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Harnessing the potential of urbanization

by June 17, 2016 General

In many countries around the world, urbanization has gone hand in hand with greater life satisfaction, efficiency, innovation and productivity.

Well-managed urbanization can create the space for economic growth, jobs, higher incomes and reduced poverty. The examples of Singapore and South Korea show how this can be achieved in the space of a few decades.

Indonesia can also capitalize on the tremendous opportunities brought by rapid urbanization. As Indonesia’s cities grow at a rate of 4.1 percent, likely becoming home to 68 percent of the country’s population by the year 2025, they can create better jobs for millions of rural poor. Cities in Indonesia already account for 89 percent of the 20 million jobs created between 2001 and 2011.

These centers of job creation can contribute more to economic growth — but more infrastructure investments are crucial for maximizing the potential of Indonesia’s cities.

With better roads and public transport infrastructure, Jakarta can reduce the estimated US$3 billion lost to congestion each year. With better water and sanitation infrastructure, city residents, particularly the poor, would fall ill less often from water-borne illnesses and save on healthcare costs.

The government has taken pro-active action. Urban development is a key element of Indonesia’s 2015-2019 National Medium Term Development Plan (RPJMN).

The plan lays an excellent foundation for sustainable urbanization, and includes: supporting medium-sized cities outside of Java; achieving standards for urban services; promoting cities that are smart, resilient and green; and upgrading the management capacity of city governments.

Targets have been set to close the infrastructure deficit. Meeting these targets — such as achieving 100 percent access to clean water and adequate sanitation, zero percent slum areas by the year 2019, and “One Million Homes” — would show the world that urbanization improves the future for individuals, families and the country.

Learning from the lessons of successfully urbanizing countries, three specific actions can be taken to increase support for sustainable urbanization.

First, an integrated approach is key. Efforts across multiple sectors would benefit from coordination, including in urban transport, urban water supply and sanitation, drainage, flood and disaster risk management, affordable housing, slum upgrading and solid waste. A national urbanization platform can help to build links across these sectors.

Second, support city governments as the leaders, partners and active change agents of sustainable urbanization. Indonesia’s decentralized system provides a framework within which city leaders can better mobilize resources, take action, and make positive changes in their cities. Clearly, city leaders carry enormous potential and many display plenty of mettle – just ask former mayor and current President Joko Widodo.

Third, urban infrastructure improvements should be complemented by strengthened government capacity for managing more sophisticated systems.

Those responsible for urban service delivery will be more effective if they are better trained in the fundamentals of, for example, spatial planning, municipal finance and disaster risk management.

Recently, the Indonesia Sustainable Urbanization Multi-donor Trust Fund (IDSUN) was established with a $13.4 million contribution from the Swiss State Secretariat for Economic Affairs (SECO), and support from the World Bank and the Ministry of Public Works and Public Housing.

Through technical assistance and capacity building at the national and sub-national levels, the IDSUN Trust Fund will support the Government in developing a suite of policy, financing and program solutions towards building a national platform for sustainable urbanization in Indonesia.

The IDSUN Trust Fund is a critical component of wider World Bank support for more livable and prosperous cities. A new investment project that supports the Government’s national program on slum upgrading is expected shortly.

Other investment lending under preparation includes support for national programs on housing, urban water supply and urban sanitation. We are also supporting the setup of a facility to provide financing to local governments for urban infrastructure.

While they will take time to manifest, the benefits of investment in infrastructure and better delivery of services will improve the lives of millions in the years to come, reducing poverty and sharing prosperity in a sustainable manner more widely across Indonesia. Cities are Indonesia’s future — let’s invest better in this future.

Rodrigo Chaves is the World Bank’s country director for Indonesia, and Ede Ijjasz-Vasquez is the World Bank’s senior director for the social, urban, rural and resilience global practice.