REPUBLIK INDONESIA

National Urban Policy: Cities as Engine of Growth

Minister of National Development Planning/Head of National Development Planning Agency

The 4th Planocosmo International Conference

Bandung, 4 April 2018

REPUBLIK INDONESIA

Sustainable Urbanization

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REPUBLIK INDONESIA

Indonesia’s Population Projection 2015-2045

2015 2045*

255.1 millionTotal Population

321 million

2.28Total Fertility Rate

2.1

70.8 years

Life Expectancy

72.8 years

49.2%Dependency Ratio

52.3%

65.76%Labor Participation

53,1% Urban Population 67,1%

Source: *Indonesia Population Projection Revision

2015-2085 (current estimation)

• In 2045, Indonesia will experience a substantial population growth- an increase of 63.9 million or

25.05 percent. About 67.1 percent of population will live in urban areas.

• Numbers of working age population will continue to increase, but the share of younger groups

(aged 15-29) will decline. It is likely as the result of the extension of average years of schooling.

• The labor force is projected to grow over the next 30 years at an annual rate of 0.7 percent. By 2045, the labor force is projected to reach 172.1 million.

80%

Projection 2030 2045

Working Age

Population

(15-64 years)

201.8

million

212.3

million

Labor Force

Participation

Rate77% 80%

Employment 155.4

million

165.2

million15.000 10.000 5.000 0 5.000 10.000 15.000

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

Thousand people

2045

Laki-laki Perempuan Bekerja Sedang Sekolah LainnyaOtherMale Female Working Schooling

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Advanced Urbanization in Java

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SUMATERA51,697,225 PEOPLE39.1% URBAN / 60.9%RURAL

KALIMANTAN14,105,730 PEOPLE42.2% URBAN / 57.8% RURAL

3 JAVA138,311,286 PEOPLE58.6% URBAN / 41.1%RURAL

SULAWESI17,663,879 PEOPLE33.6% URBAN / 66.4%RURAL

BALI AND NUSATENGGARA13,327,280 PEOPLE39.2% URBAN / 60.8%RURAL

MALUKU ANDPAPUA11,972,106 PEOPLE29.4% URBAN / 70.6% RURAL

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5

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Tier 1 –Metropolitan>1,000,000

Tier 2 – LargeCity500,000 – 1,000,000

Tier 3 –Medium City100,000 – 500,000

Tier 4 –SmallCity<100,000

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SURABAYA

3JAKARTA

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Source: World Bank, 2015

IslandPopulation (000) Proportion to national (%) Population density (/km2)

2010 2045 2010 2045 2010 2045

Sumatera 50.860 72.407 21% 23% 106 151

Jawa – Bali 140.941 176.177 59% 55% 1.042 1.303

Nusa Tenggara 9.222 13.701 4% 4% 137 204

Kalimantan 13.851 22.159 6% 7% 25 41

Sulawesi 17.437 23.967 7% 8% 92 127

Maluku – Papua 6.207 10.277 3% 3% 13 21

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REPUBLIK INDONESIA

Spreading Growth through Urban Development

= Main roads

= Rails

= National Activity Centers

= Regional Activity Centers

= Aerotropolis

= Port cities

Legend:

= PLTN

= Airports

= Palapa Ring Lane

= Dam

Mebidangro

Patungrayaagung

Jabodetabekjur

Bandung Basin

Kedungsepur

Gerbangkertosusilo

Sarbagita

Banjarbakula

Mamminasata

Manado-

Minahasa-Bitung

Ambon

Sorong

Jayapura

= KSN

= PKN

Mebidangro = Medan-Binjai-Deli Serdang-Karo

Patungrayaagung = Palembang-Betung-Indralaya-Kayuagung

Jabodetabekjur = Jakarta-Bogor-Depok-Tangerang-Bekasi-Cianjur

Kedungsepur = Kendal-Demak-Ungaran-Salatiga-Semarang-

Purwodadi

Gerbangkertosusilo = Gresik-Bangkalan-Mojokerto-Surabaya-

Sidoarjo-Lamongan

Sarbagita = Denpasar-Badung-Gianyar-Tabanan

Banjarbakula = Banjarmasin-Banjarbaru-Banjar-Barito

Kuala-Tanah Laut

Mamminasata = Makassar-Maros-Sungguminasa-Takalar

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REPUBLIK INDONESIA

Urbanization Without Growth

• Indonesia’s urbanization only 1% contribute to increased 4% GDP

• The better leveraged is urbanization, the more it will benefit national economic growth

• But if badly managed, there is a risk of “urbanization without growth”

y = 0.0482x + 5.8855

R² = 0.5674

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5

6

7

8

9

10

11

12

0 80 100

Log G

DP

Per

Cap

ita

(2010 C

onst

antU

SD)

20 40 60

Urban population share (%)

Indonesia

Log of GDP per capita –v– urbanization, 2015

Source: World Bank, 2017 (based on WDI data 2016)

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REPUBLIK INDONESIA

Chronic Shortages in Access to Basic Infrastructure

Source: Bappenas dan Yayasan Pelangi

IDR 128Tyearly loss because

of traffic congestion

annual growth of

rapid motorization9%public transport

share5-20%

air pollution costIDR 28T

72% access to improved water

supply access

access to public water

supply42%

67,5%Improved sanitation access

(including 7,4% safe access,

appr. 2% of sewerage and

appr. 5% of FSM*)

