A Policy Memo for Policy Analysis Module in Sustainable Development, MSc
Executive Summary
This report aims to support the provincial government of Jakarta in reducing traffic congestion that costs the Jakarta government more than IDR 100 T per year; it also slows productivity and lower expectancy for the resident.
The report started by assessing the problem symptoms and found there are negative externalities and public good as a market failure and rent-seeking as a government failure in the problem.
To address the symptom of the problem, there are four goals and five impact categories adapted from Weimer & Vining (2017), such as economic efficiency, environmental impact, equity, and political feasibility.
Three policy options, including the status quo, are analyzed, and I recommend implementing the Congestion Charge to minimize traffic congestion. In addition, I strongly recommend ensuring the monitoring and evaluation of the policy is implemented regularly.
1 Problem Symptom
Jakarta was the 29th of the most congested city in the world[1], with a total vehicle of 26,2 million. Jakarta’s population in 2021 is 11.201.121[2] , and an additional 1,2 million workers from neighboring cities commute daily to Jakarta. In the peak hour (7 am to 10 pm), the average travel time is 20 to 31 minutes per 10km[3].
Traffic congestion in Jakarta not only extends travel time and wastes more fuel, but the number of vehicles also contributes to air pollution. In 2019, air pollution was very unhealthy; the pollution index is 213 (see annexes 1). Even though the report mentioned the main polluters for emission in DKI from the factory, vehicles, especially gasoline and diesel-fueled engine, undoubtedly exacerbated air pollution.
The road congestion problem has become a priority for the Province Government of Jakarta. As a result, the government has allocated 14,2 trillion rupiahs for congestion handling in the 2023 provincial government budgeting[4].
1.1 Market Failures & Government Failures
Jakarta congested traffic affected the residents and workers from the externalities and ill-design of public goods.
1.1.1 Cost inefficiency from fuel and time wasted.
Jakarta’s traffic congestion cost is about 100 trillion rupiahs[5], calculated by the amount of wasted fuel and time to commute. This cost is considered an externality from the ownership of the private vehicle. The cost and scheme to purchase a new car and motorcycle in Indonesia are relatively cheap, even people from middle to low income can have relatively easy access to own new motor vehicle.
1.1.2 Air Pollutions
It is estimated there was 5054 death as a result of air pollution in Jakarta by the Global Burden Disease study in 2019. The same report mentioned that 168,000 years are lost to death because of disease, disability, and premature death because of air pollution. A similar study by Institute for Health Metrics and Evaluation reported that a pollution-related disease in Jakarta responsible for 79% or 36000 deaths of total death in 2019[6]. In addition, air pollution contributed to labor loss, increased health expenditures, cramping health providers, and reduced residents’ life quality.
1.1.3 Rivalrous and Non- Excludable
The uncongested road is typically non-rivalrous and non-excludable, which means one driver will not reduce the amount left for others. Therefore, it is difficult to prevent other people from using the road[7]. However, the road becomes rivalrous when many cars and motorcycles appear simultaneously, and the road is congested because the driver begins to impose a cost on each other[8].
1.1.4 Rent-Seeking
Despite the congestion and the lack of parking space in Jakarta, new car and motorcycle sales increase yearly. The involvement of Gaikindo as the importer of cars and motorcycles as an interest group has a significant influence in shaping transportation policy In Indonesia[9]. The central and provincial governments cannot impose radical and strict policies to reduce the purchasing power of new motor vehicles because there is a potential market depression that can affect social and economic crises.
The condition is also aggravated for the Provincial Government because the organized group only communicates with the central (national) government, where the role of the national government is negotiation and lobbying. In contrast, the role of the provincial government is regulation and sales. That means that even when the local government wants to impose a restriction, it will be difficult for law enforcement (see annex 2).
The other interest group potentially hindering the policy taxing the driver/ vehicle owner is the online taxi communities, such as Grab & Gojek. For example, the relatively new interest group was protesting the congestion charge (tax/ electronic road pricing) because it would impact their income as an online taxi[10].
