Bandung Metropolitan Transportation Planning Collaboration and Perceived Transaction Cost Changes after 2 Decades of Decentralization

Roughly 2 decades ago, the Indonesian Decentralization Act 22/1999 (revised by Act 32/2004 and Act 23/2014) initiated a remarkable shift in the governance system for Indonesia: from a strongly hierarchical system to a further decentralized one. The shift has created fragmented governance for metropolitan transportation planning. Consequently, Indonesian metropolitan areas have experienced increasing transaction costs in policy coordination and difficulties in supplying sufficient transport infrastructures. Earlier research has pointed to a range of possible solutions, including strengthening local government capacity. This paper sets out to identify current perceptions regarding transaction costs in Indonesian metropolitan transportation planning. To what extent do high transaction costs create fragmented planning? Have planning actors’ perceptions changed over time? Using Q-methodology and in-depth interviews, the research identifies significant changes in actors’ perceptions, mainly towards the need to establish supra-regional institutions and regional development priorities. The findings are critical for institutional reformulation to support comprehensive transportation planning at the metropolitan level.

Decentralization; Metropolitan transportation planning; Transaction costs

A decentralized governance system has been implemented in Indonesia since 1999 (following the Decentralization Act 22/1999, revised by Act 32/2004 and Act 23/2014). These legislative changes have affected the Indonesian governance system, which was initially highly hierarchical, to become much less hierarchical (Seymour and Turner, 2002). Under Decentralization Act, the central government, to a great extent, has lost much of its power, while local governments wield greater authority in managing their area. A typical consequence of decentralization is that, while it encourages local government’s autonomous decision-making, it also tends to motivate them to solely focus on their respective territories (Firman, 2009). The consequence of this situation to planning fragmentation is quite predictable; local governments might easily neglect cross-jurisdictional development issues and tend to focus on their inward-looking programs in response to their inhabitants demands (Lowery, 2000).

    A metropolitan area refers to an extensive region where urban functions and activities across the area are interconnected. For transportation, in particular, metropolitan problmes such as congestion, pollution, and economic loss are directly related to thesuccess or failure of efficient transport service provision, whose planning issues would go beyond the boundaries of one local government. Fragmented planning by local governments can easily result in an unbalance between transport demand and supply, which has been a fundamental cause of severe metropolitan transportation issues today (Hirschhorn et al., 2019).

From a transaction theory point of view, inter-local collaboration is assumed to be voluntary, while decision-making processes are dominated by cost and benefit considerations (Alexander, 1992; Feiock, 2005). The transaction-cost theory is often used to express social costs inherent to activities needed for coordination in policy-making processes. These activities include exploring possible projects, trust-building, agreement making, meetings, communication, setting up partnerships, and dispute resolution (Hijdra et al., 2014).

The application of transaction-cost theory has been used to study cooperation between firms (North, 1990), or, over the last two decennia, between public organizations as well (Alexander, 2001). A focus on transaction costs for applied fields such as transport management or urban and environmental planning is more recent (Hijdra et al., 2014; Boschet and Rambonilaza, 2018). An emerging debate is about the linkages between transaction costs and institutional design for planning policies. Different institutional characteristics, such as those distinctive to transportation planning, will imply different transaction costs.

       This research has identified a remarkable shift in perceived transaction cost over a decade for a case of transportation planning coordination in a profoundly decentralized context (involving the case of Bandung Metropolitan transportation planning collaboration). An earlier study in 2010 concluded that Indonesian decentralization had required a much stronger local government authority, which has subsequently stimulated various manifestations of fragmented metropolitan transportation planning. A lack of strong, consistent legal assurance and government cultural constraints were found to be the most influencing elements that created a high transaction cost at that time. However, dynamic socio-economic and political processes over a decade have changed the decision-making of planning actors who most influence perceived transaction cost elements to support or not support metropolitan transportation planning collaboration. This research reveals that today’s most influencing transaction cost elements involve the re-establishment of supra-regional institutions and promoting regional development through private sector-coordinated participation. The research suggests that giving back authority at an acceptable level to supra-regional institutions would reduce the value of transaction costs. However, while practicing its greater authority to promote a stronger metropolitan transportation planning coordination, this supra-regional institution should focus on regional economic developments by involving the private sector in well-coordinated engagement.

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