only for public transportation, but governments often require commercial trucks to obtain permits for every intended destination. Local governments could do well by abolishing such illegal permits to encourage trade within and among districts.

Truck drivers and transportation firms also make payments to the police and to local preman at checkpoints along their routes. For example, a typical truck going from Mamuju to Pare-Pare in Sulawesi is stopped 10 times. These stops generally serve no function other than extracting bribes from transportation firms.

As an alternative to on the-road payments, some trucking firms make regular payments directly to the police, or to preman organizations, so they will not be charged on the road. This is particularly common in Sumatra and, to some extent, in East Java. Firms in Sulawesi make fewer routine payments, but when they do these are usually made to the police.

Indonesia's poor infrastructure is another factor impeding the domestic trucking industry. Approximately 70 percent of freight in Indonesia is transported by trucks, and therefore the road system is critical. At the district level, only 49 percent of district roads in Indonesia are in reasonable condition. (World Bank, 2007) Poor infrastructure increases maintenance and fuel consumption costs, narrowing the profit margins of Indonesian business owners.

One of the reasons that the roads are in such bad condition is because of the widespread practice of overloading trucks. Although weigh stations are required by law, truck drivers simply bypass them by paying a non-compliance fee to the local officials manning the weigh stations. Trucks along the nine routes surveyed pass through weigh stations typically overloaded by 45 percent, or four metric tons above the legal maximum.

This failure to effectively enforce weight limits endangers public safety and damages the roads. The Ministry of Transportation should work with the private sector to implement a zerotolerance policy to address this issue.

What else can be done to make moving goods across Indonesia easier? First of all, the government must address the regulatory confusion at national and local levels. Unnecessary route permits and border charges should be prohibited. Local governments should address and eliminate unnecessary transportation user charges.

This will involve using new approaches, such as Regulatory Impact Assessments, to support provincial governments' ability to analyze, revise and monitor regulations related to regional truck transportation.

Another strategy is through a transparency campaign. Provincial governments should post legal charges and permits, and their costs, along the roads, and combine these efforts with Public Service Announcements (PSAs) on local TV station and radio stations.

Alternative incentive mechanisms must be put in place for the police to eliminate their reliance on road charges and checkpoints. Lastly, the Ministry of Transportation's efforts to monitor and enforce weight limits should be supported by other government agencies and the private sector.

Together, a campaign of legal reform and public advocacy can bring better transportation policy -- and increased trade -- to Indonesia's more remote regions.

The writer is the Director for Economic Programs at The Asia Foundation in Jakarta.

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