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ADB Loan to Indonesia for Capacity Building in Urban Infrastructure

Over 10,000 managers administering Indonesia’s urban areas will receive training through a US$42 million loan approved today by the Asian Development Bank for the Capacity Building in Urban Infrastructure Management Project.

The project will also strengthen institutional arrangements and recommend policy approaches for improving urban infrastructure.

Human resource development is the project’s biggest component, forming over half the total cost of US$70 million. Nearly 40 per cent of Indonesians live in urban areas and the number is growing at 4 percent annually. Demand for urban services outstrips the ability of the sector to provide adequate services. The major constraint is an acute shortage of qualified and experienced senior staff, especially at local level.

To address this problem, the project will add 1,900 professional staff to local governments and send 7,000 on training courses. Three hundred will take masters degrees, 1,500 bachelor degrees; 5,200 participants will attend short courses, seminars and field studies.

The project will also help non-governmental institutions participate in urban management and provide advisory services and training programs.

The project will help document best practices in urban infrastructure management and disseminate information on them. It will also help carry out pilot projects in improved methods of urban infrastructure delivery of services for 11 cities with a total population of eight million.

The Government’s strategy in the urban sector is to decentralize responsibility and resources to local governments, develop public-private sector and community partnerships and improve financing mechanisms. To achieve this, it needs to enhance local government human resources, financial management and policy and regulatory framework.

The project is targeted at the disadvantaged who suffer most from congested roads, a scarcity of affordable accommodation and a lack of safe water and sanitation facilities. Local government officials will be trained in community-based approaches to housing the poor. A scheme is also being prepared to reduce water connection fees and make potable water more affordable.

The executing agency for the project, which is due to be completed in 2002, is the Ministry of Public Works.

The project will also be financed by the Government (US$20 million), provincial governments (US$3 million) and local governments and their agencies (US$5 million). The ADB loan will come from its ordinary capital resources, carrying an interest rate determined in accordance with the Bank’s pool-based variable lending rate system for US dollars. Repayment is over 25 years, including a grace period of four years.

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