1%serve by sewerage

systems

14 cities having substantial

sewerage networks

11.4mioHousehold have no

house

11.6mio

Households live in homes

with physical buildings

unfit for habitation

10.8mio

Households who must

live to share the roof with

other families

18 champion cities for FSM*

*FSM = Fecal Sludge Management

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Integrating NUA’s Principles and SDGs

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REPUBLIK INDONESIA

SDGs:

Universal; Integration; No One Left Behind

NUA:

Equality – Leave No One Behind: Sustainable and

Inclusive; Environmental Sustainability

Integrating SDGs and NUA in Indonesia

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REPUBLIK INDONESIA

Vision for Urban Areas…towards sustainable urbanization

Liveable Competitive Green and

Resilient

Local urban

identity

Instruments: Integrated planning-

budgeting-financing

Information

technology for

efficient urban

management

Transparent,

accountable and

responsive governance

Institutional

arrangement

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REPUBLIK INDONESIA

Defining a Metropolitan Area...functional urban areas: a city and its commuting zone

Definition of a cityIdentification of a

commuting zone

Source: eurostat, accessed 2018

High-density cell

(>1.500 inhabitants

per km²)

Urban centre

(duster of high-

density cells with

population >50.000

inhabitants per km²)

Commune

> 50% of its

population in an

urban centre

City Commuting area Commuting area after

including enclaves and

dropping exclaves

City

Commune

Commune with > 15%

of its employed

population commuting

to the city

Added enclave

Removed exclave

Larger urban zone

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REPUBLIK INDONESIA

Integrated Planning-Budgeting-Financing

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REPUBLIK INDONESIA

Sustainable Urban Development and Management

05

06 01

02

0304

Urban and

Urban Areas

Development

Infrastructurea. Drinking water

b. Sanitation

c. Housing

d. Electricity

e. Telecommunication

f. Roads

Economy

a. Trading

b. Opportunities for investment

c. Funding resources

Environment

a. Open Public Spaces

b. Waste management strategies

c. Clean energy

Governance

a. Government

b. Government control

c. Effective public policies

Sociala. Sport facilities

b. Education

c. Place of worship

d. Healthcare

National Urban

System (SPN)a. City’s Function

b. Interrelation between cities

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Elements for Integrated Development

How will we improve statutory plans and their implementation for integrated planning?

What tangible benefits and impacts will we see?

Planning

Source: World Bank, 2017

Urban financing?

Capital

InvestmentDevelopment

Facilitation

Urban Management

Monitoring-Evaluation

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REPUBLIK INDONESIA

Issues in Urban Financing in Tackling Inadequate Urban Infrastructure

Cities are not self reliant –

revenue is not enough to

cover expenses

Absence of financial

investment plans

Lack of financial viability –

weak creditworthiness

Low recognition for private

investment’s to support the

mission toward liveable

cities’ – high recognition

for competitiveness

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REPUBLIK INDONESIA

Urban Financing

Local

Government

Budget

Non-government

investment (PPP,

KPBU, PINA,

BUMN, etc)

Long term

municipal bonds

Transfer from

Central

Government

Bank and

institutional

loans Zakat

Projects for sustainable cities

Cap

ital in

vestm

en

t pla

nn

ing

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REPUBLIK INDONESIA

Local Governments with immediate needs for infrastructure investments, and have expressed their interest in issuing Regional Bonds (8/93)

DKI JakartaSemarang

Surabaya

BandungYogyakarta

Prov.

Makassar

Balikpapan

Kalimantan

Province

Source: World Bank, 2017

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REPUBLIK INDONESIA

Investment Needs Exceeds Financing Capacity

Investment needs, borrowing capacity, and total revenue for 14 qualified subnational governments, USD Millions

Investment need gap

Borrowing capacity

Revenue (excl. Salary, earmarked

and contingency fund)Surabaya

2,954

Makasar860

Balikpapan339

Banjarmasin651

Semarang1,262

Pontianak361

Denpasar606

Sidoarjo875Gresik

642

Surakarta279

Bogor521

Bangka449

Batam825

Lombok Barat339

Source: World Bank, 2015; Directorate General Fiscal Balance Ministry of Finance, 2015

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REPUBLIK INDONESIA

Financing Urban Infrastructure

Different sources of financing to answer Local Government’s different infrastructure investment needs

Addressed by creative

financing such as

Regional Infrastructure

Development Fund

(RIDF), KPBU, PINA, etc

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REPUBLIK INDONESIA

Why RIDF?

RIDFDemand-based, increase access to financing,

rigorous appraisal, thorough monitoring

including safeguards standards to ensure low

default & good quality infrastructures

Before RIDFTop-down approach, limited LG access to

financing, inadequate project preparation &

appraisal, weak loan monitoring led to

defaults & distressed projects

Eligible sectors Eligible sub-

projects

(examples)

Water &

sanitation

WTP, pumping

stat

Environmental

infrastructure

Sanitary landfill,

waste

processing

facilities

Low income

housing and

slum upgrading

Public housing,

integrated

urban

upgrading

Productive and

logistic

infrastructure

Road

construction,

flyovers

Social

infrastructure

School rehab

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REPUBLIK INDONESIA

THANK YOU

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