ADB Supports Indonesia's Community-Driven Rural Infrastructure Development

MANILA, PHILIPPINES - The Asian Development Bank (ADB) will provide a $50 million loan to support the Government of Indonesia’s efforts to cut rural poverty.

The 32-year loan will be used to repair and expand infrastructure services, including water and sanitation, health, education, and transport. It represents about 80% of the estimated $62.5 million cost for the Rural Infrastructure Support to the PNPM Mandiri Project. The government and project beneficiaries will fund the balance of about $12.5 million.

The project will rehabilitate and expand rural infrastructure services in about 1,650 villages in the provinces of Jambi, Lampung, Riau, and South Sumatra, benefiting about 2 million people, or about 400,000 households.

About two-thirds of Indonesia’s poor live in rural areas. Recent surges in global food and fuel prices, which have a disproportionate effect on rural communities, threaten to drive even more people into extreme poverty.

While poverty levels have receded after surging during the Asian financial crisis of 1997 to 1998, the country’s poverty incidence rate is still over 15%, putting it at risk of missing the Millennium Development Goal of lowering the rate to 7.6% by 2015.

In order to cut poverty and meet its Millennium Development Goals, the government launched the National Program for Community Empowerment (PNPM Mandiri) in 2007, which provides funds directly to poor rural communities for infrastructure and other development needs.

“The ADB-funded project will form part of the flagship program which seeks to empower communities by engaging them in the financing, planning, and implementation of rural services, specific to their local needs,” said Urooj Malik, Director of Agriculture, Environment and Natural Resources Division of the Southeast Asia Department.

The project adopts the highly successful community-driven development approach, which gives the community control of resources backed by funds directly channeled to community groups or members.

“This will ensure strong ownership and greatly improve the prospects of achieving the common goals of improving service delivery and poverty reduction and meeting Millennium Development Goals,” said Bobur Alimov, an Environmental Economist with ADB’s Indonesia Resident Mission.

The community-driven development approach has been used in previous ADB projects and has been shown to improve transparency and accountability, reduce corruption and waste, and provide opportunities for women and the poor to be involved in the process. In this project, at least 40% of the total membership of community groups formed to carry out the work will be made up of women.

The project is in line with the government’s development strategy and is also designed to harmonize with assistance for rural infrastructure provided by other multilateral and bilateral organizations.

It is expected to start in the first quarter of 2009, and finish at the end of 2010.

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