The early New Order: preconditions

Planners first explored the possibility of connecting Indonesia’s steamy, bustling capital with the temperate hill town of Bogor to the south via a limited-access highway in 1963.⁵ The plan evoked the grandeur of other megaprojects initiated by President Soekarno: the Gelora Stadium, the National Monument, the six-lane Thamrin Boulevard, the Hotel Indonesia, and the Sarinah department store, among others. Through these, he sought to bestow prestige upon the nation’s capital as an inspiring world metropolis. The projects also aimed to divert attention away from the country’s ills and the inadequacies of Soekarno’s regime.⁶ Whether his government could afford to build the highway remains an open question. Spiraling inflation, declining per capita income, stagnating industrial output, and depleting foreign reserves marred the country’s economy. Even if the government had been capable of scraping the funds together or if the affable president had been able to cajole the Soviets or the Chinese into lending the requisite funds, the violence of the ensuing years would still have rendered the proposal inconceivable.⁷ Firmly ensconced at the country’s helm, General Soeharto in 1971 and 1972 revisited the project in earnest.

As a result of his consolidation of power, Soeharto brought the country relative political stability and helped to rekindle the inter-urban highway idea. To undertake such complex and costly development programs, New Order officials required confidence they would stay in power. Regimes in constant fear of being toppled typically do not attempt to execute such vast projects. By early 1972, a number of challenges had been addressed that nurtured self-assurance and lengthened the regime’s time horizon. The government-led anticommunist massacres of 1965–66 – which had brought Soeharto to power in the first place and left hundreds of thousands, if not millions, of Indonesians dead in their wake – were over. By the early 1970s, most communists or those suspected thereof were either dead, in jail, or under tight surveillance.⁸

Having vanquished this threat from below, Soeharto neutralized potential threats posed by members of the armed forces, who might have questioned his newfound power. Those sympathetic to Soekarno or with leftwing sympathies were purged. Others were either transferred to harmless staff positions or were bought off. From the outset of their rule, Soeharto and his inner circle began fostering a deep encompassing patronage system. As a leading observer put it, “Presiding over a system of balancing vested interests, Suharto seemed in the early 1970s to be in a position to maintain his regime indefinitely. As long as foreign aid, foreign investment and oil income continued to provide increasing resources available for distribution, it seemed rival groups in the army could be held together through judicious allocation of material satisfactions.”⁹

The New Order also faced the onerous task of securing electoral legitimacy. In the late 1960s, bowing to pressure from the country’s political parties, officials had promised elections, but reluctant authorities pushed them back to 1971. With electoral laws passed and the balloting drawing near, officials scrambled to strengthen the government’s electoral vehicle, known as Golkar. The large amounts of money, planning, and coercion that were put into ensuring a successful outcome attested to the gravity the regime accorded its inaugural election.¹⁰

Antigovernment student protests also tested Soeharto. Only a few years earlier, many of these same student leaders had lent his regime critical support and legitimacy in its fight against Soekarno and leftist groups.¹¹ Disillusionment with the New Order among the young began to set in, however. Reports about abuse of authority, official malfeasance, corruption, and the extravagance of the generals’ lifestyles proliferated.¹² As tensions mounted in 1971 over the heavy-handedness of government-led electoral preparations, activists seized on another issue – forced evictions to make way for the building of an elaborate cultural theme park, popularly known as Taman Mini.¹³ Critics railed against the multimillion-dollar project on the outskirts of Jakarta as “a grossly luxurious use of funds.”¹⁴ Soeharto was enraged by what he saw as personal attacks against his wife, popularly known as Ibu Tien, the park’s sponsor. In a well-known speech of January 1972, he threatened to smash critics and dissenters.¹⁵ With overt violence restricted to a single occasion and arrests limited to a handful of student leaders, Soeharto demonstrated a degree of political flexibility.¹⁶ His regime kept lines of communication open with students and gave them more freedom to demonstrate than labor for example.¹⁷ Eventually, the general felt sufficiently secure in his presidency to begin dropping the students as reliable coalition partners. While they remained a thorn in his side until the late 1970s, a hardened Soeharto put the 1971–72 demonstrations behind him and further entrenched the patrimonial system of governance by which he had been ruling the country for a number of years.

Favorable economic fundamentals also helped the case for embarking on a highway-building program. Much has been written on the surprising economic turnaround spearheaded by the New Order beginning in 1966. Macroeconomic stabilization and rehabilitation featured a liberalized trade regime, a simplified foreign exchange rate, and a tight monetary policy accompanied by balanced budgets. These liberal orthodox policies, developed by an elite team of university economists, fostered a dramatic recovery.¹⁸ The reining-in of runaway inflation spurred an average annual growth rate of 7.9 percent from 1967 to 1973.¹⁹ Increased government expenditure, improved investment rates, and technological progress achieved in the manufacturing and agricultural sectors fueled soaring growth.²⁰ However, this growth was also politically underwritten by the generous aid packages that Western allies made available to Soeharto’s anticommunist government in a region and a country the US had stamped as geostrategic. To coordinate these efforts among the country’s creditors, in 1967 the Intergovernmental Group on Indonesia was established at the behest of the IMF. The group became a central pillar of support for the early New Order.²¹

It is misleading to portray the New Order’s nascent highway program as a direct outcome of the 1973 oil boom. Some feasibility studies were completed, and others were underway, prior to the surge in world oil prices. That said, the unprecedented amount of resources the boom made available to the regime (“riches undreamed of hitherto”) ensured that whatever plans had been conceived would be realized.²²

Governments also require a critical mass of consumers financially able and willing to pay the tariffs that help to finance toll-road construction. This was no exception in Jakarta. As the capital became the country’s political, economic, intellectual, and modern cultural center, it became a magnet for migrants.²³ There was pervasive unemployment in the formal sector, but Jakarta’s GDP per capita was twice that of the national average. From 1966 to 1970, its economy grew 2 percent faster than the national average of 5 percent. This economic pull contributed to the capital’s rapid population growth of about 53 percent during the 1960s.²⁴ As its population approached 5 million, it looked like the city and its environs would keep growing.²⁵ By 1970, the greater Jakarta area had a population of 13.4 million, up 21.6 percent from 1961. This was forecast to increase nearly another 27 percent by 1980 to around 17 million.²⁶

Although the majority of Jakarta’s denizens, especially the migrants, could not afford a car, there was a burgeoning minority of self-employed professionals, managers and supervisors, military officials, professionals, and employers who could.²⁷ Swift population growth, combined with robust economic fundamentals like increases in income, resulted in more and more vehicles plying Jakarta’s increasingly congested streets.²⁸ From 1967 to 1974, the number of passenger cars grew at an annual rate of 9.7 percent, reaching 131,587. The number of trucks grew at 11.9 percent (to 37,391) and buses expanded at 12 percent (to 8,554).²⁹ Motor vehicles per capita increased from under 27 per 1,000 persons in 1971 to nearly 39 by 1975.³⁰ The room for greater vehicle growth seemed limitless. Jakarta’s middle-to-upper income groups and local industry seemed substantial enough to support a rudimentary toll-road network. Indonesia’s consumerist middle class is commonly conceived of as a 1980s phenomenon, but by the early 1970s, Jakarta at least was home to a substantial middle class.

