Indonesia Sustainable Urbanization Multi Donor Trust Fund Component 3 1 Development of Urban Transport Support Platform

Indonesia Sustainable Urbanization
Public Disclosure Authorized
Multi-Donor Trust Fund (IDSUN) ID: P156103
Component 3.1
Development of Urban Transport Support Platform
Program Design
Version 1.0
Version 2.0, May 2019

This page intentionally left blank.
The World Bank
IDSUN Multi-Donor Trust Fund.
Component 3.1: Development of Urban Transport National Support Platform (P156103)
PROGRAM DESIGN
IDSUN Multi-Donor Trust Fund

Development of Urban Transport Support Platform
(ID: P156103)
The World Bank
© 2019 International Bank for Reconstruction and Development/The World Bank.

This report was prepared by David John Ingham and Amilia Aldian with contributions to report content by
Georges Bianco Darido, Leonardo Canon Rubiano, Hongye Fan, Andri Wibisono and Adri Poesoro of the
World Bank and Tomas Herrero Diez, Consultant. Technical analysis was performed by Qi Yahya, Sandy
Maulana and Eldo Simantjuntak, Consultants.
The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views
of The World Bank, its Board of Executive Directors, or the governments they represent.
The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors,
denominations, and other information shown on any map in this work do not imply any judgment on the
part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of
such boundaries.
This publication has been funded by the Swiss Confederation as a component of the Indonesia Sustainable
Urbanization PASA (P153802). The views expressed in this publication are the authors’ alone and are not
necessarily the views of the Swiss Confederation.
Cover photo: Jakarta (Indonesia). Source: Tomás Herrero Diez, The World Bank.
The World Bank
Contents
1 Executive Summary .................................................................................................................. 10

1.1 Rationale ....................................................................................................................................... 1
1.2 Description of the Program........................................................................................................... 2
1.3 Building best practice into the Program ....................................................................................... 4
1.4 Institutional and regulatory structure .......................................................................................... 5
2 Introduction ...............................................................................................................................6
2.1 Background ................................................................................................................................... 6
2.2 Contents of this report.................................................................................................................. 7
3 Diagnostic ..................................................................................................................................9
3.1 Urban development and transport in Indonesian cities ............................................................. 12
3.2 Urban transport performance .................................................................................................... 15
3.2.1 Mobility in Indonesian metropolitan areas and core cities ................................................ 15
3.3 Governance of urban transport .................................................................................................. 20
3.3.1 Fragmentation of institutional responsibility ..................................................................... 21
3.3.2 National Government responsibilities ................................................................................ 23
3.3.3 Provincial Government responsibilities .............................................................................. 23
3.3.4 Metropolitan Government responsibilities ........................................................................ 24
3.3.5 Local Government responsibilities ...................................................................................... 24
3.3.6 Private sector ...................................................................................................................... 25
3.3.7 Summary of the role of different levels of Government .................................................... 26
3.4 Existing funding sources for urban transport ............................................................................. 28
3.5 Cities’ financial and technical resources ..................................................................................... 35
3.5.1 Borrowing capacity ............................................................................................................. 37
3.5.2 Fiscal capacity ..................................................................................................................... 38
3.5.3 Potential sources for funding the city commitments ......................................................... 41
4 Case studies of international experience ................................................................................... 45
4.1 National and subnational roles ................................................................................................... 46
4.1.1 Institutional structure, appraisal of proposals and project monitoring ............................. 47
4.1.2 Capacity development ........................................................................................................ 49
4.2 Mexico: Federal Support Program for Mass Transit (PROTRAM) ............................................... 50
4.2.1 Urban transport background .............................................................................................. 50
4.2.2 National support program .................................................................................................. 50
4.2.3 Funding and financial support mechanism ......................................................................... 53
4.2.4 Program assessment and lessons learnt ............................................................................. 55
Page I
The World Bank
4.3 Colombia: National Urban Transport Program (NUTP) .............................................................. 58

4.4 South Africa: Integrated Rapid Public Transport Networks (IRPTN) Program ............................ 69
4.5 China: Transit Metropolis Demonstration Program (TMDP) ...................................................... 74
4.6 Evaluation and lessons learned from the case studies ............................................................... 82
4.6.1 The logic of national support for urban mobility and how to measure its impact ............. 82
4.6.2 The impact of national programs ........................................................................................ 83
4.6.3 A summary of lessons learned from the cases reviewed ................................................... 84
5 Funding and financing of urban public transport........................................................................ 87
5.1 The cost of urban public transport systems................................................................................ 87
5.2 Funding urban transport development ...................................................................................... 89
5.2.1 Institutional source of funding ............................................................................................ 90
5.2.2 Reliability of funding: how to build a long-range and reliable funding program................ 92
5.3 Financing public transportation .................................................................................................. 94
5.4 Private sector participation in urban public transportation ....................................................... 97
5.4.1 Investment & Construction-oriented PPP........................................................................... 99
5.4.2 Investment & Operation-oriented PPP. .............................................................................. 99
5.4.3 Equipment & Maintenance–oriented PPP ........................................................................ 100
5.4.4 Leveraging private sector participation in urban transport systems ................................ 100
6 Principles and processes of the NUTSP .................................................................................... 105
6.1 Core principles .......................................................................................................................... 105
6.2 The three-stage screening process ........................................................................................... 108
6.2.1 Eligibility criteria................................................................................................................ 108
6.2.2 Readiness criteria .............................................................................................................. 117
6.2.3 Project viability criteria ..................................................................................................... 120
6.3 Integrating the NUTSP selection criteria into existing government processes ........................ 123
Page II
The World Bank
7 Institutional structure ............................................................................................................. 125

7.1 National structure for oversight and management of the NUTSP............................................ 125
7.1.1 Acceleration team to provide guidance and oversight ..................................................... 125
7.1.2 Executing team to oversee operation of the NUTSP ........................................................ 126
7.1.3 Technical Secretariat for daily operations ........................................................................ 127
7.1.4 Independent Evaluation Body for NUTSP ......................................................................... 129
7.2 Subnational structures for implementation of the NUTSP ....................................................... 131
7.2.1 International experience with Urban Transport Authorities ............................................ 131
7.2.2 Proposed structure for Indonesian Cities ......................................................................... 132
7.2.3 Strategic planning and management by a Transit Coordination Board............................ 134
7.2.4 Tactical management by a Transit Agency covering the metropolitan area .................... 135
7.2.5 Operations performed by operating companies under performance contracts .............. 139
7.2.6 Summary of Subnational structure ................................................................................... 140
8 Technical support structure .................................................................................................... 142
8.1 Support to the Technical Secretariat ........................................................................................ 142
8.2 Support to Cities ....................................................................................................................... 142
8.2.1 Technical Assistance with planning and project preparation ........................................... 142
8.2.2 Assistance with mobilizing Municipal resources .............................................................. 142
8.2.3 Assistance with PPP Structuring........................................................................................ 143
8.2.4 Capacity Building for implementation & operation of Mass Transit Systems .................. 143
9 Financial support structure ..................................................................................................... 144
9.1 Financial mechanism of the NUTSP .......................................................................................... 144
9.2 Options for funding and financing capital expenditure ............................................................ 147
9.3 Testing fiscal impacts of the options ........................................................................................ 149
9.3.1 Analysis of financing options for a conceptual LRT scheme ............................................. 152
9.3.2 Analysis of financing options for a conceptual BRT scheme ............................................. 156
9.4 Recommended financing mechanism ....................................................................................... 160
10 Summary of the proposed National Urban Transport Support Program .................................... 162
References..................................................................................................................................... 163
Annex A: Organizations consulted, 2017 - 2019 ............................................................................... 165
Annex B: Draft Presidential Regulation (Translation from Bahasa Indonesian) ................................. 185
Page III
The World Bank
List of Tables
Table 1: Planning documents for urban transport...................................................................................... 22
Table 2: RPJMN targets for public transport in Indonesia .......................................................................... 23
Table 3: Existing National Government Support Programs for urban transport ....................................... 33
Table 4: Characteristics of the largest Indonesian cities, 2016................................................................... 36
Table 5: Maximum borrowing capacity of selected Indonesian cities........................................................ 37
Table 6: Revenue sources for urban transport ........................................................................................... 42
Table 7: LVC mechanisms............................................................................................................................ 44
Table 8: Comparison between the case study countries and Indonesia, 2017 .......................................... 45
Table 9: Change in transit before and after national program in four countries ....................................... 46
Table 10: Summary of institutional set-up and urban transport planning of selected countries .............. 47
Table 11: Summary of urban transport project appraisal mechanism of selected countries .................... 48
Table 12: PROTRAM project support mechanisms ..................................................................................... 53
Table 13: Mexico PROTRAM information sheet ......................................................................................... 57
Table 14: Steps in the implementation of NUTP in Colombia .................................................................... 59
Table 15: Government authorities at different levels and corresponding roles ........................................ 61
Table 16: Colombia NUTP information sheet ............................................................................................. 68
Table 17: South Africa National Program Information Sheet ..................................................................... 73
Table 18: Targets to be designated as “Transit Metropolis” ..................................................................... 78
Table 19: China Transit Metropolis Demonstration Program (TMDP) ....................................................... 81
Table 20: Average cost of rapid transit infrastructure and length built by mode, 2000-2015 ................... 88
Table 21: Urban Transport funding sources as applied in Indonesia.......................................................... 93
Table 22: Lending attributes of various debt financing sources ................................................................. 96
Table 23: Options and factors of private sector participation into urban transport projects .................... 98
Table 24: Core principles of the program ................................................................................................. 107
Table 25: Comparison of capabilities relevant to the functions of the NUTSP Technical Secretariat ...... 128
Table 26: Comparison of functions of various transport authorities ....................................................... 131
Table 27: Comparison of SGOE structures ................................................................................................ 138
Table 28: Characteristics of Option 1: Fully Bundled PPP ......................................................................... 147
Table 29: Characteristics of Option 2: Rolling Stock, O & M PPP.............................................................. 148
Table 30: Characteristics of Option 3: O & M Concession ........................................................................ 148
Table 31: Key features of the Options for NUTSP financial structure....................................................... 149
Table 32: Key parameters used to evaluate NUTSP financial options ...................................................... 151
Table 33: Present Value of Government Support Mechanisms for an LRT Corridor ................................ 154
Table 34: Present Value of Government Support Mechanisms for a BRT Corridor ................................. 159
Table 35: Comparison of characteristics of NUTSP financial options ....................................................... 160
Page IV
The World Bank
List of Figures
Figure 1: Key elements of the proposed NUTSP ........................................................................................... 3
Figure 2: Uncongested mobility versus population per metropolitan area ............................................... 16
Figure 3: Peak hour mobility versus population density per metropolitan area........................................ 16
Figure 4: Congestion intensity by time of day per metropolitan area........................................................ 18
Figure 5: Congestion intensity by time of day per core city area ............................................................... 18
Figure 6: Daily magnitude of congestion per metropolitan area................................................................ 19
Figure 7: Division of responsibilities for rail-based transport ..................................................................... 26
Figure 8: Division of responsibilities for road-based transport .................................................................. 27
Figure 9: Division of roles in provision of public transport ......................................................................... 28
Figure 10: Type of expenditures in the National Budget Plan of Indonesia and fund channeling ............. 30
Figure 11: Borrowing capacity of the twenty largest cities ........................................................................ 38
Figure 12: Fiscal capacity of the twenty largest cities ................................................................................ 39
Figure 13: BRT operating deficit as a percentage of fiscal capacity............................................................ 40
Figure 14: LRT operating deficit as a percentage of fiscal capacity ............................................................ 41
Figure 15: Institutional framework ............................................................................................................. 60
Figure 16: Dimensions to assess the impact of NUTP................................................................................. 82
Figure 17: Institutional funding allocation and RTR growth rate by country ............................................. 91
Figure 18: Urban Transport Debt Finance by Country and Source ............................................................. 95
Figure 19: Debt Financing Source Flow Chart ............................................................................................. 96
Figure 20: Cities with population over 500,000 in 2016 ........................................................................... 109
Figure 21: Indicative Mass Transit Mode appropriate for various City sizes ............................................ 110
Figure 22: Population density in Indonesian cities ................................................................................... 111
Figure 23: Intensity of economic activity (GRDP / capita) in Indonesian cities ........................................ 112
Figure 24: Free-flow speeds in Indonesian Cities ..................................................................................... 113
Figure 25: Peak Hour Travel Time in Indonesian Cities............................................................................. 114
Figure 26: Peak Hour Travel Speed in Indonesian Cities........................................................................... 115
Figure 27: Peak Hour Congestion Intensity in Indonesian Cities .............................................................. 115
Figure 28: Integrating the NUTSP selection criteria into Government processes .................................... 124
Figure 29: Structure of the “Acceleration Team for Urban Transport Implementation” ......................... 126
Figure 30: Government of Indonesia audit structure ............................................................................... 129
Figure 31: Institutional governance model. .............................................................................................. 133
Figure 32: Proposed institutional structure for Metropolitan areas (example for Sarbagita) ................. 140
Figure 33: Proposed institutional structure for Jabodetabek ................................................................... 141
Figure 34: Operating deficit / subsidy of selected Indian and Indonesian bus systems ........................... 146
Figure 35: Financial analysis for LRT Option 1 .......................................................................................... 152
Page V
The World Bank

Figure 38: Financial analysis for BRT Option 1 .......................................................................................... 156
Figure 41: Process for allocation of the Mass Transit Development Grant .............................................. 161
Figure 42: Key elements of the proposed NUTSP ..................................................................................... 162
Abbreviations and Acronyms

ADBI Asian Development Bank Institute
AFC Automated Fare Collection
AFD Agence Française de Développement
AP Availability Payment
APBD Annual City Budget Allocation
APBN Central Government Budget Plan
API Application Program Interface
Banobras National Works and Public Services Bank, in Spanish (Mexico)
Bappeda Local Development Planning Agency
Bappenas Ministry of National Development Planning/National Development Planning Agency
BOT Build-Operate-Transfer
BPK Badan Pemeriksa Keuangan, or Indonesian Supreme Audit Institution
BPKP Badan Pengawasan Keuangan dan Pembangunan, or Indonesian National Government
Internal Auditor
BPS Badan Pusat Statistik, or National Bureau of Statistics
BPTJ Badan Pengelola Transportasi Jabodetabek, or Jabodetabek Transportation Agency
BRT Bus Rapid Transit
CAF Development Bank of Latin America
Capex Capital Expenditure
CMEA Coordinating Ministry for Economic Affairs
CMMA Coordinating Ministry for Maritime Affairs
CBD Central Business District
CGOE Central-Government Owned Enterprises, China
CIG Capital Investment Grant
CNG Compressed Natural Gas
CONPES National Council for Economic and Social Policy
CO2 Carbon dioxide
COP Conference of the Parties
CSP City Support Program
CTF Clean Technology Fund
DAK Dana Alokasi Khusus or Special Allocation Budget
DAU Dana Alokasi Umum or General Allocation Budget
DBH Dana Bagi Hasil or Revenue Sharing (Indonesia)
Page VI
The World Bank
DFAT Department of Foreign Affairs and Trade (Australia)

DBOT Design-Build-Operate-Transfer
DKI Jakarta Special Capital Region of Jakarta
DNP Department of National Planning
DoT Department of Transport
DSCR Debt Service Coverage Ratio
EMO Equipment & Maintenance-oriented
FBC Final Business Case
FONADIN National Infrastructure Fund (FONADIN from its Spanish acronym)
FTA Federal Transit Administration
GDP Gross Domestic Product
GEF Global Environmental Facility
GHG Greenhouse Gases
GoC Government of China
GOE Government-owned Enterprise
GoI Government of Indonesia
HITS Hierarchically Integrated Transit System
HTTP Hypertext Transfer Protocol
ICO Investment & Construction-oriented
IDB Inter-American Development Bank
IDP Integrated Development Plan
IDSUN Indonesia Sustainable Urbanization (Multi-Donor Trust Fund)
IFI International financial institutions
IG Inspectorate General
IMTS Integrated Mass Transport Systems
INIS Indonesia Infrastructure Support
INDC Intended Nationally Determined Contributions
IOO Investment & Operation-Oriented
IRPTN Integrated Rapid Public Transport Network
ITDP Institute for Transportation and Development Policy
ITP Integrated Transport Plan
ITS Intelligent Transport Systems
IOO Investment &Operation-oriented
Jabodetabek Jakarta-Bogor-Depok-Tangerang-Bekasi
JNNURM Jawaharlal Nehru National Urban Renewal Mission (India)
JUTPI Jabodetabek Urban Transport Policy Integration
LGFP Local Government Financing Platforms
LM/A Line Ministry / Agency
LRT Light Rail Transit
LTA Land Transport Authority
LVC Land Value Capture
M&E Monitoring and Evaluation
MDB Multilateral Development Bank
MESDE Ministry of Ecology, Sustainable Development and Energy
MHA Ministry of Home Affairs
Page VII
The World Bank
MHCP Ministry of Finance, in Spanish (Colombia)

MHRUD Ministry of Housing and Urban-Rural Development
MoEP Ministry of Environmental Protection
MoF Ministry of Finance
MoHA Ministry of Home Affairs
MoT Ministry of Transport
MoUD Ministry of Urban Development
MPWH Ministry of Public Works and Housing
MRT Mass Rail Transit
NDB National Development Bank
NDRC National Development Reform Commission
NMT Non-Motorized Transport
NUTP National Urban Transport Policy
NUTSP National Urban Transport Support Program
OBC Outline Business Case
O&M Operations and Maintenance
Opex Operating Expenses
PAC Growth Acceleration Program
PBB P2 Pajak Bumi Bangunan Perkotaan dan Pedesaan or Land and Building Taxes
PCU Project Coordination Unit
PDF Project Development Facility
PIMUS Comprehensive Plan of Sustainable Urban Mobility, in Spanish
PPP Public-Private partnership
PROTRAM Federal Support Program for Mass Transit (Mexico)
PT Public Transport
PTNG Public Transport Network Grant
PTNOG Public Transport Network Operations Grant
PT PII PT Penjaminan Infrastruktur Indonesia or Indonesia Infrastructure Guarantee Fund
PT SMI PT Sarana Multi Infrastructure
PTSS Public Transport Strategic Systems
RTR Ratio of Rapid Transit per Resident
PV Present Value
RDTR Detailed Spatial Plan (Indonesia)
RITJ Greater Jakarta Transportation Master Plan
RKP Government Working Plan (Indonesia)
RoW Right of Way
RPJMD Regional Medium-Term Development Plan (Indonesia)
RPJMN National Medium-Term Development Plan 2015-2019 (Indonesia)
RPJPN National Long-Term Development Plan 2005-2025 (Indonesia)
RTRWN National Spatial Plan (Indonesia)
RTRWP Provincial Spatial Plan (Indonesia)
RTRWK District/City Spatial Plan (Indonesia)
SASAC State-owned Assets Supervision and Administration Commission of the State Council
SCT Secretariat of Communications and Transport (Mexico)
SFPC Secretariat of Finance and Public Credit
SGOE Subnational Government Owned Enterprise
Page VIII
The World Bank
SHCP Secretariat of Finance and Public Credit, in Spanish (Mexico)

SMART Simple, Measurable, Achievable, Realistic, and Time-bound
SNG Subnational Government
SOE State-Owned Enterprise
TA Technical Assistance
TMDP Transit Metropolis Demonstration Program
TMDC Transit Metropolis Demonstration City
TOD Transit Orientated Development
TOT Transfer-Operate-Transfer
UMUS Sustainable Urban Mobility Unit
UNFCCC United Nations Framework Convention on Climate Change
URL Uniform Resource Locator
VGF Viability Gap Fund
VTPI Victoria Transport Policy Institute
WB The World Bank
Page IX
This page intentionally left blank
The World Bank
1 Executive Summary
1.1 Rationale
1. This report builds on experience in a number of developing countries to propose a National
Program of financial and technical support to Indonesian Subnational Government to accelerate urban
public transport development as a driving force to improve transport service in cities. The rising
relevance of cities and the challenge for sustainable development have stimulated the analysis and
discussions on urban transport national policies. The establishment of national programs to support
implementation of the public transport policies has been a growing trend in the last decade.
2. Responsibility for addressing urban transport in Indonesian cities has been decentralized, but
cities have little support to face the challenge and they are not yet ready. Cities do not have:
 The institutional structures required to achieve good integration between transport and spatial
planning or enable them to regulate traffic/transport effectively;
 Technical expertise to adequately plan, design, implement and operate public transport systems;
and
 The necessary fiscal capacity to implement mass transit systems.
3. Existing support from the National Government is insufficient and not well focused. A national
agency specifically responsible for urban transport was only re-established in the Ministry of
Transportation in early 2019, and national support initiatives are fragmented, relatively small, ad hoc, and
not necessarily effective (e.g. national bus purchasing program).
4. The upfront costs for mass transit are huge, and too high for Subnational Government alone.
Analysis of the borrowing capacity of the twenty largest Indonesian cities found that only the special
capital region, DKI Jakarta, had borrowing capacity adequate to implement 20km of Light Rail Transit (LRT)
lines. The lower capital cost of Bus Rapid Transit (BRT) systems makes them more affordable, however,
only DKI Jakarta, and a further six cities, namely Surabaya, Bekasi, Bandung, Medan, Tangerang and
Semarang, have sufficient borrowing capacity to meet the Capital Cost of 30km of BRT network. Of these,
Bekasi, Medan, Tangerang and Semarang all have borrowing capacity less than USD 200 Million. The
amount of borrowing for a BRT system costing USD 140 Million would, therefore use more than 70% of
the borrowing capacity of the city, leaving little capacity available for other sector and projects of
importance to the city.
5. Fiscal reform of Subnational Government and increased own-source revenue will be required
to enable cities to meet the expected range of operating deficits of a mass transit system. Analysis of
the fiscal capacity of the largest Indonesian cities revealed that the expected range of LRT operating cost
shortfall may comprise around 20% of the discretionary spending on a city’s budget. BRT operating deficit
is smaller than LRT but may still comprise around 10% of the fiscal capacity of a city.
Page 1
The World Bank
1.2 Description of the Program

6. The objective of the proposed National Urban Transport Support Program (NUTSP) is to
overcome financial and technical constraints to the implementation of mass transit systems by
Subnational Governments.
7. The NUTSP will help Indonesia tackle its urban transport crisis and reduce Green House Gas
(GHG) emissions. It is expected to:
 Initially, support the development of mass transit systems in the largest Indonesian cities;
 Reduce national annual emissions of GHG by up to one million t CO2-eq;
 Serve at least three million daily trips;
 Generate widespread socio-economic benefits for up to 30 million Indonesians (e.g. reduced
travel times, less congestion, reduced exposure to pollution and accidents); and
 Create public transport planning and management capacity in cities.
8. The fundamental basis of the NUTSP is that cities shall be responsible for service delivery of
urban transport and must take full responsibility for the full lifecycle of public transport systems within
their municipal areas.
9. The second core principle of the Program is ensuring adequate resources for implementation of
mass transit systems by:
 Cities providing maximum affordable financing for capital expenditure (capex) with a preset
minimum percentage, and fully financing any operating deficit of the mass transit system;
 National Government providing co-financing to cover the capex shortfall and financing strong
technical support to cities; and
 Leverage of private and commercial financing.
10. Achieving efficiency and sustainability is the third core principle, by implementing process to
ensure:
 Well prepared proposals;
 Appropriate and affordable modes; and
 Competitive bidding.
11. The NUTSP will provide support to cities or metropolitan areas with population exceeding one
million people by means of two pillars: technical support and capacity building to cities; and an enhanced
financing mechanism for mass transit systems development.
12. Pillar 1: Technical support and capacity building to Subnational Government comprises:
 Assistance for planning and project preparation;
 Assistance with obtaining municipal resources (e.g. bond issues);
 Assistance with Public Private Partnership (PPP) structuring;
 Capacity building for implementation & operation of mass transit systems; and
 Monitoring and evaluation.
Page 2
The World Bank
13. Pillar 2: Enhanced financing mechanism for mass transit, is based on the city providing the
maximum capex funding possible within its fiscal capacity, with co-financing from National Government
by expansion of existing PPP Instruments of Viability Gap Funding (VGF) and Availability Payments (APs),
and provision of additional capital from National Government by a Mass Transit Development Grant.
14. This Grant from National Government may not exceed 85% of the capex of the project. The
balance of at least 15% of capex must be funded by Subnational Government, which could be sourced
from Annual City Budget Allocation (APBD), city borrowing or bond issue.
15. City budget resources will be required to meet any operating deficit resulting from shortfall
between operating and maintenance costs and the total of revenue of the system.
16. Private sector financing and efficiencies will be leveraged during both implementation and
operational phases by Capex APs Support Grant to repay private sector capital investment and Operating
Expenditure (Opex) APs Support Grant to meet reimburse private sector operations and maintenance
costs.
17. The key elements of the proposed NUTSP are shown in the following figure.
Figure 1: Key elements of the proposed NUTSP
Source: World Bank own elaboration.

Note: CMMA stands for the Coordinating Ministry for Maritime Affairs; CMEA stands for the Coordinating Ministry
for Economic Affairs; MoF stands for the Ministry of Finance; Bappenas stands for the Ministry of National
Development Planning/National Development Planning Agency; MoT stands for the Ministry of Transport; MoHA
stands for the Ministry of Home Affairs; and MPWH stands for the Ministry of Public Works and Housing.
Page 3
The World Bank
1.3 Building best practice into the Program

18. Recent experience with planning of mass transit in Indonesia (and many other countries) is that
most time and resources have been allocated to designing and building infrastructure without adequate
planning that:
 Ensures that the implementing agency understand the problem they are trying to address, and
that their plans are suitable to address that problem; and
 That the project is affordable and sustainable on an ongoing basis once operational.
19. A three-stage selection framework is proposed, that builds in best-practice into the planning
and implementation process. The three stages are eligibility, readiness and project viability.
20. The eligibility criteria aim to select cities where a mass transit system is appropriate for the city,
and whether there is strong commitment from stakeholders. Compliance with the eligibility criteria
allows a “city” to enter the project pipeline and become eligible for technical assistance and capacity
building under the Program. The eligibility criteria are:
 Population of the city/metropolitan area must exceed 1,000, 000;
 Fiscal capacity: The “city” must have demonstrated long term financial capacity to ensure
implementation and operating sustainability;
 Political commitment: Inclusion in the Regional Medium-Term Development Plan (Rencana
Pembangunan Jangka Menengah Daerah [RPJMD]) or has been set as a priority by issuance of
Subnational Government Regulation (Perda) or Head of Subnational Government Regulation
(Perwali/Perbup) on project in form of a resolution; and
 Financial commitment: Commitment of adequate funds to the project preparation through
specific allocation in the city’s annual transport budget.
21. Application of the readiness criteria will ensure that the city has the necessary planning and
institutions in place to implement and operate the system. The readiness criteria are:
 An integrated and sustainable Urban Mobility Plan for the city;
 Robust estimate of demand along priority corridor;
 Institutional arrangements considering the capacity to implement and operate the system; and
 Public participation plan.
22. The project viability criteria will verify that the proposed project is technically sound and a good
investment for the city. The relevant criteria are:
 Selection of appropriate alternative along a priority corridor;
 Reference design for the selected alternative, including network and ticketing system integration;
 Economic and financial analysis of the selected alternative;
 Plan to leveraging private sector participation and/or finance;
 Public Sector funding plan;
 Environmental and social requirements; and
 Project Implementation Plan.
Page 4
The World Bank
1.4 Institutional and regulatory structure

23. An “Acceleration Team” will oversee the Program, with daily operations managed by Executing
Team and Technical Secretariat.
 The Acceleration Team comprising the CMMA, CMEA, MoF, Bappenas, MoT, MoHA and MPWH
will have the following functions:
o Facilitate the insertion of projects in the Priority Project List to obtain funding from the Project
Development Facility (PDF);
o Facilitate PPP and other supports processes;
o Issue CMMA decision on Executing Team and Technical Secretariat; and
o Guide and oversee activates of Executing Team and Technical Secretariat.
 The Technical Secretariat, which could potentially be PT Sarana Multi Infrastructure (SMI), will
have functions as follows:
o Assist cities in obtaining PDF or alternatively manage a PDF for public transport projects;
o Guide cities in technical aspects of project preparation;
o Support cities in financial structuring;
o Evaluate Outline-, and Final- Business Case (OBC and FBC) to make sure proposals are
technically and financially sound;
o Build capacity to design, implement and operate public transport systems in cities;
o Develop a national database to allow ongoing monitoring and refinement of the Program; and
o Support the design of a national value capture framework and support implementation in cities.
24. Implementation of the NUTSP will be through a Presidential Regulation, CMMA decision and
MoF regulation.
 A draft version of a Presidential Regulation on “Acceleration of Urban Transport Implementation”
has been prepared, which once signed will specify: The type of support of support; Eligibility and
readiness criteria; Procedures and the functions, structure and members of an Acceleration Team
to govern the Program.
 A CMMA decision will be required that specifies the functions, structure and membership of the
Executing Team and Technical Secretariat.
 A MoF regulation will be required to implement the Mass Transit Development Grant.
 A further regulatory change is needed to explicitly allow use of both VGF and AP (called Capex AP
Support Grants in this document) from National Government on the same project.
25. Annual allocations from the National Budget will be required to provide the funding required
from National Government to provide support for capital expenditure through the new Mass Transit
Development Grant and existing VGF and AP mechanisms. Annual budget allocations to the NUTSP will
also be required to fund the technical support and capacity building activities that comprise pillar 2 of the
program.
Page 5
The World Bank
2 Introduction
2.1 Background
26. The relevance of cities is progressively growing, as living space for people and economic hubs.
Cities occupy 3% of the earth surface but accommodate more than 50% of the population. They also
concentrate a substantial portion of the value added: some 600 urban areas, with one fifth of the world
population, generate more than 60% of the world GDP (McKinsey, 2011). Cities account for 67% of the
world energy consumed and for 75% of the natural resources extracted. There are negative visions of
cities (as the places where most problems accumulate), as well as positive ones: they provide of
opportunity, composing nodes able to generate prosperity and innovation.
27. Mobility is one of the key factors for cities´ success. The agglomeration economies generated by
the contiguity of people and activities in urban areas are one of the reasons for cities´ attraction and a key
factor for their success. But there is a paradox: when cities growth and prosper, people and freight
movements increase in number and length, generating congestion and substantial negative externalities
(like air pollution, GHG emission, noise and fatalities). Therefore, people’s access to places, activities and
services becomes increasingly difficult (particularly for the poor) and quality of life and attractiveness for
business and jobs decline. This is the reason why ensuring mobility through adequate urban
transportation policy has become one of the major challenges for urban development.
28. Public transport constitutes one of the main pillars for a mobility strategy aimed at the
development of sustainable cities. The agenda that cities in developing countries adopt generally
promote the organization of transportation systems compatible with a livable and sustainable urban
environment, ensuring mobility and minimizing negative externalities. It typically includes the
enhancement of public transportation, in order to avoid individual trips (fueled by the growing
motorization) and informal services (characterized by their poor service and large negative impacts).
Although there are many other components in the agenda (promote non-motorized transport, reduce
carbon emissions, etc.), the improvement of public transportation is doubtless a key one. It usually argued
that the lack of action in this agenda may have much large future costs for cities.
29. Responsibility for addressing urban transport in Indonesian cities has been decentralized1, but
cities have little support to face the challenge and they are not yet ready. Cities do not have:
 The institutional structures required to achieve good integration between transport and spatial
planning or enable them to regulate traffic/transport effectively;
 Technical expertise to adequately plan, design, implement and operate public transport systems;
and
 The necessary fiscal capacity to implement mass transit systems.
1
Indonesia has implemented an administrative and fiscal decentralization policy from 2001 as mandated by Law No.
22 and 25 of 1999, which were superseded by Laws No. 32 (Regional Administration) and 33 (Fiscal balance between
the Central Government and the Regional Governments) of 2004.
Page 6
The World Bank
30. Existing support from the National Government is insufficient and not well focused. There is no
national agency specifically responsible for urban transport, and national support initiatives are
fragmented, relatively small, ad hoc, and not necessarily effective (e.g. national bus purchasing program).
31. To accelerate urban public transport development, many developing countries initiated
national programs as a driving force to improve transport service in cities. The rising relevance of cities
and the challenge for sustainable development have stimulated the analysis and discussions on urban
transport national policies (Tsay & Herrmann, 2013). The establishment of national programs to support
implementation of the public transport policies has been a growing trend in the last decade.
32. In some cases, national urban transport policies include programs generated by the National
Government aimed at promoting public transportation systems in cities under the jurisdiction of
Subnational entities. This way, the programs intend to articulate national policies (urban mobility, urban
development, environment, energy) with the projects that make them happen, which are implemented
at the local level. Such an approach is consistent with Indonesian decentralization policy.
33. There are many cases of national urban transport programs aimed at developing mass transport
systems in cities that could provide guidance to the process of developing a similar program for
Indonesia. The Colombia National Government set up National Urban Transport Program (NUTP) in 2002;
Mexico started Federal Support Program for Mass Transit (PROTRAM) in 2008; South Africa established
the Integrated Rapid Public Transport Networks (IRPTN) Program in 2005, and China initiated Transit
Metropolis Demonstration Program (TMDP) in 2011. The European Union is a good example of national
transport policy agreed on a regional basis, with specific action plans for urban mobility; Australia provides
another example of urban transport strategy. Other relevant cases in developed countries are United
States, Japan, Korea and Singapore, while in the developing world, good examples of national urban
transport programs are Brazil, Chile, India and Philippines
2.2 Contents of this report

34. This report is an output from the work performed for Outcome (OC) 3.1, of Component 3:
Strengthened National Programs and Approaches in Priority Urban Infrastructure Sectors, of the Indonesia
Sustainable Urbanization Multi-Donor Trust Fund (IDSUN). OC3.1 is stated as “Improved conditions for
urban transport systems through the establishment of a national platform to channel financing and
capacity building for major urban transport projects as well as a coherent regulatory framework that
defines respective roles and modalities”. The Output (OP3.1) is “Improved understanding of the building
blocks needed for the central government to channel financing to City-level Governments in the
implementation of major urban transport projects”
35. This report follows earlier reports under this component comprising:
 Diagnostic Analysis of Public Transport in Indonesian Cities; and
 Central Government Support for Urban Public Transportation: International Experience 2016,
updated March 2019.
36. Chapter 3 summarizes the key findings of the first of these prior reports.
Page 7
The World Bank
37. The key findings of an investigation of international experience with centralized support programs
are presented in Chapter 4. The findings are based on case studies in Mexico, Colombia, China and South
Africa.
38. Chapter 5 presents a review of the funding and financing of urban public transport, and a
description of methods of private sector involvement in financing, construction and operation. In this
report the terms “funding” refers to the ultimate source of payment for the system (i.e. taxpayers or
users), and “financing” to the provision of capital to deliver the system infrastructure.
39. The principles upon which the NUTSP is based are described in Chapter 6, together with a three-
stage screening process that builds “best practice” into the program
40. The institutional framework for the NUTSP is described in Chapter 7 of this report.
41. The proposed NUTSP will address the key financial and institutional weaknesses of the current
system. The NUTSP comprises two pillars, namely: capacity building and support to cities to enable them
to plan, implement and manage mass transit systems; and an enhanced financing mechanism for the
implementation of mass transit systems in large Indonesian cities.
42. The technical assistance pillar, described in Chapter 8, covers:

 Project preparation grants and support;
 Training in analytical methods to cities;
 Requirements for effective project management and other implementation structures at city
level;
 Assistance with policy preparation for integration of transport planning with spatial planning; and
 Knowledge-sharing to develop networks and incentives for transport officials in cities to share
experience with one another and with national agencies.
43. Chapter 9 provides an explanation of the various elements of the financial support pillar of the
program, namely:
 Financing arrangements;
 Resources available for funding the Program; and
 Mechanisms for transfers from national to city governments, among others.
44. The report ends with a brief summary of the proposed NUTSP in Chapter 10.
Page 8
The World Bank
3 Diagnostic
45. Urbanization and private car dependence are increasing in Indonesia. In 2016, Indonesia had 14
cities with a population greater than one million, 12 cities with a population between 500,000 and 1
million and 72 medium-sized cities with a population of less than 500,000. The need for improved
transport is greatest in the largest cities due to the longer distances that residents need to travel.
Indonesian cities of more than one million population have the size, settlement density, and income level
that justify a network of high-capacity trunk lines with route segregation and priority at junctions, to
connect suburban centers of population with central business districts. These high-capacity routes need
to be integrated with one another and with local networks of distributor services that can access urban
compounds (kampungs) and provide mobility within the city center. Much of the growth in Indonesia’s
urban population has been in urban compounds and in suburbs remote from centers of employment and
commerce. Residents need motorized transport to reach jobs, education and social activities and the
quality of public transport now provided does not offer a credible alternative to motorcycle and car
transport. This has resulted in unsustainable growth in car and motorcycle ownership (8.5% p.a. for cars
and 10.5% p.a. for motorcycles from 2007 to 2017) and consequently a high level of motorization (488
per 1,000 people in 2017; out of this, 430 were motorcycles) 2.
46. The capacity and quality of public transport in Indonesian cities is insufficient for the size and
growth in urban population. The share of Indonesia’s population resident in cities increased from 30% in
1990 to 55% in 2015 and this trend continues. This rate of urbanization is faster than for other Asian
countries, such as Vietnam, China and Thailand. Large cities in other developing countries also struggle to
provide public transport for their growing populations but progress in providing new capacity for growing
urban population appears slower in Indonesia than in other countries of similar income levels.
47. Urban public transport in Indonesia is dominated by bus services on major routes and minibus
(angkot) services for shorter distances. A limited number of large cities have received national
government support in the form of buses for BRT services. The misnamed Indonesian-style BRT is defined
by using buses that serve stops with high-deck (700 mm) entry to vehicles but, with the exception of
TransJakarta, there is no route segregation. These BRT services do not perform well in terms of journey
time, comfort and accessibility. In addition, cities usually have informal standard buses and minibuses
serving local routes. Standard bus services depend on older vehicles and the quality of service is poorer
than for BRT. Angkots provide essential mobility, particularly in accessing kampungs, and for older people,
students and other resident who do not have access to private cars or motorcycles. The angkot fleet has
reached the end of its useful life in most cities. The commercial reality for these standard bus and minibus
services is that the poor quality of service leads to declining passenger numbers and lacking funds for fleet
renewal.
2
World Bank analysis using Statistics Indonesia data (“Number of motor vehicles by types, Indonesia 1949-2017”).
Page 9
The World Bank
48. The modal share for public transport in Indonesian cities is low and declining. The cities that
have invested most in mass transit, Jakarta and Bandung, achieve a modal share of around 15-20% but
for other large Indonesian cities, it falls to around 5% or lower. The public transport modal share for
Jakarta could be regarded at the low end of the range for cities of comparable size and income level.
However, the modal share for Surabaya at around 5% is exceptionally low for a city of 3.5 million people
and up to 9 million in the metropolitan area. Large, rapidly growing cities in China generally attract 20-
30% modal share for public transport and other East Asian capitals such as Kuala Lumpur and Manila are
comparable to Jakarta with around 15-20%. The modal share for public transport is generally more than
50% in Asian cities with well-developed networks, such as in Seoul, Singapore, Tokyo and Hong Kong.
Public transport attracts similarly high share in large Indian cities such as New Delhi (40%), Mumbai (60%)
and Kolkata (78%).
49. Fares for public transport in the majority of Indonesian cities have remained relatively low and
stable between IDR 2,000 and 4,000 over the last years. Most of the bus systems have a flat rate; for
example, in Jakarta, the TransJakarta BRT system has a rate of IDR 2,000 from 5.00 a.m. to 7.00 a.m. and
IDR 3,500 at all other times. However, commuter train services fares are usually based on the distance
travelled. In Jabodetabek3, the commuter lines have a fare structure starting at IDR 3,000 for the first 25
km plus IDR 1,000 for every additional 10 kms. Similarly, the Mass Rail Transit (MRT) system, recently
opened in Jakarta (April 2019), has a fare of IDR 3,000 for the first station plus IDR 1,000 for every further
km. Overall, fares are insufficient to cover the operational costs and further resources are required for
supplementing the farebox revenue.
50. The challenge of providing a credible alternative to cars and motorcycles, in response to
demographic growth and increased income levels, is common across large Asian cities, but not in
Indonesia. The main indicators suggest that Indonesian cities are falling behind in levels of investment
and in maintaining the competitiveness of public transport relative to private modes. As aforementioned,
Jakarta has recently opened its 16 km MRT project and two LRT lines of 32 km, which will complement an
existing 231 km BRT network and 235 km commuter rail. These are important developments but the daily
patronage on mass transit in Jakarta is small for a city of 10 million people (30 million in metropolitan
area) and other large Asian cities have delivered much higher capacity and patronage. The current
situation in Surabaya and in other large cities is much weaker and while Indonesia’s Medium-Term
Development Plan committed to an ambitious program of investment in mass transit in 44 cities, these
investments are not taking place. The inadequacy of public transport in most Indonesian cities appears
likely to become more acute, in absolute terms and relative to other metropolitan areas in Asia.
3
Jabodetabek or Greater Jakarta is an official and administrative definition of the megacity composed by Jakarta,
Bogor, Depok, Tangerang and Bekasi.
Page 10
The World Bank
51. The main consequences of insufficient supply and low modal share for public transport in
Indonesian cities are as follows:
 The usual economic benefits of urbanization are being lost due to diseconomies of scale. The
benefits of urbanization in Indonesia on prosperity have been smaller than in some other
countries in East Asia, such as China and Vietnam;
 Car ownership is higher and growing more rapidly than in other Asian cities; travel time in Jakarta
is estimated at double that of Tokyo; and
 Increasing congestion, noise and air pollution and road traffic accidents are making cities less
attractive places to do business and to live. Traffic congestion and associated pollution are leading
to adverse health impacts and poor road safety standards.
52. As urbanization occurs, Indonesian cities become more congested, which restricts mobility,
constrains economic growth and lowers the quality of life of residents. Some features common to
congested cities in both Indonesia and other developing countries4 are:
 Private sector led urban development processes;
 Urban sprawl that includes peri-urban slums and upper and middle-class suburbanization;
 Increasing social segregation;
 Inadequate public transport systems;
 Stressed and chaotic traffic patterns;
 Inadequate pedestrian and cycling infrastructure; and
 Poor and inefficient planning mechanisms.
53. If no action is taken to address the urban mobility challenges in Indonesian cities, the above
conditions will continue to deteriorate. Individually, each of these issues constrain growth. In
combination, they destroy wealth and increase inequality. Efficient and affordable public transportation
can relax the chokehold that congestion places on cities, boosting urban economies, particularly in
developing countries5.
4
Stead D., Pojani D. “The Urban Transport Crisis in Emerging Economies: A Comparative Overview.” Springer, Cham.
2017.
5
Stead D., Pojani D. “Sustainable Urban Transport in the Developing World: Beyond Megacities”. Sustainability 2015,
7, 7784-7805.
Page 11
The World Bank
3.1 Urban development and transport in Indonesian cities

54. Urban development in Indonesian cities is governed by two systems of planning. The
development planning system which is based on the Development Planning System Law (Law no. 25/2004)
and the spatial planning system, based on the Spatial Planning Law of 2007 (Law no. 26/2007).
55. The National Long-Term Development Plan (RPJPN) 2005-2025 sets a 20-year vision and
strategy for the country, while local development plans set the vision for the city or province. Bappenas
is responsible for developing and implementing national development plans, including The National
Medium-Term Development Plans (RPJMN), which are revised every five years, when a new
administration comes into power. Locally, the Local Development Planning Agency (Bappeda) is
responsible for Local Development Plans and Medium-Term Development Plans. These planning
documents, which parallel the spatial planning process, set the agenda for governance, social services,
infrastructure priorities, and socioeconomic development.
56. The Spatial Planning Law allocates spatial management authority to different levels of
government, which develop spatial plans for periods that vary according to the level of government.
The plans set policies for zoning, public transport, pedestrian networks, settlement expansion and density,
and the allocation of green open spaces, among others. Plans are supposed to be elaborated with the
support of citizens, local stakeholders, and the private sector. Based on 2017 data from the Ministry of
Agricultural and Spatial Planning/National Land Agency, 33 of 34 provinces have provincial spatial plans;
375 of 415 districts have district spatial plans; and 88 of 93 cities have city spatial plans. While the numbers
may look encouraging at first, lack of technical capacity and suitable planning data at both national and
local levels have resulted in only 90 of about 1,400 detailed spatial plans being developed.
57. Metropolitan areas are based on Government Regulations No. 26 of 2008. Attachment 2 of the
Regulation defines the following metropolitan areas:
 Mebidangro: Comprising Kab. 6 Deli Serdang, Kab. Tanah Karo, Kota Medan and Kota Binjai;
 Jabodetabek: Kab. Tangerang, Kab. Bogor, Kab. Bekasi, Kota Bekasi, Kota Bogor, Kota Tangerang,
Kota Depok, DKI Jakarta (and subsequent to the regulation, Kota Tangerang Selatan);
 Bandung Raya: Kab. Bandung, Kota Bandung and Kota Cimahi;
 Kedungsepur: Kab. Kendal, Kab. Demak, Kab. Grobogan, Kab. Semarang, Kota Semarang and Kota
Salatiga;
 Gerbangkertosusila: Kab. Gresik, Kab. Bangkalan, Kab. Sidoarjo, Kab. Lamongan, Kota Mojokerto
and Kota Surabaya;
 Sarbagita: Kab. Bangli, Kab. Gianyar, Kab. Tabanan and Kota Denpasar;
 Not named: Kab. Kutai Kartanegara, Kota Balikpapan, Kota Samarinda and Kota Bontang;
 Not named: Kota Manado and Kota Bitung; and
 Maminasata: Kab. Gowa, Kab. Takalar, Kab. Maros and Kota Makassar.
6
Kab. stands for kabupaten or regency/district, a second level administrative division in Indonesia, directly
managed by provinces.
Page 12
The World Bank
58. The World Bank has recently published a detailed evaluation of urbanization in Indonesia 7
which proposed that for metro and urban areas to benefit from urbanization and achieve greater
prosperity, inclusiveness, and livability, they must promote connected and integrated growth. With
Indonesia’s decentralization which commenced in 1999, most urban and spatial planning responsibilities
were transferred to provincial and district/city governments. However, urban and spatial planning aimed
at fostering a more connected and integrated growth has remained weak.
59. The 2018 World Bank study reported that when Indonesia will celebrate the centenary of its
independence, 70% of the population are expected to be living in towns and cities. Prior to 2000,
incomes of the urban population grew rapidly, particularly in the central, or Kota area of the large metros.
Since that date, income growth has slowed down and metro cores are struggling with problems of a lack
of affordable housing, severe traffic congestion and pollution. These factors have combined to make
metro cores less attractive destinations for migrants from rural areas, who have preferred to settle in the
urban peripheries.
60. While welfare gaps between places are large, inequality within places is even more severe, and
the gaps between the rich and poor in urban and other areas are growing. The Gini coefficient for
Greater Jakarta is among the highest in the world and, overall urban inequality in Indonesia is higher than
in regional peers such as China, India, and Malaysia. Jakarta and other Indonesian metros are residentially
segregated into high- and low-skill neighborhoods. While high-skill neighborhoods are centrally located
close to the best jobs and services, low-skill households and workers are dispersed and disconnected. This
residential segregation is contributing to inequality and undermining the strength of knowledge spillovers
between high- and low-skill workers in Indonesian metros.
61. To build cities that are better connected, and integrated, and hence more prosperous, inclusive,
and livable, better integrated spatial planning will be required. People must be connected to jobs,
opportunities and services within urban areas. Spatially coordinated urban planning can be the difference
between cities where these connections materialize and cities where people and business are left
disconnected from each other and from markets
62. Inadequate access to affordable housing remains a barrier for intra-urban connectivity and
integration. Unaffordability has led to expanded urban areas, unsatisfactory services, and proliferating
slums. This urban development pattern can be characterized as distant, dispersed and disconnected (or
3-d). This pattern of development makes public transport service provision very difficult and expensive,
with the result that urban transport services are inadequate and unattractive for users. The impact has
been poor accessibility and mobility within cities, contributing to strong congestion forces, especially in
metropolitan areas, where the response to the dispersed land-use pattern has been increasing use of
motorcycles. Transport investment in Indonesian has focused on expanding roads for private vehicles,
making limited investment in public and nonmotorized transport.
7
Urbanization Flagship Report. Time to ACT: Realizing Indonesia’s Urban Potential, World Bank 2018.
Page 13
The World Bank
63. Urban development that is conducive to livable cities, with effective provision of public
transport, requires policies that will encourage dense, diverse, and well designed (3-D) urban areas. The
World Bank Urbanization Flagship Report recommended key policy actions that will support this 3-D urban
development pattern by:
 Land use planning and housing:
o Scale-up efforts to improve technical capacity for land-use planning and administration;
o Reforming the housing finance sector to target unserved groups and encourage private sector
investment; and
o Promote more mixed-income development to counter the residential segregation of urban
areas into high- and low-skill neighborhoods.
 Urban transport:
o Strengthen the national government’s role in guiding urban transport policy and national
coverage of investment gaps;
o Enhance local capacity to plan, operate, and maintain urban transport systems; and
o Promote transit-oriented development that encourages densification in transport corridors and
reduces travel demand and private vehicle use intensity.
64. International experience has shown that excessive land use regulation limits the supply of built
space, reduces density, and leads to 3-d urban development. Some examples of bad urban regulations
are: maximum floor-area ratio, minimum lot size, minimum parking requirements, and prohibiting mixed
land uses. The absence of detailed spatial plans referred to in paragraph 56 provides an opportunity for
those cities that have yet to develop such plans to avoid over regulation, and encourage the dense,
diverse, and well designed (3-D) urban areas that are supportive of public transport.
Page 14
The World Bank
3.2 Urban transport performance

