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World Bank New Funding through PT SMI for Indonesia Infrastructure Development

by Sebastianus Epifany Wednesday, March 15, 2017 - 15:12

WASHINGTON - Indonesian government focus in developing infrastructure to create equitable development throughout the territory received positive support from the World Bank. The support is realised through financing agreement amounting to US$ 100 million which is channelled through PT Sarana Multi Infrastruktur (Persero) (PT SMI) for the local governments in Indonesia to develop the infrastructure.

PT Sarana Multi Infrastructure is a State-owned enterprise for infrastructure financing that receives funds from the World Bank to support the Regional Infrastructure Development Fund (RIDF). RIDF would then be an additional credit access for local governments to fund infrastructure projects, including the provision of water and sanitation facilities, roads, and transportation. Asian Infrastructure Investment Bank, or AIIB, also provide additional funding of US$ 100 million.

Indonesian local governments confront the obstacle of funding for large-scale infrastructure projects, due to their regional budget (APBD) which often can only be absorbed to finance projects that can be completed in one year.

"Improving service delivery at the local level and improve equality of opportunities is essential for achieving inclusive growth throughout Indonesia, especially in disadvantaged areas. This new funding is one way out for ensuring that Indonesia could reduce inequality so that the poorest people can receive the benefits of growth," said Rodrigo Chaves, World Bank Country Director in Indonesia, as reported from World Bank Press Release (15/3/2017).

Provincial governments, cities and districts can propose funding for water supply and sanitation facilities, including water systems; environmental infrastructure, including solid waste management and drainage; affordable housing and slum clearance; transport infrastructure and logistics; as well as social infrastructures such as health facilities, schools, and traditional markets.

"Currently, the financial instruments which available in Indonesia for local-level infrastructure investment is still limited. Regional Infrastructure Development Fund will address the infrastructure funding gap for the medium and long term, especially in urban areas, "said Marcus Lee, Senior Urban Economist of the World Bank.

World Bank through Indonesia Sustainable Urbanization Multi-Donor Trust Fund (IDSUN) will also provide a grant of US$ 3 million to support local governments in preparing infrastructure projects that have been proposed. The Swiss government, through the State Secretariat for Economic Affairs, or SECO, has contributed a first for IDSUN.

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