ADB Supports Indonesia Economic Master Plan to Narrow Urban-Rural Divide through Improved Connectivity

Reducing railway, road and port-related shipping costs are important to keeping Indonesia’s population connected, with faster and cheaper rates allowing more people and products to reach remote and isolated areas at more affordable prices.

MANILA, PHILIPPINES – The Asian Development Bank (ADB) is supporting Indonesia’s long-term economic master plan (MP3EI) by helping to improve domestic and international connectivity. Through a $300 million program loan, ADB is partnering with the government to reduce infrastructure gaps and strengthen links to poor, rural areas, which will pave the way to more sustainable and inclusive growth.

“Poor connectivity, infrastructure constraints and high logistics costs prevent Indonesia from reaching higher economic growth and spreading its benefits to the country’s entire population,” said Edimon Ginting, Deputy Country Director at ADB’s Indonesia Resident Mission. “For example, about 70% of the difference in rice prices throughout the country is attributed to shipping costs, a reflection of deteriorating roads, congested ports, and underdeveloped interisland transport systems.”

The Government of Indonesia has launched a series of impressive reforms aimed at improving the policy, regulatory, financial, institutional, and business climate frameworks for connectivity and infrastructure development. ADB program supports the government’s efforts to accelerate the development of better logistics systems and infrastructure to connect rural areas to urban growth centers, improve international connectivity, and strengthen connectivity coordination, legal and regulatory frameworks. Taken together, these reforms will provide substantial economic benefits. They will also help improve the delivery of social services, create a more conducive business climate, promote private sector participation in infrastructure services, enhance new technology and innovation, and generate job opportunities.

Reducing railway, road and port-related shipping costs are important to keeping Indonesia’s population connected, with faster and cheaper rates allowing more people and products to reach remote and isolated areas at more affordable prices.

The program will also help enhance international connectivity by streamlining procedures thorough more efficient clearing of imports and exports. A $1 million technical assistance grant, meanwhile, will strengthen the capacity of government agencies such as the National Development Planning Agency, Coordinating Ministry of Economic Affairs and the Ministry of Transport to develop effective connectivity policies and improve coordination.