65. Big data was used to quantify traffic and congestion in Indonesian cities. To provide meaningful
quantification of traffic conditions within Indonesian cities and metropolitan areas, the study team used
Google Traffic data in conjunction with a route-based sketch planning methodology to obtain a single
figure that is representative of travel speed within each city and metropolitan area for each hour of a
typical weekday, and to quantify the extent of congestion within each city and metropolitan area.
66. The Application Program Interface (API) on the Google Maps Platform is a service that calculates
routes, distance and travel time between locations. The API is accessed through an HTTP 8 interface, with
requests constructed as a URL9 string, using text strings or latitude/longitude coordinates to identify the
locations. Google collects current crowd-sourced location and speed data from road users who have
location service enabled on their Android smartphone. This data is processed and used to provide the
shortest time routing for the trip for either current (live) conditions or (using stored historical data) for a
day of week and time of day in the future. This is done using a proprietary algorithm, that has not been
disclosed. Akhbar and Duranton (2017) addressed the reliability of travel time estimates obtained from
using Google maps and concluded that counterfactual queries from Google Maps may slightly understate
true trip durations. The travel time and congestion estimates presented in this document may therefore
be slightly conservative.
67. 28 Metropolitan area were identified based upon Kabupaten boundaries, population size, and
inter-Kabupaten commuting flows. Kecamatans10 were used for traffic analysis zones in each metro.
“Sketch planning” travel demand models for each metro area were used to give relative travel demand
for each trip interchange. “Big data” obtained from Google Traffic API was used to define the shortest
time route for each inter-zonal trip in each metro area, for each hour of a typical weekday. Travel time
and route distance were extracted per route. Post-processing was done to derive hourly travel speeds,
free-flow speed and congestion intensity for each trip interchange. Hourly average performance measures
were calculated by weighting the performance measures for each trip interchange by the relative travel
demand. Daily measures were obtained by weighting the hourly values by an assumed daily traffic
distribution. The performance measures derived for both metropolitan areas and cities were: free-flow
speed; peak hour travel time; peak hour speed; and peak hour congestion intensity.
3.2.1 Mobility in Indonesian metropolitan areas and core cities
68. The analysis found that travel speeds in Indonesian cities were slow throughout the day, with
daily average speeds of 23 km/h and 28 km/h in the “core cities” and full metropolitan areas respectively.
Peak hour speeds were only marginally slower at 21 km/h and 26 km/h in core and full metropolitan areas
respectively.
69. Even free-flow speeds, which measure uncongested mobility, were found to be very low. Free-
flow was generally found to be between 03:00 and 04:00 a.m. The highest free-flow speeds were observed
in DKI Jakarta, where there is an extensive network of high capacity motorways, with resultant high speeds
8
HTTP stands for Hypertext Transfer Protocol.
9
URL stands for Uniform Resource Locator, colloquially termed as web address.
10
Kecamatan or subdistrict is a third level of administrative division in Indonesia.
Page 15
The World Bank
when traffic is very light. The low speeds in off-peak periods can be ascribed to the generally poor quality
of the Indonesian urban road networks, requiring motorists to navigate through generally narrow and
windy roads, with poor pavement quality and multiple uncontrolled intersections.
70. There was no significant correlation between the population of the metropolitan area and free-
flow speed, which averaged 29 km/h in the core cities and 33 km/h in the full metropolitan areas.
Figure 2: Uncongested mobility versus population per metropolitan area
Source: World Bank analysis

Figure 3: Peak hour mobility versus population density per metropolitan area
Page 16
The World Bank
71. Peak hour mobility was also found to be unrelated to the population, but with some negative
correlation to population density. The evening peak generally occurred between 5:00 and 6:00 p.m. and
the lowest peak hour speed was found to be 18 km/h in Depok, while the highest was 31 km/h in Pasuruan.
The full range of results is shown, plotted against population density, in Figure 3 on the preceding page.
72. While peak hour speed gives a good comparison of the severity of traffic congestion, a better
indicator is congestion intensity. The starting point for any assessment of the extent of congestion is to
define the term “congestion”. However, there is no commonly accepted definition. Aftabuzzaman (2007)
lists thirteen definitions, categorized under the three categories of demand – capacity, delay – travel time,
and cost related. For the purposes of this assessment, “congestion” is defined as the travel time incurred
by road users in excess of that normally incurred due to impedance caused by other vehicles.
73. Quantification of the magnitude of congestion, therefore, requires a further definition of the
“travel time normally incurred” or the baseline travel time, above which congestion is deemed to start.
The widely regarded annual US Urban Mobility Report uses free-flow travel time as the basis to estimate
congestion costs in nearly 500 US urban areas. This approach has been criticized by the Victoria Transport
Policy Institute (VTPI) (2018) claiming it is economically inefficient to provide sufficient road capacity to
allow all daily traffic to operate at free-flow conditions. Furthermore, public perception is that congestion
occurs when there are significant delays to a trip. This implies that a trip which takes, say, 5% longer than
under free-flow (one minute extra on a twenty-minute trip) would not be generally perceived by road
users as a congested trip.
74. To overcome this weakness, various other studies have used either capacity-maximizing, or
economic efficiency-optimizing speeds as the baseline against which to measure congestion costs (Litman
2014). The drawback of approaches using the maximum capacity as the baseline, is that queues and delay
on urban roads occur well before the theoretical capacity is reached. In fact, the Highway Capacity Manual
notes that slight congestion occurs even Level of Service B.
75. The approach used in this analysis is similar to that used by Transport Canada (2006) where the
baseline, or congestion threshold, was defined as travel speeds being a specific percentage lower than
free-flow speed. Transport Canada used a range of thresholds namely 50%, 60% and 70% of free-flow
speed. These threshold values correspond to excess travel times of 100%, 67% and 43% respectively.
76. As discussed earlier in this section, travel speeds in Indonesian cities are slow throughout the
day, even under “free-flow” conditions. Application of the Canadian thresholds for Indonesian cities would
therefore give an unrealistically low estimate of congestion as Canadian free-flow conditions could be up
to twice as fast as those in Indonesia.
77. The congestion threshold was therefore taken as travel time more than 25% longer than “free-
flow” conditions. Where “free-flow” is defined as the shortest travel observed for each origin-destination
(O-D) pair over the 24 hourly measurements. The study team acknowledge the arbitrary nature of this
threshold but consider to provides a definition that is consistent with road users perceptions of congestion
and is simple to measure using the study methodology.
78. In the text and graphs that follows, the term “congestion intensity” is used to represent the
percentage by which the observed travel time exceeded the free-flow travel time. Congestion intensity
exceeding 25%, was therefore considered as representing congested conditions.
Page 17
The World Bank
79. Figure 4 and Figure 5 that follow, show the congestion intensity in the peak hour for the full
metropolitan areas and core city areas respectively.
Figure 4: Congestion intensity by time of day per metropolitan area

Figure 5: Congestion intensity by time of day per core city area
Page 18
The World Bank
80. The figures show that congestion intensity builds up gradually throughout the day. There is only
a slight morning peak period when the average congestion intensity reaches 23%. However, congestion
worsens after midday to reach 28% in the evening peak hour. Congestion is significantly worse in the
“core” areas, where average morning peak congestion intensity was found to be 33%, increasing to 39%
in the evening peak.
81. From Figure 5 the most congested city areas are Kota Bandung, Kota Medan, Kota Balikpapan,
Kota Surakarta and Kota Magelang.
82. Over all twenty-eight metropolitan areas it was found that 30% of daily trips were made under
congested conditions, with the highest value, of 65%, occurring in DKI Jakarta. As shown in Figure 6 the
denser areas experience a higher percentage of daily trips under congested conditions.
Figure 6: Daily magnitude of congestion per metropolitan area
Page 19
The World Bank
3.3 Governance of urban transport

83. As aforementioned, Indonesia began a process of rapid decentralization in 1999 that assigned
responsibility for different public services to different levels of government under Law 22/1999 on
Regional Governments and Law 25/1999 on fiscal balance between the Central and Regional
Governments11. In contrast to most of the countries that give autonomy to provincial and state levels of
government, Laws No. 22/1999 and No. 25/1999 of Indonesia give autonomy directly to the regencies and
cities at the Subprovincial level. The laws give Local Governments responsibilities and authority to
determine the size and structure of budget expenditure. Compared with Local Governments, provinces
have only limited responsibilities. The Provincial Governments have double roles as autonomous Regional
Governments and as regional representatives of the National Government. They are responsible for
supervisory functions and are supposed to intervene in matters that require cross-jurisdictional
cooperation. As the regional representatives of the Central Government, the Provincial Governments are
expected to oversee and closely supervise, making decentralization work more effectively.
84. Indonesia decentralization give responsibility to Local Government to provide public services to
the regencies and cities at the Subprovincial level. The Law 22/1999 was revised twice with Law 32/2004
and Law 23/2014. Under Law 23/2014, National Government retained responsibility for absolute
functions namely finance, foreign affairs, defense, security, religion, and state administration and justice,
and give responsibility to Local Governments to execute a wide range of compulsory and noncompulsory
functions in areas such as health, education, public works, environment, communication, transport,
agriculture, manufacturing industry and trade, capital investment, land, cooperatives, labor force, and
infrastructure services.
85. As the result of decentralization, the provision of transport services and networks is divided
based on the jurisdiction boundary. Roads are classified into village roads, regency roads, city roads,
provincial roads, and national roads (Law No. 38/2004). Railways are classified into regency railway
network, city railway network, provincial railway network, and national railway network (Law No.
23/2007). Public transport is divided by regency/city public transport routes, provincial public transport
routes, and national public transport routes (Law No. 22/2009). Regency/city public transport routes are
routes connecting any origin and destination pairs located within a regency/city, provincial public
transport routes are routes connecting any origin dan destination pairs that are located in two or more
different districts/cities within one province, and national public transport routes are routes connecting
any origin dan destination pairs that are located in two or more different provinces.
86. The delegation of responsibility for transport services within cities to the Local Government has
resulted in discontinuity of services that extend across city boundaries. In principle, services that extend
to two cities fall within the responsibility of the Provincial Government and services that cross provincial
boundaries become the responsibility of Central Government. There is an exception for DKI Jakarta with
the Provincial Government taking the responsibility at city level. This rule of division is applied for road,
water, and rail-based transport. Some other sectors also have this administrative boundary-based role
division such as the spatial planning.
11
Anwar Nasution (2016). Government Decentralization Program in Indonesia, Working Paper Series No. 601
October 2016, Asian Development Bank Institute (ADBI).
Page 20
The World Bank
87. Indonesian cities have extended beyond their historic boundaries, so transport planning needs
to be based on mobility demands within the cities’ wider metropolitan areas. Cities discuss their plans
for services and form lose federations with their neighboring municipalities but structures for providing
and regulating public transport across boundaries within metropolitan areas are weak. Similarly, some
funding for public transport is allocated within historic boundaries so responsibility for services that cross
municipal boundaries falls to central transport agencies. Most Provincial Governments do not have the
financial or technical resources to take the lead in public transport in metropolitan areas.
88. The division of transport service and network has led to lack of planning coordination and urban
transport service integration, especially in metropolitan areas. As the responsibility of transport network
and service is divided based on jurisdiction, urban transport planning and public transport service in
metropolitan area are not integrated. This reduces level of service of urban transport as well as public
transport. In a metropolitan area such as Greater Jakarta, there are various mode of transport that are
not integrated at all. Those are commuter rail belongs to Central Government serving rail network in
Greater Jakarta area, MRT line belongs to Jakarta Government serving a line in Jakarta, BRT network
belongs to Jakarta Government serving bus network in Jakarta area, intercity bus belongs to Central
Government serving Greater Jakarta bus network, etc.
3.3.1 Fragmentation of institutional responsibility
89. Fragmentation of institutional structure, both at Central and Subnational Governments, to deal
with urban transport is started at planning stage. There are a number of documents to guide urban
transport planning that are issued by different institutions. As stated in paragraph 54, there are two
different laws related to planning namely Law 25/2004 on Development Planning System and Law
26/2007 on Spatial Planning. Based on Law 25/2004, development planning consists of Long-Term
Development Plan (RPJP) with horizon of 20 years, Medium-Term Development Plan (RPJM) with horizon
of 5 years, and Government Working Plan (Rencana Kerja Pemerintah [RKP]) with horizon of 1 year. Each
level of government has its own development planning namely National RPJP and RPJM, Provincial RPJP
and RPJM, and District/City RPJP and RPJM. Development Plans of Subnational Government must refer to
development plans of National Government and also must include Development Programs that will be
implemented through RKP of ministries and institutions at national level.
90. The main principles of development plan preparation are top down and participative. RPJP is
legalized through a Law and RPJM is legalized through a President Regulation. Development of RPJP and
RPJM are led by development planning agency of each level of government. RPJM and RKP are the basis
of annual budget allocation to each sector (annual budget plan). Based on Law 26/2007, spatial plans
consist of National Spatial Plan (Rencana Tata Ruang Wilayah Nasional [RTRWN]), Provincial Spatial Plan
(Rencana Tata Ruang Provinsi [RTRWP]), and District/City Spatial Plan [RTRWK]). Development of RTRW
are led by the spatial planning agency of each level of government for a 20-year horizon. A
synchronization process is necessary in the development of RPJP and RTRW. RPJM must refer to RTRW,
but RTRW may also be adjusted to accommodate activities in the RPJM. For a metropolitan area consists
of several different jurisdictions, the synchronization and adjustment processes of these planning
documents are not easy and take time.
Page 21
The World Bank
91. There are several sectoral planning documents related to urban transport that must be in line
with spatial plans. An urban transport master plan must be synchronized not only with spatial plans, but
also with road master plans, railways master plans, and road transport and traffic master plans. These
plans are prepared by the relevant transport agencies at each level of government and road authority at
each level of government. These plans usually have a 20-year horizon.
Table 1: Planning documents for urban transport
Types of Plan National Provincial District/City

Spatial RTRWN - Ministry of RTRWP - Spatial Planning RTRWK and Detailed Spatial
Agrarian Affaris and Spatial Office Plan (RDTR) - Spatial Planning
Planning Office
Development RPJPN and RPJMN - RPJPP and RPJMP - RPJPD/C and RPJMD/C -
Bappenas Provincial Development District/City Development
Planning Agency Planning Agency respectively
Transport sector National Transport System Provincial Transport District/City Transport System
Policy - MoT (Sistranas/ System Policy - Provincial Policy - District/City Transport
Tatranas) Transport Office (Tatrawil Office (Tatralok/ Tatrawil
Provinsi) Kota/ Kabupaten)
Road Transport National RTT Master Plan - Provincial RTT Master District/City RTT Master Plan -
and Traffic (RTT) DG Land Transport of MoT Plan - Provincial District /City Transport Office
Transport Office
Road National Road Master Plan - Provincial Road Master District/City Road Master Plan
Directorate General of Plan - Provincial Public -District /City Public Works
Highways (DGH), MPWH Works Office (Rencana Office (Rencana Induk LLAJ
(Rencana Induk LLAJ Induk LLAJ Provinsi) Kota / Kabupaten)
Nasional)
Rail National Rail Master Plan - Provincial Rail Master District/City Rail Master Plan -
DG Rail of MoT(RIPNAS) Plan -Provincial Transport District /City Transport Office
Office (RIP Provinsi) (RIP Perkotaan)
92. While table above includes all modes of transport, urban railway planning scarcely exists at city
level. At city-level, urban transport planning is commonly dominated by road-based transport, and
specifically private road-based transport, with little attention given to public transport.
93. Road- and rail- based transport are governed by different legislation. Thus, road-based
transport, including public transport and mass transit, follows the Law No. 22 of 2009, while rail-based
transport is governed by the Law No. 23 of 2007. Nevertheless, there are some similar parts in each Law
on sharing of responsibilities, obligation, and the implementation arrangement.
Page 22
The World Bank
3.3.2 National Government responsibilities
94. At national level, the overall transport planning processes are guided by Bappenas in
coordination with the detailed strategic implementation plans of the MoTand the MPWH.
95. The Government of Indonesia (GoI) recognizes the scale of public transport deficits in cities and
the importance of increasing investment to achieve more sustainable mobility patterns. The RPJMN for
2015-2019 has extremely ambitious targets for investment in mass transit schemes in 44 cities. The Plan
envisaged that these investments and other policies would ultimately lead to a 50% reduction in the modal
share for car/motorcycle by 2030 and that urban rail, BRT, and walking/cycling would capture these trips.
Table 2: RPJMN targets for public transport in Indonesia
Indicators Baseline Targets by 2019

Share of public transport 23% 32%
Minimum average travel speeds on urban national roads 8.3 km/h 20 km/h
Develop BRT systems 17 cities 34 cities
Develop urban railway systems 2 cities 10 cities
96. Besides that the achievement of the modal shift target captured on the table above would be a
challenge for the majority of countries. The limited investment in urban transport, except for Jakarta,
will lead to the targets for 2019 not being reached.
97. Within the MoT, the responsibility for urban transport development is split between the
Directorate General of Railways and the Directorate General of Land Transport. The cooperation
between these Directorates is limited, which hinders planning and implementation of urban transport
since all mode should be properly integrated as an urban mass transit system. Before decentralization, all
railway arrangements were under the National Government authority (MoT). However, after
decentralization, the responsibility was devolved to Subnational Governments, subject to technical
approval from the MoT.
98. Other national-level entities that have some degree of responsibility and control regarding
transportation infrastructure planning and implementation are the: MoF, CMMA, CMEA, Ministry of
Industry, Ministry of Trade, Ministry of Energy and Mineral Resources, Ministry of State Enterprises,
Ministry of Agrarian Affairs and Spatial Planning and National Police.
3.3.3 Provincial Government responsibilities
99. Provincial Government has only a limited role in urban transport. While National Government
is responsible for setting guidelines and regulation, the cities are responsible for project implementation.
The roles left for Provincial Government lie in the transport coordination between cities, delivering
grants/support to cities, and licensing public transport which cross cities/regency’s boundary.
100. In recent years, there has been an increasing need for Provincial Government involvement in
urban transport as more metropolitan areas emerged and resulted in larger number of trips crossing
cities administrative boundaries. There are more cities with the role of core city, with increasing
employment, and resultant increased commuting flows from home to the office. As mentioned above,
Page 23
The World Bank
transport between cities is responsibility of Provincial Government such as in Sarbagita Metropolitan in

Bali. However, if one city belongs to different provinces,, e.g. Jabodetabek,the National Government is
responsible for urban transport development.
101. In terms of implementation, the Provincial Government has a Provincial Transport Agency
(Dishub), a Bappeda and other departments, many of them similar to the city department.
3.3.4 Metropolitan Government responsibilities
102. Transportation coordination at a metropolitan level exists only in Greater Jakarta, or

Jabodetabek, area. The need for transport planning for metropolitan areas has been recognized in the
Jabodetabek metropolitan area through the establishment of a Transportation Management Agency of
Jabodetabek. The 2015 Presidential Regulation that established the Badan Pengelola Transportasi
Jabodetabek (BPTJ), or Jabodetabek Transportation Authority, as a manager of an area covering three
provinces and eight cities/districts. The regulation gave the BPTJ responsibility for implementing the
transport master plan for the metropolitan area and for ensuring that public transport initiatives are
integrated with land-use planning. It also recognized that investments would need to be provided by the
State Budget, the Regional Income and Expenditure Budget and other sources. This is a positive
development but as the new agency does not have authority over the participating city governments, its
remit is more advisory than decision-making.
103. Presidential Regulation No. 55 of 2018 formalized the Jabodetabek Transportation Master Plan
(RITJ) that was prepared by the BPTJ. This Master Plan has set a target share of public transport share of
60% for Greater Jakarta by 2029.
104. Beside Jabodetabek area, eight other metropolitan areas are defined by Government regulation
and are listed in paragraph 57.
105. The Traffic and Road Transportation Law No.22 of 2009 makes provision for the establishment
of a Traffic and Road Transport Forum to provide coordination amongst agencies involved in planning
and implementation of traffic and transportation services. However, this mechanism has not been
widely implemented.
3.3.5 Local Government responsibilities
106. Most City Governments have a transport department (usually called Dinas Perhubungan or
Dishub), which has the responsibility for licensing operators, regulating services and transport planning.
Historically, cities have placed more emphasis on licensing activities that generate some income rather
than on providing public services. In addition to city transport departments, some cities have established
city-owned companies to manage projects or to operate services. For example, BRT services are provided
by city-owned companies such as TransJakarta, TransMusi (in Palembang) and TransSarbagita (in
Denpasar). A separate city-owned company is operating Jakarta’s MRT system.
107. Although regulation of public transport services within cities is also a responsibility of City
Government, cities do not set standards and supervise services to ensure that licensed operators provide
a minimum frequency of service or meet other service quality standards. Consequently, cities capacity for
public transport regulation is limited.
Page 24
The World Bank
108. The gaps in skills and experience among staff with broad responsibility for transport in
Indonesian cities are understandable considering the limited investment that has taken place to date.
An important exception applies in Jakarta where the City Government has had a clearer mandate and
financial resources to upgrade public transport. Jakarta’s transport department and the companies
established to implement and operate urban transport projects have greater breadth of experience and
relevant skills for transport planning and operations.
109. At the local level, urban public transport implementation has been constrained by a
combination of lack of technical and institutional capacity within the local transport and the structure
of transport service provision. Urban public transport services have been traditionally offered by informal
paratransit schemes, i.e. small and old vehicles without fixed routes or schedules and with non-
professional drivers operating individually and being directly paid from ticket revenues. This model left a
very limited role to the Subnational Governments (SNGs), namely route licensing and vehicle condition
inspection. SNGs rarely perform any network planning or service performance supervision and evaluation
since there is no contractual agreement between SNG and the services operator. Consequently, SNG’s
capacity to plan and manage public transport is low. The Law 22 of 2009 mandated the contractual
provision of public transport services by operators which must set up a business entity and meet a
minimum level of service. However, ten years after enacting this Law, the implementation of urban
transport projects is substantially behind the expected situation, especially acute for mass transit project
development.
110. The minor role of the SNG in managing urban transport services also resulted in negligible
benefits for the operator. Although the tariffs were set by the SNGs, with prior consultation with the
operators, there was no subsidies from the SNGs leading to unsustainably low-income levels for many
Angkot owners. Consequently, they reduced the level of service to cut operating costs, which rested
attractive to this service resulting in a significant drop in the number of passengers.
111. SNGs have generally limited fiscal capacity, which is frequently insufficient for carrying out
substantial investment on mass transit development12 but might be used to cover the operational deficit,
subject to the relevant public transport budget policy of the respective SNG. However, after decades
without budget allocated for urban transport development, a significant number of cities are still
reductant to allocate a significant portion of their resources to such projects.
3.3.6 Private sector
112. The private sector plays an important, and undervalued role in public transport development
across Indonesian cities. As aforementioned, local urban transport is dominated by Angkots, which offer
low quality, unattractive services for commuters leading to declining market share. However, some older
and low-income residents are strongly dependent on these services for their mobility.
12
Refer to section 3.5 for an analysis of the fiscal capacity of large Indonesian cities.
Page 25
The World Bank
113. In addition to Angkot services, some cities award contracts to private bus companies, who may
operate city-owned buses or in some cases provide their own vehicles. The scale of these activities is
generally small, and the profitability of contracts does not allow operators to invest in enhancing fleet and
service quality. Contracting with the private sector is most advanced in the Jabodetabek, which has
allowed corporate entities investing in new vehicles and maintenance facilities.
114. The private sector’s provision of taxi and private-hire bus services is dynamic and of high
quality. The corporate entities that provide these services have high standards in customer service and
fleet condition. These professional transport operators are potential entrants to a market for city-bus
services if contracting structures and the wider institutional environment offered secure conditions and
reasonable returns.
3.3.7 Summary of the role of different levels of Government
115. Since decentralization, SNG has taken over the majority of roles and responsibilities for the
implementation of urban transport systems and National Government is left with the roles of creating
a national urban transport vision and providing umbrella regulation for urban transport. The National
Government is required to set a nationwide vision and targets for urban transport, guidelines, norms,
standards, procedures, competency, and related policy or strategy for cities to be able to implement a
good urban public transport system. The SNG is focused on setting local plans, targets, and strategies,
supervising the implementation and guaranteeing the availability of the service. This includes giving
subsidies to cover operating deficit.
116. The division of roles and responsibilities between each level of government in the provision of
rail- and road- based public transport can be seen in the two figures below.
Figure 7: Division of responsibilities for rail-based transport
Rail-based transport consists of interprovincial, intercity, or inner-city/urban railways, with responsibility

allocated to National-, Provincial- and City/Regencies Governments respectively
Central Government Provincial Government City/Regency Government
Stipulating the direction and objectives of Setting the direction and target of Provincial Setting the direction and targets of
National, Provincial and District/City Railway and District/City Railway Development District/City Railway Development Policies.
Development Policies. Policies. Providing guidance, training and technical
 Setting guidelines, standards, and Providing direction, guidance, training and assistance to operators and users of railway
procedures for the operation and technical assistance to districts/cities, services.
development of railways; and operators and users of railway services. Supervising the implementation of
 Competency determination of officials who Supervising the operation of provincial district/city railways.
carry out functions in the railway sector. railway system.
Providing guidance, training, certification,
licensing and technical assistance to the Local
Government.
Supervising the development of the railway
system.
The implementation of railway is not directly executed by the Government but by the business entities of the
railways.
Page 26
The World Bank
Figure 8: Division of responsibilities for road-based transport
Law 22 of 2009 Article 13: Coordination of the implementation of road traffic and transportation shall be
carried out by the Road Traffic and Transportation Forum/FORUM LLAJ
Central Government Provincial Government City/Regency Government
Setting the target and direction of policy for Setting the targets and direction of the Setting the target and direction of the
developing the National Road Traffic and Provincial Road Traffic and Transportation Regency/City Road Traffic and Transportation
Transportation System: Policies (and at regency/city level if networks Policies whose network is within the
 Establishment of norms, standards, exceed the regency/city boundaries). regency/city area.
guidelines, criteria and procedures; and Providing guidance, training, certification and Providing guidance, training, certification,
 Competency determination of human permits to public transport companies in the and permits to public transport companies in
resource. province. districts/cities.
Providing guidance, training, certification, Supervising the implementation of provincial Supervising the implementation of district/
licensing and technical assistance to the Local road traffic and transportation projects. city road traffic and transportation projects.
Government.
Developing Master Plan for Provincial Road Developing Master Plan for District/City Road
Supervising the implementation of the Traffic and Transportation Network. Traffic and Transportation Networks.
norms, standards, guidelines, criteria and
Guarantying the availability and determine Guarantying the availability and determine
procedures carried out by the Local
the route network of public transportation the route network of public transportation
Government.
for transportation services for people and/or for transportation services for people and/or
Developing Master Plan for the National goods for intercity/regency within the goods within the city/regency boundary.
Road Traffic and Transportation Network. provincial boundary.
Guarantying the availability and determine
the route network of public transportation
for people and/or goods for interprovincial
transportation services for intercity/regency
cross provincial boundary.
Provision of public transport services carried out by State-Owned Enterprises (SOEs), regionally owned
enterprises, and/ or other legal entities in accordance with the provisions of the legislation.
117. As captured in the preceding figures, there is a strong similarity on how the responsibilities are
shared among multilevel government depending on trip characteristics. Both Laws, No 23 of 2007 for
railways and No 22 of 2009 for road transport, stated that the operation of the rail- and road- based
transport services must be done by business entities/third parties, and not directly by the Government.
118. In summary, the division of roles and responsibilities in the arrangement of road- and rail- based
transport services is defined in the following figure.
Page 27
The World Bank
Figure 9: Division of roles in provision of public transport
119. While the sharing of responsibilities outlines in the preceding figure are appropriate, the MoT
has not been actively addressing the responsibilities of National Government shown above. Dismantling
the Directorate of Urban Transport in 2014, significantly reduced the capacity of the MoT in that regard,
despite of the subsequent establishment of an Urban Transport Subdivision under the Multimode
Transport Department of DG Land Transport (MoT) in early 2019 . Furthermore, cities have not sufficient
capacity to perform urban transport functions independently and still need guidance, capacity building,
and financial support from National Government.
3.4 Existing funding sources for urban transport

120. The limited capacity of public transport in Indonesian cities and the poor quality of services
reflect the low level of current capital expenditure. Expenditure for public transport accounts for a non-
material proportion of the city budgets for most cities. Only the three larger cities (Jakarta, Surabaya and
Bandung) spend more on their public transport systems but is still around 1% of their budgets.
121. The reason for such low spending on public transport is that under Law 23/2014, urban
transport is a compulsory function but is not defined as a basic service, which implies low budget
allocation in cities and no regular support from Central Government. District/City Governments are
usually more focused on providing basic services to what they allocate larger budget portions.
Page 28
The World Bank
122. Based on data of budget plan of Indonesia big cities in 2015, cities only allocated between 0.13%
to 1.53% of their budgets for urban transport capital expenditures. On the other hand, cities allocated
between 2.63% to 9.33% of their budgets for road capital expenditures; road is considered as a basic
service. In addition, there are also regular special allocation budget and special grant from Central
Government for subnational roads, and no such supports for urban transport. Given the low fiscal capacity
of cities and the low budget allocation for urban transport, its development heavily relays on National
Government support through APBN (Central Government Budget Plan) contributions.
123. Low expenditure on public transport in urban areas needs to be seen in the context of overall
GoI expenditure on transport, which has increased substantially since 2006. Transport accounted for 6%
of total Central Government spending and 60% of spending within Economic Functions in 2013. Most of
this expenditure is to build and upgrade national road and rail networks and to fund operating costs.
Certain infrastructure investments in the national transport networks help to relieve congestion in cities
through construction of orbital routes around cities and by transferring freight traffic away from city
streets. However, these benefits are secondary to the investments’ main objectives to improve transport
links between cities and to improve the efficiency of freight transport.
124. Similarly, national rail and bus companies have sufficient own resources or access to funds to
allocate vehicles and to provide services within metropolitan areas. Cities request additional services
from national agencies and benefit from the additional capacity provided. However, the final decisions on
allocation of resources rest with national agencies. Cities’ dependence on these allocations, in the absence
of reasonable budgets over which they have discretion themselves, means that public transport services
may be planned in cities to meet national objectives rather than to respond to mobility needs identified
locally.
125. The effective result of the current funding for transport is that while transport has been
allocated substantially increased resources, both in absolute terms and as a share of spending for
economic activities, public transport in most cities has not significantly benefited from this increased
expenditure. The main benefits have been where upgraded national networks relieve congestion within
municipal areas, where national programs have provided new buses and Intelligent Transport Systems
(ITS) to participating cities and where national bus and railway companies have resources to increase
capacity of services within certain metropolitan areas. The increased national budget allocation to
transport also helps to fund MRT and LRT construction in Jakarta and once-off projects such building a
new LRT line in Palembang for the 2018 ASEAN Games. All of these initiatives contribute to improved
public transport in specific areas but do not represent a model for sustainable funding of public transport
across large cities.
126. GoI ministries and City Governments all recognize the need to invest in additional mass transit
capacity for Indonesian cities. The primary responsibility for planning, implementing and supervising
these projects rests with the respective City Governments. However, this would require cities to have
access to resources to fund transport investments and operations at a level that would make a meaningful
contribution to their mobility needs. In considering the potential to contribute from their own resources,
cities usually borrow for capital expenditure, due to the long-term nature of the assets. In planning for
new investment, cities also need to budget for any subsidy required during the operations and
maintenance period. Cities usually fund this expenditure from current revenues.
Page 29
The World Bank
127. APBN expenditure is divided into central government expenditure and transfer to regions
(SNG). Figure 10, on the following page, shows that Central Government expenditure is divided into line
ministries and other institutions at Central Government expenditures and non-line ministries expenditure.
The non-line ministries expenditure is used for subsidy and interest payment, and also for grants (hibah)
to SNG.
Figure 10: Type of expenditures in the National Budget Plan of Indonesia and fund channeling
Source: World Bank analysis (Governance Global practice, 2017)
128. APBN expenditure transferred to SNG is for different purposes namely budget for fiscal balance,
special autonomy budget, and other programmatic transfer budget. Budget for fiscal balance is type of
transfer received by all SNG and it consist of revenue sharing, general allocation, and special allocation.
Revenue sharing (Dana Bagi Hasil [DBH]) is transfer from Central Government as revenue sharing from
the general tax revenue and the natural resources exploitation revenue (e.g. mining, oil, and gas). Some
SNGs receive revenue sharing for reforestation. The objective of this sharing is to improve fiscal balance
between central government.
Page 30
The World Bank
129. The General Allocation Budget (Dana Alokasi Umum [DAU]) is a lump sum transfer to all Local
Governments. DAU is formulated based on basic allocation, which is mainly to cover the salaries of civil
servant, and fiscal gap, which is the difference between fiscal need and fiscal capacity. Most Local
Government financing comes from DAU, which accounted for more than 60% of their total revenue. This
indicates the high dependency of Local Government budgets on grants from the Central Government to
finance local service provision14.
130. The Special Allocation Budget (Dana Alokasi Khusus [DAK]) is a transfer to finance SNGs special
activities in relation to their functions and responsibilities and in line with national priorities. There is a
competition between SNGs to receive this transfer. This transfer can be used to finance several sectors
that could be different every year. This transfer may be used for the following sectors: education, health,
road, irrigation, water and sanitation, transport safety, etc. DAK can only be used for capital investment.
131. The result of decentralization for public transport in Indonesian cities is that while the cities
have formal responsibility for ensuring that public transport is provided, they depend greatly on
transfers from Central Government for improvements in service that require any significant
expenditure. National Government transfers can be through provision of assets such as buses or IT
systems; provision of service through state-owned bus or rail companies; and special approvals for specific
projects. This approach to public transport funding means that discretion over the location and type of
expenditure has transferred back to central ministries and government agencies.
132. SNGs can also receive in-kind grant from line ministries, but in some cases, it seems ineffective.
The grant is ranging from infrastructure, good, technical assistance, study, and training. In terms of urban
transport, the in-kind grant from MoT were given to support urban transport services at subnational levels
based on some city visits, SNGs received buses (see Box 1 that follows), traffic control center, bus terminal,
feasibility study, detailed engineering design, Urban Transport Master Plan Study, etc. Some SNGs could
not operate buses from MoT as they do not have capacity in terms of financing operation and
maintenance and capacity of staff to manage the buses.
14
Anwar Nasution (2016). Government Decentralization Program in Indonesia, ADBI Working Paper Series No. 601
October 2016, Asian Development Bank Institute
Page 31
The World Bank
Box 1. Bus Distribution Program of MoT

Trans Sarbagita (Denpasar Greater Area, Bali Province)
 Bali Provincial Government received in-kind grant of 35 buses from MoT (15 buses in 2010, 10 buses in 2011,
and 10 buses in 2016) to develop quality bus service;
 Due to institutional arrangements, TranSarbagita operates exclusively on provincial roads, and has no access
to Kuta or West Denpasar roads;
 Due to decreasing ridership numbers, government officials have reduced budget support to the system to an
all-time low;
 With headways of 1 hour, the total daily ridership for each route (both directions) is less than 300 passengers;
 Estimated farebox ratio is less than 25%;
 Operation was stopped in October 2018 and relaunched in May 2019 to serve Nusa Dua-Ngurah Rai Airport
route with only 6 buses (3 round trips per day).
TransPakuan (Bogor City)
 Received bused in 2006 and started operation of corridor 1 in 2007;
 Operated by city-owned enterprise PDJT;
 Low ridership and high operation deficit;
 Inefficient institution, over human resource;
 Corridor 2 opened in 2009, until 2016 operated only in 3 of 8 planned trunk corridors;
 Regular operation stopped in 2016, with the system potentially bankrupt. Relaunched in the end of 2017 with
4 buses serving 1 route only;
 10 new buses from MoT in 2017 are not operating due to the lack of fiscal and institutional capacity.
Illustration:
TranSarbagita bus stops
that do not comply with
accessibility design
standards
133. The GoI’s ministries and agencies currently support specific public transport components in
cities, but the initiatives tend to be piecemeal and do not reflect priorities identified at city level. There
is also a strong emphasis on capital investments or new systems, with less attention paid to the quality of
service. The main programs developed by these agencies are listed below.
Page 32
The World Bank
Table 3: Existing National Government Support Programs for urban transport
Agency Programs Purpose and shortcomings

MoT Transport policy Provide guidance and procedures on urban transport. Need more
control from Central Government on the implementation of the
guidance and procedures. Lack of capacity in the cities to apply the
guidance and procedures.
Technical assistance (TA) Assist cities on capacity building (training), urban transport
planning study, project preparation, and others. Only few TA were
implemented and more ownership from the cities were needed.
Supply of buses and some Assist cities on public transport investment. Focus on buying buses
ITS and not on quality of service. This scheme was discontinued in
2016 but may be continued in the future. Maintenance is generally
poor. Some cities do not want the buses; others do not operate
them for years or at all.
Funding for commuter rail Subsidies for infrastructure investments and operation of Railway
and bus operators across Company and Bus Companies (SOEs). Need more control from
municipal boundaries Government on the use of the subsidy and the level of service.
Funding for transport Develop intercity bus terminals for SNGs. Lack of capacity of SNGs
terminals to operate the bus terminal.
Funding for urban traffic Develop urban traffic control system for SNGs. Lack of capacity of
control systems SNGs to operate the system.
MoF Funding for major projects Lack of predictability. Political negotiation necessary to obtain
such as Jakarta MRT funds. Delay in approval.
Funding for SOEs that are Lack of predictability. Political negotiation necessary to obtain
mandated to build specific funds. Delay in approval.
projects such as LRT in
Palembang and Jakarta
Funding for cities’ road and Special allocation from Central Government to SNGs for
pedestrian facilities infrastructure including roads. SNGs tended to use the funding for
through special allocation developing new roads with low quality and lack of planning.
budget
Funding for cities’ road Special allocation from Central Government to SNGs for road
transport safety activities safety. It is an ad hoc allocation and the budget allocated was
through special allocation small.
budget
Page 33
The World Bank
Table 3 (continued)
MPWH Urban roads, Central Government develops flyovers and underpass on national
including flyovers roads in the cities. It was only short traffic improvement and need
and underpasses more coordination with overall cities’ Transport Plan.
Pedestrian Central Government develops pedestrian facilities on national
facilities roads in the cities. Need more coordination with overall cities’
Transport Plan.
Bappenas National planning Central Government develops transport planning strategy for short,
strategy medium, and long terms. Need more coordination with other
sectors. Lack of capacity in the cities to implement the plan.
Technical Assist cities on capacity building (training), urban transport planning
assistance study, project preparation, and others. Only few TA were
implemented and more ownership from the cities were needed.
134. The allocation of resources from ministries and national agencies to cities does not encourage
good practice in transport planning. There is a lack of transparency about which cities are being allocated
resources, and lack of coordination among national ministries. Cities may receive allocations from number
of programs in an uncoordinated way. The central bus-purchasing scheme was one of the main programs
to build public transport capacity in cities. It sometimes provided vehicles that cities had not requested
and did not use, while other cities received no allocations. The program’s main focus was on providing
assets, on a once-off basis, and paid little attention to quality of operations or adequate maintenance.
That program has now been discontinued.
135. The distribution of responsibility and resources for supporting urban transport among a wide
number of ministries and agencies results in poor coordination of initiatives and limited capacity
building. Indonesia would achieve better results from existing levels of expenditure if it had a national
coordinating authority for public transport in cities. Such an authority would develop and transfer skills to
cities and implementation agencies and set national standards for vehicles, technology, ticketing and
other systems that would achieve better integration of modes and value for money. The institutional
arrangements for distribution of water grants from DG Housing to District Governments provide a possible
model for transfer of funds for public transport schemes to cities or other implementing agencies.
136. Given limited of fiscal and human resource capacities of most SNGs, the existing support
mechanisms from Central Government are insufficient to develop effective mass public transit systems.
Central Government may create a new Mass Transit Development Grant / hibah to SNGs to fund the
National Urban Transport Support Program. This transfer may be similar to other existing hibah, for
example water or road hibah. In parallel with the Mass Transit Development hibah, Central Government
may combine it with other forms of support namely special allocation budget and central government
assistance (boxes with yellow color in Figure 10). The Central Government assistance may also be in the
form of in-kind grant from line ministries.
Page 34
The World Bank
137. Long term funding and reliability are key ingredients for sustainable outcomes. It is therefore
desirable at the national level to develop a dedicated funding mechanism for urban mobility. The
preceding paragraph has however recommended funding of the program through annual budget
allocation in preference to establishment of a Mass Transit Development Fund because establishment of
a dedicated mechanism, will require legislation to establish and new procedures to manage. The time
required for this process would delay, and possibly even prevent, implementation of the program. The
Program Design has therefore tried, wherever possible, to use existing legislation and procedures (such
as the PPP legislation and cash and in-kind grants) to enable implementation by means of Presidential
Regulation, rather than a new Law.
3.5 Cities’ financial and technical resources

138. At present, Local Governments are given significant control over expenditure, which reduces
the control exerted by the Central Government. On the other hand, the power of Local Governments to
collect tax and borrow remains very limited. The Central Government collects major taxes and can borrow
from domestic and international financial markets.
139. Decentralization in Indonesia only gives autonomy to the Local Government to determine the
size and structure of their budget expenditure17. Local Governments do not have the power to impose
and collect customs and excise, corporate tax, personal income tax, and sales tax. Until recently, collecting
land and property taxes had been in the hands of the Central Authorities, however, this has now been
devolved to Local Government. In many countries, property rates and taxes are a key source of Local
Government revenue. Taxing power, however, remains largely with the Central Government, while Local
Governments are only given the right to collect other taxes such as taxes on land and building, motor
vehicles, hotels, restaurants, entertainment, base metal and mineral extraction, and water.
140. Capacity of public servants in districts and cities needs to be improved to produce minimum
standard of public goods. Before the implementation of Law 22/1999, SNGs had mainly functioned as
implementing agencies of national policies and programs. The decentralization of Government functions,
however, was not followed up with equipping SNGs with the capacity to produce public goods, increase
productivity and employment, and promote economic growth in their jurisdictions.
141. For the purposes of this evaluation, cities were selected with population exceeding 500,000, as
shown in Table 4 on the following page.
17
Anwar Nasution (2016). Government Decentralization Program in Indonesia, Working Paper Series No. 601
October 2016, Asian Development Bank Institute (ADBI).
Page 35
The World Bank
Table 4: Characteristics of the largest Indonesian cities, 2016
Region or City Population Area (sq.km) Population GRDP18 / Capita

density (USD)
(persons / ha)
Java and Bali
1 Jabodetabek
1a DKI Jakarta 10,229,032 643 159 15,721
1b Bogor 6,615,736 3,104 21 2,458
1c Depok 2,161,182 200 108 1,830
1d Tangerang 7,113,428 1,371 52 3,186
1e Bekasi 6,108,920 1,468 42 4,109
2 Bandung 8,305,120 3,296 25 3,325
3 Surabaya 6,267,951 1,978 32 8,502
4 Surakarta 4,375,446 3,132 14 2,602
5 Semarang 3,796,348 2,285 17 3,914
6 Malang 3,613,549 3,782 10 3,113
7 Sukabumi 2,762,378 4,197 7 1,632
8 Denpasar 2,455,999 1,738 14 3,917
9 Yogyakarta 2,575,277 1,116 23 2,498
10 Pasuruan 1,786,533 1,499 12 5,035
11 Magelang 1,375,282 1,147 12 1,790
12 Probolinggo 1,376,717 1,751 8 1,987
13 Blitar 1,287,532 1,797 7 1,995
14 Mojokerto 1,213,937 995 12 4,271
15 Salatiga 1,196,676 1,056 11 3,135
Sumatra
16 Medan 5,321,383 4,894 11 4,275
17 Palembang 1,594,110 381 42 5,519
18 Pekanbaru 1,057,894 610 17 6,469
19 Bandar Lampung 990,092 296 33 3,347
20 Padang 909,075 705 13 4,017
21 Banda Aceh 652,566 2,941 2 3,038
22 Bukittinggi 603,930 2,295 3 2,854
23 Jambi 581,598 103 56 3,114
Sulawesi
24 Ujung Pandang 2,827,899 4,008 7 4,421
Kalimantan
25 Pontianak 1,783,141 19,138 1 2,747
26 Banjarmasin 983,269 2,397 4 2,424
27 Samarinda 824,360 605 14 4,696
28 Balikpapan 623,398 468 13 9,464
18
GRDP based on 2016 BPS statistics, converted to USD at IDR14,000/USD.
Page 36
The World Bank
3.5.1 Borrowing capacity
142. The borrowing capacity of the twenty largest cities was found to vary dramatically from a
maximum of over USD 2 Billion in DKI Jakarta, to a low of USD 66 Million in Banjarmasin. This was
calculated based on Debt Service Coverage Ratio (DSCR) requirement 19; outstanding and proposed loan
should not greater than 75% of general revenue from the previous period; and maximum allowed deficit.
Table 5: Maximum borrowing capacity of selected Indonesian cities
No Region, Kabupaten or Kota Fiscal capacity status Max. loan (Million USD)
1 DKI Jakarta Very High 2,220.71
2 Surabaya Very High 329.404
3 Bekasi Very High 195.091
4 Bandung Very High 238.45
5 Medan Very High 190.004
6 Depok Very High 119.521
7 Tangerang Very High 166.676
8 Semarang Very High 157.724
9 Palembang Very High 123.833
10 Tangerang Selatan Very High 131.422
11 Makassar Very High 128.981
12 Batam Very High 92.011
13 Bogor High 90.961
14 Pekanbaru High 95.829
15 Bandar Lampung High 78.487
16 Padang High 73.317
17 Denpasar High 86.947
18 Malang High 84.842
19 Samarinda Very High 136.738
20 Banjarmasin High 66.258
143. Indonesian cites generally have insufficient borrowing capacity to meet the investment costs of
even a very limited mass transit system. Figure 11 shows the borrowing capacity with approximate values
for various types of public transport system overlaid. From the graph it can be clearly seen that the cost
of 20km of LRT system exceeds the borrowing capacity of all cities except DKI Jakarta. The lower capital
cost of BRT systems makes them more affordable, however, only seven cities have sufficient borrowing
capacity to meet the costs of 30km of BRT network.
19
Minimum DSCR > 2.5X, where DSCR is defined as:
Page 37
The World Bank
Figure 11: Borrowing capacity of the twenty largest cities
144. Only DKI Jakarta has the borrowing capacity to fund a Light Rail line without National
Government support. The seven cities or regions that have borrowing capacity in excess of the cost of
30km of BRT line, or USD 140 Million, are DKI Jakarta, Surabaya, Bekasi, Bandung, Medan, Tangerang and
Semarang. Of these, Bekasi, Medan, Tangerang and Semarang all have borrowing capacity less than USD
200 Million. The implementation of a BRT system costing USD 140 Million would therefore use more
than 70% of the borrowing capacity of the city, leaving little capacity available for other sector and
projects of importance to the city.
3.5.2 Fiscal capacity

