In The News

In Indonesia: Keeping Trucks Moving

April 23, 2008

In Indonesia, we’ve all heard stories about trucks being stopped by police, thugs and sometimes government officials, extracting payments, but it was hard to know the extent of the problem, exactly how much was being paid, to whom and where. The only way to do that was to ride some trucks.

With the support of The Asia Foundation, a team of researchers from the University of Indonesia’s Institute for Economic and Social Research (LPEM) sat in the driver’s cabs of 315 trucks along 9 routes around the country, in Sulawesi, East Java, North Sumatra, and Nusa Tenggara Timur. In addition to quizzing the truck drivers as they went along, they also carried GPS devices. This meant that when they were stopped they could record the exact position of the stop, what the stop was for and how much the driver had to pay. Little by little they literally pieced together an accurate picture of the problem (click here to view their findings). With the GPS data it was possible to draw maps which highlighted every single charge along the route.

One look at these maps and you can immediately see why the cost of moving goods in Indonesia is so high. Along one route in Sulawesi, trucks were stopped on average of 14 times, so it’s not really surprising that the Indonesian trucking industry is high-cost when compared to other countries in Asia.

But what are all these stops for? It depends on where you are in the country. In some places it is for local user charges imposed by local governments; other times it is bribes to the police or criminal organizations; sometimes it is for both legal and illegal payments at weigh stations ” in some places you will get all three types of charges! Together they add around 10% to the cost of operating a truck in Indonesia.

But why would local governments charge trucks along the road? This is one of the consequences of Indonesia’s Big Bang decentralization. Since 2001, political, administrative and even some fiscal authority has been shifted to over 470 district governments throughout the country. Each of these local governments is keen to raise revenue to supplement the money that they get from the central government. What easier way of doing so than charging trucks as they travel along the road?

There are only two problems with this: it is illegal, and it’s a really bad way of raising local revenue. It’s illegal because central laws prohibit local governments from creating legislation that inhibits the movement of goods. Nevertheless, some districts take little notice and charge anyway with, so far, little penalty from the centre. And this form of revenue-raising is inefficient, because each district is charging trucks along its roads, without taking into account the fact that other districts are doing the same. It’s a classic tragedy of the commons ” local governments are “˜overgrazing’ the field, damaging everyone including themselves. The result is very little revenue for the local governments but very high costs for the trucking industry. Almost half of the on-road charges in the Foundation/LPEM study were from user charges from local governments.

And then of course there are the police. Truck drivers and transportation firms make many payments to the police and to local thugs at checkpoints along their routes. For example, a typical truck going from Mamuju to Pare Pare in Sulawesi is stopped 10 times just by the police. These stops generally serve no function other than extracting bribes from transportation firms. In North Sumatra and also in East Java, this challenge has led many firms to pay routine payments to “security organizations” to avoid being stopped along the road. Quite often there are links between these organizations and the police or the army. Trucks even put a sticker on their truck to show that they have paid their subscription. As Dr. Arianto Patunru from LPEM pointed out, these look a bit like automobile association stickers, except that the only service being offered is NOT being hassled by the very people who sold you the sticker.

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. But a recent World Bank study shows that, at the district level, only 49 percent of district roads in Indonesia are in reasonable condition. 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 get around them by paying a non-compliance fee to the local officials manning the weigh stations.

More than half of the trucks that we surveyed were overweight. And not just by a small amount ” the average amount overweight was 45%. That means a typical truck designed to carry 8 tons was actually carrying 12 tons or more.

Weighbridges, ironically, are one of the few stops on the road that do serve a real purpose. Yet the study estimates that only around 10% of overweight trucks are actually getting fined for being overweight. At the same time 84% of truck drivers pay “additional payments” at weigh stations ” in short, you bribe your way around the fine.

What can be done to the make the situation better? Several things. First, the government must address the regulatory confusion at national and local levels. Unnecessary route permits and charges for crossing district borders 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. At the moment, many truck drivers have no idea whether the charges that they pay are legal or illegal.

Third, alternative incentive mechanisms must be put in place for the police to eliminate their reliance on road charges and checkpoints. This is probably the toughest one, as it will require real leadership from the police themselves, especially at the provincial and national level.

By contrast, efforts to improve the weigh station system are already underway. The Ministry of Transportation is trying to implement a “zero tolerance” policy for overweight trucks by improving monitoring and enforcement of weight limits.

Will anything really change? We are cautiously optimistic. There are many obstacles to making progress and many people argue that the system is so ingrained it is impossible to change. But everyone said that about reducing corruption in business licensing too, but there have been dramatic improvements in reducing corruption there, so change is possible. The key is getting a coalition that really wants to see change and helping them to work together to find the most effective ways of pushing through the needed reforms.

Neil McCulloch is Economics Program Director for The Asia Foundation in Indonesia. He can be reached at nmcculloch@tafindo.org.

View all posts by Neil McCulloch

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