The Jagorawi

According to Jakarta’s urban studies literature, the city’s planning has been spectacularly inadequate. There have been plenty of long-term plans, often supported by international money and expertise. However, few have been implemented because their planners have had little powers to do so. Grossly ill-equipped to tackle many of the area’s problems, a patchwork or piecemeal approach to planning has become the norm. The building of the area’s first toll roads was an exception. These were enormously expensive projects (with high sunk costs) that took years to construct. Returns on investment took even longer. Unlike many developments in the city, toll roads in Jakarta began with a plan that bore fruit.

With a dearth of technical knowledge and experience within the government on highway development, officials sought experts from allies of the young regime.³¹ American civil engineering firms were brought in to conduct feasibility studies. One was completed in 1969; another in 1972 refined the original 1963–65 plan for the Jakarta-Bogor highway.³² A third in 1973 analyzed a treasure trove of data for an ambitious “Trans-Java Highway.”³³ On these plans, one commentator observed that the “development of toll roads was encouraged by the nation’s newly opened relationship with the West… In the transport sector…lending agencies favoured large projects that imitated Western approaches such as freeway development in the U.S. These projects provided the local infrastructure to complement economic policies aimed at expanding spaces of flows within global trade networks.”³⁴

Firms from allies other than the US also joined in. In 1974, a Japanese development consultancy studied a highway designed to connect Jakarta to the port of Merak in West Java.³⁵ In the same year, a West German firm finished a study of the Jakarta Metropolitan area and another on a Jakarta–West Java tollway network in 1976.³⁶ These two systems years later came to comprise JIRR and three expressways leading west (to Tangerang), east (to Cikampek), and south (to Bogor) from the capital. The report also identified links for a future arterial network orbiting the city.³⁷

Officials tabbed the Jakarta–Bogor–Ciawi link (Soekarno’s highway) as the first. In the pipeline for nearly a decade, its construction appeared manageable (unlike the proposed Trans-Java Highway³⁸). The existing two-lane road on the route was already the greater Jakarta area’s most densely used arterial. It was experiencing an annual growth rate of about 16 percent, with a daily traffic count of more than 10,000 vehicles.³⁹ Foreign consultants found the traffic’s composition striking. A US firm described a bewildering array of “pedestrians, bicycles, betjaks, bemos, motor scooters, motorcycles, man-, horse- and ox-drawn carts, and a very wide range of sizes, makes, ages and types of autos, jeeps, buses, and trucks.”⁴⁰ This “intensively used facility” also passed industrial estates, including a cement producing complex in Cibinong, located about 15 km south of Jakarta. Officials, consultants, and factory directors believed that a new highway would hasten distribution and output. The 1972 feasibility report was bullish on a new facility’s ability to ease traffic congestion, on its potential to earn a high rate of return on the capital invested, and on its capacity to spark regional economic growth. It would pave the way, as it were, to a more industrialized economy aided by infusions of foreign direct investment.⁴¹ A highway would also ease the commute for the many civil servants living between Jakarta and Bogor.⁴²

After some four years of construction, on March 9, 1978, Soeharto opened the first 27 km of the Jakarta–Bogor–Ciawi highway, better known as the Jagorawi.⁴³ The ceremony featured the presentation of a small gift to the father of one of the twenty Indonesians who died while working on the road as a token of the president’s appreciation for their sacrifices. He then presented Myung Bak Lee – then chairman of the project’s builder, Hyundai Engineering and Construction Co. Ltd., and the recently defeated president (for reelection) of South Korea – with a picture of the Korean national who perished during construction. A drum band then presumably lifted the ceremony’s somber mood. Soeharto concluded the day by paying his toll, becoming the country’s first toll payer.⁴⁴

Figure 2.1 President Soeharto paying the toll to conclude the opening ceremony of the Jakarta–Tangerang turnpike (Kompas, November 28, 1984). There is a nearly identical photo of him becoming Indonesia’s first toll-road customer (for the Jagorawi Tollway) some six years earlier (Kompas, March 10, 1978).

One must wonder what Lee thought of the pomp and circumstance. In 1960, his country had a GDP per capita of US$80; yet by 1970, it had completed a tollway (from Busan to Seoul) nearly sixteen times longer than the Jagorawi’s first stage. Lee may have surmised Indonesia’s president lacked the vision to push his country along a path of industrialization that would pull millions out of poverty to the extent that Lee’s own dictator back home, Park Chung Hee, had demonstrated.

In addition to Lee and the usual panoply of Indonesian dignitaries, the US ambassador, Edward Masters, was in attendance. His country’s federal aid agency, the United States Agency for International Development (USAID), lent on generous terms nearly 40 percent of the project’s Rp. 28 billion price tag (about US$67.5 million). The remainder and the repayments came from Indonesian government coffers. The 1973 contract estimated costs at Rp. 280 million per km; by 1978, they reached about Rp. 475 million, or an overrun of some 70 percent.⁴⁵ The Jagorawi’s lifespan was designed for twenty years; the government anticipated breaking even after seven.⁴⁶

Government officials had rejected the recommendation of foreign consultants to toll the highway. After construction commenced, however, officials changed their minds, causing a rushed design of changes needed to accommodate toll plazas.⁴⁷ Foreign consultants had pointed to restricted government finances as the need for tolling. For the Second Five-Year Development Plan from 1974 to 1979, the budget for Bina Marga (the Directorate General of Highways in the Ministry of Public Works and Electric Power) was roughly Rp. 353,000 million, or US$170 million annually. Three-quarters of this was earmarked for maintenance and upgrading of existing roads. The remainder was enough to build one or two highways.⁴⁸ This pace of expansion was deemed inadequate if highways were to help promote economic modernization in a number of growth centers officials had in mind.⁴⁹

For these officials, the imperative of charging user fees extended beyond recouping costs to upgrade the country’s transport network. Anxious to avoid the impression that his regime was catering to the wealthy, Soeharto admitted in his speech at the Jagorawi’s opening that the government’s intent could be readily misconstrued.⁵⁰ As if on cue, the country’s leading news magazine quipped in its coverage of the ceremony: “Is it right for the people of Irian Jaya to help pay for it?”⁵¹ Soeharto pledged that the building of tollways would be reserved for high growth, and presumably urban, areas. To justify the expense, the president championed the multiplier effect. He prophesied that the Jagorawi would spread the fruits of Jakarta’s growth to neighboring areas. Those further afield, in turn, would benefit. The country’s paper of record, Kompas, toed the government’s line. It suggested that the new road would serve as a form of justice (keadilan), since its costs would not burden the state budget whose funds could be presumably deployed for other less developed areas.⁵²

Figure 2.2 The building of the Jagorawi’s toll plazas in 1971 (Tempo/Eddy Herwanto).