145. The fiscal capacity of the largest cities also varies dramatically. Fiscal capacity was calculated
using 2015 budget data in accordance with the formula described in the Finance Minister Regulation No.
107/PMK.07/2018 on Local Government Fiscal Capacity Map and is shown following figure.
146. The fiscal capacity calculation is as follows:
Fiscal Capacity = Total Revenue minus (Salary + Interest payment + DAK + Cigarette Tax +
Revenue sharing for reforestation + Revenue sharing for tobacco excise + Transfer to other
government + Grants for new autonomous district + Village Fund + Village Fund Allocation +
Special autonomy fund + BOS Fund)
Page 38
The World Bank
Figure 12: Fiscal capacity of the twenty largest cities

300
Fiscal Capacity (USD Million)
250
200
150
100
42
54
46
45
1,905
50
297
179
170
161
142
122
119
115
98
95
75
74
65
61
-
Kota Tangerang
Kota Tangerang Selatan

DKI Jakarta
Kota Semarang
Kota Denpasar
Kota Bogor
Kota Surabaya
Kota Bandung
Kota Bekasi
Kota Bandar Lampung
Kota Padang
Kota Depok
Kota Batam
Kota Samarinda
Kota Medan
Kota Banjarmasin
Kota Palembang
Kota Malang
Kota Makassar
147. The city commitments for funding public transport comprise:

 The city capex portion, which was assumed to be 15% of investment cost in accordance with the
proposed NUTSP financial mechanism, paragraph 493. For the purposes of estimating the
magnitude of this commitment, it was assumed that the city would borrow the money at 8% per
annum with a tenor of ten years.
 The operations and maintenance portion of APs that is required to meet the operational deficit
of the system.
148. The expected range of BRT operating cost shortfall will comprise a substantial portion of a city’s
budget. A single, 20 km, BRT line, with 150,000 passengers per day will have an initial annual opex
shortfall, namely the difference between operating and maintenance costs and net fare revenue, of
around USD 8 Million. This amount varies during the concession period21. The annual fiscal capacity of
many of the cities shown above is substantially less than the amount needed to finance the opex shortfall.
The median city, namely Depok, would be required to spend 8% of the city’s discretionary expenditure on
the transport deficit for the single BRT line. It is unlikely that such a substantial reallocation of resources
away from existing budget items would be financially and politically achievable. Repayment of a loan for
the city’s 15% capital contribution will amount to a further USD 5.6 Million per year for the initial ten
years, increasing the annual costs to the city to just less than USD 14 Million.
21
Refer to Section 9.3 for a description of the assumptions and parameters used to reach this result.
Page 39
The World Bank
149. The following figure shows the magnitude of the annual operating deficit for a BRT line (refer to
Section 9.3 for a description of the parameters used) in comparison with the fiscal capacity of the largest
cities or regions in Indonesia. For the median city of Depok, the figure below shows that the combined
effect of funding the opex deficit and repayment of the city 15% capital contribution will require 14% of
the fiscal capacity of the city.
Figure 13: BRT operating deficit as a percentage of fiscal capacity
150. LRT operating deficit is smaller than BRT but will still comprise a substantial portion of a city’s
budget. LRT options for the same scenario have annual, base year, opex shortfall AP of USD 2.5 Million.
While this is significantly lower than BRT, repayment of a loan for the city 15% portion of the capex, will
add a further USD 13.8 Million, bringing the annual cost to the city of a single LRT line to just over USD 16
Million. For the median city of Depok, Figure 14 on the following pages shows that the combined impact
of funding the opex shortfall and repayment of the 15% capital contribution will require 17% of the fiscal
capacity of the city.
Page 40
The World Bank
Figure 14: LRT operating deficit as a percentage of fiscal capacity
151. From the preceding figures, it is apparent that the less fiscally robust cities will struggle to fund
the operating costs of a mass transit system. Implementation of mass transit systems therefore requires
not only National Government support for capital expenditure but fiscal reform of SNG and increased
own-source revenue.
3.5.3 Potential sources for funding the city commitments
152. Indonesian cites, like, many cities in developing countries are stuck in an “underfunding trap” for
urban transport. In these cities, the up-front investments that are needed for new transport infrastructure
are huge, while revenue from their still small-scale and perhaps even poor-quality systems and other
sources is insufficient to cover maintenance and operation expenses, let alone new investment projects 22.
153. There are three main current sources of revenue for Local Governments:
 Local Governments’ own source of revenue (Pendapatan Asli Daerah), which includes local
retribution and small amounts of revenue from profits of public enterprises owned by Local
Governments, and revenue from their privatization and lease;
 Transfers from the Central Government; and
 Tax and revenue sharing from income, corporate tax, and tax on natural resources.
22
World Bank (2016)
Page 41
The World Bank
154. City funding from own sources through APBD and other external sources, which will require
substantial increase and leverage capacity of own-source revenue. Cities should initially aim to generate
additional revenue to finance infrastructure financing from the main own source revenue (i.e. land and
building tax - Pajak Bumi Bangunan Perkotaan dan Pedesaan – PBB P2) by expanding the tax basis,
improving spatial planning and tax assessment, and enhancing tax collection. Additionally, cities could
also generate financing from external sources such as municipal borrowing (e.g. Regional Infrastructure
Development Fund/PT. SMI, commercial banks, municipal bonds, on-lending from Central Government).
155. There is limited potential for increased funding through existing Central Government transfer
mechanisms, which comprise:
 Increased DAU and DBH to cities; and
 Expansion of the recipients of DAK for public transport to not only for lagging regions but also to
cities that urgently need urban transport infrastructure and facilities.
156. There is however potential for Local Government to generate revenue for funding urban
transportation improvements through various mechanisms including those identified in the 2016 World
Bank report “Sustainable Urban Transport Financing from the Sidewalk to the Subway: Capital,
Operations, and Maintenance Financing“ as shown in the table below.
Table 6: Revenue sources for urban transport
Type Sources
From the public sector:  General budget funded through general taxation.
(Managed by main agents in  Loans from banks or funding agencies.
areas such as infrastructure  Grants from international funding agencies or bilateral aid.
and operation)
From users:  Ticket fees by public transport users.
(Paid by users of the  Payments by users of individual motorized vehicles, such as tolls for the use of
different modes who pay for infrastructure (bridges or urban motorways), congestion charges to access
the service they are areas such as city centers, parking charges, taxes on fuels, and fines (if the
receiving) country’s legislation has earmarked the source).
 Vehicle ownership tax (allocated to transport when permitted by legislation).
 Payments by users of soft modes of transport, such as bicycles, for example,
rental charges when using self-service systems or secure lock-ups.
From other people:  Payroll tax for private companies whose employees make use of the system
(Various contributions by (in some countries, such as France, this is 0.5–2.6% of payroll).
people who benefit from the  Contributions in the form of direct assistance to the employee when a firm
improvements and effects covers a share of employees’ daily transport costs (such as the Vale
generated by a transport transporte in Brazil).
system, even if they are not  Taxes on land value increases for local residents and traders (such as
users) betterment levies in Colombia).
 Recovery of a share of capital gains to fund mobility.
Source: World Bank (2016) 23
23
World Bank. Sustainable Urban Transport Financing from the Sidewalk to the Subway: Capital, Operations, and
Maintenance Financing. Washington DC. 2016.
Page 42
The World Bank
157. Since the introduction of Law No. 17/2003, Local Governments have been allowed to borrow
from both domestic and foreign markets. Local Governments, however, require permission from the MoF
for issuing local debt. The Law adopts the fiscal and debt rules of the European Union by limiting the
budget deficits of central and local governments to 3% of their respective annual GDP or regional GDP.
The ratio of debt to GDP or regional GDP is set at a maximum of 60%.
158. Municipal finance reform is required to increase the capacity of Local Government to collect
property and building taxes, and to base the amount of taxation on a valid assessment of the value of
the property and improvements. Property and building taxes are paid by the beneficiaries of
improvements to the transit system improvement. As such, the property tax is also a value capture
mechanism if the property definition and valuation is well managed. If a public investment results in
increased property values, then the property values that form the basis of the property tax should
increase.
159. Cities that wish to implement mass transit improvement should, therefore, embark on a process
of improving the cadasters24 and property taxation mechanisms.
160. Land Value Capture (LVC) is appealing because those who benefit from the transport
improvements (even if they are not users) contribute financially to the investment. The revenue
generated through LVC should, in principle, be earmarked for the transport system. The World Bank
(2016) stated that with appropriate design and management, land-based value capture financing is a good
alternative for widening the tax base and ensuring continuous revenue for local or central governments.
Moreover, because land-based financing relates to sustainability and the need to integrate transport and
land planning policies, the instrument presents great potential for urban infrastructure financing,
161. As shown in Table 7, land-based value capture financing mechanisms can be classified in three
categories, with two kinds of beneficiaries: (i) added value capture mechanism and (ii) land asset
management, both with land or property. The third category is developer exactions, where the developer
(as the beneficiary of the improvement) pays a fee or makes other contribution that is beneficial to the
public sector.
24
Cadastre is a register of property showing the extent, value, and ownership of land for taxation purposes.
Page 43
The World Bank
Table 7: LVC mechanisms
Added value capture Land asset management Developer exactions

mechanisms
Beneficiary: land or property Beneficiary: land or property Beneficiary: developers
owners owners
Land value taxes/betterment Acquisition and sale of land under Development impact fees. Paid by
levies. Capture value growth (price specific conditions. Involves the developers for the costs of
increases) resulting from the acquisition of land at market value extending public infrastructure for
increases in accessibility and (at a “without project” price), new developments.
reductions in transport costs due before the general public is
Negotiated exactions. Paid by
to the development of transport informed of the decision to
developers in return for receiving
infrastructure. develop a project. Next, the land is
access benefits to the
sold to private developers at a
Tax increment financing. Capture infrastructure project that is being
“with-project” market price, which
the estimated increase in property developed; contributions by
captures the added value of the
tax revenue resulting from the developers include land or the
benefits.
residential and commercial installation of public infrastructure.
developments induced by the Land readjustment schemes.
Joint development. PPP or other
project. Landowners pool their land to
formal arrangement to decrease
assemble a larger plot or the
Special assessment. Capture the the costs of constructing or
Government acquires the land. A
special benefits, received within a operating public transportation.
portion of the plot is sold to raise
district, that exceed the overall
funds to finance partially public Air rights. Developers receive on-
general benefit.
infrastructure development costs. site development opportunities, on
Transportation utility fees. top of existing or new projects, in
Capture the added value in terms exchange for a financial
of the increase in transport “use” contribution or future additional
based on a certain characteristic of property and income taxes.
the property.
Source: World Bank (2016)
162. Value capture instruments have high potential for urban infrastructure financing, especially in
the fast-growing Indonesian cities, however, they are slightly controversial because currently no
standardized way exists to assess the different benefits created by transport system developments. The
key reason is that people that live in the properties that gain value and are subject to LVC will not
experience an increase in their income. The value of the property they own may increase, but this will not
generate additional cash, which is required to pay the LVC levy. Moreover, the lack of institutional
capacity within Indonesian cities may poses challenges for the successful implementation of LVC, which
requires well-functioning Local Government governance structures.
Page 44
The World Bank
4 Case studies of international experience26

164. In order to help Indonesia in deciding on how best to support urban transport, four national
urban transport programs and strategies that are relevant to Indonesia were selected, namely Mexico,
Colombia, South Africa and China. These programs are relevant to Indonesia because their positive
results, which are expected to encourage the GoI to formulate a similar one across main cities of the
archipelago. Comparative statistics for Indonesia and the four case study countries are shown below.
Table 8: Comparison between the case study countries and Indonesia, 2017
Population (Mill.) Area (Mill. Sq.km) GDP (Trill. USD) Income level
Indonesia 263 1.905 1.015 Lower middle
Mexico 129 1.973 1.151 Upper middle
Colombia 49 1.142 0.314 Upper middle
China 1386 9.597 12.238 Upper middle
South Africa 57 1.220 0.349 Upper middle
Source: World Bank, 2017
165. Each of the four selected national programs have different characteristics. In the case of
Colombia, there is a clearly defined national policy, being the program a part of it; in Mexico, the program
preceded the national policy. South African program is much newer, established as a chapter of a national
city support program. China’s program is a five-year revolving program of which the first round from 2012-
2017 is analyzed in this report. These national programs provide institutional, technical and financial
support for cities to develop their urban public transport network. While the Mexico and South Africa
national programs focus more on providing financial support, the China national program placed more
emphasis on technical support. The Colombia program has a relatively balanced support covering both
financial, technical and institutional aspects.
166. The national programs in these countries have exerted positive impact on public transport
service. According to a recent Institute for Transportation and Development Policy (ITDP) evaluation, the
ratio of rapid transit per resident (RTR ratio)27 of these countries increased after implementing respective
national urban transport programs. (See Table 9)
26
The analysis on which this chapter is based is documented in the report National Government Support for Urban
Public Transport: Case Studies of International Experience, World Bank 2019. This publication, an earlier
deliverable of this project was co-funded by the Australian Government through the Department of Foreign Affairs
and Trade (DFAT).
27
RTR refers to kilometers of rapid transit per Million urban residents.
Page 45
The World Bank
Table 9: Change in transit before and after national program in four countries
Country National Start year of RTR* at start year of RTR* at evaluation

program national program national program year (2014)
Colombia NUTP 2002 5 10
Mexico PROTRAM 2008 5.8 8.5
South Africa IRPTN 2005 0 3.6
China TMDP 2011 6 8.5
Note: * RTR = Ratio of Rapid Transit per Resident
Source: Summarized from ITDP (2015a) 28
4.1 National and subnational roles

167. Countries have basically two models of organizational structure: federal and unitary. In a unitary
state the National Government is ultimately supreme, and any Subnational units exercise only the powers
that the National Government chooses to delegate. A Federal State is a political entity characterized by a
union of partially self-governing states or regions under a Central (Federal) Government; the division of
power between them and the National Government are typically constitutionally rooted.
168. Diverse levels of government can carry the responsibility for the functions associated with
urban public transportation. These functions run the gamut from policy and strategy to daily operation.
Their distribution between different levels of government depends primarily on the institutional
organizational structure of the country:
 In unitary countries, the National Government usually have higher responsibilities regarding
public transportation, although emergent decentralization process tends to pass it to Subnational
levels.
 In federal countries, the National Government deals only with the functions explicitly delegated
by the Subnational States; functions not delegated (as is usually the case with urban public
transportation, inexistent at the time the constitutions were written) remains in their hands.
169. When SNGs bear the responsibility for public transportation, it may fall either to the state or
municipal level. Countries (federal or unitary) usually present three levels of government: The Central
one and two lower levels (provinces or states, and municipalities). The urban public transport
responsibilities not taken by the National Government are entrusted to one or the other, depending on
the country’s institutional organization. This distinction becomes relevant in metropolitan areas, where
the urban area exceeds the limit of a single municipal territory.
28
ITDP, Walter Hook, Colin Hughes and Jacob Mason, February 2015. Best Practice in National Support for Urban
Transportation Part 1: Evaluating Country Performance in Meeting the Transit Needs of Urban Populations.
Page 46
The World Bank
170. There is no absolute distinction between the centralized and decentralized models, which can
be applied mechanically according to political regimes. The interface between National Government and
SNG in urban transport development is often dynamic and evolving. It depends on the baseline of
institutional, technical, and financial capacity of Government at different levels, and also relate to
development agenda promoted by the political leadership.
4.1.1 Institutional structure, appraisal of proposals and project monitoring
171. National urban transport programs are the instruments of National Government to adjust the
incentives of Local Governments towards a more sustainable and systematic development of urban
transport. Institutionally, national programs mainly aim to:
 Set up/strengthen dedicated institutions on urban transport at both national level and local level
with sufficient technical capacity;
 Make/optimize long-term urban transport development plans and align them with city master
plan, land use plan, capital investment plan (if any), and country economic and social
development plan;
 Establish project appraisal and approval system to ensure technical, economic and financial, and
social and environmental feasibility of urban transport projects; and
 Establish project evaluation and supervision system to monitor the project impact and outcome,
and enable actions when project is not on the right track of implementation.
172. Table 10 and Table 11 indicate how Colombia, Mexico, South Africa and China set up professional
institutions of urban transport and make urban transport plans and conduct project appraisal under
national programs.
Table 10: Summary of institutional set-up and urban transport planning of selected countries
Country National Dedicated urban transport Dedicated urban transport Urban transport
program institution at central level institution at local level planning system
Colombia NUTP Coordination unit for NUTP, City BRT Managing agencies Cities have
housed in MoT; backed by transportation
CONPES (National Council for master plans
Economic and Social Policy)
Mexico PROTRAM PROTRAM team housed in Metro companies and Comprehensive Plan
Banobras (National Works and municipal BRT agencies of Sustainable Urban
Public Service Bank); Urban Mobility (PIMUS)
Transport Project evaluation
team housed in MoF
South IRPTN Management and monitoring by Municipal department of Major cities have
Africa National Department of transport long-range transit
Transport; Monitoring by plans, but weak
National Treasury multimodal planning
China TMDP Department of Highway and Municipal transport Strong five-year city
Transportation housed in MoT bureaus & BRT companies; transportation
(backed by State Council) urban rail directive office & planning frameworks
metro companies
Page 47
The World Bank
Table 11: Summary of urban transport project appraisal mechanism of selected countries
Country National Urban transport project appraisal, approval and evaluation system
program
Colombia NUTP Pre-feasibility: Cities (in head of special purpose public project delivery agencies, called
managing entities (entes gestores), and with support from MoT), present basic concepts
of projects which are evaluated by the National Department of Planning (DNP) and
eventually recommended to the council of Ministers through a Cabinet Paper (CONPES
Document). The CONPES document sets the roadmap for project financial, technical and
legal structuring (preparation).
Feasibility: Delivery agencies undertake the detailed technical, legal and financial
structuring of the project, including basic engineering designs. When the roadmap set in
the CONPES is advanced and acceptable to DNP, the municipality signs a co-financing with
the Ministry of Finance (MHCP) which sets the terms by which the project will be delivered
and funded, including private sector participation.
Investment: The delivery unit carries out the procurement process for works and services
and begins implementation. The implementation is supervised in coordination with MoT,
MHCP, DNP and co-financing Multilateral Development Banks (MDBs).
Mexico PROTRAM Pre-feasibility: In the first phase of the evaluation process, cities (called promoters)
present basic concepts of projects which are evaluated by the advisory working group
(entity responsible for the evaluation and recommendation in the decision-making
process). Then, promoters sign an agreement with PROTRAM in which they establish the
terms of the cooperation between the financial institution and the recipient.
Feasibility: Promoters can start the evaluation cycle from the feasibility phase (if support
for the financing of studies is required), or directly from the investment phase if the city
has already developed the necessary studies to support the formulation of the mass
transit project. This phase includes PROTRAM's approval of the proposed project and the
reviewing of follow-up studies.
Investment: Technical evaluations are performed by the advisory working group and
technical subcommittee of evaluation and financing. The key aspects in the evaluation
process are:
1) Analysis of public transport situation in the city that presents the project;
2) The PIMUS; and
3) The infrastructure projects.
4) The last stage of the cycle ends with the conclusion of the agreement for financial
support and monitoring of project progress
South IRPTN Pre-feasibility/feasibility: Cities are required by law to produce Integrated Development
Africa Plans (IDP), which include an Integrated Transport Plan (ITP) that describes its overall
transport plans over the medium-term (5 years) and has gone through a full consultation
and approvals process. This is repeated and updated every 5 years. The ITP in turn requires
that an Integrated Rapid Public Transport Network (IRPTN) plan is developed and updated
every 5 years. IRPTN plans are required to be demonstrably financially sustainable and
need to have, amongst others, a business plan produced to show how the system will
work, generate revenues and expenses and how it will be funded.
Page 48
The World Bank
Investment: IRPTN Plans are developed into work programs that forms the basis for a
funding application that is reviewed annually given updated roll-out plans and budget
pressures. Projects must be based on and form part of a strategic, municipal wide, long-
term IRPTN plan and strategy, approved by the municipal council, that is credibly
demonstrated, using sufficiently detailed financial and other modelling, to be fiscally and
financially sustainable, including operating and maintenance costs.
China TMDP Pre-feasibility/feasibility: The technical documents for appraisal includes feasibility study,
bus/rail network plans, and initial designs.
Investment: City Government submit proposals through Provincial Government. MoT
organized an expert committee to review the proposals which need to indicate the
development targets, implementation plan and capacity of city to develop public transport
network as a Transit Metropolis Demonstration city. MoT assigned supervision and
evaluation team to the city to review their progress each year during the five-year period
and concludes on their performance by the end of the program.
4.1.2 Capacity development
173. Technical capacity of central and local authorities is key for proper planning, implementation and
operation of urban transport systems. The lack of capacity and qualified technical teams is a common
problem for Local Governments in developing countries29. National Governments can use national
programs to develop capacity of urban transport. Both Colombia and China involve capacity building in
their national programs. ITDP (2015b)30 identified the main capacities as being:
1) Transport Governance Capacity: Metropolitan areas need strong authorities with clear mandates to
plan, design, and implement rapid transit across modes and cities within metropolitan areas. There
are two dimensions to governance capacity: first is the legal and institutional empowerment to
develop transit infrastructure and the second is the ability to coordinate such infrastructure across a
metropolitan region. One indicator of this is the presence of strong transit authorities and
metropolitan or regional planning authorities.
2) Organizational Capacity: Cities need a well-established, budget-constrained mobility planning process

that effectively guides long-term transportation infrastructure development. This requires institutions
to have the proper organization, tools, and processes in place to achieve goals. One indicator of this
is the presence of well-planned, long-range, capital-constrained mobility plans.
3) Technical Capacity: Countries need to be able to plan and implement high-quality, well-designed
transport infrastructure without major project delays. This requires an institution’s staff (or
consultants) to have the technical ability to collect, analyze, and use data or to plan, design, and
engineer infrastructure or to structure complicated finance schemes to achieve goals. It also requires
in-house expertise to structure tenders and monitor performance by contractors. One indicator of
this is the record of project quality and on-time, on-budget project delivery.
29
BMZ. (2013). Financing Sustainable Urban Transport - International Review of National Urban Transport Policies
and Programmes. Bonn: GIZ - Embarq.
30
ITDP (2015b), Walter Hook & Colin Hughes et. al. (2015). National Support for Urban Transportation Part 2:
Growing Rapid Transit Infrastructure —Funding, Financing, and Capacity.
Page 49
The World Bank
4.2 Mexico: Federal Support Program for Mass Transit (PROTRAM)
4.2.1 Urban transport background
174. Mexico is a country with multiple large and intermediate urban agglomerations, in which public
transportation plays a major role. The country currently accounts for almost 120 million inhabitants and
2 million square km. Its institutional organization is federal, with 32 states and 2,457 municipalities. Out
of the 120 million inhabitants, 88 million live in cities; there are 93 cities with a population above 100.000,
which generate more than 100 million urban trips per day. Although motorization grew substantially in
recent years, public transportation keeps a relevant share: 66% of the motorized daily trips (29% are
carried by private cars and 5% by taxicabs). The modal share varies substantially between cities and
regions; from 13% to 80%.
175. Mexican cities have traditionally confronted multiple challenges to generate mobility systems
allowing sustainable and livable cities. At the beginning of the century their problems did not differ
substantially from the ones found in most developing countries, and can be summarized as follows:
 Urban form: cities expanding in a low-density pattern, generating longer trips and promoting
individual mobility;
 Growing motorization (more than 6% per year). The country has around 250 cars per 1,000
inhabitants. In some cities this ratio is more than 500, the same level of developed economies;
 A tradition of biased national financial support to urban mobility, centered on roads and
highways (80%), disregarding public transportation;
 Low service quality in public transportation in most public transport systems, although with some
exceptions, and lack of integration among transport modes;
 Growing negative externalities from urban mobility, like congestion, fatalities, emissions and
noise;
 Weak institutions, with a serious deficit of technical skills on urban mobility, both at the national
and Subnational levels of government (with some exceptions).
176. Traditionally, urban mobility has been a local responsibility: the country legal framework does
not preview a national role for it. Mexico is a federal country. As its constitution does not delegate urban
transport to the National Government, the states (second level of government) are the natural responsible
for this service. In some cases, the states´ constitutions delegate the responsibility on the municipalities
(the third level of government). With few exceptions, Local Governments were no able to tackle the
mobility problems mentioned above, particularly with regards to public transportation.
4.2.2 National support program
177. To tackle those challenges, in the last fifteen years Mexican National and Subnational
Authorities produced several positive changes in the institutional settings of urban passenger
transportation, including the creation of a national program to support mass transit projects along the
country cities, named PROTRAM. Several states generated mobility laws and established mobility offices
to plan and organize their urban transportation systems, staffing them with qualified human resources.
Page 50
The World Bank
178. PROTRAM was launched in Box 2: Mexican cities supported by PROTRAM

2009 by the Federal Government
Mexicali Cd. Juarez
and nested within a National
Infrastructure Fund (FONADIN). The Tijuana
Chihuahua
changes did not come from an Monterrey
established NUTP policy, as there is
no specific governmental area to Tampico
Cd. Azteca - Tecámac
produce it. It was the MoF – which Pachuca
has a wide responsibility in the Lechería
León
country´s governance structure – Toluca
Cuautitlán
who promoted the enhancement of Chimalhuacán
mass public transportation; as will Guadalajara Mexico City
be seen, the policy guidelines are Puebla
Acapulco
reflected in the program and its
Oaxaca Villahermosa
instruments.
179. FONADIN was created in 2008, aimed at providing financial support to infrastructure projects
with public and private participation. The fund looked at supporting the national infrastructure plan
(renovated every six years, following the government turns) and mobilizing private funds to implement
socially desirable projects, taking risks that the private sector is usually reluctant to take. It has diverse
programs, oriented at different types of infrastructure, like roads, ports, water, waste management or
fiber optics, including PROTRAM, detailed in the following section. FONADIN is organized as a fiduciary
fund31, established within a national development bank (named Banobras), which operates as the
fiduciary institution.32 It operates through specific programs, which are organized according to the type
of infrastructure they serve; each program has a specific account within the fiduciary fund. The funding
comes primarily from National Government budget allocations, the revenues from some publicly
operated toll roads, the recovery of its loans and the income from the divestiture of publicly owned
infrastructure. It may also come from private sources and multilateral agencies
180. FONADIN provides support, comprising financing and know-how, to public and private entities
for the planning, design and construction of infrastructure projects. It assists public sector entities
(National and Subnational) and private sector organizations, typically those engaged in PPP schemes (the
recipients of concessions, permits or contracts which are part of a PPP). To be eligible by FONADIN,
projects must offer the country significant positive social impact and the prospect of major economic gain.
181. The fund support consists broadly of two types of investment: recoverable (which FONADIN
would get back in due course) and unrecoverable (which the fund would not expect to get back).
Recoverable funding would typically include subordinated debt (debt with a lower priority for the
collection), guarantees and equity. Unrecoverable funding usually involves financial support for studies,
consultancy and subsidies to support PPPs in Mexico that have a social and/or economic benefit, but
31
A fiduciary fund is an account that manages assets held in trust with a specific purpose, in accordance with a
statute.
32
Information on Banobras is available in English at:
http://www.banobras.gob.mx/opcionesdeayuda/Paginas/English.aspx
Page 51
The World Bank
which offer the prospect of only low financial returns33. One of FONADIN programs, PROTRAM, was
created to support mass transport projects, following the fund policies and procedures.
182. PROTRAM´s objective and institutional-financial setting aim at the promotion of sustainable
urban mobility by providing national financial and technical support to Local Governments for mass
transit projects. The program´s general objective is to help finance investment projects in urban mass
transportation as well as to promote the institutional strengthening of planning, regulation and
management of urban public transport systems. According to the official documents, its specific objectives
are:
 Promote the development of cities contributing to solving the chronic deterioration of urban
mobility, improving the quality of life of its inhabitants and increasing productivity and
competitiveness;
 Promote the planning of urban and metropolitan development to achieve the best possible
arrangement for transport, the greatest satisfaction of the population it serves, and the
minimization of negative externalities (congestion, pollution, accidents);
 Support the development of integrated systems that are sustainable, efficient, safe, comfortable
and affordable, that generate savings in operating costs and travel time for public transport users;
 Benefit mainly the low-income population with mass transit favoring its accessibility and social
inclusion; and
 Support policies for efficient use of energy, mass transportation and rational use of cars.
Mobilize private capital in investment projects in urban mass transportation that are financially
viable, with the support of public funds (federal, state, municipal).
183. PROTRAM - as other FONADIN programs - is housed in Banobras, a state-owned development

bank in Mexico, and funded by several national and international sources. Banobras core business is
subnational (municipal and state governments) projects finance, granting and lending national resources
to subnational entities, acting also as a trustee of FONADIN programs. For mass transit projects, in
addition to PROTRAM, Banobras financially supports cities with loans to funded with Clean Technology
Fund (CTF) resources, World Bank credits, Global Environmental Facility (GEF) resources and Carbon
Bonds.
184. Formally, PROTRAM constitutes a fiduciary fund within a state-owned bank, without a specific
organic structure. According to the regulation for fiduciary funds in Mexico, they cannot develop a specific
structure; it is the bank, as the trustee, who manage the resources, devoting part of its staff to the
management of the program. In this case, where the administration requests a number of highly qualified
experts, the figure of a fiduciary fund becomes a constraint, as the team the bank devotes to manage the
program is small as regards the size and complexity of the projects´ portfolio.
33
World Finance. http://public-private-partnerships.worldfinance.com/ppps-in-mexico/
Page 52
The World Bank
4.2.3 Funding and financial support mechanism
185. The program intends to support transit projects in cities (or metropolitan regions) with more
than 500.000 inhabitants, offering diverse type of support for studies and for investment, some of them
reimbursable and some not reimbursable. The threshold of half million residents reflects the size at which
cities are expected to justify investment in mass transport systems. Projects (including infrastructure and
equipment as well) must have high social feasibility, be co-financed with local governments, and include
private investment for no less than 34%. PROTRAM supports multiple technical options for passenger
transportation: BRT or similar, LRT or trams and suburban trains and metros. This support is made through
a menu of options, reimbursable or not, that are detailed in Table 12 are:
 Infrastructure and its associated fixed facilities for vehicles circulation (i.e., pumps);
 RoW (land acquisition);
 Works for railways or busways, carried out by the public sector or under concessions;
 Stops, stations and terminals for passenger movements; and
 Electrification, and signaling, communications and control systems.
Table 12: PROTRAM project support mechanisms
Support Characteristics
Contributions Studies Up to 50%

reimbursable
Public works investment Up to 50%

Non-
Grants Infrastructure Up to 50%.

investment Shared surplus if the project return on
investment is greater than projected
Studies financing Up to 70% for a period of 3 years
Mezzanine financing Up to 15% of investment or 20% of the debt;

Same terms as senior debt;
If debt converted: 5-year term.
Guarantees For credit Up to 70% of the emission
Reimbursable
Same term as the credit

For stock market Up to 50% of the emission
Same term of the emission
For performance Up to 15% of the project investment
Up to 40% of the projected revenues
Coverage for predetermined events and amounts
For political risk Case by case
Capital Direct Up to 49% of the concessionaire firm capital
Indirect Up to 20% of the investment funds capital
Source: FONADIN
186. The limits imposed (for grants, contributions, capital investment, etc.) are policy decisions made
by the Government looking at providing the adequate incentives, based on previous experiences. For
Page 53
The World Bank
example, the non-reimbursable investment grant is limited to 50% because the adoption of a higher level
may minimize the Local Government effort to design socially efficient projects, and a lower level may
hamper Local Governments to invest in public transportation. Other important characteristics are:
 Studies supported by PROTRAM are project-related, including urban mobility plans.
 The program allows for the capitalization of debt when this is not duly repaid.
 The guarantees offered have limits, which depend on the type of guarantee issued.
 The reimbursable components can be provided in addition to the non-reimbursable ones.
187. In order to be eligible, projects should achieve several criteria, which reflect the national policy
objectives as regards urban mobility. In general terms, urban mass transit program must follow this
approach to receive support, depending on the project specific characteristics:
 Be based on PIMUS;
 Be supervised by an urban transit authority;
 Transform the public transport organization;
 Promote integrated transit systems (trunk-feeders), developing mass transit trunk corridors;
 Promote the rational use of urban roads;
 Provide efficient vehicles with low carbon emissions;
 Include technology for centralized control using ITS; and
 Adopt tariff integration and prepaid card.
188. The program produced detailed guidelines for project presentation. In order to authorize the
financial support to a project, Subnational entities must present several pieces of documentation. The
contents have been specified in detail by PROTRAM. Project presentation must include:
I. A concise diagnosis of the urban transport problem;
II. A summary of the PIMUS;
III. A feasibility study of the project of mass transit infrastructure:
Chapter 1. Description of the project and a technical feasibility analysis;
Chapter 2. Project cost benefit analysis;
Chapter 3. Analysis and financial scheme of the project to be supported by PROTRAM;
Chapter 4. Legal framework under which the project will be implemented (state or municipal);
Chapter 5. Project Institutional Organization (how the city will be organized to implement the
project in its different states).
189. PROTRAM developed tools to help subnational entities in the project preparation stage, which
showed to be a serious obstacle. One of the main obstacles faced by the program is the weak capacity of
subnational entities to prepare projects following the guidelines. The program faced a dilemma: the more
demanding the guidelines, the more difficult to get qualified presentations; lowering the bar means
compromising with the program objectives and rising it too much would reduce substantially the number
of acceptable projects. In order to help subnational entities to prepare and present projects, PROTRAM
produced several technical documents and administrative agreements models. They are:
 Program General Guidelines;
 Guides for project presentation and assessment;
 Environmental and social framework;
 Guide for cost-benefit analysis;
Page 54
The World Bank
 Guide for integrated plans for sustainable urban mobility;

 Model for financial agreement;
 Model for project trust contract;
 Database with urban projects indicators; and
 Costs parameters for urban projects.
4.2.4 Program assessment and lessons learnt
190. After several years operating, a number of conclusions can be drawn from PROTRAM
experience. They are:
 The availability of resources (for grants, loans and guarantees) are the major pillars of the
program; they effectively attract SNGs.
 The impact of all those projects – six operating, nine under construction - is hard to measure, but
certainly positive in terms of congestion, emissions and service quality, as well as in other indirect
effects, like the enhancement of cities abilities to plan and manage urban mobility. For example,
BRT systems in Mexico City region halved travel times to users, reduced substantially emissions
(NOx, particulate matter and CO2), reduced road accidents by 30% and shifted around 6% of
travelers from private vehicles (EMBARQ, 2015).
 The experience of the projects allows for the finding of some interesting lessons, which may be
useful for other countries willing to implement a program of this type.
o The program should not be limited to the larger cities but cover medium-sized cities too. The
demands are different: larger cities need relevant infrastructure investment, while smaller
cities require support in service organization and minor infrastructure works.
o The SNGs had difficulties to comply with the program´s project preparation requirements.
They were requested to create an operating entity and transportation planning agency; this
was formally done, but not always in an effective way. Behavior regarding PROTRAM changes
a lot among cities; some of them can handle the project preparation process without much
problem, while for others this showed to be very difficult task, requiring substantial support
and assistance. There is like a “maturation curve” in cities. BRT projects typically take 5 to 6
years in States without previous experience in the Program, exceeding the Governors term
(and reducing incentives to participate). In Mexico DF, where several BRT were
implemented, it takes only about a year.
o The limitations of subnational entities in some cases resulted in an inadequate project
financial structure (particularly as regards risks allocation). This give rise to higher interest
rates for vehicles financing, demanding finally higher fares for passengers or increased
subsidies. As a result, the idea that “new transport systems are clearly better than the
previous ones, but very expensive” may reduce the interest of other potential program
clients.
o It is important to develop successful pilot projects, to generate interest from further cities.
o The financing of the SNGs segment was not a problem. But it is, to some extent, distorted:
bankability depends more on the fiscal health of the entity requesting support than from the
project´s own merits.
Page 55
The World Bank
o Setting priorities among projects through some allocation mechanism (formula,

discretionary), a typical difficulty in this type of national program, has not been a problem
with PROTRAM. This is because resources have been (so far) greater than requirements. A
trend to remark is that when cities “learn” how to present and implement projects, they tend
to repeat; this may end in the concentration of resource allocation in few cities.
o There is a clear bias towards BRT; the financial mechanism, requesting a relatively large
segment of private finance, may be encouraging it and making it difficult to finance guided
modes (where 34% of private participation is usually unfeasible).
o The program was initially sponsored by the MoF, not the transport one (which has no
incumbencies in urban transportation), adopting few clear policy definitions (requirement of
an urban mobility plan, clean technologies, etc.). The management of the program was
established in Banobras, an entity that can handle implementation, but that is not prepared
to supervise the program progress and redefine public policy if necessary. The National
Government in Mexico is slowly setting a specific area to deal with urban transport policy.
191. The institutional setting of the program is still a matter of discussion. The placement of
PROTRAM within a fiduciary fund was very practical, allowing for a quick start of the program, based on
some policy guidelines provided by the MoF, the area who generated the initiative. At the start of the
program there was no institutional area within the Mexican Government focusing on urban
transportation; the federal nature of the country impeded the MoT.34 But after starting some
shortcomings became apparent: the program needed policy directions, to make tactical decisions and to
review and correct its guidelines as well, and a state-owned development bank cannot provide them.
Additionally, the format of a “fiduciary fund without structure” limits the development of the technical
team (a small office within Banobras), constraining the operational capabilities.
192. Recent studies have identified several challenges Mexico faces as regards urban public
transport. They reflect the major shortcomings of the national urban transport policy (Paez, 2016):
 Formulate a national policy for sustainable urban transport and adapt the institutional
organization in the Federal Government to elaborate and manage it.
 Build capacity in the states so that they can respond to stimuli that are offered and improve
coordination mechanisms.
 Promote the development of knowledge, technology, innovation and human capital as a
necessary condition for progress on the proposed agenda.
 Improve PROTRAM and establish new additional instruments to tackle the agenda. These
instruments call for cities to enact legislation and new funding mechanisms.
 Optimize the use of existing financial resources and develop new ones from congestion charging,
parking management, fuel taxes, vehicle registration taxes and LVC.
34
The Ministry dealing with social and territorial matters was the only entity conducting analysis on urban
mobility.
Page 56
The World Bank
Table 13: Mexico PROTRAM information sheet
KEY ISSUE SUMMARY

Rational of the Program aimed at promoting mass transit systems, to improve urban mobility in Mexico´s
program/why was it larger cities through better public transportation.
started
Description of Studies and implementation of mass transit systems in cities with population above
program/activities it 500.000 inhabitants. Typically, BRT, light rail, suburban trains, trams and metros. The
can finance program finances infrastructure, control and fare collection systems and project
preparation activities.
Program resources: Programs are co-financed by the subnational entities (>17%), with a compulsory
source, transfer participation of the private sector not lower than 34%. Resources come from the National
mechanisms budget, revenue from state owned toll roads, divestment of public assets and repayment
of program loans. These resources are accredited in a fiduciary fund (FONADIN),
administered by a state-owned infrastructure Bank (Banobras). FONADIN has several
programs, which constitutes specific accounts within the fiduciary fund.
Available financing Up to 50% of project total investment. No allocation rules (there are more funds than
per project/city projects requesting funding). PROTRAM also provides pre-investment support (grants and
loans for project preparation).
Requirements to An overall urban mobility plan (PIMUS), together with a series of documents demonstrating
access financing the technical, environmental, economic, financial and institutional viability of the project.
Institutional setting Program housed within a state-owned bank, Banobras, managed as a fiduciary fund
and governance without specific organic infrastructure.
Program management At the national level, the program is managed by Banobras. At the subnational level, to
support mass transit projects the program requests the creation of a local mobility office
and an entity aimed at its running and supervision.
Other support Banobras also provides guarantees and financial support to subnational entities (to cover
provided by the their project financial needs).
program
Sustainability The requirements for a project to be eligible includes its contribution to a cleaner
requirements for environment and its financial sustainability.
activities financed
Supervision, M&E36 of There are not specific funds for these activities.
activities financed
What works well and The not-reimbursable national funds for infrastructure financing and support for project
what needs preparation are great attraction to SNGs.
improvement The main shortcomings are the complexity of the process, the requested large portion of
private participation and the weak capacity of SNGs to plan and execute urban transport
policies and projects. From the National Government side, weaknesses are the limitations
of Banobras to deal with a large portfolio of complex mass transit projects and the unclear
distribution of policy and project management functions.
36
M&E stands for Monitoring and Evaluation.
Page 57
The World Bank
4.3 Colombia: National Urban Transport Program (NUTP)
193. At the end of the Twentieth Century, Colombian cities faced severe mobility challenges. Public
transportation in Colombia was traditionally perceived as inefficient, unsafe and polluting. Cities streets
were crowded with obsolete buses which operated with disregard for public safety without organized bus
stops. Several factors came together to create this situation; particularly the existing transport business
model favoring competition in the market, and a fragmentation of service providers. Bus companies were
largely informal and operated on a cash-basis; their revenue depended on the number of affiliated buses,
leading to over-supply of buses, mini-buses and vans in the city. There was a weak technical capacity and
an unclear distribution of responsibilities in the transport sector that hindered efficient regulation, and a
historical institutional weakness in the municipalities and in the national government (The World Bank,
2010).
194. In 2002, the National Government decided the creation of a National Urban Transport Program
(NUTP), centered on the development of BRT systems. The program pointed to the deployment of bus
based rapid urban mobility at lower cost of that of rail systems. Its most iconic case is Bogotá’s
Transmilenio, and emblematic high-capacity BRT system; this project looked at the generation of a deep
transformation in public transportation, altering completely the existing business model. Some of the key
changes were the generation of competition for the service through bidding processes, the organization
of a service network with high-capacity trunk routes on dedicated lanes and feeder lines connecting them
at stations, modern fare collection and control systems, and the formalization and professionalization of
transport companies and labor. The outcomes of these changes were a substantial reduction of users´
travel time and externalities, chiefly traffic fatalities and emissions.
195. The advent of Transmilenio opened a new way to enhance public transportation services in
many other Colombian cities. Transmilenio, an initiative of Bogota´s municipal government, was a
successful project: it decreased the average travel times by 32%, increased property values along transit
lines, enhanced tax revenues, created jobs, and improved the health and safety of the community.
“Transmilenio helped galvanize support for the national plan to expand BRT systems to other cities in
Colombia. Through impressive leadership, strategic institutional coordination and innovative financing
models that included funding from public, private, and international institutions, Colombia was able to
address these barriers and build a national plan to expand Bus Rapid Transit systems across the country.”
(Center for Clean Air Policy, 2012).
196. After the Bogota´s success, several policy instruments settled the institutional foundations of
the National Urban Transport Program (NUTP) and its financial provisions. It was a stepped process,
made through public policy documents endorsed by the CONPES (National Council for Economic and
Social Policy). This Council, which is integrated by all the National Ministers and is chaired by DNP, is the
highest national planning advisory body to the President, signing on all aspects related to economic and
social development. To achieve this, it coordinates and directs the agencies responsible for economic and
social direction in the Government, through the study and approval of documents on the development of
Page 58
The World Bank
general policies that are presented in session; this is the way in which Colombia´s Government sets public
policy. There is no specific law establishing the program; a 2006 law requires all municipalities with more
than 100,000 inhabitants to prepare and implement a Mobility Plan. Table 14: summarizes the major
normative steps.
Table 14: Steps in the implementation of NUTP in Colombia

