How the Indonesia Gov’t spending could be further optimized to fight COVID-19 and future Pandemics to come, while helping the economy
Indonesia has been impacted by COVID-19 both economically and physically, although the Gov’t has certainly done things to tackle this Pandemic, the author think more actions should actually be done in addition to the partial lockdown and social security aid to both alleviating the effect of the Pandemic while helping the economy.
Disclaimer: A lot of things written here are have been curated based on facts and news, but some of them are from the author’s own opinion. Even though cautious checkings has been done by the author, but since nobody is perfect, there is a slight possibility of misinformation. Opinions expressed within the content are solely the author’s and do not reflect the opinions and beliefs of the website or its affiliates.
This is a US$ 11 Billion dream, but I do hope one day this dream could come true since the Gov’t could easily realize it with just a finger snap. I hope it doesn’t stay as a dream forever. This is merely a first step to step ahead into transforming Indonesia to a great country.
COVID-19 spreads probably all around the world, yet not every country reacted the same way. Finally after some early months of underestimating COVID in Feb-March 2020 (same as what also happened in the US), Our Gov’t didn’t do that bad when dealing with public health and the economy as a whole, but as always since nothing is ever perfect there are better actions to be done in conjuction with current Gov’t programs.
In Short, the partial lockdown currently held by the Gov’t should also be done in conjunction with rapidly building critical infrastructure (Healthcare, BPJS/National Health Insurance, Public Transportation, and Education) to ensure that future pandemics would not hurt so bad. We do have/can create the budget for that by doing some creative things to be described below.
Lockdowns are probably more effective in early wave of the pandemic as the vaccine hasn’t been found yet, after that Gov’t should concentrate full-force on vaccinations while still improving quality of our critical abovementioned infrastructures.
Instead of a full lockdown, PSBB (Social Restriction Order) was implemented in April 2020 by partially limiting crowds in Shopping Malls and other gathering places to somehow ‘flatten the curve’ to protect both the people & the hospitals from collapsing due to overcapacity. The illustration below was widely used to illustrate the term ‘flatten the curve.’ This decision wasn’t so bad since even lockdowns in India wasn’t proven so fruitful by that time. However, Our Gov’t could actually perform better should some extra actions were conducted since the beginning of this Pandemic.
The above figure would probably only work if a nation qualify all below items.
- Public Healthcare system capacity is adequate & conforming to International Standards before the Pandemic began.
- National Healthcare Insurance system is awesome, digitalized & widely adopted before the Pandemic began.
- 90% of citizens are loving public healthcare system before the Pandemic began.
- Public Transport system is so good where everywhere in the Cities & Suburbs are easily connected, there are high number of trips per day and very low waiting time interval for the next train, to reduce crowd interval, before the Pandemic began.
- Excellent teachers & education system before the Pandemic began.
- Excellent future-proof people inside central, regional, and local Gov’t body creating future-proof programs
- Gov’t is committed to Continuous Healthcare, Education, Transportation Improvements in a yearly/quarterly basis before the Pandemic began.
- And so on, including other sectors as well.
If our nation haven’t actually fulfilled most of the abovementioned items, probably doing a PSBB/partial lockdown is not so bad, but in addition we have to also do something else. Other countries could get away with only doing lockdown or something like that without doing too much while waiting for the vaccine, but for such nations that lacks critical healthcare, transportation, and education infrastructure, we can’t just merely copy other nations’ programs blindly.
Taking a look at China, in the early days of the Pandemic, not only did they commenced Full Lockdown in Wuhan but they also constructed a hospital in Wuhan in only 6 days (Coronavirus: How can China build a hospital so quickly? — BBC News) which has the capacity of 1000 Beds (Equivalent to RSCM/Well-known Hospital in Jakarta of 1001 beds). 5 days later, a 1500-bed hospital was opened as well (150% capacity of RSCM). Of course, 6 days might not always be our target since it will require precast/steel structures & lots of prefab units, which if it’s done in Indonesia shall lead to a significant increase in Cost/m2, not mentioning also that the prefab & precast industry in Indonesia hasn’t matured yet during the time of writing of this article. But the main important thing is that the Chinese Gov’t took pre-emptive measures of not only doing Lockdown but also constructing a few hospitals with a capacity of 2500 beds, fully allocated to COVID. People might say that “Well China is a country of 1 Billion people, of course they should provide for more” but the truth is, Wuhan is a city of only 11 million people, much less than Greater Jakarta/Jabodetabek of at least double or triple of that, yet our hospital bed capacity allocated for COVID is less than that. Talking about Jakarta City alone, the population is 10.5 million people, which is almost the same as Wuhan, but has much less number of beds allocated for COVID-19, take a look below for real time number of allocated beds.
Taking a glance above, the total number of available bed at the time of writing this article (25-Jul-21) was 1132 beds while the capacity was at 4426 beds, while Wuhan’s 2 new hospitals’ capacities stands at 2500 beds and the total capacity of Wuhan’s hospital beds allocated for COVID was at about 19000 beds and was deemed not enough (Coronavirus: Does Wuhan have enough hospital beds? — CGTN), meaning that Wuhan had a capacity of 5x number of hospital beds allocated for COVID compared to Jakarta City with the exact same population of about 11 million people. Of course, as we know in a national scale we have only allocated 28% of beds for COVID by early July 2021 (Pemerintah Targetkan Konversi Tempat Tidur Rumah Sakit 40 Persen (maritim.go.id)), and the % was demanded to be further increased to 40% (1.43x of current capacity), but as we know that we were down by 5x compared to Wuhan, having a 1.43x of increase will never be enough and is probably not the best way to alleviate the effects of this Pandemic. Even so, Wuhan was dealing with the first variant of the virus while we’re dealing with other variants which has higher reproduction rate, hence we shouldn’t only look at the case of Wuhan alone.