The predicament of promoting the equity of regional development versus generating efficiency, or high national-level economic growth, has been a staple of mainstream development thinking for half a century.⁵³ In this case, the debate struck a deep nerve within the regime. The stress on regional fairness by Soeharto and Kompas was an obvious attempt to gloss over the pressing problem of class and Indonesia’s growing income gap, especially in Jakarta, as the epicenter of the country’s rapid capital accumulation.⁵⁴ Officials were concerned about the perception that they were spending scarce state resources on a road that only the rich would use, even as millions in Jakarta clung to subsistence levels.⁵⁵ Revealingly, neither the president in his dedication speech nor Kompas in its coverage made any allusion to “justice” for the thousands of those who were forced from their homes to make way for the Jagorawi.⁵⁶ However clumsily, the regime steered clear of addressing class conflict. New Order officials assiduously policed public discourse, scrubbing it clean of related issues. To run afoul of this unofficial policy brought branding as a communist.

The president certainly was aware of the brewing resentment over the rise of the country’s new rich, which featured generals, senior officials, Sino-Indonesian businessmen, and select pribumi contractors who fed from the state’s trough. The Malari Riots of 1974, sparked by the arrival in Jakarta of Japanese Prime Minister Kakuei Tanaka, had ripped through the city’s streets only a few years prior, claiming about a dozen lives.⁵⁷ Japanese perceived “interference” in and “domination” of the local economy was in part the spark, but anger over the government’s lavishing money on the decadent rich was its fuel.⁵⁸ Student-led criticism of the impact of the regime’s development policies reverberated for years after the violence.⁵⁹ Officials did not need reminding that hundreds of cars, symbols of high living, were burned and smoldered for days in Jakarta’s major business districts.⁶⁰ Officials might have missed the irony, however, that the Jagorawi’s first toll gate was built adjacent to Taman Mini, the controversial theme park whose construction had ignited the student protests back in 1971.

Figure 2.3 Overturned, smoldering cars on the streets of Jakarta’s commercial district as a result of the 1974 Malari riots (Tempo/Syarir Wahab).

Post-Jagorawi developments

Notwithstanding the burning of cars in Jakarta’s streets in 1974 and continuing student criticism of New Order-style development, the initial success of the Jagorawi was unmistakable. Its average daily traffic far outpaced expectations of officials and consultants. In only three months, it stood at some 4,000 vehicles, which exceeded its budgeted design volume of 3,600. On weekends and holidays, volume almost doubled.)⁶¹ By 1982, the road’s annual vehicular volume of 13.4 million was triple its number in 1979, the first full year in operation.⁶² What, then, prevented this impressive performance of Indonesia’s first turnpike from precipitating a rapid expansion of the country’s tollway network?

In short, the dip in world oil prices and the onset of the world recession slowed Indonesia’s economy considerably.⁶³ From 1981 to 1986, Indonesia’s average annual rate of growth was less than half that from 1973 to 1981.⁶⁴ As the country’s terms of trade worsened, it was earning far less from its (mainly oil) exports while addicted to increasingly expensive imports, so contributing to plummeting investment rates. Aggregate demand dropped while debt rose.⁶⁵ Officials curtailed the large-scale projects that the regime was fond of building during times of oil-driven fiscal prosperity.⁶⁶ Monetary tightening meant that only those toll roads at advanced planning stages would continue. The government’s ambitious plan to build twenty-two toll-road projects at a cost of Rp. 1 trillion was reduced drastically.⁶⁷ As a result, only a handful of toll roads were opened between 1983 and 1988.

An addition of approximately 219.5 km to the toll-road network over a six-year period, or 35.4 km per year, was a limited expansion. As Table 2.1shows, Soeharto stuck to his 1978 pledge to confine toll-road building to major urban areas. Outside Java, to support development, only Medan warranted a toll road.

Table 2.1 Opened toll roads, 1983–88

Figure 2.4 Construction of the Jakarta–Cikampek Tollway in 1986 (Tempo/Anizar M. Jasmine).

Who paid for this limited expansion? The state did in large part, including Jasa Marga. The World Bank and the Japanese, Saudi, Kuwaiti, West German, and Taiwanese governments also helped to finance a number of the turnpikes. But their aid was soft loans, not grants.⁶⁸

Days prior to the March 1978 opening of the Jagorawi, Jasa Marga was established to operate and maintain the toll road.⁶⁹ Armed with a Rp. 10 billion (US$160 million) endowment from the state, the state-owned toll-road corporation turned to construction. In August 1979, it completed a modest 5-km river toll bridge in Citarum, West Java. More small-scale projects allowed Jasa Marga to gain the experience to handle the construction of the additions needed for the country’s toll-road system.

Officials used receipts from the booming Jagorawi to fund this expansion. But more was needed because of the reduction in state expenditures and the tightening of preferential credit schemes to state enterprises. As a result, Jasa Marga tried its hand at fund raising, becoming the country’s first company to sell domestic bonds.⁷⁰ Its initial March 1983 auction netted around Rp. 23 billion (US$23 million); proceeds helped to finance other toll roads including the Jakarta–Tangerang link.⁷¹ More bond issuances followed. By 1990, the total value raised was around Rp. 689,000 billion (US$363 million), with purchases by government employee pension funds accounting for the lion’s share.⁷² Nevertheless, the World Bank concluded that Jasa Marga fell short of expectations: Although the SOE “was intended to be financially independent, approximately two-thirds of its investments during this period were financed through foreign loans on which the Ministry of Finance, rather than Jasa Marga, had made all the interest and principal payments.”⁷³

Thus far, Indonesia’s toll-road experience was congruent with mainstream development policy and practice, which posited that in developing countries with poorly endowed private sectors, the state should be at the forefront of infrastructure investment. Due to the political exigencies of the Cold War, many governments had access to capital, typically from aid packages. To carry out infrastructure projects, the public sector was encouraged to form SOEs free from profit-making pressures, functioning as “the engines of modernization, the mechanisms for achieving a better future.”⁷⁴ Infrastructure was touted as a public good for which the state should absorb the cost, with the hope of generating private investment and productive economic activity.

