Penulis : Rahmat Irawan (Pegawai Direktorat KND)

The government has decided to relocate its capital city from Jakarta to East Kalimantan. The whole development is estimated to cost Rp 460 trillion (US$32.8 billion), of which about 20 percent is expected to be financed by the proceeds from asset optimization, particularly from property surplus in Jakarta. Currently, the unaudited total value of the central government’s fixed assets located in Jakarta is Rp 1.4 quadrillion.

Leading practices in public asset management adopt a centralized approach, particularly for general purposes assets, such as office buildings. The centralized approach entails the existence of an agency that owns and manages government assets.

Consequently, the agency acts as property caretaker or manager, provides or arranges workspaces and charges rent to other government agencies according to their occupancy.

Some developed countries, such as the United States and Australia, have adopted this approach. Meanwhile, the United Kingdom is attempting to transfer all government properties to a government property agency that was established in 2017.

The centralized approach heavily focuses on shared usage and benefits technology. It dissipates artificial boundaries among agencies and eases control of assets. The number of assigned workspaces declines and so does the operating cost.

According to Olga Kaganova (2018), optimized usage and a downsized portfolio would reduce associated costs by at least 10 to 15 percent. Additionally, surplus assets can be an alternative source of revenue. As evidence, the UK government earns $2 billion in revenue and 300 million pounds ($390 million) worth of yearly savings from sales of more than 1,000 properties.

In 2006, a specialized agency under the Finance Ministry, the Directorate General of State Assets (DGSAM), was established. It shows the government’s commitment to improving long-neglected public asset management.

According to regulations, the DGSAM acts as an asset manager, while other government agencies become users. Ideally, this setting should embody the spirit of the centralized approach. Yet, several facts show us a different reality.

Property titles and asset-related budgets are still attached to other government agencies. Inevitably, principal-agency issues emerge. Given this situation, the government must overcome many hurdles on compliance issues. The Supreme Audit Agency (BPK) found many problems across 72 government agencies in 2017 related to untitled property, misuse and other issues.

Furthermore, only 82 percent of all central government properties were utilized in that year. Therefore, there is a long way to go before reaching the optimum level of asset management.

Centralized asset management is typically initiated by transferring asset ownership and most of the management to a managing agency. Along with that, the asset portfolio gets rationalized to achieve an effective size through asset consolidation. This is done by moving small government agencies from small buildings to an integrated office.

The UK government is employing this strategy to transform 600 offices into 13 centers (the so-called Government Hubs program) from 2005 to 2027. The Australian government launched the Tetris Operation to cut unproductive assets and to meet a density target of 14 square meters per occupied point.

In contrast, Indonesian government agencies are spread out in many properties. There were more than 200,000 central government office buildings in 2017, compared to the US federal government’s 16,000 properties.

Asset handover and workspace arrangement, as required by the centralized approach, would cause potential discomfort for the agency employees, leading to hesitancy to relocate to offices in the new capital.

But the relocation should be used as momentum to introduce a centralized management of government properties.

Many government properties in Jakarta are located on main thoroughfares or prime sites. Hence, they would be quite attractive to private companies either for rental or outright acquisition.

However, the office space market may suffer a glut if many government properties were suddenly made available for rent or sale and property prices could fall sharply. Moreover, several properties cannot be sold because of their historical values, while foreign investors or companies are subject to stringent restrictions in property ownership.

Hence, surplus assets and properties after the relocation of the central government seat from Jakarta could, instead of generating revenues for the government, be challenging as they could instead impose new burdens.

Countries that fail to market or optimize the utilization of their old properties could encounter financial strains. Nigeria, for example, had 60 unoccupied buildings in the former capital.

A centralized approach, a key milestone of asset management reform in many countries, encourages improvement and efficiency in asset management. However, it would challenge the status quo within Indonesian asset management as agencies must hand over their assets to the DGSAM or another appointed agency.

The capital city relocation should therefore be used as the moment to rearrange property management under a centralized management agency.

Employee of the Finance Ministry. The views expressed are his own.

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.

 Artikel ini juga sudah diterbitkan di Jakarta Post  pada Rabu, 5 Februari 2020