Year Public policy Contents
document #
2002 3167 Diagnosis on the urban transport weaknesses: problems in service provision
(long travel time, extreme discomfort), inadequate infrastructure and negative
externalities (traffic fatalities, emissions). And their structural causes: deficient
institutional capabilities and inadequate regulations (institutional
fragmentation, scarce capabilities, short coordination with private operators,
regulation limited to rates setting, low abilities to control and penalize, licenses
unclear in establishing responsibilities). The document proposed the
foundations for a new National Urban Transport Policy.
2003 3260 Defines the NUTP and the general guidelines for the participation of the National
Government in the integrated mass transport systems.
2005 3368 Sets the fiscal framework, defines the institutional organization of the National
Government to manage it, its participation in the governance of the mass
transport systems, the components to be financed by the National and the Local
Governments, and the criteria to handle additional and contingent costs.
Box 3: Colombian cities supported by the NUTP 197. The objectives of the NUTP are:
 To develop Integrated Mass Transit Systems
(IMTS) and Public Transport Strategic Systems
(PTSS) within selected medium to large cities, so to
Barranquilla improve mobility at their mass transit main
corridors.
Cartagena  To improve population accessibility through the
Bucaramanga implementation of feeder and integrated routes.
To strengthen institutional capacity so to
Medellín formulate urban transport integrated policies at
Pereira the national level, whilst improving urban public
Bogotá
transport planning and operational processes at
the local level.
Cali
198. The National Urban and Mass Transit
Policy generated several instruments to achieve
its goal of enhancing public transportation. They
vary according to the city size: (i) for cities with a
population greater than 600,000 inhabitants,
integrated mass transit systems, based on BRT
Page 59
The World Bank
technology; (ii) for cities with population between 600,000 and 250,000, Public Transport Strategic
Systems (PTSS), based on system´s integration; and (iii) for cities with a population lesser than 250,000
inhabitants, efforts will be placed on public transport re-organization and the implementation of traffic
management measures (GIZ - Embarq, 2013).
199. The program was designed to support mass transit systems with a strong financial support from
the National Government. Although public transportation has traditionally been a Municipal Government
competence in Colombia, the sequence of CONPES documents illustrate the National Government policy
decision to create a program aimed at the promotion of better public transportation. The mass transit
program - defined by the CONPES documents - finances Integrated Mass Transport Systems (IMTS) in
cities with a population above 600,000 inhabitants (a threshold at which cities are expected to justify
them). All initial projects were BRT, implemented in the most important cities, following the model of
Bogotá’s Transmilenio. Several municipalities that constituted a metropolitan area where the corridors
exceeded a single municipality territory, had to prepare a joint mass transport project.
200. In order to implement the mass transit program, a specific Office of the Deputy Minister was
established at the national level in the MoT. Figure 15 shows the inter-institutional framework that was
established to implement the NUTP, which requested actions at the national and subnational levels.
Figure 15: Institutional framework
Source: Center for Clean Air Policy, 2012
201. At national-level, a specialized team named Co-ordination Unit was appointed to deal with
public transport projects within the MoT. This Ministry was previously focused mostly on roads, ports,
railways and other interurban and international transport services, with a minimum involvement in urban
transportation. The new unit, called the Sustainable Urban Mobility Unit (UMUS), which become a vital
part for ensuring the program success, acted as a coordination point, overseeing critical technical aspects
of the national plan including: administration, finance, and accounting, acquisitions, social management
Page 60
The World Bank
of resettlement, environmental management and monitoring and evaluation, coordinating with the
Ministry of Finance and the National Planning Department (DNP). Moreover, the unit received support
from multilateral entities.
202. The program requested the creation of mobility offices and operating entities to deal with the
new systems. In order to follow the NUTP and to become eligible for IMTS financial support, local
authorities created specific offices focusing on urban mobility issues. Implementing agencies were also
created at the local level and incorporated as state-owned public companies of each municipality, charged
with managing civil work construction required for BRT infrastructure and subsequently, for managing
BRT operation and fleet control. The institutional framework – as depicted above - is completed by a
fiduciary entity, which receives and manages municipal and national funds. Table 15 summarizes the
institutional roles within the NUTP.
Table 15: Government authorities at different levels and corresponding roles
Level of Government Institutions Role

National (first) Lead: National Planning Draft and present Cabinet Papers (CONPES)
Department (DNP) endorsing national and city-level programs.
MoF Define multiannual budget;
Define MDB participation and co-financing.
MoT Define co-financing arrangements with second and

third level governments;
Provide technical assistance to cities.
State (secondary) States Responsible for regulating urban transportation;
Can take leadership role (sponsor) for the
development of mass transit technical projects.
Municipality (third) Municipalities Have administrative authority to assist in the
regulation tasks;
Can take leadership role (sponsor) for the
development of mass transit technical projects.
Source: World Bank
203. The NUTP provides institutional support, training and assistance in traffic and transit planning,
management and control within a PPP scheme. It provides funds or in-kind support. The National
Government provides a Capex Grant of up to 70% of the project investment needs excluding rolling stock
(the minimum is 40%). The minimum private participation required is 10%, and the minimum local
governments participation required is 30%.
204. Within the IMTS, the elements of BRT systems that are eligible for support are:
 Specialized infrastructure (exclusive and preferential lanes, access stations, garage/workshop,
terminals);
 High capacity and cleaner technology bus fleet for main corridors;
Page 61
The World Bank
 Medium and low capacity bus fleet for feeder bus services; and
 Integrated fare collection and control system.
205. Most of the funding for the program comes from loans by multilateral agencies. USD 45 Million
from the Development Bank of Latin America (CAF), USD 200 Million from the Inter-American
Development Bank (IDB) and USD 250 Million from the World Bank (WB). As aforementioned, PPPs play
an integral part of the National Policy: the public sector is primarily in charge of the delivery of
infrastructure, busways, and stations, and the planning and control of operations, while the private sector
is contracted to be basically responsible to acquire and operate the vehicles and some supporting
infrastructure like maintenance yards, the fare collection and control systems, and the operations
monitoring equipment. (Center for Clean Air Policy, 2012).
206. National resources are appropriations from current and future National Budget. Subnational
(municipal) resources are mostly originated in gasoline tax funds. Projects are prepared by SNGs, with
technical support from the National Government and a strong assistance from multilateral institutions.
207. The Government of Colombia co-funds and/or leads the preparation of pre-feasibility, feasibility,
technical, legal and financial studies for structuring NUTP projects. Funding sources to support such
studies include IDB and WB grants (as in the feasibility studies for Cali and Pereira, respectively), as well
as DNP investment budget (ex-post socioeconomic evaluations) and a USD 4 Million MoT-executed
technical assistance component from a WB Loan.
208. To be eligible, municipalities need to meet criteria aligned with the national objectives on urban
transport development37:
 Set up a joint-stock company as the owner of the transport system;
 CONPES’ preliminary endorsement, based on technical, financial and socioeconomic feasibility
studies;
 The project must be consistent with the respective Integrated Municipality’s Urban Development
Plan;
 The project must be registered at DNP’s National Investment Project database; and
 Establish a transport authority to manage the proposed mass transit project.
209. Since the start of the NUTP, the country has formulated and implemented projects for the
equivalent of USD 5 Billion, generating substantial benefits. They include 7 BRT systems moving 4 million
trips a day, and 8 lower capacity PTSS (not mass transit). The Bogotá BRT network moves 3.2 million
travelers daily and the Cali system around 450.000. The other BRT systems are in the range of 100.000
trips per day, with the most recent in Cartagena commencing operations in 2016.
 As an example of system impact in a large city, Bogota´s BRT system (Transmilenio), which has
114 km of segregated bus lanes in operation along with 139 stations, represents in average time
saving of 32% (20 minutes) per trip vis-à-vis the traditional bus system, more than 10 hours a
month for the average rider. Operational speed augmented 55%. There have been several other
37
For more details, see Law 310/1996 of the Government of Colombia, (Diario Oficial No. 42.853, August 12, 1996).
Page 62
The World Bank
tangible benefits, including a reduction in carbon dioxide (CO2) emissions: Transmilenio has been
able to abate 0.25 million Metric tons of CO2 emissions per year38. The program also has
decreased accident rates by 90% in the corridors where the system operates, scrapped more than
2,100 old buses, and reduced noise levels by 3–10 decibels (The World Bank, 2010).
 An example of medium-size city IMTS is Pereira, with population of under 500,000, where more
than 40% of the city’s public transport demand benefit from Megabus transport system. It
generates average time saving for the lowest two income strata by 17 minutes per trip and has
produced a 30,000-ton reduction in CO2 emissions. (The World Bank, 2010).
210. The new mass transit systems represent a big step in the formalization of the public
transportation, the modernization of the rolling stock and the improvement of the labor conditions. To
implement BRT systems, a comprehensive reorganization of the sector was required to tackle the way
traditional transport companies provided service. This reorganization included a competitive bidding
process for the market, the granting of formal concessions, the formalization of drivers working hours (8
hours per day, instead of the typical 14 hours they had to work before), the formalization of the bus
operating companies (paying taxes), and the creation of social and environmental teams in each local
implementing agency, in order to develop and implement resettlement and environmental management
plans (The World Bank, 2010).
211. After the development of IMTS in larger cities, a new program was established, aimed at
improving public transportation in intermediate cities. A new mechanism, Public Transport Strategic
Systems (PTSS) was launched in 2008, aimed at the enhancement of public transportation systems and
institutions in cities with population between 250,000 and 600,000 inhabitants. The requirements of these
cities are centered in the reorganization of the service provision, the modification of business models and
routes and the strengthening of the public institutions and private operators, rather than in the
deployment of large infrastructure networks.
212. World Bank support to the Government of Colombia under the Integrated Mass Transit Systems
Project throughout the public transport reform program gave the opportunity for the World bank to
identify achievements, learned lessons and future challenges. According to the Implementation
Completion and Results Report39, and further assessments from various sources, they are the following:
Main achievements:
 Seven mass transit systems are in operation in different cities; 7 more in the authorization
process.
 Infrastructure works were successful, overcoming important obstacles in complex urban
environments (utility deviations, land expropriations), and adjusting to unavoidable changes
during projects execution
38
A 2012, UNFCCC registered project estimated 246,563 metric tonnes per annum, while other estimates cited by
WRI which include improvements in diesel quality estimate nearly 1 million tonnes per year. Refer:
https://cdm.unfccc.int/Projects/DB/DNV-CUK1159192623.07/view?cp=1
https://www.wrirosscities.org/sites/default/files/Social-Environmental-Economic-Impacts-BRT-Bus-Rapid-Transit-
EMBARQ.pdf
39
World Bank. Implementation Completion and Results Report, Integrated Mass Transit Systems Project
(IBRD-72310 IBRD-74570 IBRD-77390) June 11, 2013.
Page 63
The World Bank
 Infrastructure covered not only mass transport demands, but also the improvement of
surrounding public space
 Sound Institutional enhancement: each operating unit (at the city level) developed skilled
technical teams
 The financial agreements between the National Government and the SNGs warrantied the
resources needed for project design and implementation
 Private operators experienced a process of modernization, through good public-private
interaction
 More than 155.000 jobs were created, and substantial human capital gains were obtained
 The Colombian model was a source of inspiration to multiple BRT projects in cities around the
world, as it has a proved impact on urban mobility, enhancing people accessibility, promoting
public transportation and offsetting the strong trend towards automobile or moto expansion.
Lessons learned:
 The support of multilateral institutions and the national entities helped in the planning,
structuring and implementation of mobility solutions.
 To get successful projects (improve public transport performance), local authorities should be
firmly committed to re-structure conventional services and control informal services when
deploying new IMTS.
 Subnational entities faced difficulties in covering their portion of the financial needs for
infrastructure construction; they looked for credits from International Financial Institutions (IFIs)
or committed future tax revenues (mostly from fuel sales).
 Transparent tender processes where implemented; some bus owners and operators where
favorable to the modernization and changes imposed by the new schemes, while others opposed
them.
 The implementation of the IMTS and PTSS demanded a closer relationship between official
entities and operators, and participation process with active participation of many local
stakeholders
 Many lessons were learned as regards managing the resistance to change from transport
operators and IMTS project communication.
 Coordination between Implementing Agencies and other entities in charge of regulating traffic
and transport should be a cornerstone of any program in this area: Typically, the reorganization
of bus routes and regulation of transport operators and control of informal systems fall under
agencies such as metropolitan authorities or traffic management agencies. These entities need to
be engaged strongly since day one to ensure they adopt the complementary measures required
to enhance the operational performance of the entire urban transport system. The lesson learnt
is that this type of national mass transit program needs to include the strengthening of these
agencies and to work early on the approval and implementation of supportive regulations that
mandate coordination and effective regulation of traditional bus operators, control of informality,
and elimination of parallel routes.
 The implementation of BRT systems goes beyond building the infrastructure and a greater upfront
effort needs to be placed on operational aspects. In Colombia, the WB team grasped a sense
among project stakeholders that the focus on bus operations needs to be strengthened as these
projects are not infrastructure schemes, but rather transport schemes, requiring deep planning
Page 64
The World Bank
of operational, transit management and regulatory aspects. These transcend beyond the realm of
the Implementing Agency in charge of executing the works, and include: route reorganization,
development of bus scrapping schemes and regulation of informal transport services. Although
these aspects were considered in Colombia, the lesson learned is the need to carry out detailed
operational and regulatory assessments upfront, on a parallel front to the execution of the works
in order to lay the groundwork for the start of operations.
 Synergies and knowledge transfer are fostered by the simultaneous implementation of projects
in multiple cities. This has resulted in a continuous flow of know-how and best practices among
participating cities in areas such as civil works management, procurement and fiduciary processes,
safeguards management, operational design, strategies for initiation of operation, among others.
The project has also benefited from these informal knowledge sharing arrangements to
strengthen the implementation and institutional capacity of the new medium-sized city program.
 There is a critical role for National Government in the implementation of urban transport services
reforms at the local level. Given that small and medium-size cities lack both financial and technical
resources, the participation of the Government of Colombia becomes crucial in promoting
reforms at the municipal level. This project showed that this role needs to take the form of
constant support from the national government, particularly in areas such as the regulation of
transport services and negotiation of concession agreements. In Colombia, the Government
learned the lesson and proceeded with the formulation of a National Urban Mobility law.
 Capacity building should go beyond enhancing the capacity of the implementation unit and also
focus on strengthening its mandate and facilitating its work within the Ministry. The performance
of the Project Coordination Unit (PCU) was affected by factors outside its direct control and
related to the institutional environment in which it operated. Future projects should build the
capacity of the dependencies on which the performance of the PCU depends (i.e., procurement
and financial management) and seek a long-term commitment to maintain its link to the highest
levels of the institution or alternatively, strengthen the department to which the unit reports.
 M&E framework design needs to account for the capacity of responsible agencies and mandate
its internalization by the Borrower. Despite the technical merit and design quality of the set of 35
indicators, in practice, Implementing Agencies did not have the capacity to calculate them and
the level of reporting was low. When the resolution mandating reporting of these indicators came
out in 2009, and due to legal requirements, the focus of the PCU turned to ensuring compliance
as opposed to providing technical assistance in the measurement of indicators with limited
results. A lesson learned for future projects is that it may be worth focusing on a set of SMART
(simple, measurable, achievable, realistic, and time-bound) indicators that can be effectively
managed by Implementing Agencies. In addition, the M&E framework implementation needs to
be the direct responsibility of the PCU and not a task delegated to an external consultant and that
is never internalized and implemented.
 Early consolidation of the environmental and social management capacity is important to ensure
timely project implementation. The local Implementing Entities include environmental and social
management teams. Experience has shown that the earlier these teams are onboard and being
able to participate in project design and planning, the higher the rate of success for the particular
project activity. On the other hand, examples have shown that where environmental and social
teams were not brought onboard early on, unmanaged social issues caused serious
Page 65
The World Bank
implementation delays, and adverse impact on the affected populations. Furthermore,

environmental and social management teams need to place especial consideration on tackling
problems and designing communication and implementation strategies for vulnerable groups.
 Urban transport infrastructure projects need to account for the risk of cost and time overruns
arising from the need to relocate / replace public utility equipment and facilities that are affected
as part of construction works. One of the main causes of delays and cost overruns in the project
was associated with the additional works required to deal with affected utility networks, for which
accurate plots did not exist in some cases, and that had to be funded by local governments (not
eligible for MDBs financing). Future projects should take this risk into account and establish clear
working arrangements with public utilities and clearly delineate responsibilities. Budget
contingencies should account for the potential additional cost40.
Challenges:
 Generate agreements to ensure financial sustainability.
 Complete the reforms to the citywide public transport network, rather than limiting the network
to a few corridors.
 More attention needs to be given to improvement and integration of the conventional and
informal bus systems.
 Look for additional funding sources, like parking, congestion or pollution charges.
 Implement active policies to enhance private operators´ professional skills and capabilities
 Control conventional and informal services, in order to increase IMTS demand
 Review project design, as urban dynamics suggest that new needs are emerging
 Warrant that the fare collection is utilized exclusively to support service operation
 Complete infrastructure works and ensure integration with other transport modes
40
Several authors have devoted entire research projects to analyze the reasons that explain why most of transport
infrastructure projects tend to experience cost overruns and completion delays. For example, see Bent Flyvberg’s
Megaprojects at Risk (2003), and Harry Dimitriou’s Planning, Appraisal and Delivery of Mega Projects (2016).
Page 66
The World Bank
Further comments
213. In addition to the Government review of the Program, summarized in the previous paragraphs,
other comments can be added. Five pros and five cons have been highlighted as regards the NUTP and
its implementation programs:
Main pros:
 The NUTP generated a great change, from services that were poor indeed 15 years ago. Results
are impressive; people clearly acknowledge them. The programs generated by the NUTP,
particularly the IMTS, are a source of inspiration for many countries
 It is an example of coordination between national and Subnational levels of government
 The Program generated a great development of human capital; urban mobility is currently placed
high in the public agenda
 The projects introduced a cultural change in many operators and the level of bus operating
expertise gained by operators has opened new opportunities for local operators to provide urban
transport services in other countries.
 The Program had relevant impact reducing negative externalities
Main cons:
 There has been a bias towards BRT solutions, probably because Transmilenio showed a way to
provide mass transit systems at a much lower price than a metro, and within a mayor´s term.41
 The corridor-by-corridor implementation strategy showed to produce a slow reform in urban
public transportation, displacing the weak traditional services instead of replacing them.
 BRT systems are experiencing financial difficulties. Sophisticated original structuring and
regulatory models are proving to be not sustainable
 At the local level, the functions of urban transport authority and service management has been
mixed.
 The change of governments at the local levels was detrimental to system performance; the
Program was a policy agreed upon by the different political forces at the national level, but not a
consensual policy at the local (municipal) level.
41
Although now the support to Bogotá metro project and the development of suburban trains is generalized.
Page 67
The World Bank
Table 16: Colombia NUTP information sheet
KEY ISSUE SUMMARY
Rational of the National urban mass transit policy aimed at the development of mass transit systems in
program/why was it large cities, later extended to intermediate cities.
started
Description of Bus fleets, specialized infrastructure, fare collection and control systems. Oriented towards
program/activities it IMTS42 in cities above 600,000 inhabitants and PTSS 43 in cities with population between
can finance 250,000 and 600,000.
Program resources: Co-finance between the national government (40-70%) and Subnational entities (minimum
source, transfer of 30%). National resources from current and future National Budget appropriations.
mechanisms Subnational entities from future gasoline tax co-participated funds. Support by multilateral
institutions. Compulsory participation of the private sector not lower than 10%.
Available financing National governments not-reimbursable resources up to 70% of project investment.
per project/city
Requirements to Alignment with the national objectives: commitment to public transport organizational
access financing reforms – oversupply reduction, creation of new ownership companies and establishment
of new transport authorities to manage the projects. Project identification must be (i)
consistent to the respective Integrated Municipality’s Urban Development Plan, (ii)
endorsed by CONPES based on relevant studies and (iii) registered at DNP’s National
Investment Project database.
Institutional setting Program established at national level under the MOT. At Subnational level, entities
and governance (municipalities) created mobility offices and operating entities to manage the mass transit
systems.
Program management Specific Office of the Deputy Minister created under the MOT.
Other support The MOT supports local governments through technical assistance and training programs.
provided by the
program
Sustainability Project eligibility conditioned to high environmental standards.
requirements for
activities financed
Supervision, M&E of There are not specific funds for these activities.
activities financed
What works well and The NUTP generated a great change, from services that were very weak. Results are
what needs impressive. The Program, a source of inspiration for many countries, is an example of
improvement coordination between national and Subnational levels of government. It generated a great
development of human capital. The projects introduced a cultural change in many
operators, and had relevant impact reducing negative externalities.
There has been a bias towards BRT solutions. The corridor-by-corridor implementation
strategy showed to produce a slow reform in urban public transportation. BRT systems are
experiencing financial difficulties, demanding mounting subsidies. At the local level, the
functions of urban transport authority and service management has been mixed. The
change of governments at the local levels hurts the systems performance.
42
IMTS = Integrated Mass Transit Systems, based on BRT technology;
43
PTSS = Public Transport Strategic Systems, based on system´s integration.
Page 68
The World Bank
4.4 South Africa: Integrated Rapid Public Transport Networks (IRPTN) Program
214. Urban form and passenger flow in South African cities still reflect the legacy of the past political
organization. The spatial segregation heritage is reflected in a travel pattern characterized by strong flows
from suburban areas to city centers, generating long, unidirectional, highly peak travels and low or almost
null volume in the midday off-peak periods 44. The urbanization trend in the country is remarkable,
reaching currently 62% of the population and 80% of the national GDP. Cities show very low densities:
about half of that of Latin America cities reviewed in previous sections.45
215. In this peculiar urban context despite crowding, lack of facilities and poor safety, paratransit
plays a key role in public transportation. Minibuses taxis46 account for 68.8% of the public transport
modal share in the largest South African cities followed by commuter bus, including conventional and BRT
systems, (21.1%) and commuter railway services (9.9%)47. These minibuses taxis do not receive direct
operational subsidies, while the other public transport modes do. Paratransit industry is well developed,
capable for providing long distance one-seat rides and quickly adapt to the market. The current level of
motorization, measured as motor vehicles per 1,000 people, is still low in South Africa (214)48 in
comparison with more mature markets (above 600 in G7 countries) leading to only 16.5% of daily trips
carried out by private automobile. The competences on public transport are in the process of being
decentralized and will shift from the national and provincial governments to the local municipalities once
finalized.
216. The spheres of competence regarding urban transportation is unclear. According to the
constitutional assignments, urban transportation is a concurrent function, involving national, provincial
and municipal levels of government. National public documents state that the functional assignment of
roads and public transport functions between spheres of government is confusing and fragmented.
According some recent analysis, the funding framework for public transport in South Africa is also
fragmented, which complicates integrated transport planning “… as each funding stream has its own set
of funding requirements and criteria.” (Walters, 2014).
44
South African´s urban transport has been analyzed following documents and presentations prepared by Ramon
Munoz-Razkin and Harvey Scorcia at the World Bank. https://olc.worldbank.org/content/time-tailored-approach-
south-african-bus-rapid-transits-brts
45
South African cities density typically range between 500 to 2000 inhabitants per km 2 (except Johannesburg), while
metropolitan Bogota exceed 4300 and the Valley of Mexico houses more than 9000.
46
Low capacity vehicles (16 seats) providing a door-to-door service to commuters.
47
Statistics South Africa; National Household Travel Survey, 2013.
48
Knoema integrated global database, 2016. World data atlas – road transport. Motor vehicles include cars, buses,
and freight vehicles but do not include two-wheelers. Population refers to midyear population in the year for which
data are available.
Page 69
The World Bank
217. The 2010 World Cup spurred the development of Integrated Rapid Public Transport Network
(IRPTN) Programs, all of them BRT systems, in a number of the cities that hosted World Cup matches.
The costs of such systems, however, exceeded the capacity of the venue cities to fund the implementation
costs, prompting the implementation of a national support program. Implementation of IRPTNs, which
effectively comprise BRT systems, was initially for 13 thirteen metropolitan areas, however a number of
other (non-metro) cities were subsequently included. At the date of this report BRT systems were
operational in Johannesburg, Cape Town, George, Tshwane (Pretoria), Ekurhuleni and the first phases of
the Rustenburg Rapid Transport project due to launch during 2019. A number of systems, also shown in
the following figure, are in the planning stage.
Box 4: South African cities supported by IRPTNP

218. The South African urban
transport support program is part Polokwane
of larger city development policy. Rustenburg
The National Treasury launched Pretoria
the South African City Support Nelspruit
Program (CSP) in 2005 to support
cities to deliver on their urban Ekurhuleni
development programs. One of its Johannesburg
pillars is devoted to public Bloemfontein
transportation; the other three are
aimed at human settlements,
Msunduzi
economic development and
Durban
climate change, resilience and
sustainability. East London
219. The objective of the George
program is to develop inclusive, Port Elizabeth
livable, productive and Cape Town
sustainable cities improving the
targeted areas. It was promoted by the South African National Treasury, with support of the World Bank
and SECO.49
220. At the national level, the program is managed by the Department of Transport. The DoT is
primarily responsible for funding allocation but is also supposed to provide oversight and technical
support, although in practice this is very limited. The South African Treasury Department has prepared
Technical Guidance50 on implementation.
49
SECO is part of the Swiss Federal Department of Economic Affairs, Education and Research and supports
measures in economic and financial policy, urban infrastructure and utilities, private sector and entrepreneurship,
sustainable trade, as well as climate-friendly growth.
50
Refer:
https://csp.treasury.gov.za/Resource%20_Centre/Conferences/Documents/CSP%20Tools/Public%20Transport%20
and%20Urban%20Mobility/Consolidated%20IPTN%20Guidance%20V4%20Jan%202018.pdf
Page 70
The World Bank
221. At the Subnational level, implementation and operations management units have been
established within the relevant municipalities. In one case, in cooperation with the Provincial
Government where the municipality did not have the local capacity required
222. Resources come from the National Budget and are allocated on an annual basis to the
Department of Transport. A total amount of ZAR 5.6 Billion (approx. USD 430 Million) was allocated in
2016/17.
223. Transfers to each Municipality are made annually, to a certain extent (25% of allocation), based
on performance. There is also an amount of up to 20% of the total grant that can be given to cities on the
discretion of officials.
224. Under the IRPTN Program the national government covers 100% of the Capital Expenditure
(CAPEX) through a Public Transport Network Grant (PTNG) that provides up to 100% of project total
investment. The amount allocated to each city is set in accordance with a defined formula that includes
three equally weighted components: population size, economy size and public transport mode share.
225. Systems which are eligible for funding can be either BRT systems, or “Quality” bus systems
without exclusive right of way. The program finances all elements of the system including:
 Civil infrastructure comprising bus-lanes, stations, depot and control room
 Fare collection systems
 Passenger information and ITS
 Fleet
226. Operational Expenditure (OPEX) is also supported by the National program. OPEX was initially
expected to be recovered from the farebox and other local sources. Due to ridership being lower than
forecast, the National Government support has been extended to operational subsidies through a Public
Transport Network Operations Grant (PTNOG) which allows for National support of up to 70% of indirect
operating costs for the first two years of operations reducing to 50% in subsequent years.
227. Pre-investment support, by means of grants for project preparation, is also provided by the
Program.
228. The three cities that initially launched the primary IPTN services were Johannesburg (Rea Vaya
system), Cape Town and Tshwane; other projects follow. Implementation in Johannesburg and Cape
Town has shown that farebox revenue is insufficient to cover operating costs. The systems are demanding
large operating subsidies due to demand being substantially less than anticipated. The PTNOG is an
acknowledgement that fare revenue and local funding are insufficient to meet the operating deficit and
that National Government support is required. The main reasons for this are the low density of the South
African cities and the highly developed paratransit industry, which provides long distance one-seat rides
and quickly adapt to the market.
Page 71
The World Bank
229. World Bank research identified further aspects as quoted from Scorcia and Muñoz “a combination
of factors that are common in other cities of the developing world such as the presence of parallel informal
services offering more convenient alternatives, a degree of lack of awareness by potential users on how
to use and navigate the system, and instances of limited convenience for users to access and use the fare
media, and, sometimes, an increase in the generalized transport cost of the trips with respect to the ex-
ante situation. On the other hand, and as it is illustrated in this paper, there are other inherent factors
that have to do with the structure of the urban form and mobility patterns in Johannesburg which are
very different to the ones that Rea Vaya’s LACs siblings”
230. The financial needs are generating a warning signal to the fiscal offices at the national and local
level. Other BRT systems are under construction, expecting to cover O&M expenditures from the farebox.
231. Transitioning existing public transport operators into the new business model has had mixed
success, with implementation stalled for over eight years in one City (Nelson Mandela Bay) due to inability
to reach an agreement. In cities where agreement has been reached, a compensation framework has
been implemented that effectively doubly compensates displaced operators by compensating for loss of
business, while also providing for shareholding in the new operation.
232. The grant program should transition towards a system where funding for transport programs is
generated primarily locally, to provide cities greater revenue stability and long-term certainty. Cities
also, upon demonstrating the capacity and willingness, should gain authority over all public transport, to
implement integration between modes.
233. One of the major impediments to program success has been a lack of sufficiently trained and
skilled staff for planning, implementation and management of public transport services. It is also
acknowledged that it is unlikely that all cities will be able to retain all the skillsets required to run a major
BRT program, or for that matter develop these within a reasonable timeframe. This remains a challenge.
234. The review of the emblematic South African IRPTN, the Rea Vaya BRT system in Johannesburg,
shows the substantial gains of the program. Prior to its construction, about 70% of public transit between
Soweto Township and Johannesburg CBD involved overloaded, poorly maintained 16-person minibus taxis
operating demand-responsive (unscheduled) services. A participatory decision-making process during the
design phase engaged key stakeholders, including the minibus operators, who went on to become bus
drivers and shareholders in the BRT system. The ex-post estimated net present value found benefits in
the range of USD 900 Million, considering direct and indirect benefits. The largest portion (37 %) of
benefits comes from travel time reductions followed by improved road safety (28 %). The project benefits
accrue to lower quintiles, predominately the 4 th highest income quintile (EMBARQ, 2015).
Page 72
The World Bank
Table 17: South Africa National Program Information Sheet
KEY ISSUE SUMMARY

Rational of the Program initially aimed at implementing BRT systems prior to the 2010 FIFA World Cup,
program/why was it but subsequently continued supporting IRPTN in South Africa’s larger cities.
started
Description of Implementation of IRPTN, which effectively comprise BRT systems, in 13 thirteen priority
program/activities it cities. Initially only metropolitan areas were eligible, however a number of other (non-
can finance metro) cities were subsequently included.
Funds can be applied for either BRT systems, or “Quality” bus systems without exclusive
right of way.
Program resources: Resources come from the National Budget and are allocated on an annual basis to the
source, transfer Department of Transport. A total amount of ZAR 5.6 Billion (approx. USD 430 Million) was
mechanisms allocated in 2016/17.
Transfers to each Municipality are made annually, to a certain extent (25% of allocation),
based on performance. There is also an amount of up to 20% of the total grant that can be
given to cities on the discretion of officials
Available financing Pre-investment support (grants for project preparation)
per project/city A Public Transport Network Grant (PTNG) provides up to 100% of project total capital
investment.
In terms of operation, the Public Transport Network Operations Grant (PTNOG) allows for
up to 70% of indirect operating costs for the first two years of operations reducing to 50%
in subsequent years.
Requirements to Each City is required to prepare an Integrated Public Transport Network Plan, which
access financing consists of a set of four documents: a network plan, an operations plan, an implementation
plan and a business plan.
Institutional setting A Public Transport Strategy was approved by the National Department of Transport in
and governance 2007. The strategy introduced the concept of the Integrated (Rapid) Public Transport
Network (I(R)PTN) which was institutionalized in the National Land Transport Act of 2009.
Provincial Government is responsible for allocation of route permits and subsidizing
commuter services Although there are processes underway to devolve these
responsibilities to capable municipalities.
Municipalities are responsible for the planning, implementation and management of
modally integrated public transport networks and travel corridors for transport.
Program management At the national level, the program is managed by the Department of Transport.
At the Subnational level, implementation and operations management units have been
established within the relevant municipalities. In one case, in cooperation with the
Provincial Government where the municipality did not have the local capacity required
Other support The National DoT is supposed to provide oversight and technical support, although this is
provided by the very limited. Cities have received support through the WB and Treasury’s City Support
program Program.
Sustainability The requirements for a project to be eligible comprise a completed IRPTN Plan.
requirements for
activities financed
Supervision, M&E of The National DoT provides a very superficial level of supervision.
activities financed
What works well and Implementation in Johannesburg and Cape Town has shown that farebox revenue is
what needs insufficient to cover operating costs and operational subsidy is required.
improvement Transitioning existing public transport operators into the new business model has had
mixed success, and the compensation framework adds substantial costs to system
implementation
Developing and retaining skilled manpower is a major impediment to program success.
Page 73
The World Bank
4.5 China: Transit Metropolis Demonstration Program (TMDP)
235. Transport has been an essential element for growth and transformation of Chinese cities in the
last decades. In the first stage, from 1978 to 1995, a US approach was dominant in large-scale road
building programs. Policy settings were aimed to maximize personal mobility and the initial idea of
prioritizing public transport was neglected (Chen, 2005). From the 1990s onwards, when the road building
approach had started to bring about urban congestion, investment in public transport vehicles had begun
to increase. However, at the same time, car manufacturing was promoted as a key industry, which brought
about an unprecedented increase in car ownership without effective constraint policies. From the early
2000s, the explosive growth of private cars had dramatically increased the seriousness of transport issues
such as congestion, chaotic parking, worsening air quality, etc. There was a resurgent awareness of the
importance of public transport at this stage51.
236. Responding to rapid urbanization, and climate change, Government of China (GOC) has been
actively promoting urban transport development in cities. In particular, GOC established urban transport
institutions at all levels of government, published technical standards of urban transport modes, set up
appraisal and approval system for urban transport planning, designing and implementing, as well as
provide direct and indirect financial support.
237. To accelerate urban transport network expansion, State Council issued Guidelines of Prioritizing
Urban Public Transport Development in China (State Council No.〔2012〕64) which identifies public
transport as the primary development pattern and emphasizes key actions to take for governments at all
levels to achieve it.
238. Urban transport development in China combines centralized transport sector policy making
with decentralized funding and financing. The role of Chinese national government is to establish broad
national policies and sector development targets, appraisal and approves urban transport development
network plans, and provide crucial review, technical guidance, and general standards for project approval.
The national government reviews and approves urban master plans for major cities, mega-investment
projects, and applications for rural-to-urban land conversion (Zhi, 2011) 52. As the technical capacity of
Subnational governments improves, and the decentralization of infrastructure development deepens,
some urban transport projects (such as conventional bus, BRT,) only requires approval from municipal
governments with being archived at national government. In addition, provincial governments are
responsible for funding and implementing inter-city urban transport corridors such as inter-city rails.
239. City governments are the owners of urban transport projects within their jurisdiction and take
the most responsibilities for planning, investment and implementation. City governments make the
urban transport network plan, implementation plan, project proposal, feasibility study and also are
responsible to fund and implement projects. (see institutional setup as Figure 4) Under the decentralized
system, urban development is considered as a local concern, and municipal governments assume primary
51
Chia-Lin Chen (2017), Modern Tram and Public Transport In Chinese Cities: A Case Study of Suzhou
52
Zhi Liu and Andrew Salzberg (2011) Developing Low-Carbon Cities in China: Local Governance, Municipal
Finance, and Land-Use Planning—The Key Underlying Drivers
Page 74
The World Bank
responsibility—both functional and fiscal—for it. Due to their technical competence, the publicity
associated with good performance, and the opportunity for further promotion based on performance and
tangible results, there is a strong sense and culture of competition—between leaders in a province or a
region as well as across time. Mayors experience pressure to perform better than both preceding Mayors
and neighboring Mayors (Zhi, 2011).
240. Urban Transport Services are generally provided by Government-owned enterprises (GOEs).
City governments establish government-owned urban transport utility companies such as Bus/BRT
companies, urban rail companies, and some cities also set up companies with business related to urban
transport fare collection, construction, design, fund management etc. In many cities, urban transport
GOEs not only provide public transport service but also procure construction, equipment, and
maintenance on behalf of the city government. There are only a few private operators in urban transport
sector. For example, in 2016, Xi’an had 47 bus routes operated by private companies, which accounts for
about 20% of total number of bus routes.
241. China has three separate processes that cover different yet interrelated aspects of planning. In
addition to city master plans, they include socioeconomic development five-year plans and state land
resource utilization plans, which require approval by the higher-level governments. The three plans are
interrelated. In practice, these plans are developed by three different agencies and can sometimes set
targets and goals that are inconsistent or even contradictory. Nevertheless, these plans are considered
necessary by Chinese officials for guiding local socioeconomic and spatial development while safeguarding
the national interest in land resources.
242. Chinese mayors have some discretionary power regarding planning transport infrastructure and
how it is paid for. China’s urban transportation infrastructure planning process is currently guided by 20-
year urban master plans, five-year implementation plans, and usually one or more transport master plans
and implementation plans.
243. The construction bureaus and transport bureaus of first and second-tier cities often have their
own planning and design institutes which have the technical capacity to make master plans and some
project design. The national government also own several transport design institutes that have larger
capacity of designing rail project or more innovative transport projects.
244. National Government approves municipal master plans. Sometimes, the actual construction
related to the master plans is implemented ahead of schedule because of accelerated city development
beyond expectation, so the long-term plans become only guides to broad policy. Land development and
infrastructure development in most cities has outstripped the limit and expectation set by the master
plans, and it is within the power of the mayor to implement projects not fully identified in the master
plans so long as it is consistent with broad policy.
245. In urban transport sector, while normal bus, BRT and tram projects can be planned, financed,
and implemented by municipal government, urban rail projects require approval from provincial and
national government.
Page 75
The World Bank
246. Since 2008, China has entered an explosive stage of vehicle growth. From 2008 to 2010, the
country’s vehicle ownership almost doubled (Wang et al., 2011), from 38 vehicles to 58 per 1,000 people,
and is set to hit 269 vehicles by 2030 (Dargay et al., 2007). The increase of transit demand and car usage,
coupled with insufficient public and non-motorized transport, has produced negative externalities ranging
from traffic congestion, road accidents to carbon emissions and air pollution.
247. Yet, to tackle the challenges, transit service delivery is not sufficient. In large first-tier cities, the
sheer rapid expansion of public transport networks is not enough to meet the growing transit demand or
to stymie car usage. Further, in second- and third- tier Chinese cities, transit expansion or improvements
have been often obstructed by funding schemes and land policies that favor road infrastructure projects.
248. There were previously a number of national pilot programs associated to sustainable transport
(such as the Low-Carbon Transit Pilot Program), however these programs were often fragmented and
uncoordinated. They not only fail to comprehensively cover the needs of the cities, and some programs
are too limited on technological components such as fuel efficiency.
249. In 2011 the Ministry of Transport (MOT) initiated a national program “Transit Metropolis
Demonstration Program“ (TMDP). This program is a five-year program on a rolling basis and aims to push
forward public transport development at city level, by providing technical, political and financial support
from the national-level government authorities and transport technical institutions thus crystalizing the
“transit priority” strategy, as outlined in China’s 12th Five-year Transportation Development Plan (2011-
2015).
Box 5: Chinese cities supported by the TMDP 250. The program housed
within the Department of
Highway and Transportation of
MOT. The National Transportation
Harbin
and Planning Research Institute (a
Changchun central government owned
Urumqi Hohhot Beijing Shenyang enterprise) provides technical
Tianjin
evaluation and support on behalf
Yinchuan Dalian
Lanzhou Baoding of MOT. Provincial transport
Shijiazhuang
Xining Taiyuan Jinan Qingdao departments are responsible for
Xinxiang Nanjing
Xi’an recommending cities, as well as
Zhengzhou Shanghai
Suzhou
guiding and supervising eligible
Wuhan Hefei Ningbo city applicants to achieve their
Chongqing Nanchang Hangzhou
targets.
Changsha Fuzhou
Guiyang Zhuzhou
Kunming Liuzhou Shenzhen
Guangzhou
Haikou
Page 76
The World Bank
251. One of the main aims of the TMDP was to increase the share of public transport to more than
50% in selected cities. By 2016, 37 Chinese cities had been selected to participate; more than 50 additional
cities are projected to join by 2020 (MOT 2016).53
252. The MOT formulates the criteria for cities eligible for the program. The selection criteria include
urban population and density, public transport demands, transit investments and plans, and
commitments from the local governments. Preconditions for eligibility of participating TMDP include:
 Cities with urban population of more than one million.
 City governments have made complete urban transport development plan that is included in the
city master plan, city comprehensive transport system plan, and city detailed plan.
 City governments have issued supportive policies of urban transport or made specific action plan
to promote urban transport. Government fiscal system should have clear and stable funding
sources to support urban transport development.
 Cities should have good performance level of urban transport and have leading capacity in urban
transport administration than the peers of same province.
 In principle, cities with title of national highway transport hub will be favored.
253. The proposal for funding from the TMDP must include a public transport status quo report,
public transport-related policy and regulation documents, and a transit plan (the plan should
demonstrate how it is integrated into the city’s comprehensive transport plan, urban master plan, and
annual major infrastructure investment plan). The application should also include the objectives,
prioritized working areas, safeguards, investment budgets, financing plans, time schedules, divisions of
responsibilities, as well as support needed from the MOT. To allow for flexibility, cities can vary in the
goals, pathways, and types of transit modes invested, based on local conditions and capacity.
254. City applicants are reviewed by both provincial and national transport departments before a
list of participating cities is finalized. Every province can recommend 1 or 2 city applicants. MOT
thereafter organized expert team to conduct field investigation on the progress and promote the TMDP
at city level. Each year, cities should report the progress to the MOT, including the achievements,
challenges, financial reports, and work plans for the following year.
255. By being approved as eligible applicants, cities are expected to achieve targets set by MOT for
public transport service quality within the city, and also receive evaluation of their progress every year.
By the end of the program, MOT examines the cities’ performance in comparison with the targets, and
those cities that have met the targets are awarded the designation of Transit Metropolis Demonstration
City (TMDC).
256. The targets for cities that are included in the program are described in the following table. Given
the diverse characteristics of the participating cities, this checklist is not mandatory. A certain degree of
flexibility is allowed, and participating cities are encouraged to tailor the indicators and targets based on
the local conditions, provided that these adjustments are approved by the MOT.
53
Velásquez et al. 2017, Bus Rapid Transit In China: A Comparison Of Design Features With International Systems
Page 77
The World Bank
Table 18: Targets to be designated as “Transit Metropolis” 54
No. Indicator Minimum Target Value

1 Modal share of public transit (%) 40%; 45% (for cities
with urban rail system)
2 Ratio of length of public transit network to length of road network (%) 3 km/km2
3 500-meters coverage of public transit stations (%) 90%
4 Public transit vehicle ownership (vehicles / 10 thousand people) 15
5 Punctuality rate of public transit (%) Annual increase 10%
6 Operating speed of public transit during peak hours (km/hour) Annual increase 5%
7 Degree of crowding of public transit during peak hours (%) 90%
8 Passenger satisfaction on public transit service (%); 80%
9 Ratio of public transit vehicles that park in bus yard during non- Annual increase 5%
operating time (%);
10 Ratio of length of exclusive bus lanes to length of total bus lanes (%); Achieve completion
11 Ratio of “green” transit vehicles (%); 5%
12 Death rate of public buses (person/million vehicle km); Annual reduction 1%
13 Death rate of rail transit (person/million vehicle km); Annual reduction 1%
14 Ratio of public transit lines to total passenger lines connecting urban 85%
suburbs (%);
15 Ratio of streets with transit-first signal of all streets 30%
16 Usage rate of IC card (%); 80%
17 Inter-city operability of IC card (absence or presence); Presence
18 Intelligent public transit system (absence or presence); Presence
19 Plans of urban public transit system (absence or presence); Presence
20 Transport impact assessment for construction projects (absence or Presence
presence).
257. The MOT also develops the performance evaluation system and organizes nationwide
performance monitoring and evaluation. This monitoring focuses on the mode share of public transport,
ratio of public transport station coverage, bus network coverage ratio, ratio of bus-only lane construction,
ratio of public transport on-time service and etc.
258. The TMDP mandates participating cities to compile transit plans and to improve compatibility
of these plans with urban land use plans. The MOT provides technical guidelines and assistance in this
regard. The transit plans are similar to mobility plans that cover the planning, construction, finance and
operation of the entire urban transit system.
54
关于开展国家公交都市建设示范工程有关事项的通知-交通部道路运输司
Summarized from Mu, Jong, 2018 A Tale of Two Chinese Transit Metropolises and the Implementation of Their
Policies: Shenyang and Dalian (Liaoning Province, China), and “Directive on Implementing National Transit
Metropolis Demonstration Program” by Department of Highway and Transportation, MOT
Page 78
The World Bank
259. Under the TMDP, both the national and local governments are required to enact public
transport legislation that aims to create supportive measures around transit priority. Such supportive
measures could include pinpointing the leading municipal department in charge of the Program, devising
the mechanisms for cross departmental coordination, planning annual financial commitments,
redistributing road space for transit priority, and allocating land for bus depots, interchanges and other
spaces for transit services;
260. The MOT draws funding from the existing programs and their funding pools, not a new pool.
Therefore, the funding is primarily channeled to focal areas where the MOT has traditionally been a
leader, including the development of multi-modal transit hubs, operation monitoring systems for bus
rapid transit, clean energy buses, and intelligent transportation systems.
261. The MOT authorizes financial support for the implementation of projects and initiatives
proposed by the Demonstration Cities throughout the program cycle. As the program unveils, the MOT
will grant funding to participating cities according to their proposed projects, which should be completed
within five years.
262. Fund resources come from the National fiscal budget and are allocated on an annual basis to
the Department of Transport for use in the TMDC.
263. On average, each participating city could receive an approximate total of USD 22-33 Million
through the TMDP, equivalent to the capital cost of two to three kilometers of BRT in China, not close to
recover the full cost of any proposed project. Cities should use the fund on public transport projects.
However, the aspects of public transport projects on which cities should spend are not explicitly stated.
264. Supported by international institutions, the MOT also actively conducts capacity building
activities under the TMDP program that would facilitate both peer-to-peer learning and knowledge
transfers from developed countries to Chinese cities.
265. At the end of 2017, 632,700 km of bus routes were in operation, and the length of urban rail
routes in operation was 4,824 km. Rapid urban public transport development in China results from a
comprehensive approach of combining institution, policy, funding, and financing toward a common
objective for sector development. Experience with the TMDP has been mixed, and the main positive and
negative aspects of the program are listed below.
Main Pros:
266. The TMDP is comprehensive. It sets a broader goal of promoting sustainable transport and takes
many initiatives under its umbrella. This holistic nature of the program offers cities opportunities to
coordinate projects and policy initiatives to be able to prioritize investments and create synergies.
267. It is outcome-oriented. The clearly-stated and comprehensive goals and numeric targets set out
expectations and create accountability. On the other hand, the comprehensiveness of the goals, such as
Page 79
The World Bank
safety, accessibility, and emissions, that take the broader benefits of the program into consideration, also
guarantee the compatibility of the program with the overall sustainable transport goal.
268. The TMDP was proposed as an integrated policy. Integration of transport policy with land use
policy has been recognized as a key measure to control the negative externalities of road transport sector
(Santos et al., 2010). Unlike other national programs, the TMDP targets at the root cause of urban
transport problems, such as the lack of integrating transit and urban planning that is common in Chinese
cities. Therefore, through the mandatory transit plans, the incorporation of transit plans into urban
master plans, and legislation measures to ensure institutional coordination and safeguards, the TMDP has
a great potential to set Chinese cities onto a right path.
269. The program allows for flexibility. The TMDP does not establish uniform goals or prescribe one-
size-fits-all solutions, but rather provides guidance for cities to set up city-specific goals and targets and
allow cities to vary in terms of pathways to attain the goals.
Main Cons:
270. The Lack of Political Incentives. The top-down decision-making process in China underscores the
importance of keeping local political leaders motivated to give priority to transit. After all, local political
leaders have multiple competing priorities to balance, among which transit development is only one of
them
271. Limited and Misguided Funding Structure. First, the overall funding magnitude of the TMDP is
trivial and restricted by the current institutional and regulatory barriers. Second, TMDP’s current funding
mechanism is misguided. Because the TMDP has no dedicated funding source, it relies on funds of existing
programs and thus encourages cities to pursue a limited range of projects (including multi-modal transit
hubs, operation monitoring systems for bus rapid transit, alternative fuels for buses, and intelligent
transportation systems) just to be entitled to the national funding support.
272. The Lack of Know-how and Guidance. Despite the clear yet ambitious goals set up by the TMDP,
little is known as to how to attain these goals at both the national and local levels. Therefore, although
participating cities were asked to map out city-specific pathways, neither is there good certainty that the
proposed measures are sufficient to reach the goals, nor do these cities have rigorous methodologies to
determine what policies or plans are cost effective.
273. Application difficulties of the Evaluation System. The evaluation system is rather comprehensive,
comprising of 20 mandatory and 10 discretionary indicators. Although theoretically very sound, it is too
ambitious and even impractical in the context of insufficient and unreliable data in Chinese cities.
274. A summary of the key aspects of the TMDP has been prepared from review of various sources55,
and is shown in the following table.
55
Summarized from “Directive on Comprehensively Promoting Transit Metropolis Demonstration Program” issued
by MOT, “Directive on Implementing National Transit Metropolis Demonstration Program” by Department of
Highway and Transportation of MOT, and Velasquez, Li, Xue, Hidalgo, 2015, Challenges and Opportunities of
China’s “National Transit Metropolis 1 Demonstration Program”
Page 80
The World Bank
Table 19: China Transit Metropolis Demonstration Program (TMDP)
KEY ISSUE SUMMARY