But in Indonesia, this thinking soon came under attack from two directions, international and domestic. From abroad there was a rise of market-inspired policies emanating from the Reagan and Thatcher regimes in the US and the UK. Multilateral lending institutions took their deregulatory message to heart and by the late 1980s began to shift emphasis onto the private sector. They deemed the latter as best equipped to bring efficiency and effectiveness to large-scale infrastructure projects. The second attack came from inside Indonesia, where there was an onslaught on the country’s business sector by Soeharto’s children, who saw the toll-road sector as decidedly attractive. Their participation in this industry, camouflaged as “the private sector,” would earn Indonesia praise from the World Bank.⁷⁵

Enter the palace children

It is no secret that Soeharto’s children became major players in Indonesia’s economy, advantaged by the authoritative presence of their father. By the 1990s, their trading companies had proliferated into vast conglomerates, securing profitable government contracts, joining ventures with established cronies of their father, and amassing great wealth. For lucrative projects, it was nearly axiomatic for private sector bidders to include one of the children on their bid. The children’s interests became so pervasive that for the same auction a number of bidders had different children in their respective corners.⁷⁶ Bickering among them became both legendary – and destabilizing.⁷⁷ Their business interests reached from westernmost Aceh to distant East Timor, and with other members of Soeharto’s extended family, as a group, they became known as “Cendana.”⁷⁸ One estimate valued the First Family’s worth at more than US$73 billion at the time of Soeharto’s resignation.⁷⁹ From coal, cement, and chemicals to oil, timber, television, and telecommunications, the palace children had fingers in nearly every major industry and sector.⁸⁰ Perhaps due to the public nature of toll roads – hundreds of thousands of increasingly ordinary Indonesians (or at least Jakartans) were using them daily – the children’s stakes in toll roads became the public face of their business empires. Their toll-road domination symbolized the infectious rot that had started to afflict the regime.⁸¹ Their interests became an outstanding example of the politically powerful slogan of KKN (korupsi, kolusi, nepotisme, or corruption, collusion, and nepotism) that the democratization movement exploited to such great effect to unseat their father in May 1998.

By the mid-to-late 1980s, to accommodate increases in traffic into Jakarta via the Jagorawi and the recently opened Jakarta–Tangerang and Jakarta–Cikampek tollways, the government sought to expand the capital’s toll-road network.⁸² Around the same time, the young companies of Soeharto’s children were floundering, especially the agro-industry businesses of Soeharto’s eldest daughter, Tutut.⁸³ The toll-road expansion presented an opportunity to change their fortune. Indeed, the fortunes of Tutut’s holding company, PT Citra Lamtorogung Persada (CLP), soon changed dramatically. In 1987, the government selected CLP’s toll-road unit, PT Citra Marga Nusaphala Persada (CMNP), to build Jakarta’s north harbor toll road together with Jasa Marga.⁸⁴ Considered Indonesia’s first privately operated toll road, its first section opened in 1989. In 1996, the North–South Link, as it is known, was extended some 14 km westward to Jembatan Tiga in Pluit.

Tutut’s youngest brother, Hutomo Mandala Putra – popularly known as Tommy – lost to his sister in the bid for the North–South Link.⁸⁵ Presumably in return, he was awarded the rights to extend the Jakarta-Tangerang turnpike another 73 km to Merak, a busy port city with the massive, state-owned Krakatau Steel factory. Tommy’s conglomerate, PT Humpuss, completed the tollway, in stages, from 1992 to 1996.

The partners Tutut and Tommy cobbled together captured the blurring of the private/public sector divide and the KKN that had become fundamental to the New Order. In 1987, the year CMNP was established, its shareholders included:

1. PT Usaha Gedung Bank Dagang Negara (29.4 percent): a subsidiary of a private bank whose owner (Syamsul Nursalim) was a regime oligarch.⁸⁶ The bank, PT Dagang Negara Indonesia, was the lead lender on the project.⁸⁷ A year later, its controlling interest was passed to a Soeharto family-controlled foundation (Purna Bhakti Pertiwi).⁸⁸

2. Indocement Tunggal Prakasa (11.7 percent): the cement company of Liem Sioe Liong, then Indonesia’s richest businessman and close confidant of Soeharto.⁸⁹

3. CLP (8.8 percent)

4. Yala Perkasa International (5.8 percent), Tutut’s construction company

5. four SOEs:

   1. Jasa Marga (23.5 percent)

   2. Krakatau Steel (11.7 percent)

   3. Jaya Konstruksi Manggala Pratama (5.8 percent)⁹⁰

   4. Hutama Karya (5.8 percent).

Tommy’s consortium, Marga Mandala Sakti (MMS), was formed in 1989. In addition to his Humpuss conglomerate,⁹¹ it featured a company, Hanurata Coy Ltd.,⁹² founded by Soeharto and his half-brother Probosutedjo, a Soeharto family-controlled foundation (Sarana Wanajaya), Krakatau Steel, and Jasa Marga.⁹³ CMNP and MMS could be seen as representatives of the PPP concept that the World Bank and others were touting for infrastructure investment. However, doing so misses the incisive point of how power, money, politics, and the law operated under the New Order and how these elements intersected to produce an arbitrariness in policy-making when there were matters pertaining to the palace children’s business interests. Fissures within the state also arose as a result of such favoritism, especially when a government entity stood to lose from the children’s rent-seeking activities. By the end of the New Order, Jasa Marga and Soeharto’s children were perceived as cozy collaborators in the sector’s KKN. But the early stages of their relationship were colored by mistrust and apprehension.

In the late 1980s, the companies of Soeharto’s children were too small to absorb the sums and risks involved in tollway building single-handedly. A former high-ranking official at Jasa Marga remarked, “There were no Hyundais [the massive Korean car and construction conglomerate]”.⁹⁴ However, the number and kinds of stakeholders in the children’s consortia is better explained by the fact that Tutut and Tommy preferred to use other people’s money, including that of their father’s cronies and the state, in their projects. Jasa Marga was no exception. It held minority stakes in these putatively “private sector” toll-road firms. The emergence of these firms, however, unnerved Jasa Marga’s top brass, as the following example of the unfolding legal foundations of the toll-road sector and the revenue-sharing arrangement for the North–South Link exemplified.