2 Modeling The Problem
To address market and government failures, several variables were identified:
- Restriction on the number of vehicles entering the city
- Compensation for residents and drivers
- Improve public transportation
- Transparency on the cost, policy monitoring, and evaluation periodically
3 Policy Goals and Impact Category
The goals to reduce traffic congestion in Jakarta are categorized into four priority goals and their impact category.
Economic efficiency
Impact categories: minimize government enforcement budget; minimize fuel and time cost.
As prolonged traffic congestion will be costly for citizens and the government, effective policy on congested roads aims to increase economic efficiency in transportation by minimizing commuting time, productivity, fuel consumption, and the government of Jakarta’s budget for traffic handling each year. This policy’s success will save 100 trillion Rupiah from welfare loss and 14 trillion from the provincial government budget.
Environmental impact
Impact category: minimize emission output by private vehicles in Jakarta.
Of 961kg of CO2 emitted yearly from Jakarta traffic, 263 kilograms is from congestion only[11]. Therefore, the environmental impact of air pollution has become one of the priority goals of the Government of Jakarta Province. The measurement of the emission output will be challenging because Jakarta also has many industries that emit emissions. However, reducing congestion will alleviate a minimum of 269kg of CO2 yearly.
Equity
Impact Category: Maximize fairness to vulnerable communities such as the low-income group and people with disabilities.
Jakarta is one of the most robust economies in Indonesia. However, there is 4,69% of the poor population in Jakarta, and the Gini coefficient is high (0,4) or higher than the national level[12]. Therefore, Because of the high inequality, the rich can always pay a charge fee, hail a taxi, take a longer route, or purchase a second car to overcome the regulation and avoid congestion, but the poor and the people with disabilities will continue to suffer lack of transportation options.
Political feasibility
The likelihood of the policy implemented
The government of Jakarta can implement all of the proposals on congested roads with high political feasibility. It means that the Provincial Government of Jakarta will propose the policy will be accepted or have minimum resistance by the stakeholder, such as the Provincial parliament, interest group, and communities. Failing to get approval from the stakeholder will potentially hinder the enforcement.
4 Current Policy
4.1 Odd and Even Plate
The odd-even rule is regulated in the Regulation of the Governor of the Special Capital Region of Jakarta Number 88 of 2019 on Amendments to the Governor’s Regulation Number 155 of 2018 on Traffic Restrictions with an Odd-Even System[13]. This regulation means reducing the use of the private car and emission reduction. This regulation is implemented Monday to Friday at the peak hour 06.00 to 10.00 and 16.00 to 21.00. There are several exceptions for the car with disability stickers, public service cars (such as ambulances and fire engines), taxis, and cars loaded with essential commodities such as fuel. There is also an exception for the car with a high military plate number and Indonesia’s ministry/ public agency leader. This regulation is implemented in the main road and the business district area.
4.2 Tariff integration for public transport.
The Provincial Government of Jakarta has tariff integration for all public transport (Busses and inner-city trains) as regulated in the Governor’s Mandate No. 733, 2022. The amount of tariff is a maximum of IDR 10.000 per travel (single tap). The rationale of this regulation is to attract more residents and workers to use public transport. Additional information, Jakarta has 13 corridors route, 1 Mass Rapid Transit (MRT) line, and 1 Light Rapid Transit (LRT) line for more than ten million populations. For comparison, 309 bus routes, six MRT lines, and 2 LTR lines in Singapore for 5,4 million population.
5 Alternative Policy
5.1 Congestion Charging for all Lanes
Congestion tax for consumers/ drivers who enter the congested area. The congestion charge will be applied to all lanes in the CBD areas with the most traffic congestion. The congestion charge is applied to all private vehicles (cars and motorcycles), while inner-city residents, ambulances, fire engines, commercial vehicles, cars with disabilities stickers, public transport vehicles, and international delegation cars will be exempt.
5.2 Free Public Transport (zero fares).
A policy to attract private car & motorcycle owners to use public transport by charging 0 (free) for any inner city public transportation. This policy will increase the equity towards low to middle-income and improve the welfare in the city. The operational cost of public transport will all be under the provincial budget.
