A farmer plows his rice field with a hand tractor in Gowa, South Sulawesi, on Wednesday (30/11). (Antara Photo/Yusran Uccang)

World Bank, AIIB Set Aside $200m for Local Public Infrastructure


MARCH 14, 2017

Jakarta. The World Bank and the Asian Infrastructure Investment Bank have agreed to provide a $200 million loan to state-owned infrastructure financing firm, Sarana Multi Infrastruktur, paving the way for the firm to set up a fund to help local governments finance large-scale infrastructure projects.

Sarana Multi Infrastruktur will receive $100 million from the World Bank and another $100 million from the AIIB for the fund, which will be called the Regional Infrastructure Development Fund (RIDF).

The fund will eventually pool $400 million, with another $200 million promised by the Indonesian government.

So far though, the government has only been able to earmark Rp 2 trillion ($149 million) for Sarana Multi Infrastruktur.

AIIB said on its website the fund should be operational by next month and last through March 2021.

"Currently, there are limited financing instruments available in Indonesia for local-level infrastructure projects," Marcus Lee, the World Bank's senior urban economist, said in a statement on Tuesday (14/03).

Local governments are often constrained by limited revenue and an inability to issue complicated financing instruments like municipal bonds.

Conditions often limit them to commit only to short-term projects, in practice those that take less than a year to complete.

Larger projects — water supply, sanitation, road and transport system — depend for funding on the central government, whose priority may or may not align with the regions.

"Improving service delivery at local levels and greater equality of opportunity are critical to achieving inclusive growth across Indonesia, particularly in less-developed areas," Rodrigo Chaves, the World Bank's country director for Indonesia, said.

Last month, the World Bank and the AIIB approved a $125 million loan to renovate more than 140 dams in Indonesia. The Bank also supported the National Slum Upgrading Project in July last year.