The below figure shows the number of hospital beds per 1000 population in Indonesia & neighboring countries, countries hit badly from Pandemic by early 2020 (US & Italy), and even faraway countries such as South Africa. It can be seen that among SEA (South East Asia Countries), Indonesia still needs to do a lot of catch up, even to Vietnam.
Aside of that, the distribution people going into healthcare facilities needs to be well-distributed. It’s also not a secret anymore that the majority of the people do not love the customer experience journey of going into public healthcare facilities, and that the National Health Insurance/BPJS wasn’t really so easy to use and efficient yet. This BPJS needs to be addressed even more seriously since Indonesia is a developing country, majority of the population shall be using BPJS and to reduce time, cost, and increase efficiency, the whole process needs to be fully paperless and digital, that the patient goes everywhere without needing to bring any piece of paper since everything is already in their smartphone. The below picture illustrates the typical queues for Hospitals, also showing that the ratio of hospitals per capita in Indonesia is really not enough. People come to the hospitals at 6:00 AM in the morning and got the queue number of 300 (Antrean Masih Jadi Problem di Tempat Pelayanan Kesehatan Jakarta — Tribunnews.com). This should be easily addressed with digitalized BPJS/Hospital App flow, where people could just schedule their visit via BPJS App, go to clinics/hospitals exactly at the scheduled time. For example, we may give the doctor about 30 mins/patient for maximum time (depending on the specialty) and estimate the scheduled time for the following patient automatically through the App. If there’s any change of time (faster time/delay time) due to doctor’s unexpected duration of checks, the App will send a notification in real time and update the patient instantly. If the patient isn’t there within 1 minute of calling, the next patient is to take their place and the patient is to reschedule their appointment, however if the patient’s not there due to ‘faster time’ or ‘delay time’ issues, they may choose to either visit after the current patient session or to reschedule the appointment. The ratio of doctor-to-population should also be improved to reduce load of time slot of the doctor.
If BPJS goes fully digital, queuing time for BPJS should also be even less than walk-in customers since every booking is digitalized along with synchronizing with medical reports, ID, etc. But however, that BPJS thing shall be another topic for another day. Taiwan’s NHI (National Health Insurance) is a good example of how BPJS should be, although that it was adopted in 1995 and now is 2021, we should be able to create something better along with the efficient fully digitalized & ‘queue-free’ experience as well. I wouldn’t probably talk too much on BPJS & the digitalization plan here in this article as I would probably create a separate article for BPJS.
Solution: Create More Digitalized Future-Proof Hospitals
The problem of lockdowns are that while they’re protecting the citizens & healthcare system, but they’re also hurting the economy, reducing the opportunities for small shops to operate and gain income in this pandemic. This problem of both unemployment & loss of income could easily be compensated by the below explanation.
The literal solution mentioned above will not only increase Hospital Beds/Capita, reduce BOR (Bed Occupancy Rate), but shall also really kickstart the economy since Property (including Construction) or the AEC sector (Architecture, Engineering, and Construction) contributes to 10% of Indonesia’s GDP, employs 77,000 contractors & employs 7 million workforces in 2016 (Construction Sector in Indonesia | GBG (gbgindonesia.com)), in which I believe the numbers should be more of that by now. Below picture shows a good example of how a typical construction affects other sectors. This effect will actually extend beyond the below picture to smaller SMEs servicing the contractor & subcontractor with goods & services. Even the nearby ‘warung’ (small shops), street snack sellers, cafe, ‘Kost’ (Rental Flats/Rooms) and other sort of small businesses would really benefit from the extra traffic & population caused by the construction project, that would at least be sustained along the lifetime of the project for the next 2-3 years or so. As we know, SMEs (small & micro) are the current pillars of our economy that contributes for 43% (in terms of value added) of Indonesian GDP and employs 93% of Indonesia’s workforces (wcms_695134.pdf (ilo.org)) and is expected to grow more by 2030 (McKinsey: Micro, Small & Medium-Sized Enterprises Can Contribute $140B to Indonesia’s GDP by 2030 | Indonesia Investments (indonesia-investments.com)). By Blessing our local SMEs, we’re basically blessing our own nation.
Our Gov’t knows about this impact of AEC sector (Architecture, Engineering, and Construction) and that’s why their promoting a zero PPN (Value Added Tax) program of buying houses right now. The difference are only the source of funds. The Zero PPN program shall ignite real estate transactions with funds coming from middle class to upper middle class people, while constructing a Hospital would traditionally need funds from the Gov’t itself. However, constructing hospitals shall benefit the nation much more than just constructing houses.
Constructing more Hospitals shall benefit the economy more than constructing just Apartments, Malls, or any other buildings since the SOW (Schedule of Works) & Building trades involved were much more diverse. Of Course, a Mixed-Use complex that includes a Hospital could be more beneficial, but at least a single hospital tower could benefit the economy more than just building houses, malls, and standalone tower apartments. Instead of heavy intensive use of Concrete, Steel, Architectural Finishes, and some MEP equipments, Hospital Constructions will involve other specialized trades such as ‘Nurse Call’ works, ‘Medical Gas’ works, more complex fire fighting systems (FM200, ANSUL, etc), Medical Furnitures, Medical Equipments, and many more. The requirement for skilled workers would be much higher than regular buildings as well.