The 1980 Road Act (no. 13) had given ownership and operational monopoly rights to the government (art. 13) or a SOE (art. 17[1]). For several years the status quo held. The impending involvement of the palace children prompted an amendment, however. Rather than change the statute (undang-undang), apparently a laborious process even under authoritarian conditions, in 1987 Soeharto issued a simple two-page presidential decree (no. 25). It permitted Jasa Marga to involve national and foreign private investors in tollway projects. The same former official attested to the dramatic change in the way Indonesia would develop toll roads as a result of this brief edict.⁹⁵

In 1987, CMNP and Jasa Marga had reached an agreement to build and operate separately two connecting toll roads in Jakarta. Jasa Marga built a 7-km link in west Jakarta between Tomang and Semanggi that connected to the Semanggi–Cawang section the company had completed in 1987. Meanwhile, CMNP would construct a 5-km stretch from Cawang to Rawamangun. It would then extend an elevated section northward to Jakarta’s port, Tanjung Priok. In early November 1989, days prior to the roads opening, the government issued a decree overriding the original contract. Now the two links (Tomang–Cawang and Cawang–Tanjung Priok) would be managed jointly.⁹⁶ CMNP would receive 75 percent of their toll revenue, Jasa Marga 25 percent.⁹⁷

The decision was controversial enough to compel a rare government response.⁹⁸ In parliament, the Public Works Minister Radinal Moochtar testified that the new arrangement reflected the companies’ different construction costs. CMNP’s costs were four times that of Jasa Marga’s (due to the construction of this elevated link). Critics queried the minister’s reasoning on two counts. First, they wanted to know why the toll roads were merged into one.⁹⁹ Second, it turned out that Jasa Marga’s costs actually exceeded that of CMNP’s. (Moochtar had not given Jasa Marga’s real construction expenses.) In fact, CMNP had shaved about Rp. 70 billion off the estimate by finishing ahead of schedule and by dubiously building the carriageway more narrowly than the contract’s specifications.¹⁰⁰

In the end, although Jasa Marga did not get the 60 percent share it sought, it did receive roughly 43 percent of the revenue – 25 percent from the new arrangement and almost 18 percent from its ownership stake in CMNP.¹⁰¹ Opposition MPs continued to question the outcome, saying that CMNP “never spent one cent on the road built by Jasa Marga, so why should they [sic] get 75% of the toll collected on that stretch?”¹⁰²

Figure 2.5 A giddy Tutut during the opening ceremony of her company’s Cawang–Tanjung Priok (Ir. Wiyoto Wiyono) toll road in 1990 (Tempo/Ali Said).

Despite this, Jasa Marga officials worried about being cut out altogether from future projects. If they were forced to accept one-quarter this time, why not less the next time? Jasa Marga lobbied the public works minister, who oversaw the SOE, for a government regulation that would guarantee the corporation’s right to participate in all toll-road projects. Government regulation number 8 of 1990 did just that. Jasa Marga’s minor victory did not mean, however, that the more powerful arms of the state would regularly side with the company. In 1995, the Public Works Ministry granted CMNP’s request to extend its twenty-two-year concession for JIRR by fifteen years, to the consternation of Jasa Marga.¹⁰³

The preferential treatment the palace children received was further revealed in the setting of tariffs, although on paper “private investors” were placed on equal footing with Jasa Marga.¹⁰⁴ The government had set the Jagorawi’s tariff well below what a standard cost-benefit analysis would have yielded; the rate remained unchanged for six years.¹⁰⁵ Once the palace children got involved, initial tariffs were set higher and the pace and size of increases changed. For example, another controversy that arose from the 1989 opening of the Tomang–Rawamangun link was the flat fee of Rp. 1,500 (US$0.85) that motorists had to pay regardless of the distance traveled.¹⁰⁶ A minister recounted a popular joke to a foreign reporter, “India has the Taj Mahal…We have the Toll Mahal.”¹⁰⁷

Due to the middle-class outcry that greeted this new pricing, Soeharto responded by issuing regulation number 8 of 1990, which reaffirmed what the 1980 Road Law had conferred upon the president: the authority to set initial rates and approve subsequent increases (art. 40). In practice a dual-track policy emerged. On Jasa Marga’s routes, tariffs were kept low and raised infrequently. From 1988 to 1997, eight of its nine turnpikes experienced a single modest increase (in 1992), with the government rejecting a 1996 proposal by Jasa Marga for an across-the-board price hike.¹⁰⁸ By 1997, according to an Asian Development Bank (ADB) study, the real tariff for five of the company’s roads had “fallen to 63% of its 1992 value in constant terms.”¹⁰⁹ This evidence supports the notion that the former general had aspired to create what Howard Dick has called a system of “middle-class welfare.”¹¹⁰

But the tollways of the palace children showed a different system. There, motorists felt the costly pinch of KKN. The initial 1992 tariff for Tommy’s Tangerang–Merak expressway was Rp. 153 per km, or nearly twice that of prevailing rates for the Jagorawi and Jakarta–Cikampek turnpikes. With increases on JIRR in 1992 and again in 1995, the rates on Tutut’s road were about 18 percent above Tommy’s tollway.¹¹¹ The same ADB study reported that JIRR’s rates were about twice that of off-peak tariffs on a new privately operated expressway in southern California.¹¹²

A boom before the broom

As the 1990s advanced, Indonesia seemed once more on the cusp of a boom in tollway construction, precipitated by an economic recovery and a wave of investor confidence. The business interests of the palace children were firmly established in the sector, and the 1990 government regulation had opened the sector to private (especially foreign) investment. In 1993, the World Bank anointed Indonesia an emerging East Asian tiger.¹¹³

Reignition of the economy was again rooted in a set of deregulatory, pro-market policies championed by government technocrats. The technocrats did, however, face stiff opposition from economic nationalists and state patronage-based interests.¹¹⁴ The decline in oil prices, first in 1982 and more drastically in 1986, had forced the government to reappraise its interventionist industrial policy. It turned to “an export-oriented strategy dominated by the private sector responding to market signals.”¹¹⁵

The government announced structural reforms in a series of policy packages that began in 1983 with the partial liberalization of the country’s tightly regulated state-dominated banking sector.¹¹⁶ A more substantial 1988 deregulatory package sparked an explosion in the number of private banks. Stiff competition led to easier access to credit, boosting domestic investment. The country’s tax system was reformed and corruption in part was tackled at Jakarta’s Tanjung Priok port by assigning the management of customs to a Swiss firm.¹¹⁷

The export of non-oil manufactured products generated the foreign exchange needed to pay down the government’s large external debt.¹¹⁸ Import schemes and duties were dismantled to help exporters and currency devaluations also took place in 1983 (28 percent) and in 1986 (31 percent), so making Indonesia’s products more competitive on the international market. One economist noted, “The resulting increase in nonoil exports…[was] dramatic. In only six years, nonoil exports almost tripled, from $5 billion in 1983 to $14.4 billion in 1990, and their share of total exports rose from 25 percent to 56 per cent.”¹¹⁹

Two animating differences set these structural reforms apart from those of the late 1960s. One was an emerging sea change in the views of ordinary Indonesians toward the acceptance, both ideologically and socially, of capitalism. The headlong chase for profit had traditionally been viewed with suspicion as being stereotypically “Chinese.”¹²⁰ The second was Indonesia’s new place in the world of international finance, with the country becoming a popular destination for inflows of foreign capital. Some of it went into factories. The appreciation of the yen boosted low-wage manufacturing as Japanese firms set up shop in Indonesia and throughout Southeast Asia.¹²¹ Global hedge fund managers also began embracing the alluring concept of “emerging markets.” Their returns (but also risks) promised to outpace those in the traditional and safer US and European markets.¹²² As it did elsewhere, this trend breathed fresh life into Indonesia’s then moribund stock market, which had opened in 1977.¹²³

Rather than rely on bank loans, local companies also turned to the exchange to raise capital.¹²⁴ Despite blips, like in 1991 and late 1992,¹²⁵ the market boomed. From 1988 to 1995, “the number of listed firms increased tenfold, from 24 to 238, while the volume of listed shares skyrocketed from 60 million to nearly 46 billion.”¹²⁶ Meanwhile, international banks eagerly extended loans to Indonesian corporations, especially those considered blue-chip.¹²⁷ As a result, these conglomerates became reliant on offshore syndicated loans. In 1994, they obtained US$20.6 billion in such loans and US$34 billion by 1996.¹²⁸ In all, the appreciable mobilization of private capital augured well for investment in the country’s middling toll-road industry.

