• International Journal of Technology (IJTech)
  • Vol 12, No 3 (2021)

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

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

Title: Bandung Metropolitan Transportation Planning Collaboration and Perceived Transaction Cost Changes after 2 Decades of Decentralization
Miming Miharja, Johan Woltjer, Sheryta Arsallia, Azman Hafid Diab

Corresponding email:


Cite this article as:
Miharja, M., Woltjer, J., Arsallia, S., Diab, A.H., 2021. Bandung Metropolitan Transportation Planning Collaboration and Perceived Transaction Cost Changes after 2 Decades of Decentralization. International Journal of Technology. Volume 12(3), pp. 506-517

125
Downloads
Miming Miharja School of Architecture, Planning, and Policy Development, Institut Teknologi Bandung, Jl. Ganesha 10 Bandung 40132, Indonesia
Johan Woltjer Faculty of Spatial Sciences, University of Groningen, Landleven 1, 9747 AD Groningen, The Netherlands
Sheryta Arsallia School of Architecture, Planning, and Policy Development, Institut Teknologi Bandung, Jl. Ganesha 10 Bandung 40132, Indonesia
Azman Hafid Diab School of Architecture, Planning, and Policy Development - Institut Teknologi Bandung
Email to Corresponding Author

Abstract
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

Introduction

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 study has taken a transaction cost perspective to deepen our understanding of the interdependence of local governments for transport issues in metropolitan areas, where coordination requires a suitable institutional design by which roles, interests, and actions among them are well-coordinated. Taking Bandung Metropolitan (BM) as the case study, this study aims to understand the dynamics of the transaction cost elements under the decentralized governance system over the past 2 decades. While contributing to the literature in this field of interest, the findings would also be the bases for an institutional redesign for better interlocal government transportation planning collaboration in BM.

Conclusion

       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.

References

Alexander, E.R., 1992. A Transaction Cost Theory of Planning. Journal of The American Planning Association, Volume 58(2), pp. 190–200

Alexander, E.R., 2001. A Transaction-Cost Theory of Land Use Planning and Development Control: Towards the Institutional Analysis of Public Planning. The Town Planning Review, Volume 72(1), pp. 4575

Boschet, C., Rambonilaza, T., 2018. Collaborative Environmental Governance and Transaction Costs in Partnerships: Evidence from a Social Network Approach to Water Management in France. Journal of Environmental Planning and Management, Volume 61(1), pp. 105123

Brown, S.R., 1996. Q Methodology and Qualitative Research. Qualitative Health Research, Volume (4), pp. 561567

Buckley, P.J., Chapman, M., 1997. The Perception and Measurement of Transaction Costs. Cambridge Journal of Economics, Volume 21(2), pp. 127–145

Budisiswanto, N., Miharja, M., Kombaitan, B., Pradono, 2020. Institutional Coordination of the Multimodal Logistic Transportation Systems at Tanjung Priok Port, Indonesia. International Journal on Advanced Science Engineering Information Technology, Volume 10(6), pp. 2441–2450

Buitelaar, E., 2007. The Cost of Land Use Decisions: Applying Transaction Cost Economics to Planning & Development. Oxford-UK: Blackwell Publishing - RICS Research

Canitez, F., 2019. Urban Public Transport Systems from New Institutional Economics Perspective: A Literature Review. Transport Reviews, Volume 39(4), pp. 511530

Canonico, P., De Nito, E., Mangia, G., Mercurio, L., Iacono, M.P., 2013. Regulation Issues in the Italian Local Transport System: Aligning Transactions and Governance Structures. Journal of Management & Governance, Volume 17(4), pp. 939961

Feiock, R.C., 2005. Institutional Collective Action and Local Governance. Paper presented at The Innovative Governance Salon, University of Southern California, pp. 1–24

Firman, T., 2009. Decentralization Reform and Local-Government Proliferation in Indonesia: Towards A Fragmentation of Regional Development. Review of Urban & Regional Development Studies, Volume 21(2-3), pp. 143–157

