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INDONESIA INFRASTRUCTURE INITIATIVE

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photo by Rachmad Gunawan

The Indonesia Infrastructure development), and supported a series of local urban
Initiative (IndII) is a facility funded mobility interventions.
by the Australian Government
through AusAID. Our goal is to Policy and Investment (P&I). IndII’s P&I work has
promote economic growth by supported a range of important policy, financial, regulatory
working with the Government of and investment activities. These included work on Public
Indonesia to enhance infrastructure Service Obligations (PSOs), Public Private Partnerships
policy, planning and investment. (PPPs), and related infrastructure financing initiatives.
We focus on water and sanitation,
transport, and policy and IndII’s P&I component also helped Local Governments
investment. explore new mechanisms for local government services
delivery, and to utilise inter-governmental capital grants’
IndII was originally established for a three-year period transfers.
ending in 2011 (Phase 1). A follow-on project (Phase 2)
that will operate until June 2015 is now underway. Key Themes in Phase 2
The key lesson from Phase 1 that drives much of Phase
Phase 1 Achievements 2 work is the demonstrated power of output based aid
Water and Sanitation. During Phase 1, IndII rolled out to transform institutions. In recognition of this, OBA
innovative output-based aid (OBA) mechanisms in the programs in Phase 2 will expand and include more
water and sanitation sector. These mechanisms are governance targets, and will be increasingly applied to
designed to reward Local Governments for increasing transport sector work.
their investment in water and sanitation infrastructure
and for implementing governance reforms, by making A closely related Phase 2 theme is leverage. OBA itself is
payments only after measurable objectives are verified. a means of leveraging funding from Local Governments
Best known are the output-based Water and Sanitation and other partners. A further form of leverage is expanding
Hibah grant programs, and the performance-based IndII engagement with other donors, particularly
infrastructure enhancement grants (IEGs) for sanitation. multilateral lenders. In Phase 1, IndII realised important
IndII also completed eight city-level wastewater master synergies, for example by assisting GoI to satisfy key
plans, promoted good governance in the Nusa Tenggara triggers on policy loans as well as by filling front-end gaps
Barat/Nusa Tenggara Timur water sector, and designed on other loan programs.
a w ater and sanitation service index.
In Phase 2, IndII is continuing to create synergies
Transport. In Phase 1, IndII road programming assisted with the donor community. These include transitioning
the Directorate General of Highways at the Min­ is­try of the Phase I wastewater masterplans for possible MDB
Public Works to develop sustainable institutional capacity implementation; feasibility studies and investment plans
­to c­ on­duct road safety audits; improve blackspots; and build associated with mass rapid transit systems, as well as
cross-agency coordination. IndII’s program also delivered the preparation of brown-field sites for solid waste facilities.
an integrated package to improve overall governance IndII is also implementing the USAID Water Hibah, and
of the national highways network. IndII efforts have assisting other donors to establish infrastructure hibah
supported policy and planning reform, institutional change, programs.
and budget planning and performance accountability.
From a sectoral perspective, the most significant new
IndII’s non-road programs have targeted national and development is greater unification of IndII’s diverse efforts
local transport challenges. IndII provided key input across transport sectors. Multi-modal connectivity is
­to the Ministry of Transport on necessary regulatory a key concern. Additional themes include urban mobility
and institutional frameworks for sector reforms in rail, and congestion relief; life-cycle delivery; and safety
sea and air transport (primarily through master plan (particularly through greater inter-agency coordination).

Readers can learn more by consulting the sections on Water and
Sanitation, Transport, and Policy and Investment in this planner.

photo by IndII

Expanding Access
to Water & Sanitation
Infrastructure

IndII’s water and sanitation programming
emphasises results-based financing
mechanisms to drive reform and
increase investment in infrastructure.

The Phase 2 Water Hibah program builds on the success support construction of small-scale sewerage schemes
of the Phase 1 activity that awarded grants, based on for 90,000 household in approximately 40 LGs.
verified new connections, to Local Governments (LGs) The program can also support construction of solid waste
that invested in their water companies (PDAMs). In Phase transfer stations that meet Ministry of Public Works
2, $90 million – along with $8.6 million from USAID – standards. A smaller IndII program, the Sanitation Hibah,
is being spent across 150 LGs, with a target of 330,000 is supporting Banjarmasin, Bandung, and Balikpapan
new connections. The Phase 2 program incorporates new sewerage authorities to develop infrastructure for new
performance targets and governance milestones. connections.