6 The analysis.
6.1 Status Quo
Economic efficiency. The odd & even plate is only on the peak hour, while from tom-tom the traffic is all day from 7 am to 10 pm. Not all routes are impacted by these rules. For example, there is no rule for motorcycles even though the number of motorcycles is 17,3 million[14]. This can affect economic efficiency because even though there are fewer cars, more motorcycles will congest the road.
Environmental Impact. The study in Mexico City in 1984-1993 found no evidence that restricting license plate-based driving improves air quality[15]. There are possibilities that the driver will choose their driving schedule into the non-restrictive hour and or add more cars in their possession to match with the odd and even plate.
Equity. Despite having a promising short-term result, this policy has the possibility that citizens may purchase a second car[16] and the increased use of taxis and online transportation such as Gojek and Grab. That means there is inequality in the alternative of transport. The rich can have two or more cars or hail a taxi, while the vulnerable do not have many options.
Political Feasibility. The status quo policy has been implemented for five years without any protest or resistance from the stakeholders. After the lift up of Covid19 lockdown and travel restrictions, the road in Jakarta is back to the highly congested road. However, the Provincial Government and the stakeholder do not change the policy and just improve the policy by creating a traffic nudge, restricting U-turns, or changing the two-way road into a one-way road[17].
6.2 Congestion Charging uniformly to all lanes for cars and motorcycle
Economic Efficiency. The economist has advocated the congestion charge or congestion tax as an excellent cost-benefit action for congested roads. One efficiency study found that if imposed uniformly to all lanes, the congestion charging can achieve more than 90% efficiency. Congestion charging also can help increase government revenue and utilize the revenue to improve transportation welfare[18].
Environmental Impact. Politically, the congestion charging in all lanes uniformly correlated positively with environmental concern compared to other policies such as free public transport and adding more roads[19]. However, if people substitute private cars for a taxi, there will be no significant impact on the emission output.
Equity. The congestion charging will have better equality for people with low income and people with disabilities because the tax revenue can be used to increase transportation infrastructure (such as more routes, better schedules, inclusive sidewalks, and more disability-friendly design). However, some other communities, such as a mother with kids, will not have excellent support for this policy because they are more car-dependent.
Political Feasibility.
The high-income car owner will accept the likelihood of this policy is relatively high because of the value of time and does not have high constrain with cost. However, there will be resistance for middle-income vehicle owners and most motorcycle drivers. The car importer interest group will not be affected much because the tax is only implied in the inner city.
6.3 Free Public Transport.
Economic Efficiency. Public transport in many cities in the world is most heavily subsidized. However, the optimal public fare can be reduced to zero if there is a congestion charge[20]. Even though it’s uncommon, free public transport can be justified because it can substitute private vehicles and exhibit economic scales (Vander, 2003, as cited in Bull, Munoz, and Silva, 2021). However, another study shows that the free fare incentives will only work with people who live near the station because the cost of travel from home to the station is zero.
Environmental Impact. In the ideal situation, the incentive for public transport increases, and more people substitute private vehicles for public transportation or walking, then the emission will be lower from congestion. However, the emission will be the same if the number of busses increases and congests the shared road.
Equity. Free public transportation will benefit low-income people. An example is that free rides can help unemployed youth increase their job search and find a job. However, the crowded bus will reduce the enjoyment and comfort of passengers, and the Provincial government needs to add more buses. Consequently, adding more buses will increase congestion on the road[21].
Political Feasibility.
The government and the stakeholders will potentially approve the proposal because the cost to subsidize public transportation (IDR 838,3 Billion)[22] is lower than the cost of traffic handling (IDR 14,2 Trillion). However, the policy will succeed if congestion charges/ other taxes are implemented simultaneously.
