Indonesia: Improving Infrastructure for Millions of Urban Poor

July 12, 2016

The government project marks first co-financing venture with AIIB

WASHINGTON, July 12, 2016 — The World Bank’s Board of Executive Directors approved today $216.5 million in financing to support a new government project that will improve infrastructure in Indonesia’s slum areas and benefit more than 9.7 million urban poor across the country.

The National Slum Upgrading Program (popularly known in Indonesia as KOTAKU) is a national collaborative platform financed by multiple sources, including central and local governments, the private sector, communities, as well as multi-lateral development banks. The program is also supported by the Asian Infrastructure Investment Bank (AIIB), which is co-financing the project with an additional $216.5 million - marking the first joint co-financing between the AIIB and the World Bank.

About 29 million Indonesians live in slums with poor basic services; 11 million of them lack access to sanitation and 9 million lack access to safe water. Indonesia's urban poor pay 10 to 30 times more to buy clean water from private providers, compared to the better off families with access to water utilities.

“Addressing infrastructure and basic services gaps in urban slums is critical to ending extreme poverty, reducing inequality and boosting shared prosperity in Indonesia. The Slum Upgrading project will improve the lives of millions of Indonesia’s urban poor and support the country in realizing its potential for higher growth.” said World Bank Country Director for Indonesia Rodrigo Chaves “We commend the Government of Indonesia for establishing this national platform, which will pave the way for all stakeholders to collaborate effectively.”

The Government of Indonesia is providing the bulk of the financing at around $1.3 billion, the five-year program is also supported with parallel financing by the Islamic Development Bank (IsDB).  Australia’s Department of Foreign Affairs and Trade has also been providing technical assistance to the KOTAKU program, under separate legal arrangements.

The program’s reach extends to 154 cities (including the capital city of Jakarta) in order to provide improved water sources, sanitation, roads, drainage and regular solid waste collection. The program also tries to reduce the creation of slums, by building the institutional capacity of local governments and communities and by addressing related land issues.

Communities who live in slums do not necessarily benefit from the growth of the cities. They are excluded from the formal economy and from safe and formal settlements. They are also more like to be exposed to natural disasters such as flooding,” said George Soraya, World Bank Team Leader. “This government program can be a solution to make cities more inclusive, but the approach requires the collaboration of many stakeholders, as well as multiple sources of funding.”

The World Bank Group is strongly committed to supporting Indonesia’s efforts to transform its cities and make them more inclusive.   


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