Rational of the To tackle the challenge of insufficient transit service delivery, particularly in large first-tier
program/why was it cities, and to overcome funding mechanisms and land policies that favor road
started infrastructure projects in second- and third- tier Chinese cities. The TMDP was introduced
to promote expansion of public transit network in Chinese cities and is a mechanism to
enact the “transit priority” strategy, as outlined in China’s 12th Five-year Transportation
Development Plan. The goal is to have 50% of motorized trips by public transport modes.
Description of The TMDP has no dedicated funding source but relies on funds of existing programs. This
program/ activities limits the type of projects supported (including multi-modal transit hubs, operation
and how it can monitoring systems for bus rapid transit, alternative fuels for buses, and intelligent
finance transportation systems).
Eligibility and Urban population > 1 million, Public Transport (Mobility) Plan, adequate fiscal capacity and
selection process of commitments from the local governments. City applicants are reviewed by both provincial
Transit Metropolis and national transport departments before a list of participating cities is finalized.
Program resources: Fund resources come from the National fiscal budget and are allocated on an annual basis.
source, transfer The MOT draws funding from the existing programs and their funding pools, not a new
mechanisms pool. Projects that receive funding should be completed within five years.
Available financing On average, each participating city could receive an approximate total of USD 22-33
per project/city Million.
Requirements to Cities needs to meet the targets set for being entitled as TMDC and then are eligible to
access financing receive funding from MoT.
Institutional setting The program is managed by the Department of Highway and Transportation of MOT. The
and governance National Transportation and Planning Research Institute provides technical evaluation and
support. Provincial transport departments are responsible for recommending cities, as
well as guiding and supervising eligible city applicants to achieve their targets.
Program MOT manages the overall program in phases. Each phase is five years.
management
Other support Goal setting; Planning and technical guidance; Development of Subnational legislation;
provided by the and Capacity building:
program
Sustainability The program set targets of the share of public transport among all travel mode, and ratio
requirements for of green transit vehicles. Only be meeting those targets, cities can be eligible to access
activities financed fund support from MoT.
Supervision, M&E of The MoT provides a checklist of indicators and targets and develops the performance
activities financed evaluation system and organize nationwide performance monitoring and evaluation.
What works well and Pros: The TMDP is comprehensive and facilitates coordination and prioritization. The
what needs program is outcome-oriented with clear objectives and accountability. Integration of
improvement transport and land use policy and providing guidance, rather than a prescriptive approach.
Cons: The amount of funding from TMDP is trivial in comparison with total project costs.
The TMDP has no dedicated funding source, which limits the type of project. Lack of know-
how and guidance on how to attain the targets. The evaluation system is too ambitious
and impractical in the context of insufficient and unreliable data in Chinese cities.
Page 81
The World Bank
4.6 Evaluation and lessons learned from the case studies
4.6.1 The logic of national support for urban mobility and how to measure its impact
275. Certain national policy objectives can only be obtained (at least partially) through the
contribution at local level: this is the main reason why that justifies the national assistance to urban
mobility. For example, national policy may look at keeping cities competitive, reducing GHG emissions or
decreasing transit fatalities; in order to move forward with these objectives, cities need to develop sound
public transport systems, which usually request planning and project management skills, as well as
financial capacity, beyond the reach of local levels of government. CAPEX requirements are bigger in larger
cities, and OPEX expenditures growth as service networks expand and improve in their quality.
Additionally, as national governments develop mechanisms to support public transport projects,
knowledge on diverse fields accumulates: transport planning, financial structuring, stakeholders´
management, etc. This process allows for a rich exchange of information among projects and cities, letting
the national entities to achieve knowledge economies of scale.
276. The measurement of the success of the national programs aimed at support public transport
can be done by “hard” indicators reflecting service performance, and by perception indicators showing
the opinion of users and the community at large. Typical public transport performance indicators are:
service spatial and temporal coverage, affordability, comfort, efficiency and externalities generated on
areas such as labor, taxes, emissions, fatalities or contribution to the urban form. Perception indicators
reflect users and not used perceived quality, assessing how people weight the diverse public
transportation attributes and how they rate them.
277. The multiple dimensions of public transport enhancement impact can be categorized in six main
groups. They are listed in Figure 16.
Figure 16: Dimensions to assess the impact of NUTP
Impact on users´ service (like travel & transfer time, or comfort level) and
operators´ performance (like reducing operational costs).
Fiscal impact, at national and sub-national level
Environmental impact: contribution to sustainability and link with

decarbonization strategies
Impact on urban form, particularly on sprawl
Social impacts: accessibility, inclusion and labor conditions
Public health: link with safety, impacting on deaths and injuries.
Page 82
The World Bank
4.6.2 The impact of national programs
278. The six defined impact dimensions can be assessed making use of the most popular
performance indicators. A general assessment – summarizing comments already made when describing
the national programs - is presented in the following paragraphs.
 Impact on users´ service and operators´ performance. Reduction of travel time, including time in-
station and on-board, have been impressive. In Bogotá, for example, average operational speed
increased from 18 km/h to 28 km/h. In México, travel time savings are around 50% (depending on
the system). Time savings are usually the main benefit in public transport cost-benefit analysis. Gains
in operations efficiency is usually offset by the increase of costs due to a substantial improve in
service quality and “formalization” of the transport activity as regards payment of taxes and
regularization of labor conditions.
 Fiscal implications. Usually the enhancement of urban mobility shows substantial social, economic
and environmental benefits, but request financial support. The revenue generated by modern,
formal public transport systems usually does not cover capital expenditures, and – as commented
previously – in many cases is not covering OPEX. Therefore, a flow of public resources (national or
subnational) is necessary to implement them and keep them operating. The magnitude of these
financial needs depends on aspects such as the system´s design (technology, alignment, integration),
the operational efficiency and the fare structure and level.
 Environmental perspective: contribution to sustainability and link with decarbonization strategies.
One of the main reasons for national government to support cities mobility is to progress in their
environmental policy, looking at the reduction of harmful local emissions, GHG emissions and other
negative environmental impacts. Clean public transportation is typically a key component in the
agenda for sustainable development and for the fulfillment of the New Sustainable Development
Goals. The savings on GHG emissions in urban transportation are a key component in Intended
Nationally Determined Contributions (INDC) that countries are to prepare after the Paris agreements
reach in the COP 21.
 The linkage with urban form. Mass transit systems are the backbone of urban development; its
implementation can definitively help to transform cities following a sustainable path, favoring higher
density. Although the impact is difficult to present through indicators, public transportation
strategies are clearly intertwined with denser and more livable cities. Many projects also helped to
enhance public space, going further than the provision of better accessibility.65 Another urban impact
is the increase in land value, which favors land owners and the local government if adequate
recovering mechanisms are in place (like fiscal valuation adjustment and increase in tax collection).
65
There have been considerable discussions in both countries (and IFIs) on the extent to which urban projects
should finance associated urban space improvements.
Page 83
The World Bank
 Social perspective: public transport, accessibility and inclusion, labor conditions. The improvement
of public transport services benefits lower income inhabitants, promoting social inclusion. It also
impacts on the labor market, favoring both employees (who can look for employment opportunities
in a larger area) and employers (expanding their potential labor pool). Other social impact is the
formalization of labor conditions, including hours and driver’s ergonomics. The impact on aspects as
security against crime and gender discrimination can also add benefits to modern public transport
systems.
 Public health perspective: link with safety. The new systems, replacing other public transport that
generated many negative externalities, have improved road safety, reducing fatalities, injuries and
damage. In the case of South Africa, where road safety presents a serious challenge, the impact of
the new systems has been substantial: 28% of the total benefits of the Johannesburg BRT system are
attributed to reductions in fatalities, injuries and property damage.
4.6.3 A summary of lessons learned from the cases reviewed
279. A well designed NUTP, coordinating national and subnational levels of government, generates
substantial benefits. It looks like the most adequate policy guideline to promote public transportation in
developing cities, benefiting its users, the cities in which the systems are deployed, the local and global
environment, and the many stakeholders involved in service provision.
280. National Urban Transport Programs may generate perverse incentives, that result in
unintended and negative consequences. This was particularly evident in the Mexican and Colombian
Programs. The main two perverse incentives are, first, to increase projected project benefits by
overestimating demand. The second is to lower project cost estimates, both capital and operational. The
perverse incentive come from the capital subsidy these Programs offer from the national government to
city governments. A third consequence is a tendency to overdesign the infrastructure which is in part
justified by the inflated demand. The systems and processes on the NUTP must incorporate sufficient
checks and balances to avoid these undesirable outcomes, and in particular the program should ensure:
very robust demand analysis; comprehensive alternatives’ analysis considering not only mass transit
solutions, but also bus priority, including Integrated Corridor Management; and several layers of review
of projects to be financed by the Program.
281. Institutional organization, with public entities with adequate capabilities, both at the national
and Subnational levels, are a must to reach those benefits. The lack of this attribute presents a clear
obstacle for the success of NUTP. At the national level, experience suggest the need for a specific policy
office, and an area for instrumentation on support mechanisms. At the subnational level, capacities are
crucial, and their lack constitute a serious shortcoming; they include planning and regulation skills, with
abilities to design and implement projects and to supervise service operation.
Page 84
The World Bank
282. Rule of law and enabling regulatory framework to contract enforcement at both national and
subnational levels is important to ensure the effectiveness of the program activities. As NUTPs are often
multi-year programs within which many project contracts among various stakeholders are involved, a
stable and enabling legal and political environment contributes to better enforcement of contracts.
Especially for the NUTPs where leveraging more private sector participation is included as a program
development objective, it is essential to strengthen the confidence of private sector by creating and
maintaining the rule of law in the country.
283. Financial instruments are the key to motivate Subnational entities to generate and implement
urban transport projects. The provision of generous grants (no less than 50%) is the key to incentive them.
The challenge that cities are experiencing is that OPEX needs subsidy; there is a discussion on who should
pay for it (national or subnational levels of government). There is a risk that one level makes decisions
that are key to set the level of subsidy (i.e.: define the project technology, the routes and service
characteristics), the fares structure and level), and another has to bear the cost.
284. The level of complexity in the conditions for project eligibility should be carefully balanced. As
the participation of the national government in urban mobility is based on the interest in achieving some
national policy objectives (environmental, social, productive, etc.) there is a trend to set multiple
conditions to the projects in order to be eligible. But the greater the national requirements, the more
difficult for the Subnational entities (usually short of technical capacity) to prepare the projects. On the
other hand, lowering the threshold may generate inadequate projects. Some equilibrium should be
attained; the level of requirements can be raised gradually, as cities progress in their learning curve.
285. National programs should be flexible to respect the diverse city needs. Mass transit systems
(guided or BRT) make sense in larger cities, demanding complex projects and substantial financial support;
but medium and small cities need other type of project, organizing conventional systems, demanding
more soft than hard support.
286. Private sector participation may help reducing financial needs and the support mechanism must
be sufficiently flexible to enable the full spectrum of Public-Private risk sharing and contracting models.
Private operators may help public policy objectives supplying part of the investment needs, providing
efficiency in service design and operation (if regulation is properly set), and as a source of innovation.
287. Moving from a corridor approach to a city-wide public transport reform is a serious challenge.
The project-by-project approach, common in most NUTP support programs, may have shortcomings, as
they tackle only some corridors, slowly expanding the new system to the entire urban area. But an overall
change in the public transport systems in one step – as was intended in Santiago de Chile – may also bear
important risks for the government.
288. NUTP investment that focus on a specific mode, such as BRT or Mass Rapid Transit systems are
likely to crowd out more cost-effective options such as conventional city bus. The program must ensure
that appropriate modes are selected that match the demand and corridor characteristics, and that the
high-capacity system is integrated with the conventional public transport services.
Page 85
The World Bank
289. Establishing a new public transport system may be easier than removing the existing one. The
NUTP and their implementation programs look at the enhancement of public transport, replacing weak
services by better, modern integrated systems. The resistance of the incumbents shows to be
considerable, requesting a cautious stakeholder’s management process. Informality may be a serious
challenge for the new systems; local authorities must own the project in order to be motivated to
effectively control informality.
290. Enhancing public space associated to mass transit project may have very positive impacts,
particularly on the general population (not only the users) perception. Public transport programs usually
include some components related to the improvement of the public space surrounding facilities. These
components have a great potential to increase public acceptance of the project. But may increase the
mobility project cost, directing resources to non-mobility objectives.
291. Peer-to-peer exchange proved to be of great value. One great advantage of a programmatic
approach to support urban public transport development is the opportunity to share experiences among
diverse cities. The horizontal link is particularly rich for cities urban transport planners and for national
government officials as well.
Page 86
The World Bank
5 Funding and financing of urban public transport

5.1 The cost of urban public transport systems
292. There is a variety of urban public transport modes, according to their right-of-way, technology
and service type. Public transport represents the “common carrier” type of urban passenger transport,
different from private transportation (automobiles) and for-hire transportation (taxi cabs, jitneys, etc.).
Public transport are systems with fixed routes and schedules, available for use by all persons who pay the
established fare. They are defined by its right-of way (separation from other traffic), system technology
(guidance, propulsion) and type of service (type of route, stopping schedule, etc.) (Vuchic, 2007).
293. From a practical point of view, two major types of transit systems can be recognized: mass
modes and conventional buses. Mass modes (mass transport) can be guided, based on rail technology,
or Bus Rapid Transit type, on rubber tires. All of them are made off by a dedicated infrastructure
(significant ways, stations and terminals), fleets (usually large vehicles or trains) and important support
systems and facilities. Conventional buses, on the other hand, generally share the street with other users
and request limited size stops and support facilities. Although there are much refined classifications of
public transport modes66, the three groups considered (rail systems, BRT and conventional buses) are the
more relevant for the purpose of this document.
294. The choice of mass transit system, the most appropriate mode to adopt, and method for funding
and financing, vary according to the specific characteristics of the city and selected corridor. There is no
rule of thumb indicating a threshold at which mass transit systems start to be an adequate solution. Many
factors are relevant for their convenience: the origin-destination pattern and its time profile, the
motorization rate, population´s income, cultural preferences, the local institutional framework, etc. In
general terms, mass transit systems are hardly justifiable in cities below half million inhabitants. As
regards the most adequate mode, there is an extensive debate in the intermediate and high density of
demand corridors, where both guided modes (Metros, LRT) and BRT systems may be adequate solutions:
the latter have considerably lower initial capital expenditures, while the former may more appeal among
members of the public. During the last 15 years some BRT systems have reached very high capacity, in
levels that were previously exclusive for guided modes.
295. Public transport modes show dissimilar profiles for lifecycle financial needs. The usual
components to finance are: (i) infrastructure, like dedicated ways, stations or terminals, (ii) vehicles, and
(iii) support facilities and systems, as workshops, operations control centers or ticket selling and revenue
collection systems. Financial needs consist of capital investment (CAPEX), comprising the initial
investment and the later rehabilitation and replacement, and (ii) the operational expenses (OPEX),
required for the systems operations and maintenance.
66
Vuchic (2007) presents a complete definition and classification of urban passenger transport modes.
Page 87
The World Bank
296. Urban transport costs have five main characteristics:
1) Infrastructure investment needs grow substantially with city size (and larger travels). Large cities´
projects request substantial investment (mass transit), while small cities can improve their public
transport services by redesigning routes, adopting better vehicles and adding not-big pieces of
infrastructure.
2) Initial investment is higher in metro and LRT systems than in BRT. A study by ITDP indicated that Unit
cost of mass transit infrastructure will significantly increase by developing LRT and Metro. The higher
percentage of kilometers built as metro and LRT among all mass transit, the higher the cost is.
Comparatively, the unit cost in Colombia that has 6% of metro is more than 6 times of Indonesia (see
table below). Higher unit cost of infrastructure results in higher financial demand and require
government to carefully manage financial and fiscal risks.
Table 20: Average cost of rapid transit infrastructure and length built by mode, 2000-201567
Cost of Infrastructure: Percentage of Percentage of Percentage of
Million USD per Kilometers Built Kilometers Built Kilometers Built
Kilometer of Transit as BRT as LRT as Metro
France $50 11% 70% 19%
Colombia $26 94% 0% 6%
China $64 17% 5% 78%
Indonesia $4 100% 0% 0%
South Africa $6 100% 0% 0%
Mexico $15 88% 3% 8%
Brazil $66 69% 1% 30%
United States $82 8% 84% 9%
India $45 26% 0% 74%
Source: ITDP (2015b)
3) Total resources required (initial investment and O&M) depends on the city demand pattern. Factors
as city sprawl (generating low population density), concentric urban flows and high peaks, for
example, influence significantly CAPEX and OPEX. As a result, there is a growing interest in demand
management policies as a way to reduce the resources needed to ensure mobility.
67
Walter Hook & Colin Hughes et. （2015）National Support for Urban Transportation Part 2: Growing Rapid
Transit Infrastructure —Funding, Financing, and Capacity
Page 88
The World Bank
4) In mass transit systems life cycle, discounted O&M expenditures are usually larger than initial
capital investment. This is due to the longer life of transport infrastructure, and more accentuated in
guided modes than in BRT. A planning short-term vision may influence decision reducing initial CAPEX,
but generating larger OPEX along the system´s life.
5) Fare levels and subsidies needs depend on the efficiency along the value chain. The efficiency in
contracting works, purchasing vehicles, designing routes, operating services, or the quality of the
projects financial structure, may represent a key factor in controlling the need for public resources.
As regards subsidies, their design (focusing on the users at which they are directed) may also influence
substantially the demand for public funds. There is a growing concern on how to organize subsidies
that minimize inclusion and exclusion errors.
5.2 Funding urban transport development

297. As public budgets have to respond to numerous public service needs, it is worth identifying their
various sources which allow the urban transport sector to be funded. There are three main sources of
funding for urban transport: direct beneficiaries, indirect beneficiaries and public funds. Across all
continents, public authorities represent one of the key contributors to the funding of urban transport,
both in terms of investment and operating costs68. Box 6 and 7 (both sourced from AFD (2014) Who Pays
What for Urban Transport: Handbook of Good Practices) indicate how the fund flows from various
stakeholders directly or via public authorities to urban transport budget.
Box 6: Funding urban transport capital investment
Source: AFD (2014)
68
AFD (2014) Who Pays What for Urban Transport: Handbook of Good Practices
Page 89
The World Bank
Box 7: Funding operation and maintenance of urban transport
Source: AFD (2014)
298. Regarding fund source by transport systems, guided systems (suburban trains, metros, tramways,
light rail systems) usually rest on public resources for investment and for supplementing farebox revenue.
Neighbors/developers funds provide marginal support. BRT systems demand public capital investment for
infrastructure, but vehicles and support systems have historically been expected to be financed from
users´ fares. As discussed in the report, this expectation is vanishing, and the public sector is increasingly
supporting the operation. Conventional buses demand fewer public resources; to a great extent because
they don’t need dedicated infrastructure, sharing the publicly provided street network with other users
(automobiles, trucks), and because habitually they pay vehicles and their O&M with the operational
revenue. They also show frequently “economies of informality”, reducing financial needs due to the lack
of compliance with regulations (fiscal, labor, technical, environmental).
5.2.1 Institutional source of funding69
299. The source of funding for rapid transport infrastructure shapes a great deal about the nature of
infrastructure development in a country as the funding source generally makes the decisions regarding
which projects will be built. There are mainly five main sources of funding were found:
1) National government
2) State government
3) City/metropolitan governments or transport authorities
4) Government-owned entities
5) Private sector
69
Summarized from Walter Hook & Colin Hughes et.al （2015）
Page 90
The World Bank
300. In terms of overall funding source mixes, there was wide variation in funding for different
countries, though some patterns appeared: Countries with highly fragmented funding sources had lower
RTR growth, perhaps because no single political entity could clearly benefit from taking the lead on a
rapid transit project. Also, all countries with high RTR had a large portion of funding that came from the
city. Funding sources in this case refer to the level of government that has ultimate spending discretion
to choose a project and takes responsibility for paying for the given portion of the total project cost
whether paid up front in cash or over time with debt finance 70. (See )
Figure 17: Institutional funding allocation and RTR growth rate by country
Source: ITDP
301. However, the ability of municipal and state governments to fund rapid transit infrastructure on
their own varies considerably by country and reflects the wide differences in institutional structures
and revenue-raising powers among countries. When cities do not have the revenue-raising power and/or
capacity to fund urban transit infrastructure, the state or national government—entities with lower
political accountability to city residents—often step in.
302. As it will take time to build the capacity to plan and implement projects at the local level, it is
best if state or national governments channel as much of the funding through municipal administrations
as they can reasonably handle, while also helping build their capacity to plan and implement the needed
investments and infrastructure in other ways. So long as state or national governments remain in control
of the project selection process, careful policies must be crafted to ensure that the right projects are
funded, that the cities build capacity as the investments go on, and that concurrent structural reforms are
in place such that cities will have access to sufficient revenue in the future to take leadership in their own
transportation investment, implementation, and governance.
70
Summarized from Walter Hook & Colin Hughes et.al. (2015）
Page 91
The World Bank
5.2.2 Reliability of funding: how to build a long-range and reliable funding program 71
303. Growing the transport infrastructure of a city is a long-term process that requires dedicated
revenue streams that are relatively stable and predictable over the long term. These ensure that a city
has the financial and institutional capacity necessary to plan, implement, and maintain infrastructure
projects. However, many transportation authorities have funding sources that are not reliable—funds
from one-off programs, single-project grants, or are subject to regular political discretion meaning that
long-range financial planning is difficult or impossible. Successful transportation authorities not only need
long-range transportation planning processes to project, shape, and respond to a population’s
transportation demands in a region, but they need long range capital plans that project and plan the
revenues, budgets, and financial strategies necessary to accomplish the planned infrastructure.
304. Long-range capital plans are only useful and effective when revenue and budgets for
infrastructure development are relatively stable and reliable and come from dedicated revenues sources
such as (inflation-pegged) fuel taxes, sales taxes, long-range federal and/ or state infrastructure spending
programs, and so forth.
305. Without reliable funding, transport authorities cannot make effective long-range infrastructure
plans because budget capacity is not known. This often happens when cities depend on states and
national governments for infrastructure funds from grant programs that are limited in time or scope—or
subject to political changes.
306. In Mexico, the funding is not highly reliable, especially outside of Mexico City. Since Mexico City
is a Federal District with powers similar to those of a state and since the country’s economic activity is
concentrated there, the state VAT tax receipts are sufficient to pay for a significant share of the city’s
infrastructure needs. Outside of Mexico City, cities and states struggle to fund infrastructure needs.
Mexico’s municipalities and states are dependent on national government transfer bylaws that discourage
and restrict state and municipal revenue-raising capacity. Outside of Mexico City, states depend heavily
on the formula-based distribution of national government funds, many of which come from the sale of oil
by Pemex, the former state oil company. In addition, many of the rapid transit projects reviewed here
were funded by PROTRAM, the revenues for which come from tolls on intercity highways controlled by
the national government.
307. Colombia is an example of a country where the national government stepped in with a program
to cover a significant funding gap due to weak revenue raising and potentially weak institutional capacity
of some municipal governments. Cities have the ability to raise fuel taxes to fund public transport projects,
which gave them reliable revenue streams, for their significant contribution. Since the year 2000,
Colombia has had reliable funding from the national government and from cities. However, Colombia is
rated as mixed reliability for funding because it remains to be seen if the national government will
continue its grant program for rapid transit—a significant part of transit funding in Colombia.
71
Summarized from Walter Hook & Colin Hughes et.al. (2015）
Page 92
The World Bank
308. In South Africa, the national government collects fuel taxes, though the revenue is not earmarked
for urban transit or urban transport, it is roughly similar to annual spending on urban transportation, with
roughly one-third going to subsidize the national highway program’s deficits, and the remaining two-thirds
being spent on urban transit. Other sources of municipal revenue must be developed to increase the
capacity of municipal government to fund urban transit infrastructure as it gradually assumes its legal
authority to manage urban transportation.
309. China’s municipal finances are unique and reflect the absence of property tax. Its cities raise
revenue primarily through the sale of land and development rights, which has funded high per capita
spending and high RTR growth over the past decade. Most of the urban infrastructure in China is funded
by the annexation of peripheral rural and suburban land by cities. The land is then rezoned for urban uses,
improved, and then let on long-term lease to real estate developers. These off-budget municipal revenues
are responsible for more than half of municipal transit investment revenue. Otherwise, transit
investments are funded primarily by corporate income taxes and a variety of vehicle licensing fees and
other fees. For the near term at least, and barring any crash in urban land value, this is a reliable source
of revenue for rapid transit development in Chinese cities, although it can be problematic when poor
planning of these areas causes urban sprawl.
310. The applicability of the various potential funding sources, at both National and Subnational
level in Indonesia requires further analysis. The following table gives a preliminary assessment of
potential funding and financing instruments (adapted from Ardila et al., 2016) and states
Table 21: Urban Transport funding sources as applied in Indonesia
Funding or financing instrument Applied in Indonesia (level of Primary use or example from
government)? Indonesia
Farebox revenues Provincial, District/City, SOE Public transport O&M costs;
TransJakarta, PT. Kereta Api
Fuel taxes Provincial General budget
Vehicle taxes Provincial Minimum 10% for road
Property taxes District/City General budget
Parking fees Municipal General budget
Road tolls/charges Toll road concessionaires General budget of the grantors
(Central Government, Provincial,
District/city)
Congestion charges None None
PPP private financing National, Provincial, District/City Investment cost; Solo-Kertosono
Toll Road
Advertising District/City, SOE Public transport O&M costs;
Employer contributions None None
Betterment levies None None
Tax increment financing None None
Special land assessment None None
Transportation utility fee None None
Page 93
The World Bank
Development impact fee District/City General budget

Negotiated exactions None None
Joint development agreements None None
Sale of air rights National General budget
Carbon market funds National Investment in energy sector
Public transport subsidies National, Provincial, District/City Public transport O&M;
National and international loans National, with on-lending & on- Public Transport Investment;
and grants granting to Subnational level allowed Jakarta MRT
5.3 Financing public transportation72

311. Because of the intensive capital investment and limited fiscal resource, public transport and
especially mass transit transport, requires financing. Financing is instrumental to reach fast transit
expansion targets but should be undertaken with careful design of repayment mechanism, and good
control of debt risk. Before cities decide to take debt on an urban transport project, they need to make
sure that current debt levels are sustainable, that only good projects are financed, and that equivalent
return will be generated.
312. However, city authorities may make poor borrowing decisions on projects that do not generate
expected returns, due to the incentive distortion and short-term political interest. As the scale of urban
transport investment is large, this can snowball into a sovereign, sub-sovereign, and currency debt crisis,
which will be a bill for national government to pay in the end.
313. Therefore, national government should place pre-conditions for city governments to issue debt
for urban transport project and develop an effective ex-ante 73 financial appraisal and a full-project cycle
financial monitoring system. The level of national government interference on local government
financing also depends on the attributes of the budget system. A country with soft budget constraints,
where it is likely that the national government will bailout default of local government, often adopts more
restrictive supervision of local government financing actions, for example China. A country with hard
budget constraints generally gives more discretionary power tp local government regarding financing, but
still controls the overall debt risk for the whole country.
314. Capping debt to equity ratio of mass transit projects is used by some national governments to
manage the financing risk and market appetite for the sectoral development. For example, In China,
State Council adjusted the cap of debt to equity ratio of urban rail projects from 75:25 to 80:20 in 2015 74,
when much more projects have been successfully operated than decades ago, and more cities with
adequate fiscal capacity and traffic demand has started the urban rail development. Commercial banks
also take the debt to equity ratio as one of the criteria for project financial viability assessment. In general
72
Summarized from ITDP. National Support for Urban Transportation Part 2. 2015.
73
Before the event, i.e. based on forecast values.
74
State Council’s Notice on Adjusting Project Capital Regulation of Fixed Asset Investment, State Council, 2015
Accessed at http://www.gov.cn/zhengce/content/2015-09/14/content_10161.htm
Page 94
The World Bank
lower debt to equity ratio is regarded less risky for commercial when other conditions of projects are
equal.
315. International experience shows there are mainly five sources of financing urban transport:
1. Bonds
2. National government and national development bank loans (NDB)
3. Multilateral development bank (MDB) loans
4. Commercial loans
5. Bilateral loans or loans from export credit
Figure 18: Urban Transport Debt Finance by Country and Source
Note: The percentages shown in the figure above are based on a sample of BRT, Highway and Rail projects in
each country, and are therefore not necessarily representative of figures applicable to Mass Transit
projects
Source: ITDP, 2015
316. In each of the countries studied by ITDP, one or two types of credit tended to dominate the
financial system for different reasons. The following financing sources dominate in these countries:
1. Subnational bond financing—France, the United States
2. Multilateral development bank and commercial loans—Colombia
3. National development bank loans—Brazil
4. Commercial loans—China, Mexico, India, South Africa
317. Each of these sources of financing has its advantages and disadvantages. The main differences
include:
1. Eligibility for debt (i.e., credit rating accepted)
2. Cost of the capital (i.e., the interest rate)
3. Length of the credit (the repayment period on the debt) and the grace period
4. Conditions placed on the loan (conditionality)
5. Transaction costs of securing the loan (time and work required to secure the loan)
Page 95
The World Bank
Table 22: Lending attributes of various debt financing sources
Bonds Multilateral National Commercial Export Credit

Development Government or Bank Financing
Bank Development Bank
Cost of Capital Low Low Low High Low
Credit Rating Required High Low Low High Low
Length of Credit Term Long Medium/Mixed Medium/Mixed Medium/Mixed Long
Conditionality Low Medium/Mixed Medium/Mixed Medium/Mixed High
Transaction Costs Low High Medium/Mixed Low Medium/Mixed
Figure 19: Debt Financing Source Flow Chart

318. Countries should pursue increased access to the
lowest-cost debt finance for infrastructure, primarily
bonds and development bank loans. Countries where
cities’ infrastructure development is constrained by a
lack of low-cost debt finance should consider programs
that improve municipal credit ratings and/or lending to
cities through national development banks.
319. Multilateral development bank: Colombia.

Colombia is a true best practice success story driven by a
national program to leverage MDB and private sector
finance to invest in BRT and quickly raise RTR. The
national government essentially was able to pool loans
from the World Bank, Development Bank of Latin
America (CAF), and the IADB to create a source of
financing for its national BRT program. Funds made
available through these financial instruments s were
then granted to cities, with a matching requirement and
other conditions on project quality. All major transit
projects are funded out of a 70% National Government
cost-sharing agreement. This funding comes as part of a
multi-annual funding agreement on a fixed annual basis,
not in a lump sum.
320. Commercial lending to GOEs: China. Commercial

loans in China are largely made to GOEs at the city level,
which unlike city governments, may borrow directly from
commercial banks. These GOEs are also controlled by the
mayor and for most purposes are an extension of the
municipal government, so loans are considered by the
banks as direct loans to the municipality and thus enjoy
lower interest rates. Most cities have municipal bus
companies that are city-owned enterprises, and these
Page 96
The World Bank
enterprises are often in control of bus procurement in BRT projects. They tend to borrow from commercial
banks.
321. Commercial lending through private sector: Mexico. In Mexico, due to limited means of raising
tax revenues for most cities and restrictions for city government to raise loans, most rail and BRT projects
in Mexico are set up—at least in part—as public private partnerships (PPPs) as a way of getting around
borrowing limits and restrictions on international borrowing. PROTRAM mandated that a project needed
30 percent private sector investment to be eligible for Federal, PROTRAM grant funds. A large part of the
commercial financing in Mexico finances the private sector investment share of these PPP BRT projects.
5.4 Private sector participation in urban public transportation

322. Recent analytical work by the World Bank75 identified the following constraints that limit
private investment in urban transport:
i. Most urban transport systems do not cover their operation and maintenance expenses, let
alone capital expenses;
ii. Upgrading to more environmentally friendly vehicles or building a mass transit system—metro,
light rail, Bus Rapid Transit, etc.—requires investing large amounts of money at once;
iii. Private urban transport operators have limited control over ridership, especially in cities that are
seeing rapid motorization and the emergence of new alternatives like shared mobility;
iv. The contracts between authorities and operators for urban transport concessions are complex
and vary widely within the same country, or even within the same city; and
v. Tn many developing cities, urban transport services are provided by multiple small and
unsophisticated operators that are not considered creditworthy or cannot generate sufficient
repeat business to become a valued client for commercial banks.
323. The provision of urban public transport services has been traditionally a mix of public and
private sector participation. There is currently a broad consensus on the strong role of government in
conducting the sector policy and regulation. With regard to service provision and operations, different
cities and countries opt for diverse type of arrangements. In some cities the private sector has no role,
and public entities are responsible for service provision; this is usual in developed cities, not so much in
developing ones. The forms that private participation in urban public transport may take are quite diverse;
the most common ones are service licenses and concessions. Private participation (PPP) is viewed as an
important tool to attract additional financial resources, a way to enhance the quality and efficiency in
service provision, and a manner to promote innovation. Contracts should adapt to the urban, economic
and institutional context. Another private sector actor are the informal operators, which have a strong
participation in moving people in many cities.
75
Pulido, D. Maximizing Finance for Development in Transport: Getting from Concept to Investments. Report #1:
MFD Solutions and Case Studies. P163783, World Bank, Draft version May 2019
Page 97
The World Bank
Table 23: Options and factors of private sector participation into urban transport projects 76
Option Factors / Situation / Scenario Possible example

Completely in the • Very high public value • Metro rail system
public sector • Low profitability or large operational losses
• High degree of monopoly power
• High investments and very long gestation period
• Very complex regulation
Capital investment by • High public value • Management contracts for
the public sector but • Possibility of profit from operations but not on light rapid transit/bus
operations by the capital investment rapid transit (LRT/ BRT)
private sector • Potential of competition “for” the market operations
(management contract • Somewhat complex regulation
/ service contract)
Capital investment and • High public value • Parking facilities,
operations by the • Possibility of returns on capital investments terminals, some LRT
private sector, but for a • Simpler regulation systems
limited period • Some competition exists
Completely in the • High public value • Citywide bus services
private sector, but with • Potential for abuse of monopoly power
tight regulation • Affordability is a concern
(regulation of routes, • Existence of potentially profitable and potentially
schedules, fares, level non-profitable
of service, safety, • submarkets
emissions, etc.) • Limited competition
• Some economies of scale
• Good possibility of profits
• Simple regulation
Completely in the • Reasonable public value • Parking facilities
private sector, but with • Some potential for abuse of monopoly power • Bus operations in some
medium regulation • Affordability is a concern areas
(regulation of fares/ • Reasonable competition is available
fees and safety) • No economies of scale
Completely in the • Limited public value • Parking facilities in core
private sector, with • Limited potential for abuse of monopoly power
very light regulation • Adequate competition
only (regulation of • No economies of scale
safety) • Competition would not have negative
externalities (such as oversupply
• leading to congestion or unsafe practices)
Source: World Bank
76
World Bank. 2014. Formulating an Urban Transport Policy: Choosing between Options. Washington, DC
Page 98
The World Bank
324. Private participation demands structuring the transport project: this is the process in which it is
defined what should be done by each actor. The licensing of conventional routes services is perhaps the
most common and simple form of private sector participation in urban transport sector. It may include
the private provision of the vehicles, or just the operation of publicly provided buses. Concessions – which
incorporate larger investment obligations and risks from private firms - are usually an option for PPP,
clearly in BRT and to a lesser extent in guided systems (suburban trains, metros, light rail, trams). In
concessions, the precise definition of the responsibility each part should carry, and the allocation of risks
is key; this is done at the structuring stage and is shown to be one of the critical steps to get a successful
PPP. City governments often consider following factors when interested in leveraging private sector
support to urban transport projects. (See preceding table)
325. Urban transport PPP projects can be divided into four types according to the project phase of
private sector involvement:
Design-Build-Operate-Transfer (DBOT): DBOT is the full project-cycle PPP which starts with designing
urban rail lines.
Build-Operate-Transfer (BOT): BOT is the most common type of PPP in urban rail projects.
Operate-Maintenance (O&M): O&M focuses on the later phase of urban rail project which
aims at improving the public service level.
Transfer-Operate-Transfer (TOT): TOT enhances urban rail asset management and changes the
ownership of an urban rail project in the project period.
Private parties procure assets from the original public asset
owner and provide operation and maintenance.
5.4.1 Investment & Construction-oriented PPP
326. Investment & Construction-oriented (ICO) PPP procures a construction firm which not only
provides good quality of construction but also shares the risk of over-spending construction cost. High
capacity of construction and investment are the primary requirements under this PPP model. City
governments adopt this type of PPP to reduce their fiscal stress during the construction period as well as
set up a cap for construction cost. The construction firm is responsible to provide investment as well as
construction to the project. The construction cost is paid by the government through government
subsidies. In this model, the operation and maintenance will still be conducted by the government
institution or public utilities.
5.4.2 Investment & Operation-oriented PPP.
327. Investment & Operation-oriented (IOO) PPP aims at improving investment efficiency and
operational service level of urban rail projects. Under this model, local governments select private
companies with good capacity of investment and operation. The private company and the local
government establish a Special Purpose Vehicle (SPV) which undertakes investment and operation, while
outsourcing the construction through competitive bidding process. The SPV gets return from user fee and
government subsidy which is provided based on its performance evaluation.
Page 99
The World Bank
5.4.3 Equipment & Maintenance–oriented PPP
328. Equipment & Maintenance-oriented (EMO) PPP targets at the high-tech equipment producers,
usually who produce trains or rolling stocks. The high-tech equipment accounts for a large percentage of
the total equipment investment and is the core part of an urban rail project. Similar to construction-
oriented PPP, this type of PPP also helps government to control the risk of equipment cost and ensure
sufficient maintenance of certain equipment.
5.4.4 Leveraging private sector participation in urban transport systems
329. As a public service, urban mass transport is mostly implemented by governmental institutions or
public utilities. However, a well-functioned mass transit system requires large investment, good-quality
of construction and equipment, professional operation and ongoing maintenance. This makes it difficult
for a single government body or a public utility to fulfill all of the responsibilities and manage all the risks
during the full project cycle. Therefore, cities that plan to implement mass transit will often leverage
support from the private sector to supplement the capacity and share the risks with the public sector.
While applying PPP, different governments aim at solving different problems.
330. The Barcelona Urban Rail Lines 9 & 10 adopted ICO PPP to procure construction firms with good
capacity of metro station investment and advanced technology of station construction. The private party
was awarded the concession right of construction and daily maintenance works of the stations for 30
years. A fixed return was paid every year to the private contractor from Catalonia government. Catalonia
government required IFERCAT (a SOE) to own and operate the urban rail lines. For those countries where
domestic construction firms do not have adequate capacity or experience of constructing urban rail lines,
this type of PPP helps bringing international experience and capacity of construction.
331. Countries with great potential to improve investment and operation efficiency often adopt IOO
PPP model. For example, Zhengzhou-Gongyi-Luoyang Urban Rail PPP project in China adopted it and
selected a private company with good capacity of investment and operation. This is the first urban rail
project contracted to a private investor and operator in China. The project adopts DBOT and applies
subsidies combined with land development along the urban rail line.
332. As aforementioned, when the high-tech equipment represents a significant portion of the total
equipment investment, the EMO PPP is frequently used. For example, during phase 1 of the São Paulo
Metro Line 4 in Brazil, the Companhia do Metropolitano de São Paulo, the public authority that owns the
underground network, will be responsible for constructing the tunneling, track, and metro stations. The
private sector contractor, ViaQuatro, under a 30-year concession agreement, will be responsible for the
supply, operation, and maintenance of the rolling stock (14 metro trains with six cars each) and operating
systems (a train signaling and control system and a mobile voice and data communications system).
According to the state’s timeline, six stations were planned to be built by the first quarter of 2010. Subject
to further studies and market demand, the second phase required the private contractor to open
additional stations on the existing line and supplement between 5 and 15 more trains at the discretion of
the State of São Paulo at any time after the second year of commercial operation.
Page 100
The World Bank
333. An examination of recent PPP projects from both developed and developing countries provides
useful insights on why some PPP projects appear to be more successfully than others. Recent World
Bank analytical work77.78 provides guidance in this regard.
5.4.4.1 Core elements of successful urban transport PPP ‘s

1) Clearly and firmly put forward the primary objective for using PPP rather than conventional
procurement for the specific urban transport project. The primary objective (such as reducing up-
front fiscal burden to the public sector or mitigating risks of inadequate public sector capacity) is
significant for PPP project design, as it determines the selection of PPP model, as well as closely linked
to the implementation solutions of PPP.
2) Align with national economic development and urban sector development strategy. Urban
transport PPPs that serve the national development strategy help accelerate achieving national and
sector development goals, and hereby bring in benefits for people’s livelihood.
3) A strong and experienced Government Contracting Agency to monitor the contract and fulfill
responsibilities. To ensure that services are delivered at the quality and quantity set out in the
contract, the Public Sector Agency responsible for the PPP must have sufficient numbers of capable
staff. The Transit Agency must also have the resources and authority for the control and regulation,
of informal and illegal modes of transport to minimize unfair competition with the transport services
provided through the PPP.
4) Early and continued consultation with the stakeholders-particularly the private parties during the
feasibility and design stages offers a very productive way of achieving an optimal scheme outcome.
5) Conduct effective value for money evaluation in PPP scheme design and implementation. Value for
money provides analysis for public decision makers on whether PPP is a better option than
government investment for urban rail projects. An effective value for money evaluation should take
full consideration of the project location context, sector factors, and project demand, instead of going
through the motions.
6) Achieve full project cycle fiscal affordability. Urban transport PPP projects, and particularly urban
rail projects, require fiscal subsidy for asset availability and operation. Public authorities should set
up a threshold on the percentage of subsidy from fiscal revenue. If the subsidy demand exceeds the
threshold, public authorities could give the SPV developable resources, adjust tariff, or promises tax
benefits, etc. to supplement. This will restrict fiscal risks and ensure the fiscal affordability to an urban
transport project.
77
World Bank. Maximizing Finance for Development in Transport: Getting from Concept to Investments. Report
#1: MFD Solutions and Case Studies. P163783, Draft version May 2019
78
World Bank. Public-Private Partnerships in Urban Bus Systems: An Analytical Framework, P163709, Draft version
May 2019.
Page 101
The World Bank
7) Strongly link investment with operation in the PPP design of urban rail projects. Urban rail involves
large capital investment and recurrent financial input. The return for the private sectors mainly
derives from operation. A close link between investment and operation will create strong incentives
for private parties to improve public service level which results in a faster capital payoff, and vice-
versa.
8) Open and competitive bidding procedures. Procurement of private parties of urban transport PPPs
has to follow an open and competitive selection procedure such as tendering, competitive
negotiation, etc. The evaluation should examine not only the historical achievement of private
companies, but also the capacity and willingness of share project risks with the public parties, in the
urban rail sector. To obtain proper competition a strong private sector, with experience in
implementation and operation of urban transport systems, is required.
9) Careful systematic management. Abandoning a functioning urban transport system may be
politically unacceptable, making the strong case for trying to get it right from the earliest stages. The
complete process requires careful systematic management, with resources and focus adapted to suit
the specific project stage.
10) A clear and fair method for dealing with demand risk. Manage fares intelligently, including a clearly
defined mechanism for any subsidies (considering incentives for the private sector).
11) Subsidy scheme that reflects risk sharing and creates positive incentives to improve public service
has important implications on the PPP scheme design. PPP schemes have different mechanisms for
capital subsidies, because the capital development cost often far exceeds the capacity of the fare
revenue.
12) Allocate risks to the party who can best afford. Risk allocation of urban transport projects should
comprehensively look through the scope of government responsibilities and clarify which risks are
affordable by the private parties and which are not. This may differ in different countries, but
normally, risks regarding project approval, planning, land acquisition, policy and regulation change
should be borne by the public sectors, whereas risks of investment, construction, operation and
resource development should be taken by the private sectors.
13) Good governance and contract enforcement under rule of law. Public and private parties are equal
subjects of a PPP contract. In successful urban PPPs, good governance and rule of law enable the
effective implementation of PPP contract, which push forward sustainable project operation.
Page 102
The World Bank
5.4.4.2 Core elements of unsuccessful or failed urban transport PPP ‘s
334. On the other hand, some urban transport PPPs failed in implementation or resulted in negative
effects in the transport and financial authorities. The standard analyzes the key risks involved; whether
the public and private sector were prepared to address them; and how they managed them. Broadly, the
most common causes for project failure involve one or a combination of the following factors:
1) Delink PPP objectives from selected PPP model. For example, in China, while the objectives of PPPs
are to control local government debt and improve the public service level, some local governments
chose financial institutions who lack capacity and experience of urban rail projects as the private
party. This resulted in huge implicit local debt, which is contrary to the national objectives of applying
PPP.
2) Inadequate consultation with stakeholders. Urban transport projects involve several stakeholders
such as government (approval and supervising bodies), financial institutions, users, etc. Lack of
consultation increases the potential of opposition late in the process, which may lead to project
delays or even cancellation.
3) Bypass construction bidding through PPPs. Some urban transport projects took advantage of PPPs
to bypass construction bidding by using the criteria of investment to select construction contractors
without clear examination of their construction capacity and standard. This caused risks of increasing
construction cost and decreasing construction quality. Those countries with a highly competitive
market of urban rail construction should be cautious not to use PPP as a way of bypassing
construction bidding.
4) Obscure PPP contractual clauses on right and obligation allocation between public and private
parties. Urban transport PPP contracts without explicit obligation and rights of public and private
parties would potentially cause ineffective allocation of risks and interests. It might increase chances
of default. This affects project implementation and service level.
5) Lack of effective control on fiscal and financial risks. Public authorities may underestimate fiscal and
financial risks or overestimate the fiscal revenue increase, so that they over promise fiscal subsidies
to make the urban transport PPP more attractive to private sectors. However, if the promised subsidy
is not available, the project will suspend, or the private party may choose to sacrifice the project
quality and service level to reach the balance. Another issue is the mix of implicit debt and contingent
liability. Mistaking government subsidy on urban transport PPP as implicit debt will increase financial
risks for local governments.
6) Use PPP as alternative method of government borrowing. Urban transport, and particularly rail
projects require large investment, while some local governments are prohibited from issuing debt to
finance projects. Hence, PPP sometimes becomes a disguised government borrowing when
government promises fixed return to financial institution or provide guarantee for private parties’
loan. This not only increases the government implicit debt, but also expands the systematic financial
risks among the government, private party and financial institution.
Page 103
The World Bank
7) Unreasonable risk allocation between public and private parties. Both the public and private party
have impulse to transfer risks to the other party. However, if one party takes risks beyond its
management capacity, for example the private party takes risks of land acquisition or the public
authority takes risks of project finance, it can result in project failure.
8) Large deviation between actual traffic and forecast ridership. Urban transport is a user-paid public
service. To a large extent, sound forecast of passenger demand is the foundation for project
feasibility and is also the prerequisite for project approval. Some local governments with strong
investment impulsion might exaggerate the future traffic volume for project approval or to attract
more private investors. However, a wrong demand forecast will most likely foreshadow a project
failure, since either the local government or the private party must pay for the excessive risks.
9) Lack of effective constraints on default of public or private party. In countries with relatively
immature legal system, it may not be easy to enforce the legal terms of PPP contracts. Public and
private parties hence would tend to default when the project doesn’t implement as expected, or
when political environment changes or financial crisis takes place.
Page 104
The World Bank
6 Principles and processes of the NUTSP

6.1 Core principles
335. The fundamental basis of the NUTSP is that, in accordance with the relevant laws on
decentralization, Cities shall be responsible for service delivery of urban transport and must take full
responsibility for the full lifecycle of Public Transport systems within their municipal areas. City, or
Subnational, Government are directly politically accountable to users of the transit system and should
therefore be empowered with the technical and financial capacity to plan, implement and manage mass
transit systems in their area. While the proposed NUTSP is a National Government initiative, this does
not imply that National Government will take over responsibilities from Cities. The role of the NUTSP will
be to support the cities to plan, implement and manage their own public transport systems.
336. In compliance with the preceding paragraph, the NUTSP will not take away the financial
responsibility for funding Public Transport systems within the cities. This responsibility will remain with
the Cities themselves. While acknowledging the limitations on the current fiscal capacity of most
Indonesian Cities, the NUTSP is intended to supplement, not replace, mobilization of resources by Cities
to finance investment costs. Cities will be required to finance as much of the costs of the system as they
are able to within the fiscal constraints of their finances.
337. The principle of each City funding a significant portion of the capital costs of the system is aimed
to overcoming the situation where proposals from Cities tend to be of higher cost and quality than
necessary when funding is not required from the City itself. Full National Government support for the
Investment costs also tends to influence system design towards capital intensive solutions with lower
ongoing costs, which do not necessarily have the lowest life-cycle costs. This trend for overinvestment will
be mitigated if Cities are required to fund a portion of the Capital Expenditure.
338. The NUTSP will apply to implementation of Mass Transit Systems, which are considered to be
public transport systems that use an exclusive right of way. The decision to limit National Support to this
level or above was based on three main reasons:
 Compliance with the principles of the Decentralization law that allocates responsibility for urban
transport to Sub-National Level. Implementation issues for conventional bus systems are normally
micro-level related to location of bus-stops, impacts on parking, competition with paratransit
(Angkot) etc. Conventional Bus services require lower level of technical and financial capability to
implement and manage than Mass Transit systems and, although Sub-National Capacity is very
low, it was not considered appropriate for National Government to intervene in systems that are
essentially local in nature. However conventional buses improvement is one of requirements for
the cities to get support from the program as it will serve as feeder. This improvement will be part
of the technical assistance to the cities.
 Institutional practicality, to limit the number of support packages that need to be managed by the
Program, to those which would provide the greatest benefits will be a more efficient allocation of
national-level human resources than having the national program manage a multitude of smaller
packages.
Page 105
The World Bank
 Conventional buses improvement in cities is supported by other MOT initiatives. Technical

assistance to MOT on this topic may be provided under the Technical Assistance and Cpacity
Building pillar of the NUTSP.
339. Restriction of the scope of the NUTSP to mass transit systems with exclusive right of way excludes
conventional bus systems that operate in mixed traffic, but may include some “Quality Bus” systems that
provide a dedicated bus-lane but do not have some of the other elements typical of Bus Rapid Transit
such as off-board fare collection, level boarding etc. Improvements to other elements of the urban
transport system such as traffic management, non-motorized transport and travel demand management
will be eligible for support if they are integrated into the Mass Transit project. Public Transport systems
with dedicated right of way (RoW) are likely to only be applicable in the larger Indonesian cities.
340. Implementation of a Mass Transit System requires not only a substantial capital investment,
but also an ongoing commitment to fund the operating deficit that will probably accrue from fare
revenue being less than operating and maintenance costs. The City shall be required to accept
responsibility for funding the Operating Deficit and have sufficient fiscal resources to meet this ongoing
commitment.
341. A Mass Transit System is a long-term investment in the sustainability of a City. The contractual
agreements for implementation and operation, together with the financing agreements, will therefore
extend over multiple political cycles. As a result, the proposed system must be based on comprehensive
assessment of the mobility needs of the City, and be supported by a broad cross-section of stakeholders,
community groups and the general public.
342. The Mass Transit system proposed by a City must be a key element of an Urban Mobility Plan
and be integrated with other elements of the urban transport system.
343. The NUTSP will provide adequate resources to provide strong technical support to cities to
assist them to plan, implement and manage the proposed public transport systems. The technical
support to the cities will not only benefit the cities but will increase assurance that the project proposals
have been comprehensively and well prepared, and that project proposals from cities meet the NUTSP
eligibility criteria. Cities with well prepared and ready project proposals will thus be able to move ahead
quickly, thus reducing the time and manpower required for review and comment on proposals by officials
at national level.
344. A cornerstone of the process is that contracts for construction and operation should be
competitively bid. This precludes direct award to State Owned Enterprises (SOEs), however SOEs may
form joint ventures with private sector entities.
Page 106
The World Bank
345. A summary of the core principles of the program is given in Table 24.
Table 24: Core principles of the program
City Ownership Projects planned, implemented and managed by cities.
Adequate Resources Cities:

o Provide maximum affordable financing for Capex with a preset
minimum percentage.
o Fully finance Operating Deficit.
National Government:
o Provides co-financing to cover Capex shortfall.
o Finances strong technical support to cities.
Leverage of Private and Commercial financing
Efficiency & • Well prepared proposals.