Constructing more Hospitals will also increase demand for more skilled architects & engineers since they are more complex to design & to build. This shall also solve the stagnant wage problem that a lot of countries are currently facing, and by increasing demands and expertise requirements for architects & engineers generally the bargaining power for such skilled workforce could go higher as well. Constructing 1 hospital building of 20,000 sqm will provide much more positive impact rather than constructing 200 houses @ 100 sqm as the complexity and manpower quality requirements are far different. Constructing more complex constructions shall also increase our nation’s competitiveness level as a whole as we’re setting a higher benchmark of requirements of architects & engineers. Constructing houses would probably mostly provide the opportunities of employment for junior-middle level architects & engineers, but constructing hospitals would require hiring middle-senior level architects & engineers who knows not only how to design buildings that look ‘beautiful’ but also would comply to international hospital standards, fire code, possibly more rigorous earthquake performance requirements (such as base isolation and all that), facility management & ease of maintenance, possibly green building if required, and other aspects, including deeper Value Engineering (VE: The art of reducing construction cost while maintaining or even improving quality of buildings) expertise to make sure we could obtain the most cost-efficient Hospital Development cost possible.
The standard of construction expertise requirement is higher and shall require the use of more experienced & reputable contractors who shall employ more skilled project, construction, safety, QAQC managers and skilled workers at a higher daily rate to carry the construction in comparison to just constructing houses which got probably easily get away with employing less skilled workers at a cheaper daily rate. The more skilled they get, the higher the demand, the daily rate would also increase, and more people could be alleviated from the Poverty Line, this shall provide a direct impact to our nation as a whole.
Some people will think that because of digitalization, some industries like banking and the others wouldn’t need to open so many physical branches since they could be operated digitally. This is true for the case of those industries. However, since the Healthcare industry would need so many medical equipments, testing, this and that, it is not easily replaced with digital healthcare. Some parts of the healthcare system such as smaller clinics, consultation for low-level sicknesses to doctors, etc could be performed virtually while others might not be. And the reason why we visit a hospital instead of a clinic should be because we know that the clinic probably couldn’t really be much equipped with what the doctors need to check or even operate on us. Therefore, the need for a physical hospital shall never be questioned.
Practical Suggestion: Build 1 Model Public Digitalized 12F–20F Hospital fully integrated with expected flawless BPJS customer journey in Jakarta.
Design it under 1 year along with the Digitalized BPJS revamp policy as well. Since it is designed from scratch, this is the moment where exclusive BPJS supporting features could be fully implemented and iterated inside of the building design itself, such as:
- No cashier space in building design. Cashier-less for BPJS & other insurances. Cashless payments for private walk-in visitors, all within the newly built Digitalized Hospital App. People could still pay in cash if they want, in the older public hospitals, not in the newer & more efficient hospitals. Need to maximize efficiency to get costs down so BPJS could easily pay for it.
- No Need for Admission Space as All Personal Information are available inside the Hospital & BPJS App. All Paperless and seamless to eliminate all possible errors in data entry. Nurses could be automatically assigned to a patient and has the necessary information required in the Nurse App. Any checking results (blood pressure check, etc) can be inputted by the nurses directly in the Nurse App as well.
- No customer service space in building design. All FAQ (Frequently Asked Questions), Knowledge Center, and all questions to be answered in App.
- No Medical Record room, or as minimum as possible. All Medical Records shall be digitalized and stored inside Hospital App and integrated with BPJS App.
- No Server Racking Space in building design, or as minimum as possible, to outsource all data storage requirements to Commercial Data Centers such as AWS or other providers.
- No need for too much waiting room space in every Ward/Area, since Queue are digitalized & integrated with Hospital & BPJS App. People already know which queue it is and basically knows where and when to go to the nurse/doctor. Spaces could be rented to coffee shops instead to get extra revenue that can further decrease cost of healthcare in total.
- No laundry & sewing rooms since they could be outsourced. If needed, the Gov’t could also create their own outsourced medical laundry service and centralize them in 1 hub per city or something.
- Due to a lot of more efficient space available, the first few floors could be utillized as retail space as extra revenue for Hospital, to keep cost down for BPJS.
- This new building shall adopt to International Standards of Green Building Practices (e.g. LEED, etc) to attract Green Funds, as well as to reduce operational costs which will translate to higher EBITDA.
- Gov’t service centers (Immigration, Regional Officials/RT-RW, etc) & offices could also be provided at 2nd or 3rd floor while increasing traffic for Retail spaces, ensuring rent and again to keep costs low for BPJS customers.
- And many more, including future-proofing our hospitals to ensure that the investment won’t be obsolete/not relevant after just probably 10–20 years.
After the building is built, operate it for 1 year, while looking for creative ways to fund another 400 public hospitals @ 1000 beds in the long run just to achieve the same hospital bed/population as our fellow neighbor Vietnam (2.6 hospital beds/1000 people). The design workflow could easily be replicated and placed in various places in Indonesia. The layout, facade, and other features might not be 100% replicated since people could get bored looking at identical buildings anyway, and could conform to local wisdom for a more creative approach. The locations of the proposed digitalized hospitals in Greater Jakarta could be located within each LRT City Complex Development, a TOD (Transit Oriented Development) scattered throughout Greater Jakarta with direct access to the LRT and increase the value proposition of LRT City Developments itself.
