ADB is supporting Indonesia's long-term economic master plan (MP3EI) by helping to improve domestic and international connectivity. The program will help accelerate the development of better logistics systems and infrastructure to connect rural areas to urban growth centers, improve international connectivity, and strengthen connectivity coordination and legal and regulatory frameworks.
|Project Name||Inclusive Growth through Improved Connectivity Program - Subprogram 1|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Private sector development
|Sector / Subsector||
Transport / Transport policies and institutional development
|Gender Equity and Mainstreaming||No gender elements|
|Description||The proposed program will support a key strategic pillar of the government's medium- and long-term development plans to achieve higher and more inclusive economic growth through improved domestic and international connectivity. The program focuses on helping achieve the government's connectivity reform agenda priorities that include: (i) strengthened coordination, regulatory and institutional frameworks; (ii) improved intra-island connectivity aimed at connecting rural areas with regional growth poles, and accelerated development and better maintenance of inland transport networks; (iii) improved inter-island connectivity to enhance efficiencies and service performance of transport services; and (iv) improved international connectivity by making the country's key ports, logistics and intermodal systems more efficient in handling increasing traffic and trade volume.|
|Project Rationale and Linkage to Country/Regional Strategy||
Indonesia's economic growth performance and poverty. GDP growth edged up to 6.5% year on year in 2011, the highest since the Asian financial crisis, supported by sustained private consumption, stronger investment, and expanding net exports. Despite improved growth rates, recent economic growth is still significantly below the country's growth potential. For 2014-2016, IMF estimates a baseline potential growth rate of 7.1%, but which would increase to 7.9% if infrastructure development and economic reforms are accelerated. The recent ADB Study Diagnosing the Indonesian Economy also identifies inadequacies in infrastructure as one of the critical constraints to economic growth. Indonesia's overall ranking in the Global Competitiveness Index is at 46 out of 142 countries. However, the country only ranks 76 out of 142 on overall quality of infrastructure, far below its overall ranking, implying that infrastructure is a drag on the country's competitiveness (Figure 1a). The impact of lagging infrastructure appears in a number of forms. Deteriorating road systems in the provinces and districts increases domestic transport and logistics costs. Congested port and underdeveloped inter-island transport systems have led to expensive domestic shipping costs. Congested and unproductive international ports have made Indonesia's manufacturing sector not well integrated into international production networks. Achieving and sustaining higher growth rates over the medium-term will require an enabling environment for much higher investments in infrastructure.
Poverty reduction. Growth of 6.5% in 2011 resulted in about 1.5 million new jobs being generated, exceeding the number of new entrants to the labor force. The quality of employment also improved as formal employment rose by 16.0% (5.7 million positions). Most jobs were in construction, manufacturing, and services. Employment in the informal sector fell by 5.9%, or 4.2 million, as workers left the agricultural labor force. However, significant challenges remain in reducing poverty incinence further. About 62% of the employed labor force (about 68.2 million people) still works in the informal sector, where wages and job security are low. Poverty incidence fell to 12.4% in September 2011, from 13.3% in March 2010. While poverty and unemployment have trended downward, many Indonesians remain vulnerable to economic shocks. More than 60 million people still live just above the poverty line and are at high risk of falling back into poverty. The national rural poverty rate of 15.6% is still much higher than the national urban poverty rate of 9.1%. Poverty rates in some provinces in eastern Indonesia are much higher than elsewhere in the country
Inclusive growth through improved connectivity. Addressing the country's multidimensional poverty will require not only accelerated economic growth but also a more inclusive growth process that provides rural areas and disadvantaged regions with improved economic opportunity and access to social services. As the largest archipelagic state in the world by area and population and the largest economy in the Association of Southeast Asian Nations (ASEAN), Indonesia requires improved connectivity to make growth more inclusive. The country's connectivity can be improved with: (i) better intra-island connectivity to connect rural areas with regional growth poles, which is essential for reducing rural poverty; (ii) better inter-island connectivity between the western and the eastern parts of Indonesia, which is indispensable to reducing higher poverty incidence in the east; and (iii) improved international connectivity to make the country's productive sector more competitive, which is vital in reducing poverty overall and improving the quality of employment by reducing the size of the labor force employed in the informal sector.