Authorities expanded plans. The most lucrative promised to be a toll road encircling the capital, first proposed in the aforementioned 1975–76 West German study. In 1990, the construction cost of the 69-km project, known by the acronym JORR (Jakarta Outer Ring Road), was estimated to be Rp. 1.3 trillion (US$684 million).¹²⁹

Changes to JORR’s ownership structure over time are difficult to piece together. In an interview, a former high-ranking Jasa Marga official said that in the 1980s the project may have been packaged as a single concession, possibly held jointly by a French firm and Jakarta’s development company (PT Pembangunan Jaya).¹³⁰ He could not recall why the arrangement fell through. Thereafter the ring road was chopped into seven sections, with following designations: N, E1, E2, E3, S, W1, and W2 (see Map 2.1).¹³¹

Map 2.1 Jakarta Area Toll Roads

JORR’s division ensured that it would be built in stages. In 1990, Jasa Marga completed the E2 section (Cakung–Cikunir, 9 km).¹³² It was built first because officials hoped that connecting to the busy Jakarta-Cikampek tollway and acting as a feeder to CMNP’s elevated harbor toll road would alleviate the area’s dense traffic.¹³³ The next section of JORR would not be completed for another five years; consortiums for the remaining portions were still being formed and ownership was later in flux.

Through a 1989 tender, a consortium named PT Mataram Citra Binangun (MCB) won the rights to W2 (Kebon Jeruk–Pondok Pinang, 11 km).¹³⁴ With Jasa Marga, Tutut’s CLP, and the Sultan Hamengkubuwono X of Yogyakarta as partners, the auction’s outcome was likely predetermined. In 1991, MCB signed an operational agreement with its partner, Jasa Marga, the sector’s regulator.¹³⁵ Little progress was made and by 1996, MCB’s original ownership structure was altered to the following:

1. MCB (50 percent)

2. the Tutut-linked PT Tridan Satria Putra Indonesia (25 percent)

3. Jasa Marga (15 percent)

4. Bhaskara Dunia Jaya (10 percent).¹³⁶

With Tutut as Executive Director, the consortium was renamed PT Citra Mataram Satriamarga Persada (CMSP).¹³⁷

Around the same time MCB had formed, another consortium, PT Marga Nurindo Bhakti (MNB), was established and comprised:

1. Brey Construction (UK) (80 percent)

2. Jasa Marga (10 percent)

3. PT Marga Strukurindo Raya (5 percent)

4. PT Hanurata (5 percent).¹³⁸

The consortium “won” the rights to sections S and E1, totaling 25.5 km.

The thirty-year BOT contract, which took two and half years to negotiate, estimated construction (excluding land) costs at Rp. 536 billion (US$254 million).¹³⁹ When Brey (the majority partner) failed to provide the funding it pledged, reportedly it was replaced by the state-owned PT Barata Indonesia. This abrupt change in ownership led to the project’s delay.¹⁴⁰

The jumbling of ownership in MNB continued, as Barata’s inclusion disappeared.¹⁴¹ Three of the original companies (Jasa Marga, 10 percent; Marga Strukturindo Raya, now 10 percent; and Hanurata, now 7 percent) were joined by Tutut’s CLP (10 percent), Bhaskara Dunia Jaya (25 per cent), and Investa Kusuma Artha (38 percent). Who were behind the latter two entities that now combined to own 63 percent? Bhaskara was controlled by Djoko Ramiadji, a trained engineer and former executive in Tutut’s CMNP. The cosmetic tycoon Mooryati Soedibyo of Mustika Ratu fame ran Investma Kusuma Artha. She was also Ramiadji’s mother.¹⁴² MNB completed section S in 1996.¹⁴³ Dense with traffic, the area included the opening of a new shopping mall (Pondok Indah). Section S also connected to the busy Jagorawi.¹⁴⁴

Another consortium, PT Citra Bhakti Margatama Persada (CBMP), was formed in December 1995 and secured the license for E3 and N, whose ownership was then emerged with E2 that was already built by Jasa Marga.¹⁴⁵ CBMP’s ownership reflected what had by then become the usual players:

1. Tutut’s CLP (37.7 percent)

2. Jasa Marga (34.8 percent)

3. Tridan Satria Putra Indonesia (15 percent)

4. Bhaskara Dunia Jaya (12.5 percent).¹⁴⁶

The final JORR consortium was the only one without Tutut representation. Called PT Jalantol Lingkar Baratsatu, its main sponsor was the construction firm PT Bangun Tjipta Sarana.¹⁴⁷ In exchange for building the second carriageway of the Jakarta–Cikampek tollway, Bangun Tjipta was to receive 69 percent of the turnpike’s revenue for twenty-six years.¹⁴⁸ The company’s founder was the well-known pribumi businessman, Siswono Judo Husodo.¹⁴⁹ Siswono refused to budge on his JORR W1 license until there was through-traffic from other sections. This necessitated at least the construction of W2, which did not take place. (Siswono’s obstinacy proved prescient: When the financial crisis hit, leading to the temporary abandonment of JORR, his company remained debt-free. It was the only consortium of the four to retain its concession once the project was restarted in 2000 [see Chapter 5]).