Sustainability • Appropriate and affordable modes, using exclusive right of way.
• Competitive Bidding.
Page 107
The World Bank
6.2 The three-stage screening process

346. Recent experience with planning of Mass Transit in Indonesia (and many other countries) is that
most time and resources have been allocated to designing and building infrastructure without adequate
planning that:
 Ensures that the implementing agency understand the problem they are trying to address, and
that their plans are suitable to address that problem; and
 That the project is affordable and sustainable on an ongoing basis once operational - not just
affordable to build.
347. A three-stage selection framework is proposed, that builds in best-practice into the planning
and implementation process. The three stages are:
a) Eligibility: to select cities where a mass transit system is appropriate for the City79, and whether
there is strong commitment from stakeholders.
b) Readiness: to ensure that the City has the necessary planning and institutions in place to
implement and operate the system.
c) Project viability: to assess whether the proposed project is a good investment for the City.
6.2.1 Eligibility criteria
348. There are a number of factors that influence the appropriateness of mass transit in a city and
could thus be used as eligibility criteria. The following paragraphs investigate the applicability of the
following as potential criteria:
 City Size;
 Urban Form;
 Economic Activity;
 Fiscal Capacity;
 Public Transport Modal Share;
 Road traffic and network conditions such as Travel Speed, Travel Time and Congestion Intensity;
 Political Commitment and Financial Commitment.
79
In the context of this report the term “City” is used to refer to the Subnational entity responsible for the transit
system. In cases where the system, or its feeder services, cross the administrative boundaries of an administrative
entity such as a Kota, then a new entity comprised of the Kota, and adjoining administrative entities that are
served by the system, should be established. This may include the Province, as discussed later in the report.
Page 108
The World Bank
6.2.1.1 Population
349. A large, growing population means that more people may benefit from the project, ridership is
likely to be higher, hence higher economic benefit. As shown in Figure 20 below, there are nine cities in
Indonesia with population over 2 Million. Of these large cities, six form part of the Jabodetabek region,
which for transport purposes should be considered as a single Metropolitan Region, rather than a number
of independent cities. Surabaya, Bandung and Medan are the remaining cities with more than 2 Million
population. There are a further eight cities with between one and two Million population, and eleven
cities with between 500,000 and one Million inhabitants.
Figure 20: Cities with population over 500,000 in 2016
Source: BPS 2016
350. In general, the cities with larger population will require higher capacity transit systems. The
mode and technology used for mass transit systems should be determined based upon the passenger
demand and corridor characteristics of the line to be served, however a general indication of the
applicability of various transit modes, in relation to the population of the city is given in the following
figure. In general, cities with less than one million population can be adequately served by conventional
bus systems without dedicated right of way. Conventional bus systems are also required in cities over this
threshold, to support the higher capacity modes, and to provide an integrated public transport network
that serves the whole metropolitan area.
Page 109
The World Bank
Figure 21: Indicative Mass Transit Mode appropriate for various City sizes
Generally applicable
Potentially applicable
Marginal Metro System
Cost
Light Rail Transit
Bus Rapid Transit
Conventional Bus System Applicable in all sized cities as a supporting mode
1,000,000 2,000,000 3,000,000 >4,000,000

City Population
Note: “City” population refers to the population of the City or Metropolitan area in which the system will operate.
Source: World Bank
351. Bus Rapid Transit systems, that use dedicated bus lanes, become viable in cities of around one
million population, although some countries such as Colombia have a lower threshold, where cities
exceeding 600,000 may justify BRT systems.
352. Light Rail Transit systems generally become viable at city size of around two million. As was
noted in the previous sentence, there are examples where LRT is variable in smaller cities, such as the
Chinese Transit Metropolis Demonstration Program where a lower threshold for LRT is set at population
of 1.5 million.
353. Metro systems will generally only become viable when City size exceeds three million.
354. Indicative population ranges for various modes can be interpreted as:
 > 0 – 1,000,000 inhabitants Conventional Bus System only

 > 1,000,000 – 2,000,000 inhabitants Conventional Bus / BRT
 > 2,000,000 – 3,000,000 inhabitants Conventional Bus / BRT / LRT
 > above 3,000,000 inhabitants Conventional Bus / BRT / LRT / Metro system
355. Population of the City or Metropolitan area is considered to be a valid selection criterion, and
a benchmark of one million population is proposed for a “City” to be eligible for support from the
National Government. This limit roughly corresponds to the population at which BRT systems are likely
to be viable and, with seventeen cities exceeding this number in 2016 with a further three cities over
900,000 the number of cities eligible to receive support is likely to be around twenty within the first few
years of implementation.
Page 110
The World Bank
6.2.1.2 Urban form
356. Mass transit needs high density and mixed use in the corridors served, for more efficient
performance. Higher density equates to higher passenger volumes per kilometer of routes, which is very
beneficial for the financial and economic performance of the system. Using density as a criterion would
encourage cities to create denser urban areas, rather than facilitate urban sprawl.
Figure 22: Population density in Indonesian cities
Note: Population density is shown as persons / square-km for cities with population over 500,000 in 2016
357. Figure 22 shows that five cities, all within Jabodetabek, have population exceeding 15,000
persons per square-km. Bandung has the highest density of cities outside Jabodetabek, at 14,800
persons/sq.-km, and a further five cities also have density between 10,000 and 15,000 persons/sq.-km.
Of the eleven cities with density exceeding 10,000 only Bandung and Surakarta are located outside
Jabodetabek. Eight cities have density between 5,000 and 10,000, with Surabaya being the densest of this
group at 9,500 persons/sq.-km. The figure shows a variation by a factor exceeding ten between the
highest density in Jakarta Barat and the lowest density in Batam.
358. The figure shows a variation by a factor exceeding ten between the highest density in Jakarta
Barat and the lowest density in Batam. It is undeniable that Mass Transit systems in the high-density areas
such as Jabodetabek, Bandung, Surakarta and Surabaya will have higher ridership than systems in
Samarinda, Balikpapan, Padang and Batam. This density figures shown are however the average density
with the Kota boundaries. It is possible that, even in a City with low average density, a corridor exists
which has characteristics significantly different from the average density. This may result in a corridor, or
several corridors, having sufficient demand to warrant a mass transit system despite the low average
density of the City. For this reason, density was not chosen as an eligibility criterion.
Page 111
The World Bank
6.2.1.3 Economic activity
359. A higher contribution to the economic output of the country shows the important economic
role of the city, hence public transport improvements have potential to generate more benefits. This
can be measure by Gross Regional Domestic Product of the City.
Figure 23: Intensity of economic activity (GRDP / capita) in Indonesian cities
Source: Data from BPS 2016, with IDR converted to USD at 13,500
360. As shown in Figure 23 five cities with population over 500,000 in 2016 have GRDP / Capita
exceeding USD 10,000, with Surabaya being the only City in this group not located in Jabodetabek. Ten
cities have GRDP / Capita between USD 5,000 and USD 10,000. It is interesting to note that the three
lowest ranked cities in the above figure, namely Kota Bogor, Bekasi and Depok, have GRDP per capita of
around USD 2,000 and are all in Jabodetabek. This may reflect the residential nature of these areas, whilst
the vast majority of GRDP in the Jabodetabek is allocated to DKI Jakarta, where GRDP per capita exceeds
USD 43,000 per capita.
361. GRDP / Capita was not selected as an eligibility criterion, as even the lowest ranked, namely Kota
Bogor, Bekasi and Depok, have an urgent need for Mass Transit systems, and National Government
support is required by these cities.
6.2.1.4 Fiscal capacity
362. Whilst the preceding section concluded that GRDP per capita was not a valid eligibility criterion,
the ability of the City to fund a portion of the Capital Cost, and the full amount of Operating Deficit
addresses a similar issue. Section 3.5.2 has analyzed the fiscal capacity of the largest cities and concluded
that likely magnitude of Operating Deficit of a simple BRT system may amount to around 12% of the fiscal
capacity of City. This is clearly a significant portion of the discretionary expenditure of the City, requiring
careful consideration of the relative importance of public transport in comparison with other municipal
expenditures.
Page 112
The World Bank
363. The fiscal capacity of the City to contribute a portion of Capital Cost, and fully fund the
Operating deficit is a critical factor that will influence the long-term sustainability of the system and
was thus chosen as an eligibility criterion.
6.2.1.5 Existing public transport modal share
364. The existing public transport share of a City shows the initial demand for mass transit and also
the quality of the existing public transport system. A higher share means more people will be likely to
use the proposed project. A very small share could also result from a lack of adequate basic public
transport system, so support may also be required. This condition is illustrated by Denpasar, where modal
share using public transport is less than 1%, in part due to the lack of adequate public transport
infrastructure and services. To set a criterion that existing modal share must exceed a specified limit
would exclude Denpasar from National Government support, whereas cities such as Denpasar may be
those in most need of National Government support.
365. Existing Public Transport modal share was not selected as an eligibility criterion, in order to not
exclude cities with negligible current infrastructure.
6.2.1.6 Road traffic and network conditions
366. Chapter 3 included a description of the congestion and travel analysis performed for twenty-eight
Metropolitan area in Indonesia. For the purposes of assessing conditions in the areas likely to be served
by a mass transit system these Metropolitan areas, which extend to the full extent of the constituent
Kabupatens, are too large to provide a meaningful assessment. For the purposes of testing the
applicability of various criteria, the same analysis was performed for the “Core area” or Kota of each
metropolitan area.
Figure 24: Free-flow speeds in Indonesian Cities
367. The free-flow
speed on the network is an
indication of the quality of
the road network. The
average free-flow speed in
the Kota or City area of
each Metropolitan area
analyzed was 29km/h.
Samarinda, Pekanbaru and
Semarang were the best
cities in this regard, with
free-flow speed in
Samarinda being 36km/h
and Pekanbaru 35 km/h. In
contrast the lowest free flow speed was observed in Yogyakarta at 24 km/h.
368. Higher speeds under very low traffic volumes are due to the network having higher percentage
of high capacity roads, better pavement conditions, and/or fewer junctions per kilometer. The impact
Page 113
The World Bank
of higher order roads is however most pronounced when values are compared between metropolitan
areas, where the presence of toll roads in Jabodetabek results in significantly higher free-flow speeds.
These higher order roads, however generally do not enter the “Kota” or City areas and this effect is not
observed in Figure 24 that shows free-flow speed, which was generally observed between 02:00 and
03:00AM.
369. While low values of free-flow speed give an indication of the need for road network improvement,
it does not provide a strong motivation for improvement to the public transport network. Free-flow speed
is thus not proposed as an eligibility criterion.
Figure 25: Peak Hour Travel Time in Indonesian Cities
370. Peak Hour travel time,

as shown in the figure
opposite provides a measure
of the average commuting
time within each city. The
methodology used
calculated the average travel
time of trips that start and
end within the City
boundaries. For Cities that
form part of a broader
metropolitan area, this is an
underestimate, as many trips
will have one end within the Kota, and other end in an adjacent administrative area.
371. Using travel time as a criterion also has the disadvantage that the travel time is substantially
influenced by the topographical and geographical layout of the City. The presence of rivers, for example,
results in restricted routes between parts of a city which increase travel time. Larger geographical areas
also have longer travel times, which is not necessarily indicative of greater need for public transport.
Inspection of Figure 25 shows the three areas with longest travel times to be Balikpapan, Sukabumi and
Samarinda, which cannot be considered as top priorities for public transport improvement. Travel time is
thus not proposed as an eligibility criterion.
372. Peak Hour Travel Speed, as shown in Figure 26, gives a good indication of the ease of traffic flow
within a city. In the thirty-two cities analyzed the average peak hour speed was found to be 21 km/h.
Samarinda, Salatiga, Balikpapan and Pekanbaru experience the best peak hour conditions, all with peak
hour speed in excess of 25 km/h. The worst peak hour conditions were found in Kota Yogyakarta, where
average peak hour speed was only 16 km/h. Bukittingi, Bandung, Jakarta Pusat 80, Surakarta, Malang and
Depok all were found to have peak hour speeds between 17 and 18 km/h.
80
Within DKI Jakarta only the “core area” city was analyzed, namely Jakarta Pusat. Jakarta Utara, Jakarta Selatan,
Jakarta Barat and Jakarta Timur were not analyzed.
Page 114
The World Bank
Figure 26: Peak Hour Travel Speed in Indonesian Cities
Figure 27: Peak Hour Congestion Intensity in Indonesian Cities
373. Figure 27 shows the peak hour congestion intensity in the 32 Cities analyzed, which averaged
40%. The least congested cities were generally the smaller cities. Problingo, Blitar, Pasuruan, and
Sukabumi all had peak hour congestion intensity less than 25%. Kota Bandung was the most congested
city with peak hour congestion intensity of 65%, with Medan being only slightly less congested with a
comparable value of 64%. Surakarta, Malang, Makassar, Bukittingi and Jakarta Pusat all had values
exceeding 50%.
Page 115
The World Bank
374. Whilst Congestion Intensity is a valid indicator of traffic flow conditions in cities, the analysis
required detailed assessment of each city. For this indicator to be used as an eligibility criterion, the
analysis must be done in an identical manner for each city. It is unlikely that the analysis described above
will be replicated in applicant cities once the NUTSP is implemented. It is therefore proposed that
Congestion Intensity be used as a screening indicator for selection of potential cities for pilot
implementation of the NUTSP, but that it should not be used for ongoing eligibility assessment beyond
the pilot phase.
375. In light of the above issues, it was decided that the eligibility criteria would not include
indicators related to road and traffic conditions. It should be noted, however, that existing conditions
play a substantial role in the project viability and are thus considered at the third level of screening.
6.2.1.7 Commitment of Subnational Government
376. As has been discussed in the introduction to this Chapter, one of the core principles of the
program is the “City” must take ownership of the project and provide the all management, technical and
financial resources required to ensure complete and timely implementation. With many Subnational
institutions this will be a significant challenge, as the expectation has in many cases been that national
government should implement transport projects.
377. The first requirement is that the proposed project must have political support from the
appropriate City or Subnational government structures. This will be assessed by whether the project has
been Included in the areas Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah
Daerah [RPJMD]) or has been set as a priority by issuance of Subnational Government Regulation (Perda)
or Head of Subnational Government Regulation (Perwali/Perbup) on project or has been agreed by local
house of representative (DPRD) in form of resolution. A further form of political commitment is a
willingness of a city to relax land-use regulation to encourage transit-friendly development such as mixed
land uses and higher floor-area ratio, and removal of requirements for minimum lot size andminimum
parking requirements.
378. The second requirement is that the “City” must have a commitment of adequate funds to
project through specific allocation in the City’s annual budget. Thus budget commitment may be used
for the preliminary investigations, institutional development, and studies.
6.2.1.8 Summary of selected eligibility criteria
379. The eligibility criteria selected were:

 Population of the City / Metropolitan area must exceed 1,000, 000.
 Fiscal capacity: The “City” must have demonstrated long term financial capacity to ensure
implementation and operating sustainability.
 Political commitment: Inclusion in RPJMD, Perda/Perwali/Perbup on project, and agreement from
DPRD in form of resolution.
 Financial commitment: Commitment of adequate funds to the project preparation through
specific allocation in the City’s annual transport budget.
380. Compliance with the eligibility criteria allows a “City” to enter the project pipeline.
Page 116
The World Bank
6.2.2 Readiness criteria
6.2.2.1 Urban mobility plan
381. An essential first step toward the readiness of a City for program support is an integrated and
sustainable Urban Mobility Plan that examines transport conditions and future needs and proposes a
transport system that explicitly meets the needs of users. The Urban Mobility Plan shall be developed
in accordance with guidelines to be developed by Bappenas and Ministry of Transport. It shall provide a
city wide, long term, strategic mobility vision (typically with a 20-year horizon) based upon a City-wide
analysis of transport supply and demand as described further below.
382. The Urban Mobility Plan should analyze the interaction between transport, as a supporter of
economic and social activity in each City or Metropolitan area and the socio-economic characteristics
of the area of interest. Any major transport infrastructure investment will not only serve and support the
residential and employment zones of the area but will influence future land-use development. Therefore,
an urban mobility plan typically includes the following tasks:
 Collect data to evaluate current transport system performance and travel patterns;
 Develop forecasting and evaluation models;
 Consider context of the city: land use patterns, policies, regulations;
 Visualize the spatial distribution of trips and population by group and the location of housing, jobs
and services (health, education, etc.) that generate travel.
 Analyze sustainable and inclusive development goals, for example accessibility, mobility, safety,
efficiency, affordability, acceptability, availability, etc.81
 Identify priority corridors for capacity expansion or mass transit improvement as packages of
actions or investments;
 Identify urban transport policies and other supporting measures;
 Collect feedback from the stakeholders.
383. The Urban Mobility Plan should recommend short to long-term investments, policies or other
actions to improve accessibility to jobs and other opportunities. It should also aim to reduce travel times,
congestion (lost time and productivity), local pollution, global emissions, traffic injuries and fatalities,
noise, and other negative externalities from transport. The types of interventions may include:
 Investments in infrastructure, equipment (traffic management), and services (public transport);
 Institutions and policies to regulate modes, road space, land uses, etc;
 Funding, pricing and subsidy policies.
384. Good international practice suggest that an Urban Mobility Plan should consider transport
interventions in an integrated and sustainable manner. Midgely (2018) recommends a Sustainable
Urban Mobility Plan that “…relies on a mix of local measures that will vary according to city specific
objectives, rather than applying a "one size fits all" approach.
81
For definitions and examples of such goals, please see Chapter 2 of World Bank “Urban Rail Development
Handbook” (2018).
Page 117
The World Bank
385. Available evidence and experience show that there is a need in most cases for a set of consistent
“push” and “pull” measures from within the following ten groups:
 Coordinating land use and transport planning;
 Promoting and improving public transport;
 Encouraging cycling and walking;
 Urban freight management;
 Parking management;
 Urban road pricing;
 Traffic calming and reallocation of road space to most environmentally friendly vehicles and
modes of transport;
 Restricting access for the most polluting road vehicles (low emission zones);
 Fostering the use of cleaner, quieter and lower CO2 road vehicles; and
 Soft and smart measures (car-sharing, business and school travel plans, mobility management
centers, etc.)”
6.2.2.2 Demand assessment along priority corridor
386. A fundamental requirement for any mass transit investment is a reliable and robust estimation
of mass transit demand in the priority corridor identified in the Urban Mobility Plan. This assessment
should estimate the peak-hour, daily and annual demand considering the existing and future public
transport network. The quantitative methods to estimate demand can range from sophisticated four-
step travel demand models to simpler sketch planning models.82 In order to provide a reasonably accurate
assessment of demand, the Origin - Destination Matrices should be at Kecamatan (district) level and make
use of household travel surveys or other available data methods to characterize trips by mode, purpose,
and socio-demographic characteristics of the traveler (e.g. income level, gender, etc.). The analysis should
not only assess existing demand but should forecast medium to long term demand according to
reasonable assumptions about economic growth, socio-demographic characteristics, willingness to pay,
and other important transport demand variables.
387. The demand modeling must carefully assess potential users’ willingness to transfer and
willingness to walk to a station. Integrated mass transit systems require walking to stations and
transferring between routes and/or modes. Demand models have tended to overestimate willingness to
walk and to transfer, which has resulted in lower than expected revenue and subsequently the need for
operators to reduce service frequency to match the demand. This action increases waiting times, and total
journey time, which creates a downward spiral of reducing demand.
388. The low modal share of public transport in Indonesian cities coupled to the dispersed land use
pattern, has resulted in high motorcycle use, which offers door to door travel. People are not used to
walking let alone transferring. The demand models must use techniques to understand the willingness to
pay (value of time) for saving one minute of time in each stage of the trip: walking to feeder bus or station,
transferring from feeder bus to trunk service, waiting for bus (including waiting for feeder), time in vehicle,
walking to destination –hopefully no more transfers.
82
For further details, see Chapter 3 of the World Bank “Urban Rail Development Handbook” (2018)
https://openknowledge.worldbank.org/handle/10986/30392
Page 118
The World Bank
389. A mass transit system or any public transport reform makes sense only if it benefits the users
by reducing the generalized costs of travel. This improvement must be central to project preparation. If
not, the project will not deliver the expected demand.
Box 8: Improving demand modelling with stated and revealed preference surveys
Value of time is a key component for transport demand modelling. Demand models assume users are rational and
minimize the generalized cost of transport. Generalized cost of transport include the value of the transit fares, but
also the value of time. Value of time is usually more important than the financial cost when influencing decisions.
Value of time can be defined as the amount a user is willing to pay to avoid one minute of travel. Hence, the most
“uncomfortable” the time spend in a trip. That justifies the importance of differentiating between different modes,
as well as to differentiate between time in-vehicle, waiting, walking, and transferring. The fact of needing to
transfer may imply an additional perceived cost for the user. Similarly, waiting time value can be two or three
times higher than in-vehicle time. In the classic four-step transport model (trip generation, distribution, mode
choice, and route assignment), the definition of value of time and the use of stated or revealed preference surveys
is key for the third step, which consist of mode choice. Trip generation consist of identifying origins and
destinations, typically using an Origin Destination survey, but with many alternatives available linked to new data
available. Distribution matches origins and destinations. Mode choice determines what mode is the user taking to
make the trip from the origin to the destination. When estimating demand of a given mode, proper mode choice
understanding is critical. An underestimation of value of time waiting or transfer penalization would lead to a
demand overestimation.
The gold standard method for estimating value of time is revealed and stated preferences surveys. Demand
models are based on the maximization of the utility perceived by people. The models use econometric models
whose parameters are estimated from revealed (observed) and stated preferences surveys data. Stated
preferences surveys consist of asking respondents to choose between different hypothetical scenarios. Revealed
preferences consist of asking what mode of transport they chose. The main objective of these surveys is to
understand how each type of users value each transport mode. In addition, they provide information about in-
vehicle travel time, transfer penalization, changes in time value depending on trip duration, elasticity to price,
value of other features (air conditioned, availability of seats).
Source: World Bank: Public-Private Partnerships in Urban Bus Systems: An Analytical Framework (Draft, 2019)
6.2.2.3 Institutional structure and capacity
390. To be declared “Ready” a “City” must have appropriate institutional arrangements for the
implementation and operation of the proposed system. Where the transport project, and/or it’s feeder
services cross administrative boundaries the institutional structure must clearly allow for cross-border
integration of services and ensure the sustainability of operations. In order to meet the readiness criteria
an institutional plan should be agreed with all key stakeholder and become operational before the
implementation of the project.
391. The institutional plan must demonstrate that the “City” has sufficient human, technical and
financial resources to implement and sustain an urban transport project. Similarly to the preceding
paragraph, the readiness criteria requires that a credible plan is in place to secure the appropriate budget
and trained staff before the implementation and operation of the project.
Page 119
The World Bank
6.2.2.4 Public participation plan
392. It is essential that a comprehensive public participation process of the Urban Mobility Plan be
underway to meet the readiness criteria. The public participation strategy will include outreach with
community groups, NGOs, potential users and a communication strategy with the general public on the
priority corridor(s) and potential strategies. This process must start sufficiently early in the project
development cycle that stakeholder input can be incorporated into system or project design and features,
rather than presenting the public with a completed plan which cannot be modified.
6.2.2.5 Summary of readiness criteria
393. The readiness criteria comprise:

 An integrated and sustainable Urban Mobility Plan for the city
 Robust estimate of demand along priority corridor
 Institutional arrangements considering the capacity to implement and operate the system
 Public participation plan
394. Compliance with the City Readiness criteria enables the city to access Project Preparation support
under the National Urban Transport Support Program as described in section 8.2.1.
6.2.3 Project viability criteria
6.2.3.1 Selection of an appropriate mass transit alternative
395. The project viability criteria require a thorough and systematic analysis of alternatives for the
priority corridor. These alternatives typically include the mass transit mode (BRT, LRT, MRT, etc.), system
features required to achieve desired capacity (persons per hour per direction) and levels of service
(frequency, safety, comfort, reliability, etc.), vertical alignment (surface, elevated, or underground),
location of stations, project phases, and land areas required for construction of stations and depots. The
results of this analysis shall be used to select the alternative that best meets the transportation needs of
the corridor, and the broader development needs of the city. This analysis should be performed as an
element of the Outline Business Case, or Pre-feasibility study.
396. The selection of a transit mode is a key decision in planning a new or expanding existing transit
systems because it only determines the technological, operational, and network characteristics of the
planned system. It also influences the role transit will have in the development of a city’s physical form,
its economic activities, and social and environmental conditions” (Vuchic 200583). Many feasibility studies
in Indonesia are limited to a predetermined mode, such as Automated Guided Transit (AGT), Monorail,
Light Rail Transit (LRT) or Bus Rapid Transit (BRT), but this approach does not necessarily result in the
implementation of the optimal solution for a given corridor or network.
83
Vuchic, Vukan R. Urban Transport: Operations, Planning, and Economics, John Wiley & Sons, 2005
Page 120
The World Bank
6.2.3.2 Reference design for operations, infrastructure and systems
397. A Reference Design for the selected alternative is required to meet the project viability criteria.
This is expected to be sufficiently detailed to be able to take final decisions on all elements of the system,
develop Detailed Engineering Design, and develop appropriate bidding documents. The reference design
will be based upon the Final Business Case and include a detailed, bottom-up estimate of investment and
operating costs. The reference design will include both operational and infrastructure elements.
398. An Operational or service plan which caters appropriately to the demand analysis will define
the fleet size and vehicle type based on its capacity, initial demand analysis and existing environment.
It should also be consistent with the operational headway plan. The operational plan shall also:
 Determine the nature of right of way and how it will be prioritized.
 Select the appropriate headway considering both demand and people preference.
 Select the appropriate location/distance of stops/ stations based on demand analysis, walking
distance to station, and potential integration. Walking distance analysis become less determinant
for long trip mass transit.
 Assess the need for feeder routes, and/or direct services that extend beyond the section of route
served by an exclusive public transport right of way.
 Consider network integration with existing Angkot, Bus and Rail services in the corridor.
 Assess the possibilities for ticketing system integration between modes and routes, so that a
single payment method can be used throughout the City.
399. The Infrastructure or Physical plan should explain how the physical infrastructure will ensure
that operation plan will work. This will include:
 Concept design of right of way.
 Concept design of stations (Should consider the passenger movement in terms of flow,
convenience, and capacity. Should provide universal access includes wheelchair in most places).
 Concept design of depots.
 Concept design of contextualization into environment/ interfaces/ pedestrian/ NMT/ lighting etc.
400. The reference design must promote ridership and financial sustainability by means of
integration of the proposed system with existing and planned public transport services, as well as
encouraging transfers by integration of the Ticketing System between routes and services.
6.2.3.3 Economic and financial considerations
401. The viability assessment must comprise both economic and financial analysis of the project. The
selection of the preferred alternative should be based on an analysis of multiple criteria, including public
priorities, as well as economic and financial returns of the investment. An evaluation of project benefits
and costs showing an economically viable and “bankable” project is required. The economic analysis
should be based on the net present value of economic costs and benefit streams from the perspective of
society over the lifecycle of the project or a 30-year period. Typical benefits include travel time savings,
changes in consumer surplus, changes in transport operating costs, and changes in externalities such as
Page 121
The World Bank
local pollutants, global emissions, traffic injuries and fatalities. Typical costs include capital, operating and
maintenance costs.84
402. Leveraging Private Sector Participation and/or Finance. Project viability should require a plan to
enhance cost efficiency and mobilize private sector finance. Mass transit project can bring tremendous
benefits, but they are also costly to implement and operate. Considering all options to mobilize funding
and financing for a project is an essential part of the preparation and structuring phase. Public-Private
Partnerships (PPPs) involve a long-term contract between a public and a private party in which the private
party bears significant risk and management responsibility throughout the life of the contract, and
remuneration is linked to system performance or ridership. The forms of private participation in public
infrastructure projects can be classified according to the degree of risk and control taken on by the private
sector and the specific project components or scope of work assigned to it.
403. A plan for Public Sector funding. Chapter 5 has discussed the funding options available to
Subnational Government. The City must conduct a comprehensive review of the expected fiscal
implications of implementation and operation of the mass transit system and develop a public sector
funding plan that ensures adequate fiscal resources available to ensure financial sustainability over the
life-cycle of the system. The funding plan should consider, amongst others: reallocation of budget
expenditure from other programs; efficiency improvement to reduce City spending; reform of property
tax valuation and collection; transit orientated development and land value capture; parking and
congestion charging to discourage private car use in addition to generating revenue.
404. Environmental and social requirements. The City must produce the environmental and social
assessments, documents and plans as required by Indonesian law. These documents should be
harmonized with international standards87 to maximize opportunities for funding and financial support.
405. Project Implementation Plan. The City must present a resource-loaded implementation plan
with clear allocation of responsibilities, budget and schedule.
6.2.3.4 Summary of project viability criteria
406. The project viability criteria comprise:

 Selection of appropriate alternative along a priority corridor;
 Reference design for the selected alternative, including network and ticketing system integration;
 Economic and financial analysis of the selected alternative;
 Plan to leveraging private sector participation and/or finance;
 Public Sector funding plan; and
 Environmental and social requirements
407. Compliance with the Project Viability criteria enables the city to access Transaction Advisory
support under the National Urban Transport Support Program as described in section 8.2.3.
84
For further information, see Chapter 3 of the World Bank “Urban Rail Development Handbook” (2018).
87
For further information and examples, see Chapters 14 and 15 of the World Bank “Urban Rail Development
Handbook” (2018).
Page 122
The World Bank
6.3 Integrating the NUTSP selection criteria into existing government processes
408. The NUTSP will incorporate formalized procedures and decision-making criteria to give clarity to
cities on the process required to access funds from the program and reduce project development and
implementation time frame.
409. Given the desirability of private sector participation, together with open and competitive bidding,
the NUTSP will be implemented within the Indonesian PPP framework. The current procedures and
institutional responsibilities for the PPP process will be unchanged. The flow of funds will also be in
accordance with current procedures. The selection criteria described in the preceding section do not
replace, but complement, the existing processes of project preparation and PPP transactions used by the
Government of Indonesia.
410. Compliance with “Eligibility” criteria will qualify the “City” for additional Project Development
Facility (PDF) support, and technical assistance which will be used to assist the “City” to meet the readiness
criteria. Cities are likely to require support, in particular, for preparation of an Integrated Mobility Plan,
development and implementation of an appropriate Institutional Structure, training and capacity building
of officials, and the Public Participation process.
411. Evaluation of compliance with “Readiness” criteria will take place after the “City” has prepared
an outline Business Case or Pre-Feasibility Study. If procurement using the PPP process is proposed,
market sounding should also be done before the assessment of “Readiness.
412. After compliance with the Readiness Criteria, the project components suitable for PPP are
identified and appropriate bundling of components into bidding packages is done. Components for Public
procurement are also identified. A Financial Support Package is then formulated that identifies the
funding needs for VGF, Hibah etc. This is then submitted to MOF for approval.
413. After MOF approval in principle for the financial support package, the “City” will prepare the Final
Business Case, which will form the basis for the assessing the economic and financial viability criterion.
Following compliance with all other Project Viability criteria the “City” shall be eligible for support with
Transaction Advisory Services to package and procure the PPP.
414. The interaction between the three stages of selection criteria, namely Eligibility, Readiness and
Project Viability, and the current Government PPP process is shown on the following page in Figure 28.
Page 123
The World Bank
Figure 28: Integrating the NUTSP selection criteria into Government processes
Existing PPP Process NUTSP Process

Presidential Regulation and Establish Acceleration Team Program Management
Establish
NUTSP
CMMA Decision  & Technical Secretariat (TS)  and Capacity Building

Consultant appointed
Cities propose Compliance with MOF approval of Project TS reviews compliance with TS recommends Project City and TS sign
concept for PDF  President Regulation  Development Facility  Eligibility Criteria  Planning Support Package  implementation
Project Planning
75 of 2014 (PDF) agreement
City forms PPP TSC coordinates Technical TS reviews compliance with TS recommends Project
implementation Support to the City for Readiness Criteria Preparation Support
   
Team planning & to comply with Package
Readiness Criteria
TS Coordinates technical support for Project Preparation

Project Preparation
City prepares Outline City performs Market TS reviews PPP bundling and TS formulates Financial
Business Case (pre-  Sounding  identifies components for  Support Package for VGF,
FS) Public procurement (if any) Hibah etc for MOF approval.
In-principle approval City prepares Final TS reviews compliance with TS recommends Transaction
  
of VGF by MOF Business Case Project Viability Criteria Advisory Support Package
Prequalification. Request for Proposals, Establish Project TS Prepares complete Government Support package (Mass
Transaction
MOF approval of VGF Bid Submission and Company, Signing of Transit Development Grant, Capex AP Support Grants,
PPP
Cap  Evaluation  Agreement and Financial  Guarantees etc) for approval by Minister of Finance
Close
Construction of both Operation Termination Technical Support to City for TS manages transfers to City
Implement-
PPP and Public Operations for Capex AP Support Grants

ation
   
components (if used)
Notes: TS = Technical Secretariat, or agency acting on behalf of the Government to manage the NUTSP.
Page 124
The World Bank
7 Institutional structure
415. The institutional structure proposed for the NUTSP consists of oversight and management of
the program at National level, with Subnational institutions being responsible for project
implementation.
7.1 National structure for oversight and management of the NUTSP

416. As further described in the following sub-sections, the National-level institutional structures
comprise:
 A multi-ministerial “Acceleration Team for Urban Transport Implementation”;
 An “Executing Team” comprising Echelon 1 officials of the ministries represented on the
Acceleration Team;
 A “Technical Secretariat” to manage the day-to-day operations of the National Urban Transport
Support Program; and
 An independent evaluation body.
7.1.1 Acceleration team to provide guidance and oversight
417. Implementation of the NUTSP will require cooperation between numerous Ministries
comprising:
 Coordinating Ministry for Maritime Affairs
 Coordinating Ministry for Economic Affairs
 Ministry of Finance
 Bappenas
 Ministry of Transport
 Ministry of Home Affairs
 Ministry of Public Works and Housing
418. An “Acceleration team for Urban Transport Implementation” is proposed that will consist of the
Ministries listed above. The Acceleration team will have the following functions:
 Facilitate the insertion of projects in the Priority Project List to obtain PDF
 Facilitate PPP and other supports processes
 Issue Coordinating Ministry of Maritime Affairs decision on Executing Team and Technical
Secretariat
 Guide and oversee activates of Executing Team and Technical Secretariat
419. The Coordinating Ministry for Maritime Affairs is proposed as the head of the Acceleration
Team as this Ministry has oversight over the Ministry of Transport and is well placed to coordinate the
various other Ministries. The Coordinating Ministry for Maritime Affairs has also role in preparing
regulations related to the implementation of this program.
Page 125
The World Bank
Figure 29: Structure of the “Acceleration Team for Urban Transport Implementation”
7.1.2 Executing team to oversee operation of the NUTSP
420. An Executing Team to formulate collective decisions to be made by acceleration team and /or
by the executing team itself. With the input from Technical Secretariat, the executing team support the
acceleration team with draft strategic decisions and their supporting documents. The executing team shall
also have responsibility for technical and tactical decisions. The executing team members are proposed
to be echelon I officials from the relevant Ministries represented on the acceleration team. A suggested
composition is as follows:
 Deputy for Infrastructure, Coordinating Ministry of Maritime Affairs
 Deputy for Infrastructure and Regional Development, Coordinating Ministry of Economic Affairs
 DG of Budget Financing and Risk Management, Ministry of Finance
 DG of Fiscal Balance, Ministry of Finance
 Deputy for Facilities and Infrastructure, Ministry of National Development Planning (Bappenas)
 DG of Land Transport, Ministry of Transport
 DG of Railways, Ministry of Transport
 DG of Development Management of Subnational Governments, Ministry of Home Affairs
 DG of Fiscal Management of Subnational Governments, Ministry of Home Affairs
 DG of Highways, Ministry of Public Works and Housing
 DG of Regional Infrastructure Development, Ministry of Public Works and Housing
Page 126
The World Bank
7.1.3 Technical Secretariat for daily operations
421. A Technical Secretariat is proposed to handle the day-to-day operation of the NUTSP. The
functions of the Technical Secretariat will be to:
 Assist cities in obtaining PDF or alternatively manage a PDF for public transport projects. In order
to obtain PDF, the project submitted by cities must be included in the priority projects as it has
been regulated under Presidential Regulation 75/2014 on acceleration of priority infrastructure
provision that has been changed with Presidential Regulation 122/2016. Based on Ministry of
Finance Regulation 73/2018, the requirement to obtain PDF is that cities must prepare a
document that includes, amongst others, the following aspects: legal and institutional, technical,
economic and commercial, environmental and social, risks, type of partnership, etc. The PDF may
include a project preparation facility, transaction advisory service, or both. The Technical
Secretariat may execute the PDF on behalf of the cities. The assistance to cities includes guidance
to cities on technical aspect of project preparation, assistance in financial structuring, evaluation
of the OBC/FBC to make sure proposals are technically and financially sound, etc. The Technical
Secretariat shall furthermore build Subnational capacity to design, implement and operate public
transport systems in cities
 Develop a national database to allow ongoing monitoring and refinement of the program
 Support the design of a national value capture framework and support implementation in cities
 Provide day to day support to cities on any issues and assist cities to communicate with executing
team
 Monitor and supervise the operation of the public transport system in cities and advise cities on
strategies to maintain and improve service as well as financial performance.
422. It is proposed that an existing institution should perform these functions, in preference to
establishment of a new entity. Three options were considered, PT Sarana Multi Infrastructure (PT SMI),
PT Penjaminan Infrastruktur Indonesia (PT PII) and the Ministry of Transport.
423. PT Sarana Multi Infrastructure (PT SMI) is a State-Owned Enterprise under the Ministry of Finance
to accelerate implementation of national infrastructure development by facilitating infrastructure
financing as well as preparing projects and providing advisory services for infrastructure projects in
Indonesia. PT SMI acts as a catalyst and/or facilitator between the project owner and the
financier/investor. PT SMI works in the Transport Sector (Toll Roads, Urban Transport, Air and Sea Ports)
as well as Electricity, Water, Oil & Gas, Social Infrastructure and Telecommunications. The services
provided comprise:
 Financing and Investment. This includes Infrastructure financing through Loans, Mezzanine
Financing & Equity Investment. Pt SMI can act as arranger and underwriter as well as a standby
lender for PPPs. PT SMI also implements Municipal financing through the PIP/RIDF.
 Consultation services comprising Public Sector Advisory, Training and Capacity Building,
Investment Advisory and Financial Advisory
 Project Development through the project development Facility for PPP projects, TA and Donor
Fund Management and Technical Assistance.
Page 127
The World Bank
424. PT Penjaminan Infrastruktur Indonesia (PT PII), or Indonesia Infrastructure Guarantee Fund
(IIGF). PT PII is a State-Owned Enterprise under the Ministry of Finance that was established to accelerate
the development of sustainable infrastructure in Indonesia by providing government guarantees for
infrastructure projects developed under the Public Private Partnership (PPP) scheme. PT PII has the
following objectives:
 To improve creditworthiness and quality of PPPs in infrastructure projects by establishing a clear
and consistent appraisal and claim framework for guarantees.
 To improve the governance and transparency of guarantee provision.
 To facilitate the deal flow for Contracting Agencies (i.e. Ministries, SOEs, Regional Governments)
by providing guarantees to well-structured PPPs.
 To ring-fence Government contingent liability and minimize sudden shock to State Budget.
425. Ministry of Transportation (MOT). The Mission of the MOT is:

 Maintaining the level of transportation facilities and infrastructure services;
 Carry out consolidation through restructuring and reform in the field of transportation facilities
and infrastructure;
 Increase community accessibility to transportation services;
 Improve the quality of transportation services that are reliable and provide added value
426. Within the Ministry of Transportation, the Directorate General Land Transport and its newly
established88 sub-Directorate for Urban Transport have responsibility for Road-based public transport
services, whilst urban rail systems fall under the jurisdiction of the Directorate General Railways.
427. A comparative evaluation of the relevant capabilities of the three organizations is shown below.
Table 25: Comparison of capabilities relevant to the functions of the NUTSP Technical Secretariat
Factors PT. SMI PT. PII MOT

Experience in operating PDF ++ ++ +
Familiar with PPP project development process ++ ++ +
Current experience with PPP for Pubic Transport (LRT & BRT) ++ + -
Ability to assist cities to obtain loan finance (e.g. Regional ++ + -
Infrastructure Development Fund)
Wholesaling financial agency with experience providing local ++ + -
government funding
Possible integration with other Infrastructure PPP projects ++ ++ +
Technical capacity in public transport development + + ++
Key: ++ = Strong capability, + = Moderate capability, - = No capability
428. Based upon the above assessment it is considered that PT SMI has the necessary capability to
perform the functions of the NUTSP Technical Secretariat.
88
The Sub-directorate of Urban Transport was established in early 2019. Prior to this there had been no MOT
entity responsible for urban transport after disbandment of the Directorate general Urban Transport which
occurred in response to enactment of the decentralization legislation that transferred responsibility for urban
transport to Subnational level.
Page 128
The World Bank
7.1.4 Independent Evaluation Body for NUTSP
429. To obtain a better value for money for urban transport infrastructure projects an Independent
Evaluation Body is proposed to oversee all phases during project preparation and implementation. The
Independent Evaluation Body will have the following functions:
 Assess methodologies/standards used for projects planning and design, including among others,
demand modeling and alternative analysis.
 In-depth appraisal of project proposals (OBC/FBC) soundness in terms of technical and financial
viability, including comprehensive review of the estimated project benefits and capital and
operating costs.
 Supervise quality of civil works and rolling stock and timely project implementation.
 Undertake a systematic review of estimated vs. actual project completion costs and time for the
urban transport projects to identify broad trends and better inform future interventions.
Figure 30: Government of Indonesia audit structure

