Buy the Service programme needs local government support

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Investor Daily - Program Buy the Service butuh dukungan Pemda

3 January 2025

By Ichsan Amin

Jakarta, ID – The Government's initiative to implement urban transportation using the Buy the Service (BTS) scheme requires support from various parties, particularly financial backing from regional governments. 

Darmaningtyas, a transportation observer from the Institute for Transportation Studies (Instran), noted that provinces such as Bali and Yogyakarta, which need the BTS programme, should be capable of financing it.

"I believe Yogyakarta can support it using the Regional State Budget (APBD). In Bali, I’ve heard that Badung Regency is capable, being the most prosperous regency in Indonesia," Darmaningtyas told Investor Daily in Jakarta on Thursday (2/1/2025).

He emphasised that the BTS programme is necessary in every region, with the central government providing an initial stimulus due to the service's importance. 

"Does the region no longer receive subsidies from the central government? I think the budget shouldn't always come from the central government, particularly the Land Transportation Directorate General of the Transportation Ministry," he added.

The Transportation Ministry, through the Land Transportation Directorate General, announced that subsidies for the BTS programme in Bali and Yogyakarta would end in January 2025. Other regions, including Palembang, Medan, Surakarta, Makassar, Bandung, and Banjarmasin, will follow suit.

This follows the expiration of memorandum of understanding number HK.201/8/16/DRJD/2019 on Planning, Construction, and Operation of Urban Public Transportation in Denpasar and memorandum of understanding number HK.201/8/11/DRJD/2019 on Planning, Construction, and Operation of Urban Public Transportation in Yogyakarta.

Acting Land Transportation Director General Ahmad Yani stated that the initial agreements, covering the period from 2019 to the end of 2024, stipulated a five-year subsidy duration.

“Based on the mutual agreement between the Land Transportation Directorate General with the regional governments on the planning, construction, and operation of urban public transportation [in their regions], the period for the mutual agreement is only five years from 2019 to 2024,” Ahmad Yani stated.

Continuing for five years

Subsidies for the BTS programme will continue for five years, after which regional governments are expected to independently sustain the service. In many areas, governments are committed to maintaining the programme by providing maximum services to the public.

The Land Transportation Directorate General has engaged with Bali and Yogyakarta's regional governments to discuss the BTS programme's continuity and has sent official communications about plans for 2025 in Sarbagita and Yogyakarta.

According to the memorandums of understanding, Bali and Yogyakarta's regional governments are expected to maintain the service, demonstrating their commitment to urban mass transportation.

"We hope each regional government can optimise its budget to provide urban mass transportation and promote it to increase public awareness and usage," Ahmad Yani stated.

Ahmad Yani also mentioned discussions with Bali and Yogyakarta Provincial Governments to encourage them to take over the BTS programme, ensuring uninterrupted service. "We at the Land Transportation Directorate General hope both provinces can make a prompt decision to avoid public disappointment," he stated.

Since the service's inception until 2024, the Land Transportation Directorate General has provided subsidies for the BTS programme in 11 cities, including Denpasar, Medan, and Yogyakarta, covering 45 corridors.

Yani added that cities like Denpasar, Medan, and Palembang, where memorandums of understanding are expiring, have already taken over some corridors of the BTS programme. "Several regional governments have taken over the BTS programme. For instance, Surakarta has taken over three corridors, and Banjarmasin, Medan, and Bandung have taken over all corridors to be managed by their local governments," he added.

Half-hearted

Meanwhile, Djoko Setijowarno, a transportation observer from Unika Soegijapranata in Semarang, criticised the central government's lukewarm approach to advancing public transportation in Indonesia. He pointed out that, in developed countries, transportation subsidies are typically the responsibility of the national government.

"Public transportation needs subsidies. If the region is tasked with this, their capability must be questioned. I am sceptical that regions are willing to take over," he stated.

Djoko suggested that if regions or regencies wish to undertake the subsidies but lack APBD funds, the government might provide solutions through Special Allocation Funds (DAK). "Regarding DAK, it depends on the central government's willingness," he stated.

He warned that if regions cannot accommodate the subsidy, public transportation might be replaced by online transport services. 

"If this happens, we have failed to organise domestic transportation. The government cannot curb private vehicle growth and allows online transportation, which is essentially private transport, to thrive," he added.

Djoko also noted that regional governments do not recognise public transportation as a solution to congestion. "If public transport isn't seen as a solution, they are essentially allowing online services and private vehicle growth," he added.

The Government launched the BTS programme in 2020 to address the high demand for public transportation in cities, in line with set minimum service standards. 

According to Law Number 22 of 2009 on Road Traffic and Transportation, the Government is responsible for providing public transport. The BTS programme utilises buses in cities such as Medan, Surakarta, Denpasar, Yogyakarta, and Palembang, and expanded to Bandung, Surabaya, Makassar, Banjarmasin, and Banyumas in 2022.

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