This 400 new public hospitals need to be constructed within 5–7 years where by the first 3 years, initial new 50 public hospitals should be ready to be operated, in the 5th year 150 hospitals, and in the 7th year 200 hospitals. Assuming a footprint of 1,500–2,000 sqm/floor, a total of 30,000–40,000 sqm of GFA (Gross Floor Area) shall be needed. Let’s assume each hospitals shall have 35k sqm on average. The new 400 public hospitals shall require at least 14 million sqm of constructed GFA. Although the author was previously involved in the developments of a few other mixed-used projects with a hospital, a publicly available data shall be used as cost benchmark. A publicly available data for Hospitals cost in Indonesia is currently not present, but a 2020 cost data from ARCADIS informed that the cost of hospital construction in Malaysia is starting from USD 840 ~ 1,160/sqm, as shown in table below. As we know, quite a lot of things in Indonesia could be cheaper than Malaysia hence ideally construction costs in Indonesia should be cheaper or at least slightly cheaper than Malaysia. For the sake of simplicity, we will just assume that the baseline construction cost target is USD 800/m2, which is slightly similar to the bottom cost/m2 of Malaysia even though in reality it would be cheaper. Based on the author’s experience, usually the cost data shown on these reports is a bit more than actual incurred cost of construction due to some buffers, and the author thinks that even USD 800 is a bit more than enough for construction cost/sqm for efficiently constructed hospitals in Indonesia or at least Jakarta area. The extra buffer would be used for some small additional features of green building, future-proofing, and all that was considered, assuming our Gov’t might not be able to get the best design at the first iteration, would probably had a lot of ‘overdesigns’.
However, as the design is more and more iterated, a lot of standardization and more efficiency, and our Gov’t finally has more experience doing the thing, the cost/m2 is expected to go down much more below that. Please note that the abovementioned cost only covers construction cost, as fitting out costs shall be borne by the Hospital operator. The schedule of only 12–20F would not exceed 6 months for Design & 15~18 months for Construction. It doesn’t have to be 12–20F, you might maximize the FAR (Floor Area Ratio) or KKOP (Building Height Limit). Land cost is not included in this calculation as it assumes that it will use gov’t owned land, but it could be easily calculated later on.
To ensure that our investment shall still be safe & sound within perhaps 50-years building lifetime, and to ensure the performance level of such buildings during severe earthquake, as it needs to be designed with Risk Category III as per ASCE 7–16 (American Society of Civil Engineers) requirements, Base Isolations could be considered to ensure that the Hospital could still be operational and take care of patients even after 2500-years Earthquake as prescribed in Building Code. Base Isolations are structural elements to isolate the movement of a building in the event of an earthquake, usually is a set of rubber materials to help the structure move independently during earthquake, resulting in very minimum damage after the earthquake and could be easily designed to have the performance level of “Immediate Occupancy” after the earthquake. This system has been adopted in multiple hospitals, and if I’m not mistaken it was even mandatory to be used in some countries for important buildings, and was recently used in the Apple Headquarters. This could seem like an additional cost but the investment will pay for itself after a 2500-years Earthquake hits the building. A picture of base isolation placed in a hospital in India could be seen in the below picture. This should reduce the insurance cost of the building itself significantly and shall protect the investment over a longer period of time, possibly even more than 50 years. This shall raise the requirement level of appointed Structural Engineers doing the job, where we can set the bar higher and eventually increase the demand & eventually salaries of more expert engineers in the nation. Instead of filling this nation with engineers capable of doing low-rise buildings let’s fill this nation with engineers capable of more advanced Seismic Design & Dynamic Nonlinear Analyses. Although the US$800/m2 might have to be seen again to take account for extra cost of base isolation, but the final figure shouldn’t be that far, also with value engineering.
Based on the abovementioned phasings, we shall need the following funds along these milestones:
- 1st Year (Digitalization of BPJS & Commencement of 1 model hospital): US$50m
- 2nd Year (Commencing 50 hospitals): US$1.4B
- 3rd Year (Commencing 150 hospitals): US$4.2B
- 4th Year & 5th Year (Commencing 100 hospitals each year): US$2.8B for each year
Note:
- Construction of Hospitals should ideally be followed by increased number of smaller clinics as well. For example, creating 400 hospitals would need to be accompanied by creating 1000 modern & future-proof clinics as well. Since BPJS starts from clinics. These Digitalized Clinics should also be modern & future-proof, with no queue whatsoever and easily accessible through the App.
- Design Process should go along with market & financial researches as well.
- 400 Hospitals assumes that they’re all 12–20F of hospitals, while actually in some places you might not need 12–20F since you may have abundance of land in regional places. However, what we’re sticking with for now is not the number of floors nor the number of hospitals but the GFA in m2, which shall translate to the Total Development Cost (TDC). Please also note that building low-rise hospitals (under 10 floors) doesn’t always translate to less TDC/m2 nor higher ROI (Return on Investment), hence a proper study needs to be done to achieve maximum efficiency.
Problem #1: Manpower
In short, we would have problems of manpower within:
- The Gov’t Body: Ministry of Public Works, Ministry of Health, and Ministry of Finance
- Gov’t-owned Companies (BUMN) for operating the Hospital
- Medical Professionals: Doctors, Nurses, etc.
- AEC Professionals: Top Level Senior Architects, Masterplanners, Urban Planners, Civil & Structural Engineers, MEP Engineers, Infrastructure Engineers, etc.
As we all know, we‘ve been having shortages of top talents in Indonesia, and most of them are actually concentrated in Jakarta.
To create future-proof, self-funded, fully digitalized, cost-efficient, and very profitable hospitals yet charges very low fee, of the future, we need to employ the leaders of tomorrow. We need to have hundreds or thousands of agile-minded people in our Gov’t, and pay them very handsomely. Only hire the top talents so they would hire other top talents as well. Both Talent quality & compensation level should never be compromised. Moderate-High skill talents might hire other Moderate-High talents, or might also hire a mediocre talent, to make himself look good, and a mediocre talent could probably hire another low level talent, also to make himself look good. In a lot of industries, employee cost is only a few % of the total operational cost and should not be compromised, a mere small millions of savings in talent cost would cause billions of company loss due to poor hiring, while great hiring, even though it costs millions more, but will result in billions of savings/extra revenue. The same problem & solution applies in the State-owned companies (BUMN). Those BUMNs could easily hijack top talents of business-minded hospital operational experts from all over the world to ensure they’re getting the best out of their hires.
