Indonesian Regional Infrastructure Development Alliance(IRIDA)

A Multi-Stakeholder Development Initiative

REGIONAL AUTONOMY AND INDONESIA’S DEVELOPMENT CRISIS

Current Situation: Centralized management of development failing in decentralization era National infrastructure ex-monopolies focus investment on urban areas Private sector not investing due to legal uncertainty / lack of financial accountability

Outlook: Local Governments continue to enact ill-conceived taxes to fund politically important

projects, further crippling investment prospects / retarding development Key social institutions – Schools, Healthcare, SME Cooperatives – are increasingly

disenfranchised as national support decreases and isolation sets in Urban / rural gap grows exponentially, creating political and economic instability

Order from Chaos? Under regional autonomy law, a vehicle exists that could enable Local Government and

key social institutions to own local infrastructure, generate sustainable capacity building funds, and encourage private sector investment via a financially transparent entity: a publicly owned regional corporation, or BUMD.

Actions to Avert an Infrastructure Crisis in Indonesia The World Bank, Jakarta, December 2, 2003

The Context:> Indonesia lags behind the region in almost all infrastructure sectors. > Infrastructure is critical for Indonesia’s growth and poverty reduction. > Public planning and management of infrastructure is inadequate.> The institutional and regulatory framework is simply not conducive to private participation in infrastructure

Findings:Decentralization presents enormous opportunities for improved infrastructure provision, but, unmanaged, these opportunities remain liabilities.

For networked infrastructure there are compelling arguments for empowering the provinces to play a much stronger coordinating role vis-à-vis kabupaten and municipalities.

Investment in capacity building for infrastructure management at the local level is essential.

“The stakes are now high. Indonesia’s failing infrastructure is already undermining growth prospects, and making it very hard to achieve its national goals for poverty reduction. With Indonesia’s macro-

economy now in sound shape, it is time to move more boldly in addressing longer term infrastructure needs.”

Andrew Steer, World Bank Country Director for Indonesia

WHAT IS IRIDA?

IRIDA is a PUBLIC SECTOR / PRIVATE SECTOR INIATIVE designed to create a sustainable model for deploying community owned infrastructure at the

regional level.

IRIDA establishes a legal and financial framework under current regional autonomy law, to enable key public institutions responsible for development – Schools, Government, Healthcare, and SME Cooperatives - to own local infrastructure, via community owned corporations, or BUMD.

To insure sustainability and sound business operations, the BUMD charter requires contract management of day to day commercial operations by private sector partners, who supply personnel, technical and financial management to operate the various infrastructures on a commercial basis.

Profits from commercial operations are shared between the management contractor and the BUMD, and then proportionally within the local BUMD stakeholder group, creating a sustainable funding structure enabling local investment in developing institutional capacity and human resources.

IRIDA provides a legally accountable and financially transparent vehicle for obtaining funding for infrastructure development from a variety of sources, including public and private, local and international financial institutions.

IRIDA’s initial target is the deployment of Information and Communication networks, a key enabling infrastructure that allows: coordination of development efforts between the national and local levels human resources capacity building, e-Government, e-Learning, Telemedicine, SME programs improved information handling and reporting, efficiencies and cost savings available via IP

communications

Subsequent IRIDA phases deploy additional infrastructure according to local need, including power generation, water treatment and sanitation, etc.

BUMD STRUCTURE

IRIDA AS A KEY TO DRIVING RURAL DEVELOPMENT

“A process that gives rural communities some ownership of infrastructure facilities provided has been shown to have

a high potential for success.”

Mainstreaming Poverty Alleviation Strategies through Sustainable Rural Infrastructure Development - BAPPENAS / KIMPRASWIL

IRIDA PHASE ONE: ICT INFRASTRUCTURE

ICT infrastructure, built on existing fiber optic and satellite networks with low-cost broadband wireless last mile technology, is the necessary “enabling infrastructure” to spur community-wide development.

ICT networks will enable the coordination of national to local institutional capacity building programs, and increase transparency and accountability.

ICT networks create significant cost savings, allow more efficient allocation of human resources, and allow for effective, coordinated training programs.

ICT networks vastly improve the delivery of institutional services at the local level.

ICT networks improve reporting by local institutions and improve the flow of data from the local to the national level, resulting in more informed decision making.

ICT networks allow access to markets for SME and enable consolidation of supply and delivery systems, improving local economies and creating jobs.

ICT networks allow increased citizen access to information, education and participation in the local decision making process.

