WASHINGTON, March 13, 2017— The World Bank’s Board of Executive Directors approved on March 10, 2017, $100 million in financing that will enable subnational governments to scale up investments in infrastructure and improve the welfare of communities and the competitiveness of districts across Indonesia.
PT. Sarana Multi Infrastruktur, a state-owned infrastructure financing firm, will receive the funds to support the Regional Infrastructure Development Fund, or RIDF. The RIDF, in turn, will boost access to credit by subnational governments to finance infrastructure projects, including water supply and sanitation, roads and transport facilities. The Asian Infrastructure Investment Bank, or AIIB, is providing an additional $100 million in co-financing.
Subnational governments in Indonesia face financing constraints for large infrastructure projects, as their budgets - known as the APBD - may be used to fund only projects that take less than a year to complete.
“Improving service delivery at local levels and greater equality of opportunity are critical to achieving inclusive growth across Indonesia, particularly in the less developed areas. This new financing is one solution to ensure that Indonesia can reduce inequality, so the country’s poorest can benefit from growth,” said Rodrigo Chaves, World Bank Country Director for Indonesia.
Subnational governments – provinces, cities and regencies – can propose financing for water supply and sanitation facilities, including sewerage systems; environmental infrastructure, including solid waste management and drainage; affordable housing and slum upgrading; transportation and logistics infrastructure; and social infrastructure such as health facilities, schools and public markets.
“Currently, the financing instruments available in Indonesia for local-level infrastructure investments are limited. The Regional Infrastructure Development Fund will address the gap for medium- to long-term infrastructure financing, particularly in urban areas across the country,” said Marcus Lee, World Bank Senior Urban Economist.
The World Bank, through the Indonesia Sustainable Urbanization Multi-Donor Trust Fund (IDSUN), will also extend a $3 million grant to support subnational governments’ effort to prepare for the proposed infrastructure projects. The government of Switzerland, through its State secretariat for Economic Affairs (SECO), provided the first funding to the IDSUN.
This is the third co-financing arrangement in Indonesia between the World Bank and the AIIB. Last month, the World Bank approved a $125 million loan to upgrade more than 140 dams throughout the country. In July 2016, the World Bank extended financing of $216.5 million to support the National Slum Upgrading Program, which aims to improve infrastructure in Indonesia’s slum areas.