As shown in the above figure, the number of doctors per population in Indonesia are only half of Vietnam & South Africa, a-fifth of Singapore, and a-third of Malaysia. Our number of Nurses per population are only a-third of Singapore and close to two-third of Malaysia. Constructing more hospitals & clinics mean that we have to get more medical professionals going in as well. This could be done by increasing paygrades for medical professionals such as nurses to attract younger talents to get into the workforce. Automation & Digitalization needs to play parts as well since we can’t always have more nurses if the workflow isn’t efficient yet, meaning that less-important administrative works could be easily done by AI and necessary paperworks are extracted by integrating BPJS & Hospital App systems to ensure that Nurses would only need to do their core expertise.
In the US, for example, the take-home-pay of a Registered Nurse could easily exceed other professions, even junior doctors. You’re guessing then, “If the wages of nurses increase, then so does the hospital price!” Indeed, this is what would occur, and the solution for this shall be answered in Strategy #5 below.
The next solution is to provide informal training programs for non-medical-graduates/undereducated people to pave their way to help the medical sector, probably to become nurses or something like that. They might need more time to learn and finish the course, and this could be collaborated with President Jokowi’s Program of “Kartu Prakerja” (Pre-employment card) where he’s equipping an army of undereducated people with necessary skills to enter the workforce. I’m not sure whether or not this is possible, but hey this is just an idea.
There is also a very huge shortage in AEC mid-senior professionals nowadays and this could be easily solved by just significantly increase wages for them, and to attract newer generations into the AEC professional workforce as well. This relates to, and shall address the Problem #3 highlighted below. This is a win-win solution. I understand this problem of top talent shortage since I’ve personally struggled hiring both top inhouse & outsourced talents since their supply is extremely limited, but I believe with better budgets, proper training system, and improved wages, better bonuses, hopefully the issue could be solved. Unlike the above problem, this couldn’t be solved with “Kartu Prakerja”, at least not for Engineers as we really need to fix the Education system since Engineers require a degree in their respective field to ensure we’re getting the best engineers out there. Probably for BIM Drafters (Building Information Modelling), we may use “Kartu Prakerja” for that, to equip Vocational High School/Senior High School graduates with BIM knowledge and flood the industry with BIM-ready Drafters capable of doing more and has more earning power which in the end blesses their families in return. To fill the top level architects & engineers gap, if needed then we’ll need to get top talents from all around the world to do the project, while employing local engineers as well. That way, by more intense international collaborations, local architects & engineers could also learn things as well which could benefit the society by increasing level of knowledge of our architects & engineers. I myself learn quite a handful of new things from international collaborations with overseas architects & engineers as well, in fact we learn from each other and that’s what makes us stronger. The key, is again, to only hire top talents, with no compromise on quality. Top talents will hire other top talents while medium-high talents that aren’t as good as top talents could possibly hire mediocre talents just to make them look good in front of the management, and mediocre talents would probably hire low level talents.
Problem #2: Complexity of Construction & Hospital Permits
It has been a common secret that permit related things in Indonesia are very complex and not transparent. However, it is appreciated that by 2020, when Covid-19 first hit Indonesia, there is a major simplification of permits in Indonesia regarding Hospital permits to ease the construction & investment of hospitals (Lewat UU Cipta Kerja, Izin Membangun Rumah Sakit Dipermudah untuk Gaet Investor | merdeka.com).
It is also appreciated that a lot of paperworks could now be done under 1 roof (PTSP/Centralized Department of Permits in Jakarta), and is accessible via a website of PTSP DKI (jakarta.go.id). However, it would be very much appreciated if it could be even more simplified, transparent, and digitalized. Taking a look at the PTSP website, some forms still need to be downloaded, filled, signed, and uploaded. This will involve people manually checking this and that, and since we’ll need the process to be very efficient, minimum human interaction should ideally be implemented. Such paper/PDF forms should be entirely replaced by online forms where people could just fill in their KTP (National ID) or Company Identity and fill the forms easier. Any requested upload of documents could be simply uploaded through an upload button.
Basically, it is very much appreciated if all permits & paperworks could be digitally conducted with very very minimum human interfacing, reducing risk of unwanted malicious practices of civil servants or the permit requestor as well, although I believe it shouldn’t happen anymore in today’s world. Leverage the power of Computers for most administrative paperworks & also the power of AI for simple-medium level judgements. Let the humans handle the higher level problems and do their work efficiently.
Imagine a world where to get a building permit, the building owner/representative could just go to a certain website, fill some forms, upload some documentations in PDF only (no need for hardcopy), and receive comments that their documentations are not yet complete this and that, all without having to go to any Gov’t office. This is also good for the Gov’t since they don’t need to store tons and tons of physical documents. If not, once somebody needs to find something, they’ll need to go to a certain storage room & find a certain documents that isn’t readable anymore. Also, in the event of fire or any other unwanted events, the files are at risk as well. After the submissions are well reviewed, the TABG (Building Authority Review) process could go on either physically or virtually and take as little time as possible, as long as no building code is being violated. All necessary files are to be extracted from the permit submission website, any revisions are to be uploaded again to the same platform. The Building Authority Review officials would be happy since they won’t have too many documents lying on their desks, nor having to physically look for a certain physical hardcopy documents when checking something out. The process would then go out smoothly, as the required approvals from officials are done digitally through either the click of a button or through more secure digital signatures. This way, the Building Owner is happy, the Building Authority Review is happy, and the Gov’t is happy. Everybody is happy due to more efficient & paperless administration, the environment is also happy to reduce paper use & less mileage traveled hence less green house gasses are produced.