The “Water and Sanitation Services Index” (WSSI) is IndII is also assisting LGs to implement Wastewater Master
a complementary activity designed to incentivise LGs Plans (WWMPs), by helping with Detailed Engineering
to improve governance and increase public accountability. Designs and social safeguard technical assistance, and
WSSI is a practical performance measure that will reward planning a grant program to support LGs and the national
high-performing LGs and encourage others to emulate government as they implement WWMPs. IndII plans
them. to support construction of the sewerage in one city through
a grant to the LG.
In areas that PDAMs can’t reach, IndII assists Community
Based Organisations (CBOs) to manage water supplies. At the regional level, IndII support to national government
While Phase 1 focused on access to commercial credit, and World Bank planning for solid waste management
Phase 2 emphasises output-based grants, and has plans in large cities is continuing through technical assistance
to scale up to reach more than 1000 CBOs. to strengthen operating facilities and scope out regional
waste management sites.
A Phase 1 program in Nusa Tenggara Timor/Nusa
Tenggara Barat to improve governance in the water Together these programs not only increase citizens’
sector is also being expanded. access to water and sanitation infrastructure, but also
build the institutional capacity that ensures that Indonesia
IndII’s sanitation programming addresses both waste can meet Millennium Development Goals and keep pace
water and solid waste. The Australia Indonesia with growing demands for clean water and sanitation
Infrastructure Grants for Sanitation managed by IndII will infrastructure.

photo by Rachmad Gunawan

Enhancing Connectivity
and
Improving Road Safety

IndII’s transport sector activities are
guided by four overarching objectives:
multimodal connectivity, urban mobility
and congestion relief, life-cycle
program/project delivery, and safety.

Over the coming years, IndII support for roads, ports, IndII’s work in the railway sector is helping to strengthen
air transport and railways is being closely integrated the policy framework and support moves towards a level
to reflect connectivity objectives. At the national multimodal playing field, initiated under PSO-IMO-TAC
level, the North Java Multimodal Transport Project is (Public Service Obligation-Infrastructure Maintenance-
assessing the potential for rail and coastal shipping Track Access Charges). An IndII scoping study is also
to assume a greater role in multimodal freight examining issues related to railway safey regulation.
transport. At the ­sub-national level, public transport,
pedestrian and safety initiatives are being combined In the critical area of urban mobility and congestion relief,
in Integrated Corridor Solutions. IndII is helping to strengthen the efficiency and financial
performance of Jakarta’s TransJakarta bus rapid transit
The groundwork for IndII’s work in the road sector was laid by system, as well as providing transport policy and planning
Phase 1 efforts to improve sector performance, strengthen assistance to the DKI Jakarta administration.
planning and address critical policy issues, including
land acquisition and establishment of an expressway IndII’s road safety work to date has supported the efforts
development authority. Now, with the Directorate General of DGH in road safety engineering, the Directorate General
of Highways (DGH) shifting its focus from road preservation of Land Transport in road safety education and city safety
to arterial network development, IndII is helping to prepare improvements, and the Indonesian National Traffic Police
an expressway master plan and a five year strategic plan in speed enforcement and crash investigations. Phase 2
(RENSTRA) that prioritises inter-regional connectivity. work will also involve safety auditing, mitigating risk where
At both national and subnational levels, IndII still provides crashes frequently occur, capacity building and mentoring,
assistance to extend the life of road assets. and supporting implementation of c­orridor-based safety
measures through grants.
In the port sector, IndII is supporting reforms by helping to
prepare model master plans for large, medium and small Lastly, IndII is helping the Directorate General of Civil
ports. Its efforts will also help strengthen the capacity of Aviation to address airspace capacity issues, with
newly established port authorities and port management the aim of improving air safety through better airspace
units. management.

photo by Christ Sandeman

Addressing
Policy
and
Investment
Concerns

IndII’s Policy & Investment (P&I)
component supports activities
that are related to Infrastructure
financing, infrastructure governance,
or that link or cut across activities
from other sectors.

The infrastructure financing sub-component includes The primary focus of the infrastructure governance sub-
activities such as IndII’s continuing program of financial component is assistance to the Inspectorate General
reform of local water companies (PDAMs), preparatory at the Ministry of Public Works (MPW) as they carry
work on select water projects (the Jatiluhur-Jakarta out a major reform agenda. With technical assistance
pipeline), and rapid appraisal of potential small from IndII, the MPW is implementing risk-based internal
to medium water Public-Private Partnerships, as well audit methodologies, undertaking a systemic review
as potential institutional strengthening measures. of internal controls, strengthening capacity within the
In Phase 1, IndII successfully engaged PDAMs with Inspectorate General, and addressing procurement
“unhealthy” financial ratings, strengthening their and anti-corruption issues.
operations and preparing them to access commercial
credit under the terms of Presidential Regulation no. The third sub-component of the IndII Policy and
29/2009. Now, programming is turning to “healthy” Investment program covers programming in other
PDAMs as well, to take advantage of opportunities sectors, such as the Gas Development Master Plan,
to scale up and link with IndII’s Water Hibah and the development of an infrastructure research
program. grants program.

Indonesia Infrastructure Initiative