During JORR’s first seven or so years, not a single pair of contiguous sections was built.¹⁵⁰ However, the sector still had a buzz around it. The four JORR concessionaires were actively scouring international markets for loans worth up to nearly US$120 million.¹⁵¹ Coveted projects were becoming more plentiful. In addition to the extension to Merak by Tommy’s MMS and Bangun Tjipta’s widening projects, there was a route from eastern Jakarta (Cikampek) to western Bandung (Padalarang), nicknamed Cipularang. This BOT contract, worth Rp. 1.3 trillion, took six years to negotiate, but was finally signed in 1994. The syndicate comprised Trafalgar House, a British company (40 percent), Tutut’s CLP (30 percent), and Jasa Marga (30 percent). It was the first international joint-venture to sign a toll-road contract.¹⁵² The increasing presence of foreign players was a conspicuous change heralding a rosy future for the sector and for Indonesian infrastructure generally. In late 1996 or early 1997, a consortium of foreign investors paid some Rp. 425 billion (US$181 million) for a majority percentage stake in Tommy’s MMS.¹⁵³

Richard Borsuk of the Asian Wall Street Journal summed up the concerns of foreign capitalists prior to the 1990s:

Foreign firms continued to prefer their revenue in dollars. But Indonesia’s deregulatory measures and boom economy of the early 1990s began to allay their apprehensions somewhat, as did partnering with Soeharto’s children.¹⁵⁵ The circulation of bullish industry accounts added to the sector’s buzz. These reports cited strong government commitment to private sector investment and enough data to make investors drool – the need for improvement of an anemic toll-road network suffering under the weight of exploding volumes in traffic and in vehicle ownership.¹⁵⁶

The boom seemed limitless, with more than sixty toll-road projects either on offer or in the planning stage.¹⁵⁷ By the mid-1990s, expressways had already changed radically how and where residents of the Jakarta metropolitan area lived and worked. What the railways were to Java in the late nineteenth century, the toll roads had become to Jakarta in the late twentieth century.¹⁵⁸ They had profound social, cultural, economic, and spatial ramifications.¹⁵⁹ One was further integration with the world economy, as foreign investment, especially from East Asia, poured in.¹⁶⁰ Taking advantage of the logistical convenience that the tollways provided, capitalists opened factories on the periphery of the greater Jakarta area, with lower land and labor costs acting as pulls. This kept Indonesia’s exports competitive internationally, as cheaper inputs offset an increase in transport costs for the Jakarta market.¹⁶¹

Unleashed by the president and his closest circle, a select coterie of powerful private property developers followed the factories. The developers built US-style gated housing estates in the peri-urban areas.¹⁶² As the suburban housing boom spiraled out of control and was gripped by a “BMW vision” of the expanding capital,¹⁶³ developers flouted scores of local regulations on water conservation and open space.¹⁶⁴ Jakarta was transformed into what geographers call an extended mega-urban region.¹⁶⁵ Although the label “Jabotabek” had been in circulation since the early 1970s as a planning model to deconcentrate the population and economic activity from Jakarta proper, only around this time did the concept begin to take shape.¹⁶⁶ Population growth in the surrounding districts (Bogor, Tangerang, and Bekasi) soon raced past Jakarta.¹⁶⁷ A special feature of this growth was the mushrooming of new towns. From 1985 through to 1995, their number rose from zero to twenty-five.¹⁶⁸ As Dick and Rimmer aptly put it, Jakarta’s toll roads “knitted together the satellite towns, industrial estates, shopping malls, airport, seaport with expanding, high-rise central business districts into a bustling, air-conditioned quasi-First World city. Beneath and around it was the slow-speed, heavily polluted, Third World city of the large majority of the population.”¹⁶⁹ While the poor majority suffered more profoundly, the rich also felt the toll on the environment. Increased flooding (due to the loss of water catchment areas), worsening air and noise pollution, and rapid aquifer depletion were only the most noted problems.¹⁷⁰

One major toll-road project that was on offer in the mid-1990s stood to repeat this class-polarizing, suburbanizing, environmentally damaging experience. The impact, however, would not be confined to the capital area, but would be felt right across the densely populated north and central corridors of Java.

The Trans-Java Expressway

Some 180 years after the Dutch built the bumpy Great Post Road traversing Java that cost the lives of thousands of corvée laborers, and some twenty-two years after the first feasibility study was completed, the New Order regime sought to turn the idea of building a modern, limited-access highway across Java into reality.¹⁷¹ In 1995, the government announced tenders for nineteen concessions for an accumulative length of 770 km (most of which was on Java). Exclusive of land acquisition costs, the total investment was valued at Rp. 5 trillion (US$21.7 billion).¹⁷² This new facility was designed to run parallel with the existing two- and sometimes four- lane, congested, and accident-filled road. For planners, the tollway presented an opportunity to build up population densities and capital formation along the small and intermediate cities of Java’s northern and central corridors.¹⁷³

Authorities tasked Jasa Marga, as the state’s procuring agency, with overseeing the bidding. The corporation also stood to gain handsomely, for it would hold a minority share in each link. More than eighty-five domestic and foreign firms submitted papers, of which around half passed Jasa Marga’s qualifying criteria.¹⁷⁴ Authorities unveiled six concession winners in April 1996 and another batch in August. Winners had ninety days to form a consortium; many awardees were expected to partner with foreign firms. This meant the likelihood of resorting to offshore financing, although some international lenders were skeptical without government guarantees on a minimum level of revenue.¹⁷⁵ Nevertheless, it was reported widely that Soeharto expected the as-yet-unnamed Trans-Java Expressway to be completed by 2003.¹⁷⁶

Map 2.2 The Trans-Java Expressway

Before describing each of the concessionaires (from west to east), it bears mentioning that several of them had been appointed directly by the government prior to the 1995–96 auctions.¹⁷⁷ As such, the Trans-Java Expressway illustrated the mixed economic governance system with which Soeharto ran the country,¹⁷⁸ where KKN elements, in the form of direct appointments or bogus auctions, combined with private companies, in the form of competitive auctions.

Aggregate significance

Four main conclusions can be drawn from the above capsules. First, the high number of short-distance concessions on offer was striking. It was mentioned that Indonesia lacked a massive conglomerate with experience in the field, like that of Hyundai of South Korea, to build these projects singlehandedly. So, the plan’s ambitiousness likely surpassed the capacity of the sector’s established actors to do it themselves. More critically, however, was an overriding political concern to have more non-Cendana private sector players benefit from the sector’s spoils. As resentment brewed about the stranglehold the palace’s children had over the toll-road sector, the ageing Soeharto sought to spread the wealth, so to speak, by involving a wider swath of the political-business class. The resentment was particularly acute among the pribumi bourgeoisie who felt marginalized by the favoring of the Chinese conglomerates.

Consider the toll road across Java, which at this time was divided into eighteen separate concessions.²²⁶ The average distance of each turnpike was about 42 km, the median 39.5. While perhaps politically expedient, the maneuver was inefficient economically. It stood in stark contrast to what Prime Minister Mahathir Mohamad – also well known for his cronyism – had done in Malaysia. After government efforts to build the North–South Expressway encountered financial difficulties, in 1988 Mahatir awarded the contract to build and operate the 973-km toll road to a single, though politically connected, firm. A subsidiary of United Engineers Malaysia (UEM) Berhad, PLUS Expressway Berhad, finished it in 1994, more than a year ahead of schedule.²²⁷ The giant Japanese firm Mitsui, a subcontractor on the Malaysian road, reportedly had requested to build the toll road across Java under one concession.²²⁸ Apparently, Soeharto was not interested.