Problem #3: Reducing Construction Cost through Value Engineering
As mentioned above, Value Engineering / VE is the art of reducing construction cost while achieving same or even better quality of building. The answer to this problem is actually one of the easiest in all problems highlighted in this article. The solution to that is just simply to employ better architects & engineers who have been proven through a certain track record. In a US$ 11 B project, the % of manpower cost to this project is very very negligible. Employing better architects & engineers, or extremely even saying, doubling or tripling the salaries of them even, might only cost you 1–2% more in your softcost (Engineering Consultancy Cost) and much less than 1% due to your inhouse manpower cost increase, but shall be able to save you at least 10%-20% of your construction cost, and that results to US$1–2 B in cost saving only by recruiting top talents. The key is just making sure that you’re getting the top people that’s all, and to pay them handsomely, this shall attract more manpower going into the workforce as well, solving the qualified manpower shortage issue. The above figures are not mere imaginations since I’ve personally confirmed these cost savings just simply by hiring top talents. Really as easy as that. The problem is just that top talents aren’t that easy to find, and that’s another problem but was addressed in Problem #1.
Problem#4: Scarcity of Land
The Gov’t needs to secure & buy back some of the lands prior to construction and ensure that whoever owns it are fairly compensated. This needs to be backed by the ‘Agrarian Reformation’ that was initiated by the Gov’t, ensuring a digitalized & centralized Land Ownership Information System could happen not only in Jakarta but also other major cities/regions where we would build the hospitals. Our current problem is because our Gov’t even said that ‘Electronic Land Certificate’ is not a must (Menteri Sofyan: Sertifikat Tanah Elektronik Tidak Wajib — Ekonomi Bisnis.com), this shall slowdown the process of converting to digital certificates. The solution is actually to enforce such digital certificate requirements to a rural level and ensure that everybody could understand the benefits of doing so. Our Gov’t already set a goal of full adoption by 2025 but now they’re skeptical of their own program (Target Pendaftaran Tanah Tahun 2025 Bisa Meleset (kontan.co.id)). This shouldn’t be happening and the Gov’t needs to really push for this, Digital Adoption is a must to transform this nation. The goal even needs to be set to 2023 instead of 2025 to ensure that after 2023, our nation won’t have any more land problems while doing our next infrastructure & building projects. Setting the goal to 2023 means that we’ll be a developed nation by 2030 the fastest, since we’ll need probably 7 years to develop a lot of things, any delay of digital adoption will cause delay to our prospect of being a developed nation.
In contrary to China where the Gov’t have freedom in building almost anything anywhere they want, you couldn’t always build things easily in Indonesia due to land problems. Even the Jakarta-Bandung HSR (High Speed Rail) struggled for 4 years of Land Acquisition Problems (Empat Tahun Penuh Polemik, PT KCIC: Pembebasan Lahan Sudah Selesai (idntimes.com)). The solution to this is by relocating communities to better quality public housings, which is another problem, but probably not to be discussed in this article. Assuming BCR (Building Coverage Ratio) of 0.5~0.6 and allowable FAR (Floor Area Ratio) of 4~5, our Gov’t needs to prepare almost 1 hectare in every Hospital development. The Gov’t may use their existing landbanks but they don’t have quite a lot. The solution to this is to start doing proper long term urban planning, start hiring the best business-minded masterplanners & urban planners around the world and start doing land acquisitions while the price is relatively cheap. The other solution is also to build another government entity/state-owned company to buy the land and then lease-back to the respective Hospital operator state-owned company. It’ll easily pay for itself after you’ve finally developed it.
On top of the abovementioned problem, there’s also the problem of Land financing in Indonesia. In other countries, land financing is an option to ease the land acquisition process. But the Gov’t do have a good point to do this, to ensure that ‘naughty developers’ wouldn’t easily scam people by getting easier land deals. I would propose that this land financing scheme to be open only for IDX30/LQ45 Publicly Listed Companies and those who’re listing in REIT (Real Estate Investment Trust). This way, the ‘scam’ could be minimized as newer companies might not easily get the same deal unless if they’re going for REIT. But I could always be wrong, however, to a certain degree, I think land financing should be an open option to public while minimizing the risks of it.
If land financing is available to Gov’t entities, they could easily buy lands here and there to match their long term future-proof masterplanning plan while relocating people to better public housings. The location of these ‘better public housings’ might not always be the best, but if they could reach the city center within 20 mins by MRT or whatsoever, it should be great right? Public transport is to be developed to ensure that those people would want to be relocated elsewhere. This hopefully could solve the land problem.
Problem #5: How to Fund it?
This is the tricky part. US$11 B (For 7 years) isn’t so big for Indonesia, as we shall need to prepare about US$2 B annually, but it isn’t so small as well. Our Yearly Gov’t Expenditure for Health (5% of total expenditure) is about US$11.7 B (Portal Data APBN — Ministry of Finance — Republic of Indonesia (kemenkeu.go.id)) but from that budget, it needs to be well distributed to all categories of interest in Healthcare & to all locations throughout Indonesia. There are multiple solutions to this, and there is not a one-size-fits-all answer down here, while actually the Gov’t could creatively use and combine some of the answers below.
