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What’s Wrong with Semanggi Interchange?

During the commemoration of Independence Day, President Joko “Jokowi” Widodo inaugurated the Semanggi Interchange and joined the crowd in complimenting the city for its breakthrough achievement. But what lies behind that celebration, unfortunately, is abuse of the land use regulation.

The interchange was constructed by PT Mitra Panca Persada as part of Rp579 billion (US$43 million) in compensation for additional floor area ratio (KLB).

Jakarta Gubernatorial Decree No. 210/2016 allows property located in KLB bonus areas to acquire additional KLB in exchange for building public facilities. Additional KLB allows property owners to build taller buildings with a higher utility rate and value. In return, the city gets public facilities equaling the property value increase to be built or renovated.

While the regulation seems to offer a fair deal, it exploits KLB as a source of funding without considering the land-use implications.

The city designates KLB bonus areas without putting forward objectives and limitations. Devoid of both, the city aims for rapid funding for public facilities without managing the outcome.

KLB bonuses ultimately promote densification, which comes with costs and benefits that the city ignores when compensation is determined solely by the property value increase.

The city uses a formula that involves property tax (NJOP), location index and the amount of additional KLB itself, but excludes impact assessments in its quantification.

The deal for the Semanggi Interchange could possibly amount to Rp579 billion because there is no limit to increasing the KLB. Another deal with PT Sampoerna Land tops that record with nearly Rp730 billion worth of compensation.

The compensation, however, could have been undervalued when it is insufficient to compensate for the negative consequences. On the other hand, overvaluing compensation would fail to generate significant benefits by appealing to only those with deep pockets.

Another problem lies in allocating compensation amounts. This deal could have multiple impacts, yet the regulation allows the city to make decisions without rigorous process and public participation.

In building the interchange, the city argued that it would reduce traffic congestion. But the city lacks preliminary studies to support this claim and discounts the concerns of adjacent communities who are directly affected by the granting of additional KLB.

In the end, there is hardly any relevance between the consequences and the compensation.

Ultimately, the deal pardons property owners for future mistakes and burdens the city with future costs. Property owners receive additional KLB allowance as soon as they agree to pay compensation.

Property owners are freed from further responsibility once the compensation is handed over to the city, together with its risks.

The public is too uninformed to scrutinize this issue. According to a poll by Kompas last year, 61.6 percent are unaware of city zoning ordinances (RTRW, RDTR and Peta Zonasi) and 71.2 percent are unaware of the development plan in their respective neighborhood.

Some media outlets have added even more confusion by classifying the compensation as corporate social responsibility payments. The public was pushed further away from the fact when the incumbent governor and the President himself claimed that this exploitative practice was an innovative method.

Jakarta is indeed new to this practice, but the claim is misleading. It credits the city with being able to build facilities without using taxpayer money and to bypass the City Council. In fact, citizens are transferring another public good to pay for the interchange.

Permitting taller buildings means taking away part of the air space that, according to the Constitution, belongs to the public. The City Council desperately needs to regain credibility, but the city has opened another window to corruption through a system void of proper checks and balances.

In short, the existing practice is rooted in extractive economy. It employs KLB bonuses as a commodity and establishes an exclusive system to secure transactions. History tells us that an extractive economy is likely to have short-lived growth and a precarious outcome.

As Jakarta envisions sustainable development, the approach in employing KLB bonuses must shift from extractive to incentive. With an incentive approach, the city translates a specific development goal into requirements for land use and grants additional KLB to property owners who satisfy those requirements.

To achieve an optimum outcome, requirements and incentives are standardized through a rigorous process involving the public. Having a standard would help the city define a common goal, to make a trajectory in accomplishing that goal and to cap KLB bonuses in proportion with the expected outcome.

Hence, the city would be able to intensify development while anticipating negative consequences.

Additionally, when valuation and allocation are standardized, it minimizes quantification flaws and vested interests, which are found in the existing approach.

This approach, furthermore, proposes shared responsibility between the city and the private sector.

Requirement is set aside from private property and post-construction maintenance is mandatory for property owners.

In conclusion, an incentive approach would assure a more sustainable outcome by defining a common goal, better risk anticipation and cost sharing. With this approach, the city and the public could foster stronger collaboration.

A fine example of this approach is Mandatory Inclusionary Housing (MIH) in New York. The MIH requires new residential development in the inner city to set aside 20 percent of housing to be permanently affordable.

As an incentive, the city grants additional KLB for property owners to build 30 percent extra market-rate housing. Within the first year of implementation, New York authorized 4,700 permanently affordable housing units under the program.

With this approach, New York generated more than 500 public spaces in Manhattan — one of the most expensive and densest places in the world.

Given that the governor-elect and deputy governor-elect have pledged commitment to more transparent, participatory and accountable governance, a shift to the incentive approach in employing KLB bonuses should be a priority.

As published on The Jakarta Post by Muhammad Daud

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