The directive to divide the toll road into a high number of concessions is readily apparent in several cases. A technical study from the early 1970s recommended two sections to cover the roughly 135 km from Cikampek (or Sadang) to Cirebon.²²⁹ This route was later divided into four concessions – Sadang–Subang, Subang–Dawuan, Dawuan–Palimanan, and the Jasa Marga-operated Palimanan–Kanci turnpike that was opened in 1998.²³⁰ Another study from the late 1970s reported on government plans to build a single toll road from Kertosono to Surabaya. Authorities later split these 76 km into two concessions.²³¹ A government-funded feasibility study analyzed the roughly 130-km Cirebon-to-Batang corridor as a single turnpike.²³² Subsequently, officials auctioned three licenses – Kanci–Pejagan, Pejagan–Pemalang, and Pemalang–Batang.

A second conclusion relates to the first. The upper echelon of pribumi contractors were best positioned to benefit from the Trans-Java project. Besides them, the main pillars of capital formation under the New Order – the state (Jasa Marga), the Cendana family, Sino-Indonesian capital, and, arguably, the army – were represented but in a less significant way.

The aggregate interests of Cendana were low. Probosutedjo was most likely a minority partner in Ramiadji’s Bhaskara Lokabuana, the majority owner of the Subang–Dawuan franchise. Bambang owned roughly 10 percent of Kotjo’s Van der Horst, which held a controlling stake in the Dauwan–Palimanan license. Hanurata was the majority investor of the minor Kertosono–Mojokerto link. Tutut and Tommy were not financially vested in this megaproject.

Sino-Indonesian capital was similarly underrepresented. Go Soei Kie and Johannes Kotjo were behind the Semarang–Solo and Dauwan–Palimanan franchises, respectively. Tomy Winata may have been a minority partner in the Subang–Dawuan license. But Liem’s Salim Group, Soeryadjaya’s Astra Group, Mochtar Riady’s Lippo Group, Eka Tjipta Widjaya’s Sinar Mas Group, and others of the largest ethnic Chinese conglomerates apparently held no ownership stakes.²³³

Official army participation was also limited to two small shares in the Pandaan–Malang concession, and a small part (via Hanurata) in the Kerotosono–Mojokerto turnpike.

In all, save for Jasa Marga, pribumi capitalists, contractors, and businessmen – represented by Bakrie, Kalla, Gowindasamy, Moeladi, Djody, and Basuki – stood to gain the most from the building of the Trans-Java Expressway.

However, a third conclusion may erode the certainty of the first two: This concerns who in the final count held stakes in the project, an issue that remains a matter of conjecture. Facilitated by lax reporting laws and the ease of creating proxy companies, the hidden or secret nature of investor participation was prominent. We can identify nearly all of the majority shareholders, but identities of the many minority stakeholders remain unclear. Hanurata’s partners included seemingly mysterious entities such as PT Meta Corp and PT Satryo. In addition to ghosts, we encounter shadows. Consider the case of Concord. While a former director admitted that “nameless” businessmen used his company as a proxy to secure the Sadang-Subang concession, it is doubtful Concord was alone in abetting this practice.²³⁴

The difficulties encountered in pinpointing the stakeholders result from the lack of disclosure laws and the attempts to evade taxes by establishing business fronts. Given the onset of the financial crisis that engulfed a number of investors in debt (see Chapter 3), many of the licenses also exchanged hands, some illegally. Therefore, when efforts to recommence the project’s construction started around 2003 and 2004, it did not mean that many of the names associated with a concession were part of the original consortium.

The fourth and final conclusion concerns the competitiveness of the auction process. The international “best practice” literature emphasizes the competitiveness of auctions as a means to ensure efficiency, but how competitive the bidding was remains a difficult question to answer. This uncertainty sheds light on key characteristics of Indonesia’s political economy at the New Order’s twilight.

The simple answer would be that these auctions were not very competitive. Rigging of the bidding process under the New Order was widely known. Cartels controlled the process, including a system of alternating winners. Bidders also bid up prices to facilitate involving the losers in the spoils. Bribing, though discreet, was a matter of fact, and companies included it into their cost estimates.²³⁵

I discussed the degree of competitiveness with a former Jasa Marga official who sat on the auctioning committee for the 1995–96 tenders. Not surprisingly, he was keen to promote the process’s competitiveness and stressed the committee’s respect for the rules. Understandably, he sought to distance himself and Jasa Marga from the notorious improprieties associated then with the toll-road sector and the bidding for government projects generally. To support his case, he pointed to the number of new investors to the sector to show that concessions were not handed to established players. Press reports at the time did take notice of the newly involved, including the two military-related entities (Yamabri Dwibhakti and Dharma Kencana Sakti), Kotjo’s Van der Horst, Djody’s Setdco, Kalla’s Bukaka, and others.²³⁶ However, although new to the toll-road sector, they were not newcomers to the wheeling and dealing of the country’s business world. All were well versed in securing sizeable rent from government officials and projects.

A second piece of evidence in support of the fairness of the concessioning process at the twilight of the New Order according to the Jasa Marga informant was that Tutut, the sector’s “queen-pin,” was not awarded a Trans-Java concession. The auctions were competitive and Indonesia was heading in the right direction, he maintained. The 1995–96 bidding was “not like before.” In the late 1980s and early 1990s, Tommy’s and Tutut’s companies and those of their cronies had been essentially handed concessions.

A more reasonable explanation behind Tutut’s absence, however, is the probability that she simply did not pursue these licenses. (The same could be probably said for the many Sino-Indonesian conglomerates.) Primarily an inter-regional tollway, the Trans-Java licenses did not promise to be as lucrative as CMNP’s urban routes. To wit, as a result of the very same 1995–96 bidding, CMNP secured the rights to a 32-km tollway in eastern Surabaya. The investment value of this project (Rp. 475 billion, or US$205.7 million) was the highest of these tenders.²³⁷

In the awarding of the concessions, given their large number, it is reasonable to believe that politics or connections played less of a role than normal in the awarding of a specific concession. To this end, however, what happened in those latter years on long-term projects like the Trans-Java tollway meant little. With the bursting of Bangkok’s property bubble, a tidal wave of regional economic ruin swept away deals crooked and straight. It led to the end of Soeharto’s long-standing presidency and gravely crippled Indonesia’s economy and its business sector. Illustratively, in September 1997, as the value of Indonesia’s currency began to tumble, Soeharto issued Presidential Decree 39, freezing government spending on large-scale infrastructure projects, although some of the palace children’s projects were exempted. The unsuccessful efforts of state officials to revive the toll-road sector in the chaotic aftermath of the financial crisis are the subject of the next chapter.