This US$11 B might seem like a very big fund even though I believe we can somehow engineer it to repay itself under 10 years. In Strategy #3, the amount of US$11 B was slashed even to US$3 B only, showing that there are more creative ways to bless the society with proper Healthcare. Hospitals are basically revenue-generating machines while benefiting humanity as a whole, hence because of its relatively better profitability /m2 in comparison to other some of other real estate types, it should be not too hard to source good financings into the property. The Gov’t may choose between using their own money (which they have) and attain full profitability due to BPJS & operational efficiency, sourcing other funds/investments, or do some partnership with the private sectors. I personally wouldn’t suggest too much partnership since our Gov’t should have enough cash for the initial investment of this project, and since this is a very high traffic & profitable business. Such profitable businesses would make a very good investment vehicle.
Please also note that a US$11 B construction could possibly translate to a US$30 B in the long run of AUM (Asset Under Management) which is already higher than the viral e-commerce giants ‘GoTo IPO’ (US$25 B valuation, US$ 2B to be raised in IPO) and ‘Bukalapak IPO’ (US$5.6 B valuation, US$ 1.1B to be raised in IPO).
Strategy #1: Shift of Gov’t Funding
The initial funding required for the model hospital & the second year commencing 50 hospitals is US$ 1.5B. In Strategy #3 below, due to REIT Capital Recycling (to be explained below), we’ll need US$ 3 B in initial investment. Assuming that we’ll need the fund in the first 2 years, the first 1 year would probably need half of that at US$1.5 B.
The Ministry of Health Yearly Expenditure for 2021 was originally US$11.7 B but was increased to US$17.5 B (increased by US$ 5.8B) and the Yearly Expenditure of Ministry of Social Affairs is at US$28.1 B, while the total Gov’t yearly expenditure is US$190B. Cutting a very small chunk (<0.5%) from some other ministries that didn’t directly fight this pandemic could be an option to raise half of the required funds of US$750m, adding to the Ministry of Health budget for next year and establish the required state-own companies to operate the hospitals. The other half of the funding could be raised by the below strategies. The number doesn’t have to be exactly 50:50 as the Gov’t could probably be more creative in determining these numbers. If we’re lucky, we might only need to finance 30% of that from cash, 30–40% from bond, 30% from private funds, or something like that.
Strategy #2: Bond / SWF
This strategy could probably be used as the initial investment before we go to the third strategy. Our Gov’t could establish a ‘Hospital Development Fund’ or even ‘Green Hospital Development Fund’ to attract conventional & green investors coming in and investing in our US$11 B Hospitals. We could do even 1 Fund = 1 City, to ensure funds coming directly into each cities as we want them to. People who’d like to invest in Public Hospitals developed in Sidoarjo (a small town near Surabaya), for example could invest in ‘Green Sidoarjo Hospital Development Fund’ with a coupon of X% for how many years. Of course, it doesn’t always have to be cities, since it could be greater regions, for example ‘East Indonesia’ or something like that.
On top of that, Our President Jokowi has established the official SWF (Sovereign Wealth Fund) of Indonesia at US$7.1 T. The hospitals would really be an attractive addition to the assets while blessing our economy.
Strategy #3: REIT (Real Estate Investment Trust)
REITs are publicly listed stocks trading on real estate. The REIT stock shall provide a significant dividend amount (above the usual time deposit interests from banks) and shall have capital appreciation as attained from the real estate’s own profit of business/leasing and capital appreciation of property price. REITs are eventually inevitable for probably almost any kind of commercial real estate. The problem is that the capital to be raised in Indonesia would be too small, and the “DIRE” (Dana Investasi Real Estate/Equivalent of REIT) program ignited by President Joko Widodo wasn’t seem to be that attractive. The Gov’t need to provide better tax incentive or other incentives for that. Ease of permits & land-financing for those who’s doing REIT could be a good option. A lot of companies simply just go to Singapore or elsewhere to establish their own REIT while raising higher amounts of capital than Indonesia.
REITs could benefit this 400 Hospitals program by capital recycling of assets while providing higher investment yield for foreign investors. In this way, after the first 100 hospitals are sold to REIT, the raised funds could easily be used to fund the next 200 hospitals, and so on. Because of that, potentially we might only need a-quarter of US$11 B which is about US$3 B to come out from our Government’s pocket. This assumes if everything goes smoothly, of course. To ensure that this could happen, we need to employ top talents of Fund Managers in our Gov’t body & State-owned companies who’ll operate the hospitals, and ensuring that our construction quality matches international standard, especially green building standards as we could potentially attract green funds as well.
Strategy #4: PPP/BTS/BOT/BOOT Scheme
As mentioned above, PPP (Public-Private-Partnerships) is an option, but should be placed at the lowest priority. If needed, we’d better partner with overseas partners who’ve had experiences of best practices & maximum operational efficiency.
BTS (Built-To-Suit) might not be applicable in Indonesia nor the Hospital sector probably as I haven’t heard of any such example of doing so. But again, “I haven’t heard” doesn’t mean that it doesn’t exist. So this probably would just be an option, though probably to be placed on the lower priority as well.
BOT (Build, Operate, Transfer)/BOOT (Build, Own, Operate, Transfer) of Hospitals seemed to have been done in some parts of Europe, but didn’t seem to be quite popular in Asian countries. However, based on paper by WHO (06–030015.pdf (who.int)) it can be seen that it might not always come with perfect results, as shown below. We can always draft a perfect design brief but the real results might not be perfect if we’re not 100% involved into the details of it. Some problems indicated below does affect operational & maintenance time & cost and shouldn’t be taken lightly, which could affect ROI of the building and the business itself.
If the Gov’t is to choose PPP scheme, at least they need to be very involved to the deepest level of detail to ensure for ultimate operational efficiency & ultimate construction cost efficiency, while achieving future-proof & digitalized results.