430. As was
proposed for the Technical
Secretariat, it is
recommended that an
existing audit institution
should carry out these
functions, in preference to
setting up a new entity. As
shown opposite, the
Indonesian audit landscape
is composed by three main
bodies: the Indonesian
Supreme Audit Institution
(BPK), the Indonesian
Source: BPKP. National Government
Internal Auditor (BPKP) and
the Inspectorate General
(IG) of the line Ministries.
431. The Indonesian Supreme Audit Institution or Badan Pemeriksa Keuangan (BPK) is the only
external audit institution of state finances. This independent institution, established pursuant to an
Indonesia Law, is at the same level than the MPR (People’s Consultative Assembly), DPR (House of
Representatives), DPD (Regional Representative Board), President, MA (Supreme Court) and MK
(Constitutional Court). Its members are selected by the Parliament. BPK is responsible to audit the
management and state financial responsibilities conducted by the central government, local government,
other state institution, state-owned enterprises, and other bodies which manage the state finance,
including KPK (Corruption Eradication Commission). Subsequently, BPK hands over the audit
results/findings to be followed up to the National/Local Parliament, and to the President (Executive
Agency). In terms of audit types, BPK can carry out financial, performance and specific purpose ones.
Moreover, BPK is responsible for setting standards of state finance.
Page 129
The World Bank
432. The Indonesian National Government Internal Auditor or Badan Pengawasan Keuangan dan
Pembanguan (BPKP) is an internal audit institution of the state finances. This non-ministerial
government institution, established pursuant to a Presidential Decree, is at the same level than the
National Land Agency (BPN), the National Bureau of Statistics (BPS), the National Anti-Narcotics Agency
(BNN) and others National Agencies/Bureaus. Its members are appointed by the President. BPKP is
authorized to conduct internal control of the accountability of the state finance over certain activities
which include State General Treasury activities and other cross sectorial agendas based on special
assignments from the President. BPKP is a Government Internal Supervisory Apparatus (APIP), which is
directly responsible to the President to provide early warnings for enhancing the quality of governance of
government agencies and reasonable assurance on obedience, efficiency and effectiveness.
433. Lastly, the Inspectorate General (IG) is an internal audit institution of the line Ministries
(Ministry of Transport in this case). It is part of the organizational structure of the Ministry and is
established pursuant to a Presidential Decree. Its members are appointed by the Minister of Transport.
IG is a Ministerial Internal Supervisory Apparatus, which is directly responsible to Minister, authorized to
conduct internal control of accountability of the ministerial finance. The capacity of the majority of the
IGs is not adequate, with a limited number of auditors for supervising a large portfolio of projects,
resulting in a significant volume of works not being revised89.
434. BPKP is considered as the most appropriate audit institution to establish an Independent
Evaluation Body for NUTSP. Based upon the above assessment, BPK and IG might not be the most
adequate option to set up such Independent Body due to limited project orientation and lack of
impartiality respectively. BPKP structure would need to be strengthen by hiring independent professional
technical staff, including international experts.
89
For details, see the Minutes of the Meeting held with the IG of the Ministry of Public Works and Housing on
September 26, 2016 on the Annex A.
Page 130
The World Bank
7.2 Subnational structures for implementation of the NUTSP

435. Implementation of Public Transport systems in the twenty largest Indonesian Cities covers a
wide range of Subnational institutional structures. In Jabodetabek the transport network crosses a
number of provinces. In the Metropolitan areas such as Sarbagita (Denpasar, Badung, Gianyar, and
Tabanan in Bali Province) and Gerbangkertosusilo (Gresik, Bangkalan, Kertosono, Surabaya, Sidoarjo, and
Lamongan in East Java Province), coordination is required across City boundaries, while the remainder of
systems will only be within a single City.
436. In Jabodetabek and the Metropolitan areas it is necessary to provide coordination across the
jurisdictional boundaries in order to provide urban mobility at the lowest practical cost to society.
Reducing the cost of urban mobility requires measures to address the trip rate, reduce trip distance,
maintain efficient network speeds, have efficient vehicle occupancy rates and reduce fuel consumption
and emissions. To address these issues, it is necessary to have a coordinated approach, and integrated
services across local government boundaries, which is the function of an Urban Transport Authority.
7.2.1 International experience with Urban Transport Authorities
437. In achieving main objective of urban mobility management, most international urban transport
authorities focus on public transport as shown in the following table.
Table 26: Comparison of functions of various transport authorities
City Authority Roads, Traffic, Public Transport Freight Transport

Parking, NMT Infrastructure Service Infrastructure Service
Operate92
Construct
Construct
construct
Design &
Regulate
Regulate
Manage
Design
Design
Plan90
Plan
Plan
Plan
91
Singapore LTA         
Hong Kong TD        
Bangkok BMTA     
New York NYTA      
Manila LTD 
Munich MVV   
Paris STP    
London TfL      
Jakarta BPTJ       
Source: Modified from Urban Transport Institutions, Richard Meakin, 2004
LTA = Land Transport Authority, TD = Transport Department, BMTA = Bangkok Mass Transit Authority (bus service)
NYTA = New York Transit Authority, LTD = Land Transport Department, MVV = Munich Verkehrsverbund
STP = Syndicat des Transports Parisiens, BPTJ = Badan Pengelola Transportasi Jabodetabek
90
Plan’ means to forecast demand and intervene to ensure supply
91
Construct’ means to finance and direct construction
92
Operate’ means to own and manage the transport system
Page 131
The World Bank
438. From the above table it can be seen that the Singapore land Transport Authority has the highest
degree of control and integration, with their mandate also including regulation of taxi fares. The lowest
level of integration is with the Bangkok Mass Transit Authority, where twenty Government departments,
agencies and state-owned companies have responsibilities for various aspects of the system.
439. In all the examples above, the transport authority does not design and construct the road
infrastructure, which is normally the responsibility of either the City or National Road Agency.
7.2.2 Proposed structure for Indonesian Cities
440. The primary objectives of establishing a new institutional structure are to:
 Provide a unified and coordination policy and plan for provision of public transport services in the
Metropolitan area;
 Ensure public transport routes and services operate seamlessly across administrative boundaries;
 Ensure stable, budgeted, funding for public transport;
 Introduce commercial accountability for operating deficits;
 Clarify roles and responsibilities of the various agencies and departments; and
 Improve coordination between Kota / Kabupaten within the metropolitan area regarding
provision of supporting infrastructure.
441. Indonesia established Badan Pengelola Transportasi Jabodetabek/BPTJ (Jakarta Greater Area
Transport Authority) in 2015. The mandate of BPJT is to develop, manage, improve, and integrate
transport service in Jakarta Greater Area that consist of Jakarta, Bogor District, Bogor City, Depok City,
Tangerang District, South Tangerang City, Tangerang City, Bekasi District, and Bekasi City. The BPJT is
under Ministry of Transport. So far, the BPJT can only take the role of Ministry of Transport in Jakarta
Greater Area that is managing interprovince network. The BPJT still cannot integrate even public transport
in Greater Jakarta Area.
442. Based on the experience of the BPJT, there is a need of an institution that can coordinate,
integrate, manage, and develop transport service across city/jurisdiction boundaries. The institution
should belong to different jurisdiction in a metropolitan area.
443. Public transport is currently managed by only two agencies, namely the Ministry of Transport
and the Transport Agency of District/City. It is therefore relatively simpler to coordinate than other urban
transport elements (i.e. road, traffic management, TOD, law enforcement, freight) which have many more
role players involved. It is therefore proposed that the Authority will initially only handle Public Transport,
but may in future have its mandate expanded to cover roads, land-use planning etc.
Page 132
The World Bank
444. The proposed institutional structure comprises three levels, with clearly defined roles and
responsibilities at each level. Each level is responsible for various risk elements and is accountable to
different institutions. The following figure shows the three levels:
i. A Transport Coordination Board that sets the overall strategic direction for transport, namely
defining the policy, strategy, and resource allocation to achieve the desired mobility outcomes.
The BRTTF assumes political responsibility for the policy and implementation;
ii. A commercially orientated Transit Agency the performs Tactical Planning, namely the short-term
actions to achieve the strategic longer-term goals, and is responsible for managing the transport
system;
iii. Transport operators, who provide services under contract to the Transit Agency.
Figure 31: Institutional governance model.
Manages Political  Facilitate development of a MOU to agree on service levels

Risk and fares, and responsibility of Subnational governments for
Transport securing funding if fare levels are insufficient provide service
Coordination Board at the prescribed level of service.
(Road Transport and  Obtain political support.
Traffic Forum)
 Institutional oversight.
 Coordination between agencies.
Manages  Operates on a commercial basis with revenue from fares and

Transit Agency Commercial Risk allocations from constituent authorities to meet the
difference between the economic fare 93
 Plans and manages bus operating contracts.
Manages  Performance based contracts, fully funded to provide

Operators Operating Risk specified level of service.
Source: World Bank
445. The quality of public transport service, and how well services are delivered depends on the
coordination of different agencies, both inter- and intra-jurisdiction. The guiding principles of the
coordination are to provide integrate service to commuters using backbone and feeder services, using
network economic and financial viability in deciding services, and leverage competition for the market.
446. The coordination has two levels namely strategic and tactical. Strategic coordination is
responsibility of government institutions and tactical coordination is necessary to ensure efficient
operation and service. Tactical coordination must be done by an institution that has technical, financial,
and operational capacities. The capacities are usually not available at government institution.
93
Economic fare is the tariff required for full cost recovery for bus services run by an efficient operating company
at the level of service prescribed by the Board
Page 133
The World Bank
7.2.3 Strategic planning and management by a Transit Coordination Board
447. The Local Government Law (No. 23 of 2014) Article 344 clause 1 requires Sub National
Government (SNG) to guarantee the implementation of public services which are the authority of the
Region. Furthermore, Regional Government is required to establish appropriate management entities for
such public services (Article 345 clause 1). The annexes of the Law clarify that provision of public
transportation for transportation services of people and / or goods between cities in 1 (one) province is
the authority of Provincial Government while the public transportation within one City/Kabupaten will be
the responsibility of each Kota / Kabupaten Government. One implication of this legislation is that the
province is responsible for trunk services between Kabupatens, but feeder services to the trunk route are
the responsibility of each individual Kota / Kabupaten. In order to provide an integrated system of routes
and fares, a single entity is needed to plan, implement and manage the public transport system.
448. At the strategic coordination level, the proposed institutional structure uses a Transport
Coordination Board (TCB) which represents all the Subnational Authorities, and which will coordinate
all public transport related agencies within its geographical area. The TCB may utilize the Road Transport
and Traffic Forum as mandated in Law No. 22/2009. The objective of the Transport Coordination Board
will be to oversee the planning, implementation and management of an integrated public transport
network that meets the needs of commuters in an efficient, cost-effective and sustainable manner.
449. The TCB will be an oversight body that sets the policy and regulatory aspects of the public
transport network. The roles of TBC include:
 Setting up public transport network coverage with close consultation with Transit Agency and
ensuring inclusive accessibility;
 Setting up Level of Service and standards to ensure quality of service;
 Developing Fare setting to ensure achievement of urban transport strategy and financial
sustainability;
 Monitoring and evaluation;
 Providing technical support (e.g. pedestrian facility, traffic management); and
 Providing regulatory support (e.g. permits, approvals, law enforcement).
450. The TCB carries the political risk associated with the transport system, as it defines objectives
of the constituent subnational administrations and is thus answerable to the residents of the
Metropolitan area. The TCB will also review and approve the Urban Mobility Plan that will be prepared
by the Provincial Dishub (with input from the Kota / Kabupaten Dishubs). The Mobility Plan will guide the
Transit Agency in the operation of the transport system. The TCB will also define the Level of Service (LOS)
based on a political-level commitment to meeting the transport needs of the public, and set tariff levels
based upon the social, economic and political perspectives of the elected political officials.
451. In setting both tariff levels, and service levels, the TCB must acknowledge the financial
implications of these policy decisions. The costs of service provision increase with the level of service,
and conversely restricting fares for political reasons reduces fare revenue. Both these factors therefore
are critical elements of the financial viability of the services. The TCB must therefore be also responsible
for securing funding if fare levels are insufficient provide service at the prescribed level of service.
Page 134
The World Bank
452. It is proposed that the TCB (Road Transport and Traffic Forum) should be established using a
Decree from the Provincial Governor in accordance Government Regulation No 37/2011. The TCB will
be funded by APBD of the relevant Province.
453. Metropolitan Transport Authorities (MTA) work better when they have holistic responsibility for
the whole transport system, not just public transport. Furthermore, funds for public transport, including
subsidies, are subject to political controversy while funding for roads, and the large implicit subsidies for
private vehicles, receive little political attention – unless someone wants to reduce them. Having all
funding or most of it in a single MTA that is responsible for roads and public transport can help. It is
therefore proposed that the TCB may in future have its mandate expanded to cover other elements of
transport planning and development, including roads, land-use planning etc.
7.2.4 Tactical management by a Transit Agency covering the metropolitan area
454. At the tactical level, different Subnational governments within a metropolitan area must
establish an institution that can integrate public transport serving intra and inter-jurisdictions in a
metropolitan area. The institution must belong to all Subnational governments within a metropolitan
area. This institution may then be called as Transit Agency (TA).
455. The middle level of the institutional structure therefore consists of a publicly owned Transit
Agency which manages project design, implementation and operation of the public transport system.
The Transit Agency (TA) should be a corporate and autonomous entity, that is not subject to political
interference. The agency should be commercially focused and able to borrow funds. It should not be
subject to the constraints of the civil service and able to hire staff on a merit basis, as well as dismiss staff
for poor performance. The TA can be considered as the ‘Business Manager’ of the transit system and will
be guided by the strategic policy set by the TCB and will develop service level policy to manage the
business in an effective and efficient manner. The roles of the TA may include:
 Service planning, including demand estimates;
 Procuring, monitoring and regulating services of operators;
 Managing fare collection;
 Marketing;
 Planning Public Transport Infrastructure;
 Funding Public Transport Infrastructure;
 Managing Construction of Public Transport Infrastructure; and
 Land use and Public Transport integration.
456. To perform the above roles the TA will have a commercial focus and use a business-like
approach to maximize revenue and to minimize costs within the framework of strategic policy set by the
Bali Road Transport and Traffic Forum, Bali Provincial Government and the National Government. The
commercial focus aims to optimize financial performance through revenue generation and cost
management, while providing the quality of operation required for customer satisfaction.
457. It must be noted that the TCB sets the fare level, which may for political or social reasons may
be below the fare required to commercially operate the service. Fares will be set based on a clear formula
that consider level of service and profit. If fares are above the ability to pay of passengers, the tariff may
be reduced. Through a MOU, the TCB may request the Provincial Governor and Head of Districts and City
Page 135
The World Bank
to reduce the fares. In this case the Provincial Government and Cities / Kabupatens shall, as prescribed in
the MOU, fund TA for the difference between actual tariff and the economic tariff. The decision on tariff
will be taken by the Provincial Governor and legalized using Governor Regulation.
458. The TA will contract the operation of the buses, and other elements of the transit system,
through performance-based contracts. In the case of the bus services these contracts will be with Bus
Operating Companies who will supply the services in accordance with the requirements of Bus Service
Contracts. The TA will have total responsibility for the performance of the transit business and will
therefore be required to monitor and enforce the conditions of the various contracts.
459. Minister of Internal Affairs Regulation No. 12 year 2017, article 1 clauses 16, 17,19 enables the
creation of Regional Technical Implementation Units (UPTD). These are organizations that carry out
operational technical activities and / or certain supporting technical activities at the Regional Office or
Agency. The UPTD can be established under Provincial or City/Kabupaten Government and the
establishment of the provincial UPTD shall be stipulated by a governor's regulation after consultation in
writing to the Minister. However, there are three key limitations of the UPT structure that make this
structure inappropriate to fulfill the functions of the Transit Agency because:
 It is a Provincial Government entity, and is therefore constrained by the Provincial employment
and salary regulations;
 If another UPT is responsible for transport services within the area (such as UPT TransJakarta in
Jabodetabek or UPT TansSabagita in Bali), it would have to be disbanded in order remove the
duplication of responsibility with an expanded UPT that would act as the Transit Agency; and
 It can only utilize funding from the Provincial Budget (APBD) and thus cannot receive contributions
from the Kota / Kabupatens within the Metropolitan area.
460. The Local Government Law provides further other options for institution to manage Metropolitan
Mass Transit system other than UPT. Two of them are:
 Regional Public Service Agency (Badan Layanan Umum (BLU)) under Article 346; and
 Regional Owned Company (Badan Usaha Milik Daerah (BUMD)) under Article 331.
461. A BLU is an entity under Sub National Government (SNG), that provides public services to the
community and can take retribution/payment for the services, but the aim is not to generate profit.
The objective of BLU is to improve economic condition of people through their service with adopting
efficiency and effectiveness of private company. Their source of funds is mainly from the host
government, but they may receive funds from other sources. A BLU has a better flexibility on the budget
management than the UPT. A Provincial BLU would be required to manage transport services in Sarbagita
as the services cross Kota / Kabupaten boundaries. However, similarly to the Provincial UPT structure,
Kota / Kabupaten may not allocate their budget to fund the Province’s BLU, thus making the BLU structure
inappropriate for application as the Transit Agency.
462. The Badan Usaha Milik Daerah (BUMD), or Regionally Owned Company, may operate for profit,
which is the fundamental difference from a BLU. Two types of BUMD are permissible under the
regulations:
 Perusahaan Umum Daerah / Regional public companies (PERUM). This is a form of BUMD that all
its capital owned by one region and is not divided into shares (Article 334). PERUM can form
subsidiaries and / or own shares in other companies.
Page 136
The World Bank
 Perseroan Daerah / Regional Enterprise (Perseroda). In accordance with Article 339 Perseroda are
BUMD in the form of a limited liability company whose capital is divided into shares. In the event
that the shareholders of a Perseroda consist of more than one Subnational government entity,
article 339 of Law 34/2014 on Local Government requires that one region must hold at least 51%
of the shares. In the case of a metropolitan area such as Sarbagita the host region would be the
Bali Province, with Kota Denpasar and the Kabupatens of Tabanan, Badung and Gianyar being
minority shareholders.
Box 9: Using the BUMD structure for water
463. Unlike UPT and BLU which are under the
supply in Intan Banjar PDAM
Government Body, BUMD will work as a third
Intan Banjar PDAM, established in 1982, began with a
party through the Regional Cooperation body called the Drinking Water Management Agency
method. This is covered by Article 363 of Law 23 (BPAM) on the legal basis of the Decree of the Director
2014, in which SNG may establish cooperation General of Human Settlements, Ministry of Public
with other regions, third parties and / or Works No. 014 in 1982.
institutions or regional governments abroad. The Later based on Local Regulation (Perda) No. 5 In 1988
cooperation must be based on consideration of PDAM Banjar Regency was established. Along with the
improving the efficiency and effectiveness of development after the regional expansion in 1999
public services and achieving mutual benefits. As which Banjar Regency was divided into two regions,
stated in paragraph 462, a Subnational namely Kabupaten Banjar and Banjarbaru City.
government may establish a SOE in the form of a PDAM Banjar Regency was changed again through the
limited liability company whose capital is divided Banjar District Regulation No. 8 of 2001 concerning
into shares, wholly or at least 51% (fifty one Regional Water Companies, and finally in accordance
percent) of the shares are owned by one Region. with the existence of capital participation by two
In the Perseroda form of Subnational administrative regions, then the Regional Regulation
was revised with Regulation No. 1 of 2006 under the
Government Owned Entity (SGOE), the 51% of the
name of PDAM Intan Banjar.
shares may belong to provincial government as
transport network connecting different PDAM Intan Banjar is however still operating under the
old regulations and has not yet formally adopted the
district/city in one province belongs to provincial
Perseroda model under the current regulations.
government or to a Subnational government with
(Government Regulation / PP number 54 of 2017 about
the biggest fiscal capacity and service coverage, Subnational-owned company/BUMD)
for example Jakarta Province in Greater Jakarta
In January 2018, the shareholding was Banjar District
Metropolitan Area. Shares of other districts/cities
57%, Banjar Baru City 27%, and South Kalimantan
may depend on their fiscal capacity and service Province 16%.
coverage in their jurisdiction.
464. SOE’s can have a working system and environment as efficient, professional, independent as
typical private company. Administratively, SOE is separated with the host Government and it means they
are two different entities. The Perseroda type of shared BUMD, namely a SGOE in the form of a limited
liability company has been implemented in some Subnational governments for urban water supply.
Examples are the Intan Banjar Clean Water Company, Bandung District Clean Water Company, and
Jayapura Clean Water Company. An example of the structure used in PDAM 94 Intan Banjar is shown in the
box above.
94
PDAM = Perusahaan Daerah Air Minum
Page 137
The World Bank
465. A comparison of the legislation, characteristics and relative merits for application with
establishment of the proposed Transit Agency is given in the table below. The options UTPD, BLUD and
BUMD forms of SGOE are covered in the table.
Table 27: Comparison of SGOE structures
Type Regulation Main Characteristics Degree of Suitability for TA

UPTD Law Number 23 of 2014 concerning Regional Technical Implementation Very Low
Regional Government Unit /UPTD operates independently  Can only manage inner
Government Regulation Number 18 under parent agency network,
of 2016 concerning Regional Carries out technical operations and /  Depend only on APBD,
Government Institution or certain supporting technical  Cannot hire professional
Regulation of The Minister of Internal activities for the Regional Office or
Affairs Number 12 of 2017 about Agency.
Guidelines for Establishment and Direct provision of in kind or services
Classification of Sub Agency and for people
UPTD/ Regional Technical
Implementation Units
BLUD Law Number 23 of 2014 concerning BLUD is a system implemented by the Low
Regional Government official technical implementation unit  Can only manage inner
Government Regulation Number 74 / regional agency in providing services network,
of 2012 concerning Financial to the community that have flexibility  Depends on APBD for subsidy
Management of General Services in the pattern of financial despite having flexibility on
Agency management financial management
Regulation of The Minister of Internal Applying sound business practices to  Can hire professional staff
Affairs Number 79 of 2018 about improve services to the community,  Less business orientation
Regional General Services Agency may generate income and manage results in lower service quality
internal budget in order to advance and resource efficiency
public welfare and educate life
without seeking profit
BUMD Law Number 23 of 2014 concerning BUMD’s goal is to generate profit and Moderate / High
Regional Government provide public services.  More professional
Government Regulation of the At least 51% should be owned by the management than BLUD
Republic of Indonesia Number 54 of government  Independent financial
2017 concerning Regionally-Owned BUMD may also be directly appointed management
Enterprises by the Government to do a public  Can hire professional staff
service, funded by government, if  Owned by government and
separate accounts are kept. direct appointment create
contractual and justification
subsidy dilemma
PERMUDA Moderate
Permuda ia a BUMD with all capital  Can receive capital injection
from a single region from government
 Operating within 1
administrative boundary
PERSERODA High
Pereseroda is BUMD with  Can receive capital injection
shareholders of several regions and from multiple government
one of the regions must have the agencies
majority shareholder at least 51%  As co-owned BUMD, can
operate in multi-
administrative area
Page 138
The World Bank
466. The BUMD (Perseroda) model is considered to be a good match with the requirements of the
Transit Agency. It is therefore proposed that the Transit Agency should be established in compliance
with the articles of the Law on Local Government applicable to BUMD. Financial contributions to the
Transit Agency (BUMD) would be made from the Province, Kota and Kabupatens in proportion to their
shareholding. These contributions would need to cover the running cost of the Transit Agency,
implementation costs of public transport systems, and any operational deficit that may occur when fare
levels are set below the rate required for full cost recovery. Under the Regional Cooperation modality, the
financial contributions from each SNG to the BUMD may be allocated from the annual budget (APBD) of
each region.
467. The legislation allows profit sharing between the constituent regions however this is highly
unlikely to occur with an urban transport BUMD.
468. The business risk of the system is carried by the Transit Agency, with revenue risk taken away
from operators. This will be achieved because the Transit Agency does not operate transport service but
contracts out the operation to service providers under performance-based contracts. With this structure.
A performance-based contract can either pay operators to provide services (on a cost per km basis), per
passenger under a centralized and integrated fares and ticketing system.
7.2.5 Operations performed by operating companies under performance contracts
469. The third level of the structure comprises operators that provide the transit services. The role
of the “Operator” is to provide services in accordance with the requirements of a Bus (or rail) Operating
Contract. The contract specifies the responsibilities and duties of both parties in the contract, and the
specified duration of the contract gives security to the operator to make investment in equipment and
manpower required to deliver the services.
470. Performance-based contracts specify clear requirements in terms of the level and quality of
outputs required from the Operator and, as stated in the preceding section, these requirements are
monitored and enforced by the TA.
Page 139
The World Bank
7.2.6 Summary of Subnational structure
471. A Transit Coordination Board, using the structure and regulatory structure of a Road Transport
and Traffic Forum, will be responsible for strategic planning and management of the Transit System
within the Metropolitan Area. The TCB will define service levels and fares, and responsibility of
Subnational governments for securing funding if fare levels are insufficient provide service at the
prescribed level of service. The TCB, with representation from the various Mayors and District Head will
be responsible for obtaining political support, performing institutional oversight, and coordination
between agencies.
472. Tactical planning, implementation and management of the system will be the responsibility of
a Transit Agency. The Transit Agency is a State Own Enterprise (SOE). The ownership of SOE will be shared
by all jurisdictions, with the province to have the majority in share-holding. Central Government may also
be a shareholder, and in this case the MOF may inject capital directly to the SOE. By having this kind of
SOE, the problem of service and subsidy across jurisdiction will be eliminated. An example of this structure
is shown for the case of Denpasar Metropolitan Area, where the share-holders of the SOE will be Bali
Province, Denpasar City, Badung District, Gianyar District, and Tabanan District. Bali Province, as the entity
with the highest fiscal capacity, will have the majority of share-holding. The following figure gives a
summary of the allocation of institutional functions between the Bali Road Transport and Traffic Forum,
Sarbagita Transit Agency, Operators, Provincial and Kota/Kabupaten Departments of Transportation and
the Traffic Police.
Figure 32: Proposed institutional structure for Metropolitan areas (example for Sarbagita)
473. Central government may assist the Transit Agency through cash grant and/or in-kind grants to
the shareholders. All jurisdictions in the TBC may also have their own SOE as public transport operators.
Page 140
The World Bank
474. For the Greater Jakarta area (Jabodetabek), the inter-provincial nature of the transport network
requires a slightly difference structure, and the inclusion of BPTJ/MOT as shown below.
Figure 33: Proposed institutional structure for Jabodetabek
475. In the above structure for Greater Jakarta, the Transport Coordination Board, that could be
considered as a new BPTJ, will have representatives from Ministry of Transport, Subnational governments
in Jakarta Greater Area, Business, Academia, and Community Organizations.
476. The Transit Agency, in the form of a SOE, will jointly belong to National Government and all
Subnational governments in Jakarta Greater Area. Central Government or Jakarta Province could be the
majority share-holder and in this case, Ministry of Finance may inject capital to the SOE.
477. Operation of the transit services will be Bus-, and potentially Rail-Operating Companies. These
companies will provide services in accordance with contracts with the Transit Agency.
Page 141
The World Bank
8 Technical support structure

8.1 Support to the Technical Secretariat
478. A Project Management, Evaluation and Capacity Building Consultant will be appointed to
supplement the capacity of the Technical Secretariat. The functions of this Consultant will be as follows:
 Program Management
 Review of compliance with Eligibility Criteria by cities
 Review of compliance with Readiness Criteria by cities
 Review of Outline Business Case submitted by the City’s Consultant and provided advice and
guidance
 Review of Final Business Case submitted by the City’s Consultant and assessment of compliance
with Project Viability Criteria
 Advise and assist with defining the Government Support Package of VGF, Hibah, Guarantees,
Availability Payments etc.
 Monitoring and evaluation
8.2 Support to Cities

479. Support to Cities will be provided by the Technical Secretariat and the Project Management,
Evaluation and Capacity Building Consultant that will be appointed to assist the Technical Secretariat. In
addition, project Preparation and Management Consultants will be appointed to work with each City.
8.2.1 Technical Assistance with planning and project preparation
480. Project Preparation Consultants will assist the City / Subnational implementing agency with:
 Preparation of the Outline Business case, Market sounding and Final Business Case
 Assistance to establish the Transit Coordination Board and Transit Agency if required
481. Design and Supervision Consultants will assist with:
 System design, drawings and specifications

 Quality control and project management
482. Capacity Building & Training Consultants will assist with implementation & operation of Mass
Transit Systems
8.2.2 Assistance with mobilizing Municipal resources
483. The Technical Secretariat will provide assistance and, if necessary, engage appropriate
specialists to assist the Subnational implementing agency to obtain financing required to meet the
required City contribution to Capital Expenditure. This assistance may be required when new financing
methods are to be used such as Municipal Bond Issuance.
Page 142
The World Bank
8.2.3 Assistance with PPP Structuring
484. Transaction Advisory Consultants will assist with PPP Structuring, drafting concession agreements
and assistance to financial close.
8.2.4 Capacity Building for implementation & operation of Mass Transit Systems
485. The Project Management, Evaluation and Capacity Building Consultant will be required to develop
and roll-out a training program to ensure that the Subnational implementing agencies have the necessary
competencies for implementation, operation, monitoring and evaluation of the mass transit system.
486. The capacity building provided may include:

 Establishing and delivering a recurring Training Program, such as the Leaders of Urban Transport
Program (LUTP) developed by the World Bank (See box below);
 Organizing peer-to-peer learning events among Indonesian cities, such as an urban mobility
conference for government officials, project staff and other stakeholders of the Program;
 Establishing partnerships or a “Center of Excellence” with an Indonesian technical / planning/
engineering institutes and / or international organizations;
 Organizing study tours and technical site visits inside and outside Indonesia to showcase relevant
projects, programs, or institutions to Program´s stakeholders; and
 Annual National Urban Mobility Event for cities to share experiences.
Box 10: World Bank Leaders in Urban Transport Planning Program (LUTP)
The Leaders in Urban Transport Planning (LUTP) program helps participants develop a structured way of
decision making that considers the complexities of urban transport. The program uses a "hands on"
learning approach that makes extensive use of case studies, group exercises, and site visits to highlight
the linkages among the different components of the urban transport system.
The program consists of a seven-day workshop, preceded by a self-learning phase which involves about
24 hours of self-paced learning, and covers topics ranging from land use and transport planning to
environmental and social issues in urban transport planning. Optionally, the program can provide
individual mentoring and international study tours.
The LUTP program equips transport professionals with knowledge of integrated strategic planning and
transport management. The program objectives are to build urban transport leadership that:
 Understands the complexities of urban transport problems and possible context-sensitive solutions;
 Recognizes the need for integrated mobility planning, what this planning involves, and how it should
be undertaken;
 Uses lessons learned from cities and cases for better decision making.
The LUTP program is designed for senior and mid-level transport professionals. Policymakers and
planners from national, state and city level governments who are responsible for "putting the pieces
together" will find the program very useful. Participants from civil society, consultants and potential
faculty from local training institutions have also attended the program.
Page 143
The World Bank
9 Financial support structure

9.1 Financial mechanism of the NUTSP
487. It is essential that the financial support mechanism shall provide secure and reliable funding,
from project planning until completion of implementation. Planning, project preparation and
implementation of Mass Transit systems is process that stretches over many years, and in some case
decades. During the planning and project preparation periods the City Government will be required to
expend considerable resources and extensively engage with stakeholders and the general public. The
credibility of the City Government is therefore dependent upon delivering on the plans and proposals that
have been the subject of the public participation process. The credibility of the public sector to deliver
the funding necessary for project implementation is also a key factor that the private sector will consider
when determining the “bankability” of the project. Funding for mass transit infrastructure must be
therefore have predictable long-term revenue flows to give the City Government advance knowledge of
budget levels to enable effective planning.
488. In order to avoid the need for enactment of new legislation, regulation and procedures the
NUTSP proposes to utilize existing Government of Indonesia mechanisms of fund transfer. Three
existing financing mechanisms are proposed for use to supplement the City financing, namely:
a) Viability Gap Funding (VGF). This is a government support in the form of contribution of some costs
of construction, given in the form a direct cash transfer from the Ministry of Finance (MOF) to the PPP
project Company to assist with the viability of a PPP project that is economically-, but not financially
viable. VGF, up to 49% of the investment cost can be given when there is no other alternative to make
the PPP project financially feasible. Local Government can contribute to the provision of this support
after obtaining the approval of Local Parliament. The NUTSP intends to use VGF to reduce the
Investment Cost of Public Transport systems to be borne by the private sector. Use of VGF requires95:
i. Economic viability of the project
ii. User pays principle to be implemented for services delivered under the PP
iii. Investment cost of greater than IDR 100 Billion (Approx. USD 7.4 Million)
iv. Open and competitive bidding for selection of the private Company
v. Asset transfer to the Government Contracting Agency at the end of the concession period
vi. A comprehensive pre-feasibility study;
b) Grant funding to supplement VGF in order to make the reduce the amount of private Sector Finance
required. This may be either:
i. In-kind grant from the Ministry of Transport, where the Ministry will provide physical assets
to the project. This may through construction of a portion of the infrastructure, or through
provision of rolling stock as has been done with bus fleets in various Indonesian Cities. It must
be noted that in-king grants are suitable for relatively simple infrastructure, such as that used
for Bus Rapid Transit (BRT) systems. Where the complexity of the infrastructure is higher, and
many different elements of infrastructure must be integrated (such as in a Light Rail Transit
95
Referenced from “Government support and facilities for PPP project in Indonesia” Direktorat Pengrlolaan
Dukungan Pemerintah dan Pembiayaan Infrastruktur.
Page 144
The World Bank
system where civil infrastructure, track, communications and signaling, and rolling stock
elements must be fully integrated) the interface risks are significantly reduced by having the
Project Company construct all the infrastructure. The applicability of in-kind grants to LRT
systems is therefore limited.
ii. Cash grant or Hibah from the National budget (APBN). The Ministry of Finance is responsible
for allocation to Subnational governments. The Hibah is suited to all size projects ranging from
water connection to mass rapid transits projects. Under current regulations, Hibah
mechanism is set up as a performance or output based. Hibah is disbursed at the direction of
the line ministry (e.g. Ministry of Transportation) in coordination with the Ministry of Finance.
for growing municipalities with adequate self-supporting projects (e.g. urban transport),
grants can help leveraging and mobilizing additional finances. There are four mechanisms for
transfer from the National Budget to Subnational Government:
 Dana Alokasi Umum (DAU) is the budget transfer mechanism is for general purposes,
namely expenses such as salaries etc.
 Dana Alokasi Khusus (DAK) is the Special Allocation Fund which is the budget transfer
for maintenance of infrastructure /services, based on formula to ensure equal
development across the country.
 Dana Bagi Hasil (DBH) is an Equalization Grant intended to transfer financial resources
to account for regional disparities in natural resource income.
 Deconcentration (Dekon) grants to balance poverty amongst regions.
 In addition to the four budget allocation categories described above National
Government may provide loans to Subnational government and special assistance
grants (Tugas Pembantuan).
c) Availability Payments (APs) from National Government to repay Private Sector Capital Investment.
Availability Payment is a periodic payment by the Minister / Chairman of the Institution / Head of the
Region to enterprise for providing infrastructure services that conforms the quality and/ or criteria as
specified in the PPP agreement. AP is used where the project company does not take the demand
(and revenue) risk. It can therefore cover the full amount of Capex, Opex, Financing Cost and return
on investment.
d) A fourth element, which is strictly not part of the NUTSP but which an integral part of the financing
mechanism is the use of APs from the City to meet operating cost shortfalls.
489. VGF is a separate payment from AP. There is still however a lack of certainty that VGF and AP can
be combined. Regulatory clarification is required to ensure that VGF paid by National Government can
be supplemented by National Government AP payments. Subnational Government may, however, pay
for AP even if National Government has paid VGF.
Page 145
The World Bank
Figure 34: Operating deficit / subsidy of selected Indian and Indonesian

bus systems
100%
80% Subsidy 490. Mass Transit
60% Fare Revenue Systems are not able to
40%
20%
recover capital costs from
2% 4% 8% 18% 22% 30% 37% 47% 53% 56% 64% 66%
0% fare revenue and in only
very few cases are fare
revenues sufficient to
cover the full operating
costs. Some Indian and
Indonesian examples of the subsidy required to meet the operating deficit of urban bus systems is shown
in Figure 34. This provides a significant constraint on the financial mechanism because fare revenues
cannot provide any contribution to recovery of the capital costs of the systems. The NUTSP therefore
requires a mechanism for meeting Operating deficits as well as a mechanism for financing the Capital
Cost.
491. As stated in section 6.1, a core principle of the NUTSP is that Cities shall be responsible for
meeting the Operating Deficit. With private sector operation of a Public Transport system, the
appropriate mechanism will depend upon the risk allocation between the City and the Private Sector. If
the City takes the full revenue risk, then payments to the operator will be for the services delivered, which
is normally determined on the basis of vehicle-kilometers travelled by the operator on approved trips. If
the Operator is taking the revenue risk, then the operator will be paid an amount to cover the expected
operating deficit based upon the competitive bidding process used to select the Operator. In either case,
ongoing monthly payments will be required from the City to the Operator to meet the Operating Deficit.
For the purposes of the NUTSP these regular payments have been called Opex Availability Payments.
492. Opex Availability payments, paid by the City, are common for all the NUTSP financial
mechanisms.
493. In accordance with the core principle described in paragraph 337 Subnational Government is
required to make a significant contribution to the capital cost of the system. This contribution should be
the maximum possible in accordance with the fiscal capacity of the “City”. Given the counterstained fiscal
capacity of most Indonesian Cities, as analyzed and described in 3.5, it is acknowledged that this will result
in the National Government co-financing significantly exceeding Subnational financing. A series of
discussions were held with officials from Bappenas and Coordinating Ministry, which resulted in
consensus that the minimum contribution of the City to Capex shall be 15%.
Page 146
The World Bank
9.2 Options for funding and financing capital expenditure

494. To guide the formulation of the NUTSP financing scheme a conceptual financial model was
prepared that assessed the fiscal impacts of implementation of both Light Rail Transit and Bus Rapid
Transit on a single corridor with conditions representative of those found in a typical large Indonesian
City. The model was used to assess the fiscal impact to Government of the Pillar 1 of the proposed scheme
by considering three options for financing and funding of LRT and BRT. All options require the maximum
contribution from the Cities that is within the fiscal capacity of each city to provide. For the purposes of
the financial modelling this has been taken as 15% for all options.
495. Option 1: Fully Bundled Public Private Partnership (PPP). This option involves the private sector
financing and constructing the infrastructure and systems, providing the rolling stock, operating the rolling
stock and maintaining all the components of the system. The PPP Special Purpose Vehicle 96 (SPV) is 100%
privately owned and the PPP contract period, inclusive of construction, is 23 years. This option uses the
existing VGF up to a maximum of 49% of Capex. With the City contribution of 15%, the balance of 36%
will be financed by the Private Sector. As was mentioned the Private Sector cannot recover their
investment from user charges, which in the case of Public Transport is fare revenue. Funding for
repayment of the Private Sector Finance must therefore be made by Availability Payments.
Table 28: Characteristics of Option 1: Fully Bundled PPP
Infrastructure & Rolling stock cost Operation and

systems cost maintenance (including
rehabilitation)
Financing Private investor, Private investor Private investor
responsibilities National government
& city government
Funding responsibilities National government National government, City government & SPV
& city government city government fare revenue
Delivery responsibilities SPV SPV SPV
496. Option 2: PPP for provision of rolling stock, operations and maintenance. In this option the PPP
excludes the cost of infrastructure and systems, which will be funded by the public sector outside of the
PPP structure. The Private Sector will be required to finance provision of rolling stock, which is estimated
to comprise 19% of Implementation Costs for an LRT and 20% for a BRT. National Government may
support this PPP, through VGF for an amount up to 49% of the investment value of the PPP (i.e. 49% of
the cost of rolling stock) so the VGF for option 2 is reduced to under 10% of the investment value. The City
contribution of 15% of total investment costs remained unchanged from Option 1. The balance of capital
costs, which amount to 66% of total costs for an LRT system and 65% for a BRT system require funding
from National Government through either increased VGF or a new Mass Transit Development Grant (or
Hibah). As with Option 1 the PPP SPV is 100% privately owned, while the PPP contract period is reduced
to 22 years.
96
SPV is term used to describe the Project Company that will be established for the purposes of providing the
infrastructure and services required by the PPP.
Page 147
The World Bank
Table 29: Characteristics of Option 2: Rolling Stock, O & M PPP
Infrastructure Rolling stock cost Operation and

+system cost maintenance
(including
rehabilitation)
Financing National Private investor Private investor
responsibilities government and city
government
Funding National National government & city City government &
responsibilities government & city government SPV fare rev
government
Delivery National SPV SPV
responsibilities government & City
government
497. Option 3: Operations and Maintenance PPP. In this option all infrastructure, systems and rolling
stock are publicly financed, with 85% of capex financed by National Government Hibah, and 15% capex
financed by city government. The private sector involvement is only for Operations and Maintenance
which includes the rehabilitation of rolling stock. It is worth noting that there is zero VGF in this scenario,
because there is no up-front private sector investment. In this option the PPP contract period reduces to
20 years.
Table 30: Characteristics of Option 3: O & M Concession
Infrastructure +system Rolling stock cost Operation and

cost maintenance (including
rehabilitation)
Financing responsibilities National government National government Private investor
and city government and city government
Funding responsibilities National government & National government City government & SPV
city government & city government fare revenue
Delivery responsibilities National government & National government SPV
City government & City government
Page 148
The World Bank
498. The following table shows the key features of the three options.
Table 31: Key features of the Options for NUTSP financial structure
Option 1: Option 2: Rolling Option 3: O&M

Fully bundled PPP Stock + O&M
City contribution for Total 15% 15% 15%
Capex
VGF from MOF for Total 49% 9.3% (LRT) 0
Capex 9.8% (BRT)
Private Sector financing for 36% 9.7% (LRT) 0
Total Capex 10.2% (BRT)
National Government Hibah 0 66% (LRT) 85%
Contribution to Total Capex 65% (BRT)
Capex AP* to repay private Yes Yes No
sector capital investment
Opex AP** to cover Yes Yes Yes
Operating Deficit
Notes: * Capex AP to be paid by National Government, ** Opex AP from City Government
9.3 Testing fiscal impacts of the options

499. The options for financial structure of the NUTSP were evaluated using a simplified financial
model of a conceptual Mass Transit system, loosely based upon the planning for the East – West Surabaya
LRT line. This planning was for a corridor of 20km which will carry 150,000 passengers per day. For the
purposes of the evaluation passengers were assumed to grow at 2% per annum. The cost for the LRT
option shown in the following table is based upon roughly 50% of the alignment being elevated, and the
remaining 50% at-grade.
500. Initial fares were assumed to be IDR 3,000 for BRT and IDR 3,300 for LRT. All costs, including
fares, were assumed to escalate at a uniform rate of 5.6% per annum97, commercial finance was assumed
at 13% per annum, with a tenor of ten years, and expected return rate of private sector equity investment
was assumed at 16% per annum98.
501. Construction costs for Light Rail were based upon the estimates prepared for the Surabaya LRT
system, and can therefore be considered reasonably representative of likely costs of such systems in
Indonesia. For BRT, the construction costs were based upon USD 10 Million per km, which is
representative of international costs for a full BRT system.
97
The escalation rate is based on the average Inflation and Consumer Price Factor of Indonesia from 2007 to 2017,
accessed at https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG
98
The expected return rate of private sector equity investment is based on The Cost of Equity For A PPP Project In
The Transportation Sector for A Selection Of Emerging Market produced by Bloomberg, PRS Group and Damodaran
2017
Page 149
The World Bank
502. No firm values for Indonesian values of operating and maintenance (O&M) costs was available
to the study team. The international values of urban rail networks in a few cities such exists but still have
limitations when applied to Indonesia context due to the difference between a single corridor and a
network, and variance of unit cost of salaries and energy consumption in different countries. Given that
this analysis was done at a very coarse, and conceptual level, with the sole intention of providing
indicative, comparative, values of the cost to Government of various funding and financing options, it was
considered sufficient to develop coarse estimates of Operating and Maintenance costs for LRT based on
average unit O&M cost (USD 13.3/vehicle kilometer ) of light rail networks in 23 cities in US in 2017, and
for BRT based on average unit O&M cost (USD 8.2/vehicle kilometer) of BRT networks in 11 cities in 2017 99.
503. The average O&M costs of LRT and BRT were adjusted with Purchasing Power Parity (PPP)100,
exchange rate of IDR to USD101, and inflation factor of Indonesia. So the O&M cost per vehicle kilometer
of LRT was assumed at USD 4.9 in 2020, and the O&M cost per vehicle kilometer of BRT was assumed at
USD 3.0 in 2020. In addition to O&M cost, the financial modelling also considers cost of rehabilitating
rolling stock which often starts at the 10th year of operation for both LRT and BRT and completes over
three years. Given the life spans of LRT and BRT rolling stocks, the rehabilitation cost of LRT rolling stock
is 50% of total rolling stock cost, while the percentage for BRT is 100%, according to international
experience.
504. Despite the basic parameters of daily passenger demand for LRT and BRT being identical, the
frequency of the BRT is significantly higher than LRT, the model used the elasticity of transit use with
respect to service frequency (called a headway elasticity) averages 0.5102, and adjust the daily passenger
demand of LRT and BRT accordingly.
99
Estimated based on the data from Federal Transit Administration, accessed at
https://www.transit.dot.gov/ntd/national-transit-database-ntd-glossary
100
Purchasing power parities (PPPs) are the rates of currency conversion that equalizes the purchasing power of
different currencies by eliminating the differences in price levels between countries. In their simplest form, PPPs
show the ratio of prices in national currencies of the same good or service in different countries. This indicator is
measured in terms of national currency per US dollar. The PPPs for Indonesia in 2017 was 4190.492, accessed at
https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm
101
According to OECD data, the exchange rate of Indonesian Rupee to USD in 2017 was 1:13380.327, accessed at
https://data.oecd.org/conversion/exchange-rates.htm#indicator-chart
102
Todd Litman, 2019, Victoria Transport Policy Institute, Understanding Transport Demands and Elasticities How
Prices and Other Factors Affect Travel Behavior, accessed at http://www.vtpi.org/elasticities.pdf
Page 150
The World Bank
Table 32: Key parameters used to evaluate NUTSP financial options
Light Rail Transit Bus Rapid Transit

Capital cost USD 500 Million USD 200 Million
Rolling Stock USD 116 Million USD 49 Million
O&M cost per annum Base year USD 11.7 Million USD 20.6 Million
Total Rehabilitation cost of rolling stock 59.2 49.0
Construction period 3 years 3 years
Operation period 20 years 20 years
Daily Passenger Demand 150,000 150,000
Peak Hour Demand on busiest section (pphpd) 5,500 5,500
Annual passenger growth 2% 2%
Average Fare (IDR) 3,300 3,000
Annual Fare Revenue (after collection costs, discounts, USD 9.2 Million USD 8.4 Million
evasion and including advertising & rental)
Annual Fare revenue (% of O&M cost, rehabilitation 79% 61%
cost excluded)
Cost escalation (PPI) including fares 5.6% 5.6%
Debt-Equity ratio for SPV 80:20 80:20
Interest rate for loan 13% 13%
Tenor of debt 10 years 10 years
Shareholders Real Return on Equity required 16% 16%
103
Discount rate 10% 10%
103
http://intresources.worldbank.org/INTOPCS/Resources/380831-1360104418611/Discount_Rate_Technical
Note.pdf
Page 151
The World Bank
9.3.1 Analysis of financing options for a conceptual LRT scheme
505. The conceptual LRT and BRT systems were tested under each of the NUTSP financing options
using the simplified financial model.
506. Figure 35 below shows the annual cash flows for Option 1 applied to the conceptual Light Rail
Transit system. VGF is 49%, City Capital Contribution is 15% and the balance of Capital Expenditure of
36% comes from the private sector for a “Bundled PPP”, including Infrastructure, Depot, Track and
Systems, Rolling Stock, Operations and Maintenance.
507. Nominal cash flows are shown in all the outputs of the financial modelling. Hence recurrent
O&M costs and revenue escalate at the assumed rate of 5.6%. The cost of rolling stock rehabilitation was
spread by 30%, 30% and 40% over 2030-2032. The debt repayment ends on 2031. The total AP at 1 st year
of operation is about USD 52 Million, slowly decreases over time until the 10 th year increases to USD 67.6
Million. It goes up and down during 2030-2032 with rehabilitation cost distribution and end of debt
repayment. In 2033, the total AP drops significantly to USD 9.7 Million as there is neither rehabilitation
cost nor debt repayment left. After that AP stays at quite low level but however do not drop to zero, as
there is an ongoing requirement to provide the shareholders of the private investor with return on their
equity contribution.
Figure 35: Financial analysis for LRT Option 1

Annual Cash flow (USD Million)
508. The Capital portion of the Availability Payment, shown by the orange line in the preceding
figure, amounts USD 50 Million per annum for the ten-year debt tenor. For the remaining ten years of
the concession, after debt service has been completed, it reduces to USD 11.5 Million to provide only
return on equity to the shareholders of the project company.
Page 152
The World Bank
509. Opex starts at about USD 2.2 Million and slightly goes down until the 10 th year when
rehabilitation of rolling stock takes place and goes up to USD 22 Million on year of 2032 and stops in
2033. The Opex Availability payment is not shown directly in the graphs but can be interpreted as the
difference between the Total AP and Capital portion of AP lines in the graphs.
510. Option 2 uses conventional public procurement for 81% of investment cost, and a PPP for the
balance of 19%. Under this scenario conventional procurement could be used for Infrastructure, Depot
and Track. The public procurement has been assumed to be funded by 15% (of total costs) from City
resources and 66% from Hibah. The partial PPP (19% of investment cost) would cover Rolling Stock,
Systems, Operations & Maintenance, with 49% of the PPP cost covered by VGF. The VGF portion therefore
equates to 9.3% of the total Investment Cost, and the balance of 9.7% of investment costs is financed by
the private sector.
511. The total AP follows the same trend as option 1, with a start value of USD 15.5 Million, dramatic
increase of value to USD 30.9 Million on 2030, and drop to USD 1.3 Million in 2033. Different from option
1, there is no AP needed for the project from the year of 2035 when the project revenue exceeds
operation expense. The capital AP continues at about USD 3 Million as it relates to the equity return of
the private sector investment, yet in practice, this cost will be offset by the additional revenue as well,
which makes no payment obligation of government.