7 Recommendation
Based on the analysis, I recommend the Provincial Government of Jakarta implement a congestion charge. Implementing the policy will increase the city’s revenue, maximize transportation welfare, and reduce air pollution. The government will save more than IDR 14 trillion or divert to another public service to minimize the Gini coefficient. If the implementation succeeds, the revenue from the congestion charge can be used to pay for the environmental damage because of pollution, such as adding more park and side road plants and subsidies for the health of the residents. This policy must be challenging first because of the driver’s resistance, especially from outside Jakarta. A parking lot in the outer ring of the Jakarta area will need to help workers from out of Jakarta switch their vehicles from private to public. In addition, for implementing this policy, regular monitoring and evaluation of the policy are necessary. Regularly measure the number of cars, congested areas, public transport passengers, and emission numbers.
8 References
‘APBD-2023-Prov-DKI-Jakarta’ (no date).
Börjesson, M. et al. (2015) ‘Factors driving public support for road congestion reduction policies: Congestion charging, free public transport and more roads in Stockholm, Helsinki and Lyon’, Transportation Research Part A: Policy and Practice, 78, pp. 452–462. Available at: https://doi.org/10.1016/J.TRA.2015.06.008.
BPS Provinsi DKI Jakarta (no date a). Available at: https://jakarta.bps.go.id/indicator/17/786/1/jumlah-kendaraan-bermotor-menurut-jenis-kendaraan-unit-di-provinsi-dki-jakarta.html (Accessed: 20 April 2023).
BPS Provinsi DKI Jakarta (no date b). Available at: https://jakarta.bps.go.id/indicator/17/812/1/jumlah-penumpang-dan-pendapatan-trans-jakarta-menurut-koridor-rute.html (Accessed: 21 April 2023).
Bull, O., Muñoz, J.C. and Silva, H.E. (2021) ‘The impact of fare-free public transport on travel behavior: Evidence from a randomized controlled trial’, Regional Science and Urban Economics, 86, p. 103616. Available at: https://doi.org/10.1016/J.REGSCIURBECO.2020.103616.
Demo Tolak Jalan Berbayar, Pengemudi Ojol Sebut Program Jalur Sepeda Justru yang Jadi Biang Macet Halaman all – Kompas.com (no date). Available at: https://megapolitan.kompas.com/read/2023/01/25/16355671/demo-tolak-jalan-berbayar-pengemudi-ojol-sebut-program-jalur-sepeda?page=all (Accessed: 20 April 2023).
Dinas Perhubungan DKI Jakarta on Instagram: “#TemanDishub, dalam rangka mengurai kepadatan di berbagai ruas jalan di Jakarta, Dishub DKI Jakarta melakukan Penutupan Putaran Lalu Lintas…” (no date). Available at: https://www.instagram.com/p/Cqsbcu9Pjp5/?igshid=YmMyMTA2M2Y%3D (Accessed: 21 April 2023).
DKI Jakarta Provincial Government Sectoral Statistics 2021 |i (no date).
Gruber, J. (2019) PUBLIC FINANCE AND PUBLIC POLICY.
Hakoso, M.W. (no date) THE IMPACT OF NEW CAR MARKET ON THE DKI JAKARTA POLICY TO LIMIT THE NUMBER OF VEHICLES (A Case Study on Honda Mobil 2017).
Jakarta Makin Macet, Negara Bisa Rugi Rp 71-100 T! (no date). Available at: https://finance.detik.com/berita-ekonomi-bisnis/d-6564529/jakarta-makin-macet-negara-bisa-rugi-rp-71-100-t (Accessed: 20 April 2023).
Jakarta traffic report | TomTom Traffic Index (no date). Available at: https://www.tomtom.com/traffic-index/jakarta-traffic/ (Accessed: 20 April 2023).
MRT Jakarta Catatkan Peningkatan Pendapatan Non-Tiket dalam Tiga Tahun Terakhir (no date). Available at: https://databoks.katadata.co.id/datapublish/2023/03/21/mrt-jakarta-catatkan-peningkatan-pendapatan-non-tiket-dalam-tiga-tahun-terakhir (Accessed: 21 April 2023).