IRIDA IN THE CONTEXT OF INDONESIA’S IT STRATEGY

SISFONASGoal - Integrate all government information systems at the central and district institution level

Problem – Lack of a complete network infrastructure solely for government use Solution - Create a web enabled system to link government agencies through existing ISPs

INPRES 3, 2003 – (Presidential Decree on E- Government) Mandates business process re-engineering and e-government to increase operational efficiencies.

The National Information Technology Framework - BAPPENAS Guides the coordination of Information Technology planning, development and utilization.

“Five- year Action Plan For the Development and Implementation of Information and Communication Technologies (ICT) in Indonesia”

(TKTI Infrastructure Working Group Guidelines)Develop innovative methods to provide infrastructure that will assist in reducing the “digital divide”.

Ensure that the government can readily make use of developing private communications networks in promoting its service delivery infrastructure.

Promote opportunities and develop infrastructure proposals that will enable government information and services to be made more widely available, including integration of information and services from different ministries

and use of Regional and Local Government infrastructure in delivering information and services.

WHO SUPPORTS IRIDA’S FIRST PHASE?

Private Sector

Public Corp Social Sector

Ministries

Ernst & Young(legal & financial)

PLN(fiber optic network)

LPMI(SME support, Madrasah

education)

KOMINFO + BAPPENAS

(Services & Infrastructure)

KampungCyber(broadband wireless IP /

local network mgmt)

IPTEKnet(secure gov’t network and

data services)

CLGI(local governance)

Home Affairs(E-Government)

Optima

(information mgmt systems)

Inti(telecom and television

infrastructure)

KPI(women SME owners)

Education + Religion(Schools)

Agritani/E-ASEAN

(training/SME support)

UPI - UII – UMM(teacher training and

distance learning)

APKASI(Kabupaten government)

Cooperatives and SME + Womens Empowerment

(SME)

JDI(content development)

APEKSI(Kotamadya government)

Health + BKKBN(Hospitals/Clinics, Family

Planning)

UTILIZING THE ENABLING INFRASTRUCTURE: NATIONAL/DONOR COORDINATION

DEPLOYING THE ENABLING INFRASTRUCTURE

PHASE 1 Create BUMD Legal and Financial Structure Build National Stakeholder Support and Commitments

PHASE 2 Socialize Program / Sign Charter Agreements and Register BUMDs Procure and Deploy Infrastructure

PHASE 3 Commence Commercial Operations Coordinate Delivery of Content and Program Support

PHASE 4 Conduct Impact Studies and Refine Support Program

HOW CAN USAID HELP?

Providing initial funding to create a local infrastructure development corporation (BUMD) legal and financial structure.

Provide equity funding to stakeholder groups (SME, Edu, Gov, Health) to enable local ownership of infrastructure.

Provide expert human resources to constituent communities (SME, Edu, Gov, Health) to develop ICT plans, review business processes, and develop capacity.

Provide support to IRIDA consortium members to develop curriculum preparing young Indonesians to work in the ICT sector and with ICT in other business sectors.

Work with US ICT companies to provide support and in-kind donations.

Coordinate with other donor agencies (WB, ADB, etc.)

FUNDING REQUEST

From DFI:Estimated costs to create legal and financial framework, and coordinate stakeholder support: +/-US$200,000

Work would be performed by Ernst & Young with input from existing government / donor programs focused on regional autonomy legal issues and policy reform.

After legal / financial framework has been created, financial support for widespread rollout can be obtained from USAID Education/Basic Services/Local Governance funds, private infrastructure funds, multilateral and local banks.

From Education, Basic Services and Local Governance Funds: Provision of grant funds to give local schools, government, healthcare and SME equity ownership in community infrastructure BUMDs: +/-US$4,000,000

Funding would enable deployment of first phase ICT infrastructure, and e-Gov, Education and Health Care Information Management Systems in 40 locations throughout Java and Bali, served by PLN fiber optic network, under management of KampungCyber.

Additional funding could be provided to establish PDAMs (local water utilities) or strengthen existing ones.

Results of USAID Support for IRIDA

Education More Effective Local Management of Schools Increased Community Ownership and Participation in Education Improved Teacher Training Improved Quality of Basic Education Improved Workforce Skills for Youth

Local Governance Improved Delivery of Local Government Services Improved Transparency and Accountability of Local Government Increased Citizen Participation in Development Planning

Economic Development Improved Basic Human Services Delivery at Local Level Increased Certainty in Business and Investment Environment Improved Investment in Public Services Supporting Private Economic Activity

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Martin Crow, President DirectorPT Kampungcyber.com

Tel: 0818637529Email: mcrow@kampungcyber.com

David Rimbo LimPrincipal, Ernst & Young

Tel: 02152895025Email: david.rimbo@id.ey.com