Hawkins, C.V., Hu, Q., Feiock, R.C., 2016. Self-Organizing Governance of Local Economic Development: Informal Policy Networks and Regional Institutions. Journal of Urban Affairs, Volume 38(5), pp. 643–660

Hijdra, A., Woltjer, J., Arts, J., 2014. Value Creation in Capital Waterway Projects: Application of a Transaction Cost and Transaction Benefit Framework for the Miami River and the New Orleans Inner Harbour Navigation Canal. Land Use Policy, Volume 38, pp. 91–103

Hirschhorn, F., Veeneman W., van de Velde, D., 2019. Organisation and Performance of Public Transport: A Systematic Cross-case Comparison of Metropolitan Areas in Europe, Australia, and Canada. Transportation Research Part A: Policy and Practice, Volume 124, pp. 419–432

Kent, R., 1998. Marketing Research: Measurement, Methods, and Application. London: International Thomson Business Press

Kozonogova, E., Dubrovskaya, J., Dubolazova, Y., 2020. Assessment of the Contribution of Inter-Territorial Interaction in the Development of the National Economy. International Journal of Technology, Volume 11(6), pp. 11611170

Lowery, D., 2000. A Transaction Costs Model of Metropolitan Governance: Allocation vs. Redistribution in Urban America. Journal of Public Administration Research and Theory, Volume 10(1), pp. 49–78

Miharja, M., Woltjer, J., 2010. Inter-local Government Collaboration and Perceived Transaction Costs in Indonesian Metropolitan Transport Planning. International Development Planning Review, Volume 32(2), pp. 167–189

Mizutani, F., Smith, A., Nash, C., Uranishi, S., 2015. Comparing the Costs of Vertical Separation, Integration, and Intermediate Organisational Structures in European and East Asian Railways. Journal of Transport Economics and Policy (JTEP), Volume 49(3), pp. 496515

Naruetharadhol, P., Srisathan, W.A., Suganya, M., Jantasombut, J., Prommeta, S., Ketkaew, C., 2020. Organizational Commitment and Engagement Practices from Applying Green Innovation to Organizational Structure: A Case of Thailand Heavy Industry. International Journal of Technology, Volume 12(1), pp. 22–32

North, D.C., 1990. Institutions, Institutional Change and Performance. Cambridge USA: Cambridge University Press

Seymour, R., Turner, S., 2002. Otonomi Daerah: Indonesia’s Decentralisation Experiment. New Zealand Journal of Asian Studies, Volume 4(2), pp. 33–51

Strauss, A., Corbin, J., 1998. Basics of Qualitative Research: Techniques and Procedures for Developing Grounded Theory, (2nd ed.). Thousand Oaks. CA: Sage Publication

Thompson, G.F., 2003. Between Market & Hierarchies: The Logic and Limits of Network Forms of Organization. New York: Oxford University Press

Ulin, P.R., Robinson, E.T., Tolley, E.E., McNeill, E.T., 2002. Qualitative Methods. A Guide for Applied Research in Sexual and Reproductive Health. North Carolina: Family Health International, USA. (Chapter 6 & 8)

Wegelin, P., von Arx, W., 2016. The Impact of Alternative Governance Forms of Regional Public Rail Transport on Transaction Costs. Case Evidence from Germany and Switzerland. Research in Transportation Economics, Volume 59, pp. 133142

Weiss, R.S., 1994. Learning from Stranger: The Art and Method of Qualitative Interviewing. New York: Free Press

Williamson, O.E., 1981. The Economics of Organization: The Transaction Cost Approach. American Journal of Sociology, Volume 87(3), pp. 548–577

Williamson, O.E., 1985. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press

Zhogova, E., Zaborovskaia, O., Nadezhina, O.S., 2020. An Analysis of the Indicators of Regional Economy Spatial Development in the Leningrad Region of Russia. International Journal of Technology, Volume 11(8), pp. 15091518