Invest now or the whole of Jakarta will be submerged

Riyadi Suparno, The Jakarta Post, Jakarta

Floods have paralyzed Jakarta at least twice, now and back in 2002, and experts believe that the flooding is becoming a five-yearly "event," and that unless something is done to prevent it, we will have another major flood in 2012 or even sooner.

This time, the flooding is said to have been the worst ever, with 70 percent of the city affected last week. The losses have been huge, including dozens of fatalities. The official estimate puts total losses at Rp 4.3 trillion (US$470 million). This estimate includes losses resulting from disruption to industry and trade, household losses, damaged infrastructure and lost productivity.

Such estimates, however, do not cover intangible losses, such as the terrible inconveniences and mental distress caused to the victims.

Looking at all these losses, both tangible and intangible, as well as the potential losses from future floods, we might well wonder why the central and Jakarta governments have not invested more in flood-prevention infrastructure.

To date, most of our flood defenses were built by the Netherlands Indies administration, i.e., the canal system that channels water from the western part of Jakarta to the sea.

About 20 years ago, the city administration drew up plans to build the 23.5-kilometer East Flood Canal to divert water heading to Central and North Jakarta through a number of rivers to the sea. This project, however, is still in limbo due to the lack of money allocated for the project in the Jakarta annual budget.

Following the massive flooding in 2002, the Jakarta administration drew up a more comprehensive flood-prevention master plan, which incorporated the construction of the East Flood Canal. The master plan also envisages the construction of more sluice gates and water-retention ponds, river dredging and the relocation of riverside dwellers.

The plan will need a total investment of Rp 18.1 trillion, but to date has largely remained nothing more than a plan because not enough money has been committed to seeing it through.

But why the paucity of funding? Why has inadequate investment been made in flood-prevention projects given the massive losses that the inundations produce?

The answer may lie in politics, where proper project analysis is frequently absent. Projects of lower economic value are often prioritized by the politicians if they deliver immediate benefits that can be felt by their constituents, while projects of greater value may be ignored if their benefits will only become apparent years down the line.

And flood-prevention projects definitely fall into the latter category, where the benefits will not be immediately apparent upon the completion of the projects, as compared, for example, to the Jakarta monorail, whose benefits will be immediate. This might explain why the Jakarta administration is a lot more interested in pursuing the monorail project than the East Flood Canal project.

Unlike the monorail, where private investors are keen to invest their money, especially after a controversial government guarantee was given, flood-prevention projects like the East Flood Canal do not attract much interest from the private sector. This is what economists normally refer to as "market failure".

In such a situation, the government has an obligation to intervene. If the Jakarta government has no resources or lacks the capacity to implement the plan, the central government has to take it over. Otherwise, the plan will remain on the drawing board for ever.

There is no reason for the central government not to take over the project. First of all, it will have a spillover effect in two other provinces -- West Java and Banten.

Secondly, the government has the capacity and resources to implement the plan. If the government lacks ready cash at the moment, it can always borrow to finance this essential project.

In fact, financing the expansion of Jakarta's flood defenses through borrowing would be eminently sensible, and even be the fairest way of all as the benefits that the project will bring will extend to succeeding generations. By financing these projects through borrowing, the next generation will also play a part in paying for the benefits it will enjoy from the investment we make today.

Conversely, we must also ensure that we do not burden succeeding generations with unnecessary expense resulting from markups and corruption during the course of the works.

So, we have no other choice now than to soon put this comprehensive flood mitigation plan into effect. Otherwise, the whole of Jakarta could well be submerged in 2012, or even sooner.