Across most of developing Asia, infrastructure prices in the regulated formal sector are suppressed. But dualism is common than often realised. Many infrastructure services are provided in largely unregulated informal sectors. Discussion about infrastructure policy in developing Asia needs to pay far more attention to what is going on the in unregulated informal sector than is currently the case.

As Andrew points out, the supply of public goods in infrastructure in the region is generally very unsatisfactory. There is an acute shortage of infrastructure. This can be measured in all sorts of ways. My own favourite measure is the supply of kwh per person per year: in most western counties, average annual consumption of electricity is around 10,000 kwh while in Indonesia the figure is around 450kwh.

The result of this extreme shortage of infrastructure goods is two-fold. First, thriving unregulated informal sectors often spring up. In Manila, huge amounts of water are delivered by hand on large trolleys across the city every day. Services in the unregulated informal sector are generally expensive and of lousy quality. But no matter! People are desperate to get access to even modest supplies of services so they are prepared to put up with these things.

Second, under intense political pressure, governments are sometimes prepared to take fairly desperate measures to increase the supply of infrastructure in the regulated formal sector. As Frank points out, the current “crash program” to supply around 10,000 MW of power is largely coal-based. Much of this is financed by soft credits from China. Faced with extreme power shortages, neither Indonesia nor China are all that interested in discussions about climate change. Indeed, there is already talk of the need for second crash program in Indonesia, involving another 10,000 MW, to begin in 2012 when the current program is finished. And it’s a fair bet that the second 10,000 MW won’t be powered by solar or wind!

As we were told in recent fieldwork for our AIGRP project (http://www.aigrp.anu.edu.au/research/project.php?pid=1016), the subsidies used to be for capital investment, now they are needed to cover operating costs. And there is great uncertainty about future pricing which hinders private investment by independent power producers.

Indonesia’s ‘crash program’ for power generation also creates a potentially huge liability in terms of carbon emissions and air pollution. The program essentially consists of quickly installing low-cost Chinese plants to burn very low-grade coal. It’s the option with the lowest up-front investment cost and that seems to be all that counts. More advanced coal plants would reduce operating costs and the environmental liability, renewable options like geothermal eliminate it.

And no doubt we could all come up with lists for different polities. Makes me wonder whether is anything we can say about some public-good type policies being more important than others and whether some systems of government do a worse job over time than others in providing them.

At one level, reasons for the foot-dragging (superficial reasons, anyway) are clear enough. Nobody with sufficient clout has stepped in to coordinate a policy response to the slowly-emerging crisis. Why? My own guess is that it’s an institutional problem. The top levels of Indonesian Government are not yet sufficiently well-organised to handle these sorts of problems very well. The Vice President, Jusuf Kalla, has been taking a well-publicised interest in the power situation, it’s true. But it is not clear that he has been senior enough to force the coordination that is needed.

At a deeper level, the reasons are more complex. One needs to consider the history, and the interplay of lobbies, that influence the issue. For at least the past ten years (much longer, really) there has been a tug-of-war over the issue of financing for infrastructure in Indonesia. The whole issue has been messy. On one hand, are those (call them the “financiers”) who have sceptical about the idea of providing public funding for infrastructure (including electric power). On the other hand, there are those (call them the “engineers”) who have been inclined to call the bluff of the “financiers” and have said that without money, there will be a crisis.

There have been many twists and turns in the tug-of-war between these two group. Tensions between “financiers” and “engineers” is common in infrastructure sectors the world over. Judith Tendler wrote a ripping yarn about precisely these issues in Latin America around 40 years ago (“Electric Power in Brazil”, 1968). When the lights are on, policy-makers in Jakarta might find it quite useful to refer to Tendler’s book. Amazon has copies.