Strategy #5: BPJS
Yep, you heard it right. BPJS. You’ll say “BPJS fee is so few, how could BPJS basically afford it?” and that is true. But BPJS fee has a very big advantage. Just like Obamacare, BPJS has a very big economies of scale currently covering 82% of current Indonesia population (Total Peserta BPJS Kesehatan per Akhir Maret 82,3 Persen dari Total Penduduk — Bisnis Tempo.co) and shall keep increasing to 100% since the Presidential Regulation no 111 Article 6 requires all Indonesian citizens to be registered. A mere US$10/month increase of subscription fee shall equal to an increase of US$2 B/month extra money to our government to make lots and lots of great improvements & could easily cover a lot of medical services. The benefit of this huge economies of scale is that you don’t actually need to increase the subscription fee by too much to generate an immersive amount of extra cashflow.
I understand that for some folks, US$ 10/month for BPJS is not considered too cheap, even though it is basically cheaper than Netflix’s Premium Subscription fee. Currently for those who work in corporates, US$ 8/mth shall be paid by the employee while US$32/mth shall be paid by the company (Actually the number is 5%, but there is a current cap of US$800/mth resulting at US$40/mth). To make sure that the BPJS could be the ultimate National Health Insurance with maximum efficiency & service coverage, an increase of subscription fee is inevitable. However, not everything has to be paid by the employee, most of it (maybe 70%) could still be paid by the company. Dreaming if the subscription fee could be US$100/mth for those employed in corporate sector and US$30/mth for those in informal sector (majority of Indonesia’s workforce are there), BPJS shall have additional cash of at least US$4B/mth which could be used to increase quality of healthcare & improve wages for medical personnel as they do deserve more, to also attract more qualified manpower into the medical workforce.
By charging US$100/mth for BPJS, US$70/mth (70%) shall be borne by the employer/workplace, while US$30/mth shall be borne by the employee. Every year, there’s gonna be an increase in national minimum wages, and the Gov’t need to just make sure that next year, the increase is US$20–30 to cover for the increase of subscription fee. That way, the employee shall not be burdened by the increase of fee. For those in the informal sector, they might need to be better educated that it’s okay to spend more for a nation-wide healthcare system as long as they could get pretty much ‘free healthcare’ without any queue by just spending $30/mth and would never worry if any family member are to get sick or anything.
However, we wouldn’t really would like to increase the BPJS fee blindly without increasing quality of healthcare & increasing operational efficiency of Hospitals. There is no point increasing the BPJS fee if the Hospital operation is still far from efficient, it would only enrich the hospitals without actually providing any added value to the customer, nor even increasing payroll for the medical professionals. That being said, there has to be ‘Model Hospitals’ established by the Gov’t to ‘show a good example’ of this maximum operational efficiency, to prove that you can actually charge less for a much better quality, while having better profit margin & better pay for medical professionals.
With the given above condition of economies of scale, BPJS as a local product could easily outperform other Private Insurance Companies, which are mostly foreign companies these days. As our President states, that we should love and buy from our local brands instead of foreign brands, hence we should also love and ‘buy’ BPJS instead of other foreign brands of Insurance. To ensure that this is happening, BPJS needs to outperform the other foreign brands by providing a decent service coverage at a much lower cost & efficient time & flow. BPJS needs to ensure that they could pay the hospitals well with a guaranteed 28-days payment or something like that, with completely digitalized & paperless reimbursement flows.
You might ask, “What if these 400 digitalized hospitals become 400 empty hospitals with no one to visit?” The answer is not so hard. Previously, some people are reluctant to go to hospitals since they thought it will inflict more cost, time wasted for queueing, etc. After BPJS revamp, since BPJS is more and more efficient, people would not hesitate to go see their local doctor at a local clinic and hospitals. Any kind of light sickness, they would immediately see a doctor, since it’s ‘free’ anyway, and people, especially Asian people, oh God you need to see how much do they love ‘free’ things. The second thing is that, people would visit these newer & digitalized hospitals since they need to spend less money & time in comparison to other competitors. Even qualified top nurses & doctors from other hospitals would willingly move to these newer Hospitals just due to better wages. This would really benefit our society as a whole as they would never have to worry if one day one of their relatives get sick or having to wait/queue too long in a hospital. Even Japan & South Korea is doing fine with ratios of hospital beds per capita at 13x of Indonesia.
You’ll probably ask also, “Wouldn’t it be cheaper to improve the existing Public Hospital Buildings?” Probably not really, since they’re built way before our time, the effort of just optimizing the existing hospitals could be much more than constructing new ones. I personally would say that, we’d better build the newer ones first, and improve the existing hospitals as we have attained operational excellency & efficiency of the newer hospitals.
Verdict
The final conclusion is that, to escape ourselves from this Pandemic & next Pandemics to come, our Gov’t needs to take the initiative by constructing 400 future-proof digitalized hospitals in the next 7 years, spending about US$11 B or about US$2–4 B annually. The Gov’t has this budget, and could combine this with other financing methods as well.
This solution would not only reduce BOR, increase number of hospital beds per capita, improve our BPJS system, alleviate so many people out of poverty, improve wages for certain sectors, and increase our competitiveness level in the world. If done properly as well, there is a very high chance that it could increase our GDP growth towards the 7% growth target as required by our President in one of his speech, perhaps to 10% if we’re lucky. China also did the same, infrastructure & construction comes first before others and their GDP growth is mostly above 10%. To get the GDP growth of China, we need to ‘act’ like China, where the Gov’t creates millions of construction projects all over the place to benefit their society, and not really relying on the private sector. The only remaining challenge of this is only the shortage of qualified manpower & that I think could be easily addressed to a certain extent with doubling/tripling wages for certain professional sectors (for now it’s medical & AEC sector, for next maybe more) & only hiring the top talents.