Convergence of government's national strategies and ADB strategy. The government recognizes that lagging infrastructure, underdeveloped intra- and inter-island connectivity, weak international connectivity, and inefficient logistics constrain achieving its medium- and long-term targets of higher growth and faster poverty reduction. Strategically, the government's National Medium-Term Development Plan (RPJMN) 2010-2014 provides direction for the two pillars of ADB's Indonesia country partnership strategy (CPS) 2012-2014: inclusive growth and environmental sustainability. Reforms supported by the proposed program will support the inclusive growth pillar of the CPS. In addition, improving connectivity is a strategic focus of the government's long-term Master Plan for Acceleration and Expansion of Indonesia's Economic Development, 2011-2025 (MP3EI). The MP3EI will guide the convergence of ADB's policy-based, sector and thematic interventions related to connectivity and the government's vision of accelerated economic development.
|Impact||Reduced transport and logistics costs|
|Description of Outcome||The Government improves domestic and international connectivity|
|Progress Toward Outcome||The TA was progressing well.|
|Description of Project Outputs||
Connectivity coordination on regulatory frameworks strengthened
Key initiatives to upgrade intra-island connectivity implemented
Measures and strategy to improve inter-island connectivity put in place
Key policies executed to enhance international connectivity
|Status of Implementation Progress (Outputs, Activities, and Issues)||
The TA had been supporting the government in its connectivity reform priorities. These included the following:
i. Assisted to develop effective and integrative national connectivity policy at the national and regional level. These included providing a framework for an efficient and integrative network of transport (land, sea, and air), energy, information and communication, and housing and water provision. The TA also assisted to synchronize policy recommendation on national connectivity in the government'.
ii. Assisted to incorporate the Strategic Environment Assessment Framework in connectivity programs of the Master Plan for the Acceleration and Expansion of Economic Development (MP3EI) 2014-2025.
iii. Assisted the government in preparing the Indonesia Broadband Plan (IBP) 2015-2019, which included discussion with external stakeholders and recommendation for changes and additions to the IBP. The IBP was successfully launched in mid-October 2015 through a Presidential Decree.
iv. Provided legal advice on the revision to the existing regulation on Public-Private Partnership (PPP) for infrastructure development. The input of the TA included: regulatory mapping related to PPP in infrastructure development, legal opinion on the main laws related to PPP, initial draft of a revised regulation on PPP, and further in-depth discussion with all key sectors related to PPP.
v. Assisted on the analysis of maritime intra-island freight transport costs and identification of conditions and interventions for reducing transport costs in the eastern part of Indonesia.
vi. Assisted on logistic cost analysis. These included: (i) measuring Indonesia's logistic performance by using National Logistic Cost Indicator and National Logistic System (Sislognas) Performance Index (SPI); and (ii) develop a proposal for a standard cost of port.
The TA also supported the new government in its connectivity reform.
|Summary of Environmental and Social Aspects|
|Environmental Aspects||No impact|
|Involuntary Resettlement||No impact|
|Indigenous Peoples||No impact|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation||The government will form a steering committee (SC), chaired by Bappenas, with senior representatives of the implementing agencies and development partners (ADB, the World bank and JICA) as members.|
|Consulting Services||In consultation with the BAPPENAS, ADB will recruit consultants as required under the CDTA (34 person-months of consulting services, consisting of one international consultant for 16 person-months and two national consultants for a total of 18 person-months). The consultants will be selected and engaged on an individual basis by ADB in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time).|
|Procurement||All procurement under the CDTA will accord with ADB's Procurement Guidelines (2010, as amended from time to time).|
|Responsible ADB Officer||Aji, Priasto|
|Responsible ADB Department||Southeast Asia Department|
|Responsible ADB Division||Indonesia Resident Mission|
National Development Planning Agency (BAPPENAS)
Jl. Taman Suropati No. 2
|Concept Clearance||25 May 2012|
|Fact Finding||25 Jun 2012 to 13 Jul 2012|
|MRM||23 Aug 2012|
|Approval||16 Nov 2012|
|Last Review Mission||-|
|Last PDS Update||30 Sep 2016|
|Approval||Signing Date||Effectivity Date||Closing|
|16 Nov 2012||26 Nov 2012||18 Dec 2012||31 Mar 2013||-||31 Mar 2013|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||400.00||Cumulative Contract Awards|
|ADB||300.00||16 Nov 2012||300.00||0.00||100%|
|Cofinancing||100.00||16 Nov 2012||300.00||0.00||100%|
|Approval||Signing Date||Effectivity Date||Closing|
|16 Nov 2012||21 Feb 2013||21 Feb 2013||30 Oct 2014||17 Jun 2016||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|1,000,000.00||0.00||0.00||0.00||0.00||0.00||1,000,000.00||16 Nov 2012||944,821.48|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Inclusive Growth through Improved Connectivity Program (Subprograms 1 and 2): Program Completion Report||Project/Program Completion Reports||Jul 2017|
|Pertumbuhan Inklusif Melalui Program Peningkatan Konektivitas : Lembar Data Proyek||Translated PDS||Jan 2013|
|Loan Agreement for Inclusive Growth through Improved Connectivity Program - Subprogram 1 between Republic of Indonesia and Asian Development Bank||Loan Agreement (Ordinary Resources)||Nov 2012|
|Inclusive Growth through Improved Connectivity Program||Reports and Recommendations of the President||Oct 2012|
|Inclusive Growth through Improved Connectivity Program||Concept Papers||May 2012|
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