Second Infrastructure Development Policy Loan

closed

Commencing in 2007, the Infrastructure Development Policy Loan (IDPL) series has rapidly assumed central importance in the dialogue between the Government of Indonesia and the World Bank concerning the Government's infrastructure reform program. The program is built around four areas of engagement: national infrastructure (e.g. electricity and roads); subnational infrastructure (e.g. water); public-private partnerships; and cross-cutting governance issues including land acquisition, environment, and procurement. The common theme in each of these areas is to increase the amount and effectiveness of infrastructure spending, in order to contribute to economic growth and poverty reduction. The program is primarily grounded in areas of influence of central ministries - the Ministry of Finance, the Coordinating Ministry for Economic Affairs, and Bappenas (the planning ministry). For national infrastructure, the emphasis is on increasing the level of government investment and improving planning and budgeting processes to improve the effectiveness of government spending. For sub-national infrastructure, the reforms are centered on intergovernmental fiscal relations and the incentives for sub-national governments to deliver infrastructure services. For public-private partnerships the emphasis is on establishing a policy framework, institutions, and financing mechanisms to encourage greater private sector interest in Indonesia's infrastructure. And finally, in the cross-cutting governance areas, which typically fall outside the direct influence of the central ministries, the approach taken is either to build on the relevant line ministries' existing reform programs, or to develop progressively greater engagement with these ministries commencing with development of their own action plans for reform.