ADB Seeks Ways to Boost Infrastructure Investment in Indonesia

News Release | 19 December 2005

MANILA, PHILIPPINES - A technical assistance grant of US$2 million from ADB should help Indonesia significantly increase infrastructure investments.

All infrastructure sectors - including roads, ports and airports, power, and water - in the country are facing an investment shortfall compared to needs. There are still 50 million people without access to treated water, 90 million without electricity, 200 million without fixed telephone lines, and 210 million without connections to a sewerage network.

"Indonesia's poor suffer the most from lack of access to basic infrastructure services, with rural areas, particularly outside Java and Bali, particularly hard hit," says Sohail Hasnie, an ADB Senior Energy Specialist. "Acceleration of infrastructure development is essential to achieving national economic growth and poverty reduction targets."

ADB since 1971 has lent $8.1 billion for 90 infrastructure projects and programs in Indonesia. However, such ADB support has declined since the Asian financial crisis began in 1997, reflecting a downturn in infrastructure investment in the region in general and in Indonesia in particular.

In response, the TA will provide support for policy and regulatory reforms and project transactions in the country's various infrastructure sectors.

Specifically, it will provide support to the high-level interministerial Committee on Policy for the Acceleration of Infrastructure Development (KKPPI). Created in 2001, and reporting directly to the President, the KKPPI's main purpose is to formulate strategies and policies to accelerate infrastructure development, coordinate implementation policy, and address constraints.

The TA will assist the KKPPI in developing public service obligation and regulatory frameworks, establishing documentation based on best practice, and preparing model projects based on public-private partnerships, which offer the preferred approach to increasing private sector participation in infrastructure.

It will be carried out in coordination with the World Bank's Private Provision of Infrastructure Technical Assistance loan approved in May 2003.

The total cost of the TA is estimated at $2.5 million equivalent, of which the Government will contribute $500,000 in kind. The National Development Planning Agency BAPPENAS is the executing agency for the TA, which is due for completion around March 2007.