Parry, I.W.H. (2002) ‘Comparing the efficiency of alternative policies for reducing traffic congestion’, Journal of Public Economics, 85(3), pp. 333–362. Available at: https://doi.org/10.1016/S0047-2727(00)00163-8.
Pendapatan LRT Jakarta Naik 57 Persen pada 2022 (no date). Available at: https://lrtjakarta.co.id/pendapatan_lrt_jakarta_naik_persen_pada_berita578.html (Accessed: 21 April 2023).
Syuhada, G. et al. (2023) ‘Impacts of Air Pollution on Health and Cost of Illness in Jakarta, Indonesia’, International Journal of Environmental Research and Public Health, 20(4). Available at: https://doi.org/10.3390/ijerph20042916.
Tirachini, A., Hensher, D.A. and Rose, J.M. (2014) ‘Multimodal pricing and optimal design of urban public transport: The interplay between traffic congestion and bus crowding’, Transportation Research Part B: Methodological, 61, pp. 33–54. Available at: https://doi.org/10.1016/J.TRB.2014.01.003.
Traffic Index ranking | TomTom Traffic Index (no date). Available at: https://www.tomtom.com/traffic-index/ranking/ (Accessed: 20 April 2023).
Weimer, D.L. and Vining, A.R. (2017) ‘Policy Analysis Concepts and Practice’. Available at: https://ebookcentral.proquest.com/lib/suss/detail.action?docID=4834198. (Accessed: 20 April 2023).
Zhang, W., Lin Lawell, C.Y.C. and Umanskaya, V.I. (2017) ‘The effects of license plate-based driving restrictions on air quality: Theory and empirical evidence’, Journal of Environmental Economics and Management, 82, pp. 181–220. Available at: https://doi.org/10.1016/J.JEEM.2016.12.002.
Annexes
Annex 1. The level of air pollution in DKI Jakarta by the highes measurement value in 2020.
Source: DKI Jakarta Sectoral Report 2021
Annex 2: The relationship between Gaikindo- Central Government and Provincial Government.
Source:
Annex 3: Goals & Impcat Category adapted from Wiemer & Vining, 2017
Footnotes
[1] (Traffic Index ranking | TomTom Traffic Index, no date)
[2] (DKI Jakarta Provincial Government Sectoral Statistics 2021 |i, no date)
[3] (Jakarta traffic report | TomTom Traffic Index, no date)
[4] (‘APBD-2023-Prov-DKI-Jakarta’, no date)
[5] (Jakarta Makin Macet, Negara Bisa Rugi Rp 71-100 T!, no date)
[6] (Syuhada et al., 2023)
[7] (Gruber, 2019)
[8] (Weimer and Vining, 2017)
[9] (Hakoso, no date)
[10] (Demo Tolak Jalan Berbayar, Pengemudi Ojol Sebut Program Jalur Sepeda Justru yang Jadi Biang Macet Halaman all – Kompas.com, no date)
[11] (Jakarta traffic report | TomTom Traffic Index, no date)
[12] (DKI Jakarta Provincial Government Sectoral Statistics 2021 |i, no date)
[13] (DKI Jakarta Provincial Government Sectoral Statistics 2021 |i, no date)
[14] (BPS Provinsi DKI Jakarta, no date a)
[15] (Zhang, Lin Lawell and Umanskaya, 2017)
[16] (Zhang, Lin Lawell and Umanskaya, 2017)
[17] (Dinas Perhubungan DKI Jakarta on Instagram: “#TemanDishub, dalam rangka mengurai kepadatan di berbagai ruas jalan di Jakarta, Dishub DKI Jakarta melakukan Penutupan Putaran Lalu Lintas…”, no date)
[18] (Parry, 2002)
[19] (Börjesson et al., 2015)
[20] (Bull, Muñoz and Silva, 2021)
[21] (Tirachini, Hensher and Rose, 2014)
[22] (MRT Jakarta Catatkan Peningkatan Pendapatan Non-Tiket dalam Tiga Tahun Terakhir, no date; BPS Provinsi DKI Jakarta, no date b; Pendapatan LRT Jakarta Naik 57 Persen pada 2022, no date)