Page 153
The World Bank
512. Option 3 is for a Partial PPP for Operations and Maintenance only. This involves conventional
procurement for Infrastructure, Depot, Track and Systems, and Rolling Stock, funded by City 15% and 85%
from Hibah. As there is no private sector financing of Capex, there is no VGF and no Availability payments
for Capital. The AP for Operating deficit is identical to the preceding options.

513. Table 33 that follows, shows the results of the financial modelling of the options for a conceptual
LRT system, from the perspective of the Public Sector.
Table 33: Present Value of Government Support Mechanisms for an LRT Corridor
(USD Million)
Option 1: Full PPP Option 2: Rolling Option 3: O&M

Stock +O&M
Private Portion (Debt & Equity) 196 52 0
Initial fiscal commitment 360 503 556
City Portion (Grant) 84 84 83
Grant / Hibah 0 369 473
Viability Gap Grant 276 50 0
Ongoing fiscal commitment 267 83 16
Availability payment for Capex 251 67 0
repayment
Availability payment for 16 16 16
operating cost shortfall
Total Present Value of 628 586 572
Government support
Page 154
The World Bank
514. The Present value of the Capital Expenditure (private portion plus City Capital Portion plus Capex
Hibah plus VGF) of USD 556 Million is less than the combined cost of Infrastructure (USD 500 Million) and
Rolling Stock (USD 116 Million) shown in Table 32 because costs were escalated at the PPI rate of 5.6%
over the construction period, and then discounted to present value at the higher discount rate of 10%.
515. The bottom line in the table shows the total cost to the Public Sector of the various options. Due
to the higher financing costs of private capital the Option 1 with the highest (36%) private sector
investment also has the highest PV of Government support. As the percentage of private investment
decreases across the options, so does the PV of Govt support.
516. Govt decisions are however sometimes not made on lifecycle costs, but often short-term
(political) issues may override long-term efficiency. The second line of the table addresses this issue by
showing the initial fiscal commitment. This has the opposite trend as total PV, with higher private sector
investment reducing the initial fiscal burden on the Public Sector.
517. Option 1 has the lowest Initial fiscal commitment, with USD 360 Million required from the Public
Sector, however the high amount required for Capex Availability Payments make this option the most
expensive in terms of the total present value of Government Support with a need for USD 628 Million
over the life cycle of the concession.
518. Option 2 has higher initial fiscal commitment with USD 503 Million from public sector, as private
sector investment is lowered to 9.7% of total capital cost of the project. The capex AP is also much less
compared to the option 1, while the O&M is the same as option 1 because the rehabilitation cost stays
the same for the three options and accounts for the majority of the OM deficit. The net result is that the
total cost to government decreases to USD 586 Million.
519. Option 3 has no private sector financing of capital investment. As a result of the lower cost of
Public Sector financing this option has the lowest present value of Government Support, at USD 805
Million.
520. The conclusion from this evaluation is that higher level of private sector investment will help
reduce the initial fiscal commitment of the governments but result in increased levels of total
government fiscal support over the project period. When cities are experiencing high-speed economic
development with potential of increasing fiscal revenues over the operational period, option 1 will be
more desirable, as it delays the fiscal commitment and in the long run ease the fiscal stress. However, if
the economic and fiscal development is not developing in a positive trend, or have many underlying
factors that may cause turmoil, having less private investment (option 2 and option 3) may be more
desirable.
Page 155
The World Bank
9.3.2 Analysis of financing options for a conceptual BRT scheme
521. The results of the financial modelling of the conceptual BRT system displayed the same trends
as were found for the LRT system, albeit with lower absolute values as a result of the lower capital cost.
The BRT system has Capital Costs and Rolling Stock costs totaling USD 249 Million, in comparison to USD
616 Million for the LRT, and hence requires substantially lower Public Sector and Private Sector
investment.
522. A further key difference between the results of LRT and BRT systems is that while BRT
Investment costs are only 40% of that of LRT, the annual recurrent O&M costs of BRT is 40% higher than
LRT. This is because the O&M costs are estimated based on the length of operational trips each year.
Despite the O&M unit cost of BRT is USD 3 per vehicle kilometer which is 60% of LRT O&M unit cost, the
vehicle capacity is around 33% of LRT. To serve the similar traffic demand, BRT runs triple the operational
distance of LRT, with higher frequency per day than LRT, which explains the increase of annual recurrent
O&M cost.
523. To make the comparison between LRT and BRT, the financial models assume same construction
and operational period for both corridors. As the life span of BRT fleet is 10 years, the rehabilitation cost
of rolling stock is 100% of the investment cost, thus representing full replacement of the fleet.
Figure 38: Financial analysis for BRT Option 1

Page 156
The World Bank
524. As was reported for the earlier LRT example, Option 1 for the conceptual BRT consists of a
Bundled PPP, including Infrastructure, Depot, Track and Systems, Rolling Stock, Operations and
Maintenance. Nominal cash flows are shown in all the outputs of the financial modelling. Hence recurrent
O&M costs and revenue escalate at the assumed rate of 5.6%. The cost of rolling stock rehabilitation was
spread by 30%, 30% and 40% over 2030-2032. The debt repayment ends on 2031.
525. The total AP at 1st year of operation is about USD 28.8 Million, slowly decreases over time until
the 10th year increases to USD 43.8 Million. It goes up and down during 2030-2032 with rehabilitation
cost distribution and end of debt repayment. In 2033, the total AP drops significantly to USD 13.1 Million
as there is neither rehabilitation cost nor debt repayment left. After that AP stays at quite low level but
however do not drop to zero, as there is an ongoing requirement to provide the shareholders of the
private investor with return on their equity contribution.
526. The Capital portion of the Availability Payment, shown by the orange line in the preceding
figure, amounts USD 20 Million per annum for the ten-year debt tenor. For the remaining ten years of
the concession, after debt service has been completed, it reduces to USD 5 Million to provide only return
on equity to the shareholders of the project company.
527. The Opex Availability payment is not shown directly in the graphs but can be interpreted as the
difference between the Total AP and Capital portion of AP lines in the graphs. Opex AP starts at about
USD 8 Million and slightly goes down until the 10 th year when rehabilitation of rolling stock takes place
and goes up to USD 23 Million during the year of 2032 and reduces to USD 8 Million in 2033.
528. BRT Option 2 uses conventional public procurement for 81% of investment cost, and a PPP for
the balance of 19%. Under this scenario conventional procurement could be used for Infrastructure,
Depot and Track. The public procurement has been assumed to be funded by 15% (of total costs) from
City resources and 66% from Hibah. The partial PPP (19% of investment cost) would cover Rolling Stock,
Systems, Operations & Maintenance, with 49% of the PPP cost covered by VGF. The VGF portion therefore
equates to 9.3% of the total Investment Cost, and the balance of 9.7% of investment costs is financed by
the private sector.
Page 157
The World Bank

529. The total AP follows the same trend as option 1, with a start value of USD 14.2 Million, dramatic
increase of value to USD 29.2 Million on 2030, and drop to USD 9.7 Million in 2033. The capital AP starts
at USD 5.6 Million and reduces to USD 1.3 Million after the private debt is fully repaid. The OPEX AP follows
the similar trend as total AP, and accounts for averagely about 60% of the total AP for the first ten years,
and averagely 90% of total AP for the rest ten years.
530. BRT Option 3 is for a Partial PPP for Operations and Maintenance only. This involves
conventional procurement for Infrastructure, Depot, Track and Systems, and Rolling Stock, funded by City
15% and 85% from Hibah. As there is no private sector financing of Capex, there is no VGF and no
Availability payments for Capital. The AP for Operating deficit is identical to the preceding options.
Page 158
The World Bank

531. Table 34 that follows, shows the results of the financial modelling of the BRT options, from the
perspective of the Public Sector.
Table 34: Present Value of Government Support Mechanisms for a BRT Corridor
(USD Million)
Option 1: Option 2: Rolling Option 3:

Full PPP Stock +O&M O&M
Private Portion (Debt & Equity) 79 22 0
Initial fiscal commitment 145 202 224
City Portion (Grant) 34 34 34
Grant / Hibah 0 147 191
Viability Gap Grant 111 21 0
Ongoing fiscal commitment 169 96 68
Availability payment for Capex repayment 101 28 0
Availability payment for operating cost shortfall 68 68 68
Total Present Value of Government support 314 298 292
532. The above table displays the same trends with regard to total present value of Government
Support for a conceptual BRT project as was found from the analysis for a conceptual LRT project, namely
that higher amounts of private sector finance increase the cost to Government due to the higher cost of
private finance. The hybrid funding scheme of option 2, combining VGF with Capex Hibah, was applicable
across the full range of potential private sector investment options.
Page 159
The World Bank
9.4 Recommended financing mechanism

533. The following table compares the relative merits of the various financing options. This
comparison indicates the trade-offs between having high contribution of private sector investment and
managing fiscal commitment pressure. When identifying the sources of fund to each option that involve
VGF, Hibah and Capex AP from National government, Construction Grant and Opex AP from City
government, both National government and City government need to carefully assess their fiscal
affordability over the entire project period for decision making.
534. Regarding the risks, the financial model does not consider variety of different risk allocation
between private and public sectors. On the other hand, the private sector almost takes no revenue risks
as its equity return and debt repayment are fully covered by AP. If higher risks are allocated to private
sector, the expected return rate will be increased as well. More analysis considering different risk
allocation context will be conducted when certain projects are identified.
Table 35: Comparison of characteristics of NUTSP financial options
Option 1: Option 2: Rolling Stock Option 3: O&M

Full PPP +O&M
Initial fiscal Lowest Moderate Highest

requirement
Total fiscal Highest Moderate Lowest
requirement
(Present Value)
Applicable for No. PPP Only. Yes Yes
Publicly funded
infrastructure
Changes to VGF No changes No changes No changes
Regulation?
Changes to AP Change needed to Change needed to allow No changes
Regulations? allow Capex AP from Capex AP from National
National Govt together Govt together with VGF
with VGF
Changes to No changes MOF Regulation needed MOF Regulation needed to
Hibah to implement Mass implement Mass Transit
Regulation? Transit Development Development Hibah
Hibah
Significant Lowest - due to Moderate, due to Highest, due to operator is
interface risks? bundled PPP different providers of different from infrastructure
infrastructure and rolling and rolling stock provider.
stock. The risk will be The risk will be increased if
increased if Hibah is Hibah is provided in kind.
provided in kind.
Page 160
The World Bank
535. From this comparison it was concluded that the combination of VGF and AP mechanisms with
a new Mass Transit Development Grant, or Hibah, provided the most flexibility with regard to packaging
a PPP concession. Without the proposed new Hibah, the National Government Support would be limited
to the VGF and AP mechanisms that can only be applied to PPP projects, thus precluding the use of these
instruments for publicly funded infrastructure. As public funding of the infrastructure is a mechanism
widely used, particularly in BRT projects it was considered that this presented a significant flaw in using
only the VGF and AP mechanisms. In contrast, if a portion, or even all, of the National support were to
be in the form of Hibah, all PPP options, including the fully bundled PPP scheme, would be eligible to
receive support.
536. It was concluded that National Government support must be compatible with the likely range
of Private Sector investment models for mass transit systems, and therefore the combination of VGF,
AP and a new Mass Transit Development Grant (Hibah) is proposed for the financing mechanism.
537. While establishing the Mass Transit Development Grant will require the Ministry of Finance to
enact appropriate regulation, existing government procedures can be used to channel the Hibah to
Subnational Government as shown in the following figure.
Figure 41: Process for allocation of the Mass Transit Development Grant
Page 161
The World Bank
10 Summary of the proposed National Urban Transport Support

Program
538. The Key elements of the proposed national Urban Transport Support Program are shown in the
following figure.
Figure 42: Key elements of the proposed NUTSP
539. The program will provide technical and financial support from national Government to
Subnational Government areas with population in excess of one million. The Subnational area may be a
City (Kota), Metropolitan Area, or combination of administrative areas that have a shared public transport
demand.
540. The program will be governed by an Inter-Ministry Acceleration Team chaired by the Coordinating
Ministry of Maritime Affairs, while will management of the program will be performed by a Technical
Secretariat.
541. The proposed NUTSP requires establishment of a new Mass Transit Development Grant that will
be used to supplement the existing Government PPP support mechanisms of Viability gap Funding and
Availability payment.
542. A comprehensive package of technical support and capacity building will be provided to
Subnational Government under the NUTSP, subject to compliance with a three-step screening process
that specifies sets of criteria that must be met during project preparation.
Page 162
The World Bank
References
AFD, MEDDE. Who Pays What for Urban Transport: Handbook of Good Practices. 2014. Available at
www.codatu.org .
Ardila, A., & Ortegon, A. Sustainable Urban Transport Financing from the Sidewalk to the Subway.
Washington DC: The World Bank Group. 2016.
BMZ. Financing Sustainable Urban Transport - International Review of National Urban Transport Policies
and Programmes. Bonn: GIZ - Embarq. 2013.
Carnegie India. National Urban Transport Policy Symposium. Roundtable summary. New Delhi. 2012.
Center for Clean Air Policy. Case Study: Colombia’s Bus Rapid Transit (BRT) Development and Expansion.
An Analysis of barriers and critical enablers of Colombia’s BRT systems. Washington DC. 2012.
Chia-Lin Chen. Modern Tram and Public Transport In Chinese Cities: A Case Study of Suzhou. 2017.
Dimitriou, H., Ward, J.E., & Wright, P. Planning, Appraisal and Delivery of Infrastructure Mega Projects 1:
Decision-making Beyond the Iron Triangle. 1 Jan 2016.
EMBARQ. Social, environmental and economic impacts of BRT systems. Washington, DC: World
Resource Institute. 2015.
Flyvbjerg, B., Bruzelius, N., & Rothengatter, W. Megaprojects and Risk: An Anatomy of Ambition.
Cambridge University Press. 2003.
Hidalgo, D. (s.f.). Financing Sustainable Urban Transport. Bonn. GIZ - Embarq. 2013
Infrastructure Australia. Urban Transport Strategy. Canberra. 2013.
ITDP. Hook, W., Hughes, C., and Mason, J. Best Practice in National Support for Urban Transportation
Part 1: Evaluating Country Performance in Meeting the Transit Needs of Urban Populations. February
2015.
ITDP. Hook, W. & Hughes, C. National Support for Urban Transportation Part 2: Growing Rapid Transit
Infrastructure —Funding, Financing, and Capacity. 2015.
Kumar, A., & Agarwal, O. Institutional Labyrinth - Designing a way out for improving urban transport
services: lessons from current practice. Washington DC: The World Bank Group. 2013.
Mu, Jong. A Tale of Two Chinese Transit Metropolises and the Implementation of Their Policies:
Shenyang and Dalian (Liaoning Province, China. 2018Nasution, Anwar. Government Decentralization
Program in Indonesia, ADBI Working Paper Series No. 601, Asian Development Bank Institute. October
2016.
Paez, F. Perspectivas sobre la movilidad en ciudades de México. Santiago de Chile: ECLAC - Seminario
Cambio Climático, gobernanza y movilidad en América Latina y el Caribe. 2016.
Stead D., Pojani D. “The Urban Transport Crisis in Emerging Economies: A Comparative Overview.”
Springer, Cham. 2017.
Page 163
The World Bank
Stead D., Pojani D. “Sustainable Urban Transport in the Developing World: Beyond Megacities”.
Sustainability 2015, 7, 7784-7805.
Tsay, S., & Herrmann, V. Rethinking Urban Mobility - Sustainable policies for the century of the city.
Washington DC: Carnegie Endowment for International Peace. 2013.
UN-Habitat. Planning and design for sustainable urban mobility - Global Report on Human Settlements.
New York: Earsthscan - Routledge. 2013.
Velásquez et al. Bus Rapid Transit In China: A Comparison Of Design Features With International
Systems. 2017.
Velasquez, Li, Xue, Hidalgo. Challenges and Opportunities of China’s “National Transit Metropolis 1
Demonstration Program”. 2015.
Vuchic, V. Urban Transit - Systems and Technology. Hoboken, NJ: John Wiley and Sons. 2007.
Walters, J. Public transport policy implementation in South Africa: Quo vadis? Journal of Transport and
Supply Chain Management. 2014.
World Bank. From Chaos to Order - Implementing High-Capacity Urban Transport Systems in Colombia.
Washington DC. 2010.
World Bank. Implementation Completion and Results Report, Integrated Mass Transit Systems Project.
(IBRD-72310 IBRD-74570 IBRD-77390) June 11, 2013.
World Bank. Formulating an Urban Transport Policy: Choosing between Options. Washington, DC. 2014.
World Bank. Sustainable Urban Transport Financing from the Sidewalk to the Subway: Capital,
Operations, and Maintenance Financing. Washington DC. 2016
World Bank. Maximizing Finance for Development in Transport: Getting from Concept to Investments.
Report #1: MFD Solutions and Case Studies. P163783, 2019
Zhi Liu and Andrew Salzberg. Developing Low-Carbon Cities in China: Local Governance, Municipal
Finance, and Land-Use Planning—The Key Underlying Drivers. 2011.
Page 164
The World Bank
Annex A: Organizations consulted, 2017 - 2019

A. 1 Meetings with stakeholders
1. 26 September 2016 - Meeting with Inspectorate General (IG) of the Ministry of Public Works
and Housing (MPWH) on
The IG is the internal auditor for MPWH. They check if the construction process, including contracting,
work execution, payments etc. are in line with the local regulations/specifications. The auditing process
is regulated by Ministerial Decree 14/PRT/M/2007 and Peraturan Menteri PU o7/PRT/M/2008 and
consists of an entry meeting with the Satker, administrative audit and field audit. Before going to the field,
they do a desk review to check the administrative aspects, such as procurement documents, bidding
documents, contract, schedule, backup quantities and qualities, payment certificates, etc. During their
audit, they look at everything from work planning, bidding, implementation, payment and contract
finalization. After their audits, they give instructions to the Directorate General of Highways (DGH) and
the other relevant Directorates of the MPWH to correct the identified shortcomings. They do not go back
to the field to follow up on their instructions, but they require photos, test results, etc. to be sent to them.
The Inspectorate General is organized by provinces (Wilayah), five in total. For each province they have
about 25 auditors for all types of public works not only road works. Please consider that Bina Marga alone
has about 1,200 Satkers and each Satker can easily have 10 and more road work contracts, so overall, we
have been told that DGH probably has about 20-30,000 road work contracts.
Given the significant volume of contracts and limited capacity, they inspect works on a sample basis. Based
on the package size, the complexity, the urgency, etc., they assign a risk rating and give priority for
inspection. An audit normally has a duration of 14 days and it is for several road work contracts. It is
carried out in the office and the field. The audit team is composed of 4 to 5 people. There is at least one
engineer and one accountant on the team. They have about 150 auditors. About half of the auditors are
engineers and half are accountants, lawyers, economists. Before 2015 the auditors were experienced
technical staff. Since 2015 the auditors are young people with no technical staff (they get about 1-month
training per sectors and they need to cover all three sectors of MPWH). BPKP provides training for auditors
on administrative and financial aspects. Bintek provides technical training.
The most common problems observed in the field are:
 Resettlement, people complain or do not allow access to the work site;

 Lack of equipment on site (e.g. if a contractor has more packages, they have only one set of
equipment);
 Supervision (e.g. they have an unqualified team, no site instruction by the supervision consultant);
 Small or very big stones used in stone masonry;
 Not enough cement in stone masonry; and
 Unsatisfactory base camp conditions.
They are not following up/provide solution for systematic findings outside the specific audit process.
Page 165
The World Bank
2. 26 January 2017 - National Support for Urban Transport with Pak Wismana
Discussion on the urban transport support system in other countries with Pak Wismana, Deputy
Infrastructure of Ministry of National Planning/Bappenas in Bappenas
In this meeting, WB team explained the findings of national support for urban mass transport in other
countries. Some of the examples are Mexico with PROTRAM program, India with JnNURM program, and
Colombia with NUTP program.
Bappenas are interested on the idea and principally agree on the needs of similar program to be
implemented in Indonesia. They would like to learn further on how it could be developed in Indonesia and
the procedures within the program.
3. 7 March 2017 - NUTSP Development with Pak Wismana
Follow up discussion with Bappenas chaired by Pak Wismana and attended by Worldbank Program
Manager Taimur. Worldbank team shared their initial thoughts on the proposed procedure for Indonesian
national support for urban transport, potential cities, and three stages of criteria, eligibility, readiness,
and project viability, as components of National Urban Transport Support Program (NUTSP).
Bappenas gave positive feedback on the criteria and requested to elaborate the criteria further and
complemented by the possible institutional arrangement of the program.
4. 20 March 2017 - Pak Wismana on World Bank Mission
WB team and Phillip Van Ryneveld, South African Transport Consultant, had meeting with Pak Wismana
and Pak Ikhwan, Director of Transport, in Bappenas as an introduction meeting of Phillip mission. Phillip
shared his experience in the conceptualizing and implementing national support in mass transit in south
Africa particularly in the institutional setup. The meeting went well, and the result was common
understanding of Philip’s mission plan accommodated Bappenas interest.
5. 21 March 2017 - Expert Staff of MOT
Meeting with by then an expert staff of Ministry of Transport (MOT), Bambang Prihantoro. He was former
Director of Transport of Bappenas and now his position is a Head of BPTJ (Greater Jakarta Transport
Authority). Philip presented his experience and WB team deliver plan of creating NUTSP. Some
experiences of other countries brought up to the discussion and Pak Bambang requested to focus more
on the creating the Indonesian one.
6. 24 March 2017 - Bogor Local Government and Philip
This event took in place after several internal meetings on creating outline and strategy to develop NUTSP.
The meeting is to collect the information and feedback from the city also to understand the needs of the
city. Bogor as one of the cities received Bus Grant program from MOT city explained their problem with
angkot reform and their mass transit plan.
Page 166
The World Bank
7. 27 March 2017 - WRI on NUTSP
Discussion in WB office with Director of World Research Institute (WRI) Indonesia, Nirarta Samadhi, and
his staff in Urban Division. The meeting was about exchange information on the activities of both
Institution and the possibility of joint project between local Government in one metropolitan area e.g.
Jabodetabek (Greater Jakarta). WRI at the time was also cooperating with WB in the Bloomberg project
on Road Safety in Bandung. The result of the meeting was both parties will keep in touch on the urban
transport program.
8. 19 June 2017 - GIZ Sutrinama
Another international agency meeting with GIZ Sutrinama-Indobus. They are on the process of getting
implementation agreement with either Bappenas and MOT for the project of developing Bus Rapid Transit
in Indonesian Cities. The project component are technical assistance and co-financing. The Indobus part
also funded by the SECO, donor of the WB’s NUTSP. Since both programs share the same counterpart and
working on the similar case of urban mass transit, there was commitment to continue working and
communicate closely on progress to avoid overlapping and enhance synergy.
9. 21 June 2017 - Coordinating Ministry of Maritim Affair
Meeting with Coordinating Ministry of Maritim Affair (Menko Maritim), Mr. Luhut, follow up of previous
meeting in DC, attended by Lead Specialist Urban Transport Georges Bianco Darido. The meeting
discussed two topics, the development of NUTSP and Bali Mobility including Sarbagita Metropolitan and
WB annual meeting transport. The Ministry agree in principal with the need to improve urban transport
condition in Indonesia and asked the right projects as solutions for Bali mobility.
10. 22 June 2017 - South Tangerang Transport Agency
This meeting was part of request from Bappenas to assess the proposal from Tangerang to build elevated
BRT as the extension of TransJakarta corridor 13. Another discussion during the meeting was about
current urban transport arrangement in Tangerang as an input in the developing NUTSP.
11. 25 July 2017 - Pak Wismana
Meeting on NUTSP and the finding of previous Tangerang mission. Bappenas interested in the financing
mechanism of the NUTSP and considering the already on table proposals from cities e.g. Medan LRT.
Bappenas conducted OBC for this project and the FBC will be done by Ministry of Finance with PT SMI as
an implementor. Regarding the Tangerang project, there will be comparison between Tangerang proposal
and the existing TransJakarta elevated corridor.
12. 29 September 2017 - Official of Ministry of Finance (MoF)
The meeting was a follow-up of the previous discussion on urban transport on a different topic with
Ministry of Finance and PT SMI at 24 September. The Ministry of Finance was keen to improve urban
transport and brought up the idea of using potential of PPP in the mass transit development. This meeting
on NUTSP explain the overall program complemented with the preliminary financing simulation of the
program. This meeting went really well and there really seems strong interest in the Ministry of Finance
for an urban transport program that will use their PPP process and the existing financing instruments.
There also seems willingness to change the rules slightly to enable a bigger national contribution and
Page 167
The World Bank
accommodate other characteristics of public transport project. The only concern from the MoF side is the
large amount needed to run the program. WB plan kind of phasing for the program and revised the slide
for the Minister of Finance.
13. 28 November 2017 - GIZ Sutrinama on NUTSP
The meeting was updating both progress and the possibility of sharing task where GIZ will work closely
with the city while WB focus in national program set up. Both institution had informed Bappenas on the
built- collaboration.
14. 15 December 2017 - Meeting with Pak Darwin Director of PT Sarana Multi Infrastruktur (PT.
SMI)
Meeting with the director of PT SMI (Financing- Stated Own Enterprise established by Ministry of Finance),
explaining about the concept of the NUTSP and the plan to establish it within PPP structure and the
potential to engage with PT SMI. It was a very good meeting with the director of PT. SMI, who seems
genuinely interested in taking the leadership in shaping the urban transport program. Both parties agreed
to meet again in the week of January 8. Wb would prepare presentation with details on how the program
could look like.
15. 11 January 2018 - Bu Emma PT. SMI
First meeting with PT SMI’s Main Director, Emma Sri Martini, and her team on NUTSP development. PT
SMI as an institution has helped the financing scheme and implementation of LRT Jabodetabek and
currently working on Medan LRT OBC. The meeting is to discuss the financing scheme of NUTSP, Medan
LRT, and the possibility of PT. SMI to become a technical secretariat for NUTSP should it use PPP scheme.
PT SMI agree to go forward with the idea of NUTSP which will cover the hole of ad hoc financing policy
and keen to be the technical secretariat for the program if they were assigned by National Government.
16. 12 January 2018 - Deloitte on Medan LRT
Deloitte was the consultant hired by PT SMI to do the FBC for Medan LRT. The discussion was about the
initial plan of the LRT Medan and the work they are doing now. There was also topic on city fiscal capacity
which in the NUTSP is an important information since the program require significant contribution from
the city for the total project investment cost by then for around 30% of total cost. Besides, the city should
cover the deficit of operation and maintenance. In the Medan LRT case, there was no intention from
Medan City government to contribute on the investment cost.
17. 22 January 2018 - Pak Ikhwan Bappenas
Updating the NUTSP development to Bappenas primary on the institutional setup and the potential of
using PPP scheme. Bappenas suggested to look at the current joint office for PPP mechanism. Bappenas
was working with Medan and Surabaya while Medan was doing the FBC with MoF and Surabaya start the
OBC with Bappenas. The meeting also discussed the support option for the city whether the grant should
be as infrastructure transfer or cash transfer or in kind. Worldbank elaborate the preference on cash so
the city will decide most suitable facility for their system and the ownership will be higher.
The magnitude of the budget needed to fund this project is depend on the pilot project. The selection of
technology will influence the financial, especially the capital and operation cost. The Medan cost was
Page 168
The World Bank
estimated to increase to 21 Trillion. The commitment of budget need to be gained very soon thus
Bappenas suggested to held technical meeting with many stakeholders discussing Division of task
between institution. Bappenas also advised to look at the example for PINA (Joint office and ad-hoc) now
facilitated by PII and revealed they could take responsibility to put the project on the plan where the MoF
will decide the amount. MOT need to take a role to approve grant from urban transport. One other entity
Bappenas suggested to put on the list is KPPIP since they will accelerate the process.
18. 25 January 2018 - Technical Meeting with Pak Darwin
Progress meeting on the NUTSP development, discussing the financing mechanism and its simulation for
the proposed phasing program using some options of national grant/support mechanism. There was also
analysis of fiscal and borrowing capacity of the city against the cost to implement mass transit. Pak Darwin
in line with the proposed options and plan to bring it to Kemenko Maritim.
19. 7 February 2018 - NUTSP Meeting with PT SMI and CMMA
Meeting held in PT SMI office chair by Pak Darwin and attended by expert staff of Coordinating Ministry
of Maritim Affair (CMMA) Pak Seto. WB brief the attendance about the overall NUTSP program, the
background, benefit, procedure, and the needs of institutional setup to implement it. Pak Seto agree with
this idea as he had experienced with the difficulty in the implementing LRT Jabodetabek along with PT
SMI due to absence of national support on mass transit scheme. He suggested to move fast with the
program development and expect to be launched in the middle of the year. The need of new regulation
to establish this program was also raised in the meeting.
20. 13 February 2018 - Meeting with Bu Sri Hayati Balitbang (Research and Development) MOT
Join meeting with urban flagship team which initially requested by Bu Hayati head of Balitbang. The
meeting was more on understanding what Balitbang contributed to urban transport and the possibility to
cooperate with WB. There was also explanation of NUTSP which she basically agreed with the objective
of the program which she agree with the principal of the program.
21. 14 February 2018 - Meeting with Masyarakat Transportasi Indonesia (MTI),
The meeting with MTI (Indonesian Transport Community) representative Pak Tori Damantoro, was to gain
information and advised from non-government transport expert on the condition of the urban transport
in Indonesia and the current effort from both national and local government. The meeting was initially
requested by urban flagship team. Wb also explained the concept of NUTSP which received good feedback
with an advice to pay attention on the existing paratransit/public transport reform and how to engage
them as any mass transit trunk line would need a good and integrated feeder.
22. 19 February 2018 - NUTSP Meeting with PT SMI and CMMA
Follow up of previous meeting at 7th February. Discussed the financing mechanism option for the program
using existing support tools such as VGF, AP, etc. Elaborates the challenges of it tools and the limitation
of current regulation. There was also discussion on the contribution from the city which initially set as
30% of total investment cost. Lately it decided to be reduced to at least 15% considering the capacity of
Indonesian cities. The contribution of the city is a must as it to control overdesign or wrong choice of mode
Page 169
The World Bank
technology which will imply to high investment, operation, and maintenance cost. The timeline was also
discussed in the meeting.
23. 23 February 2018 - NUTSP Meeting with Bu Emma PT SMI
Progress meeting of the NUTSP details that had been developed from previous meeting. In the meeting
Bu Emma asked three specific points which are selection of modes to provide a slide on demand vs most
suitable mode, potential source of financing of city to see potential sources vs different type of
investments and decide which one is better in term of cost and risk between municipal bond and other
loans for infrastructure financing, and the background of why SMI is the preferable institution for technical
secretariat of the NUTSP which complemented by comparative analysis between SMI, IIGF, and MOT in
selecting technical secretariate. PT SMI also still concern on fiscal capacity which contributing 15% of
investment cost may still too high for them (using Medan as example). PT SMI suggested to have a meeting
with MoF.
24. 27 February 2018 - NUSTP Meeting with PT SMI on Fiscal Capacity
Technical meeting on the city fiscal capacity and borrowing capacity analysis of Indonesian cities. In the
case of Medan, they faced difficulty to contribute significantly on the investment cost while they were
confident to cover O&M cost in the future once the targeted demand has been achieved. PT SMI has also
studied the potential optimization of Medan budget and found the possibility to spare up to 5% of their
annual budget or around 200 Billion rupiah which can be used for city contribution in the LRT project
subject to the willingness and policy of the Mayor.
25. 2 March 2018 - Meeting with Pak Luky DG Financing and Risk management of MoF
This was a meeting with Pak Luky to brief him the development of NUTSP. The team, explained the
cooperative process with PT SMI, Kemenko Maritim, and Bappenas in the designing the components and
procedure of the program. There was more specific discussion on the financing mechanism, national
support options, and city fiscal capacity. Pak Luky asked for more time to discuss it with his team.
26. 9 May 2018 - Meeting with Pak Luky MoF and Other Institutions
The meeting was multi institutional meeting with the Ministry of Finance, PT.SMI, IIGF, and the CMMA as
participants. Pak Luky was very supportive on the program. Regarding topic of institutional framework, it
was suggested to reduce the members of the Executing Team to have more agile decisions at project level,
but to add the Deputy of the Cabinet Secretariat, and to better define its functions. There was also
discussion on the need for a Presidential Regulation to formalize the Program since there is limited
ownership in the Ministry of Transport, many stakeholders to coordinate, and it might be an instrument
to revise existing regulation on national support for urban transport or to give more strength to existing
regulations. The need for a criterion on mode/technology choice was expressed while WB have been
asked to refine the criteria in the light of the Medan proposal. They also have big concern for the source
and large amount of budget required to run the program. Following the meeting, Pak Seto will call for a
meeting between key ministers in the week of May 21 and WB will reach out Pak Freddie, Director within
DG Financing and Risk Management MoF, to organize a half-day in-depth discussion on the framework.
Page 170
The World Bank
27. 16 May 2018 - KIAT on NUTSP
KIAT is the successor of INDII, Indonesia Infrastructure Initiative, program of AUS AID for Transport
Infrastructure. Majorly work on road development, KIAT also has program on urban mobility. The meeting
was to exchange information between agencies, sharing activities and avoiding overlaps. The counterpart
of KIAT was also BAPPENAS.
28. 22-May 2018 - KIAT on NUTSP, Meeting with MoF on NUTSP
Follow up meeting in KIAT office from the previous meeting in WB office. There was discussion on the
process and component of NUTSP from WB and KIAT explained their plan to develop integrated urban
mobility plan guideline for Indonesian cities which will be in line with one of NUTSPs requirement for the
city. Both parties agree to collaborate in future development and talk with the Bappenas about this
cooperation in further meeting.
29. 22 May 2018 - Bu Insyafiah MoF
Technical meeting with Bu Insyafiah as a follow up of previous meeting with MoF. The meeting focus on
financing mechanism of NUTSP, each option of funding support and fiscal capacity. Bu Insyafiah
requested WB to test the the applicability of the NUTSP proposals against a “real-life” example
proposed for the Medan Project.
30. 25 May 2018 - Pak Ikhwan on NUTSP
Update meeting with Pak Ikhwan as a preparation of the future meeting with Pak Wismana. Within the
meeting WB explained the progress had been achieved on the NUTSP development and the intense and
good cooperation with CMM, MoF and PT SMI. There was also discussion on the plan of presidential
regulation and the institutional setup for the program. Pak Ikhwan principally agree with the idea and to
bring this progress to Pak Wismana in the next meeting.
31. 30 May 2018 - Pak Wismana on NUTSP
The meeting is to update Pak Wismana of the progress on the NUTSP development including the
cooperation with CMM, PT SMI and MoF in the designing the financing mechanism, criteria, and
institutional arrangement of the program. There was also in-depth discussion on the PP side of the
program and Pak Wismana requested WB to meet KPPIP (The Committee for Acceleration of Priority
Infrastructure Delivery) to gain more information on the arrangement of infrastructure development
between institution and the possibility of KPPIP to be a candidate of technical secretariat of NUTSP. He
also requested WB to acknowledge Bappenas as the main counterpart in the developing of NUTSP.
32. 4 June 2018 - KPPIP and PT SMI on NUTSP
The meeting was to understand the role of KPPIP in Indonesian infrastructure development and inter-
institutional coordination. WB also explained briefly the NUTSP development and its component include
the need of technical secretariat within the program institution. KPPI dubious to be the technical
secretariat since their roles and authority was limited to coordinate and support current structure and
their institution status was ad hoc which there is no certainty of the existence of KPPIP in the long-term
which relies on the policy of the elected president.
Page 171
The World Bank
33. 20 July 2018 - Pak Seto CMMA
Update meeting with Pak Seto on the NUTSP development, the input from Bappenas for the institutional
setup, and the progress of presidential regulation. Pak Seto revealed that they still waiting for high level
meeting to take in place and expresses his doubt on Local government to implement the project with less
intervention from national government. Pak Seto asked WB to look after potential of national execution
for NUTSP project. He highlighted the high risk of corruption besides the low capacity in local government.
34. 27 July 2018 - Pak Ikhwan at Bappenas
Report meeting to Bappenas about the progress of institutional development, meeting with KPPIP, and
meeting with Pak Seto. Bappenas keen to take a lead on the drafting of the presidential regulation
(Perpres) for NUTSP.
35. 6 August 2018 - ITDP and UK Build Environment Advisory Group on NUTSP
Meeting with ITDP Indonesia and Build Environment Advisory Group on NUTSP discussing each activity in
Indonesian Urban Transport. They also invited WB to attend their workshop for urban mobility in Bandung
and Surabaya.
36. 7 August 2018 - Bappenas on NUTSP Perpres Draft
Meeting with Bappenas on the presidential regulation for NUTSP draft. The draft basically adopting the
NUTSP outline and components. Some important points in the Perpres was to establishment of a new
mass Transit Infrastructure Grant from Central to Subnational Government of up to 85% of the Investment
Cost to allow Subnational implementation of Mass Transit Systems with a requirement for Subnational
Government to contribute at least 15% of the Investment costs. The Perpres also mentioned leveraging
private sector investment through PPP’s that may be either for the full infrastructure, systems, fleet,
operation and maintenance or for discrete elements of the system. The responsibility fully allocated to
Subnational Government for funding any operating deficit. Besides, Subnational Government also to be
responsible for identification and development of the proposed system, performing technical studies and
making the necessary submissions required for the Coordination team to assess compliance with the
specified criteria.
37. 15 August 2018 - MRT Jakarta
Meeting requested by PT MRT Jakarta to understand WB roles in Mass Transit development in Indonesia.
PT MRT also presented their plan on TOD in Dukuh Atas station and would be interested if Wb can
facilitate any event or capacity building on TOD topic.
38. 28 August 2018 - Bappenas on NUTSP
Progress meeting with Bappenas to discuss the Perpres draft and the phasing and institutional setup of
the NUTSP. Bappenas asked the possibility of National Government 100% funding for NUTSP through
MOT as the executor of the project. The discussion went well with WB side explained their concern of the
idea which understood by Bappenas and asked WB to elaborate further the pros and cons of the options.
Page 172
The World Bank
39. 29 August 2018 - GIZ on NUTSP
Meeting with GIZ in updating each activities’ progress. GIZ Sutrinama had their implementation
agreement for the project with Ministry of Transport and were currently expanding their team and
preparing to work on selected city. Potential Cities for them are Batam, Semarang, Pekanbaru, and
Palembang.
40. 7 September 2018 - Meeting with Pak Ikhwan.
Meeting with Bappenas and KIAT on NUTSP Perpres with the discussion mainly on the institutional set up,
urban mobility plan, and national support options. The discussion went well, and the draft mentioned the
city must contribute on the system and rolling stock investment besides operation and maintenance
deficit. KIAT also determined the importance of having guideline on a good urban mobility plan which will
help city to achieve one of the requirements of NUTSP readiness criteria. There was also plan from
Bappenas on having different Perpres on general Urban Development with urban transport will also be
part of the Perpres.
41. 12 September 2018 - BPTJ on Greater Jakarta Masterplan Implementation
This meeting requested by BPTJ where WB explained their work on the NUTSP and other Indonesian
transportation project and BPTJ presented their Transport Masterplan for Greater Jakarta. There was also
discussion on the possibility of WB to pitch in some of the project mentioned in the masterplan as the
implementation of the masterplan required large amount of fund while the BPTJ has limited resources
and National Budget wouldn’t be sufficient to finance the whole list of projects.
42. 8 November 2018 - AfD Transport
Meeting with AfD on urban transport in Indonesia. AfD previously work on developing urban mobility plan
in Bandung and had the LRT Bandung project cancelled. AfD keen to works on similar study should there
is opportunity.
43. 15 November 2018 - Meeting with Bappenas
Update meeting NUTSP development. The draft of Perpres had been discussed with other ministries (MoF
and MOT) and PT SMI. The Perpres had also been reported to the Minister of National Planning (Bappenas)
and the team are waiting for his further direction.
44. 11 December 2018 - DG Railway Ministry of Transport on NUTSP and City fiscal analysis for
NUTSP
Meeting with the Director General of Railway of MOT to discuss on NUTSP. DG Railway had been several
times invited by Bappenas for the development of NUTSP Perpres draft. The meeting went well with the
Director General of Railways chaired the meeting and led the discussion actively with in-depth discussion
on the NUTSP components, criteria, financing and support mechanism. DG agree with the need of having
one program to accommodate and to control the support from national to cities in case of developing
mass transit. He supports the Perpres as it is in line with policy of DG Railways in urban rail. DG revealed
the challenges and difficult they faced from LRT Palembang and LRT Jakarta implementation which based
on ad hoc Perpres and suggested to not replicate those kinds of procedures. DG informed that Bappenas
had proposed to DG railway to fund the Medan LRT using AP but thinks it will be too much for them to
Page 173
The World Bank
handle considering the existing budget. MOT through DG Railway currently can only pay 1/3 of their
responsibility to maintain national railway network to PT. KAI and ask PT. KAI to maintain using their own
budget. During the discussion they agrees that national government should not involve in the operating
deficit and proposed to do more simulation on the minimum city contribution (which in our simulation
was 15%) so that it more attractive for cities to join the program. They still disagree with 100% support
from central government for infrastructure as currently stated in the draft Perpres. He proposed to have
city contribution in the infrastructure. The contribution of city in infrastructure will ease the transfer of
asset.
There was suggestion to presents this study to cities and Subnational Governments to make them
understand the program as well as the consequences of their choice while in parallel preparing regulation
on procedures and guidelines. There was request to WB to sharpen the program in the financing support
strategy. He was keen to bring this idea to the higher level and support the establishment of NUTSP. He
will report to Minister of Transport and discuss with Pak Wismana on the detail of the Perpres and next
process. He is available to have more discussions with us.
45. 18 December 2018 - PT SMI on LRT Medan and NUTSP and Presidential Decree Draft
Update meeting with PT SMI on the Medan LRT case and the NUTSP Perpres draft. At the time MoF still
stall the implementation of Medan LRT since the source of fund and national support have not decided
yet. LRT Medan cannot be implemented without National Support and City financing contribution far
below expected. PT SMI tried another approach to phasing the plan start with the BRT system. There was
also discourse on extending the corridor beyond Medan city to bring the Provincial Government in.
46. 15 January 2019 - PWC on National Urban transport support and working on fiscal capacity
analysis
Meeting with PWC on initiative of urban public transport in Indonesia. WB explained their work on NUTSP
and the tendency to work outside Jakarta as many agencies already working there. PWC currently working
on the preparation of MRT East West corridor and GIZ Sutrinama BRT project. They are looking forward
the potential collaboration with WB in the future.
Page 174
The World Bank
47. 16 January 2019 - Directorate of Transport and Multimode (AMM) on national Urban Transport
Support
This meeting mainly discussed the national support for urban transport and NUTSP. AMM had just
initiated one division focus on urban land transport. Prior to the establishment, there was no specific
division in Ministry of transport working on urban transport after dissolution of BSTP (Directorate of Urban
Transport) in 2014. The discussion went well with many input and exchange idea with AMM and they are
looking forward for further collaboration. There was also presentation on google traffic big data analysis
from WB.
48. 22 February 2019 – Bappenas meeting with Pak Ikhwan and KIAT on Perpres draft
This was a progress meeting on Perpres draft chaired by Pak Ikhwan with Worldbank, GIZ, and KIAT
attended the meeting. Pak Ikhwan revealed his meeting with KFW about their intention to gain support
from the Major for the Commuter Extension Project in Surabaya while the city had well known interest in
urban LRT which administratively separated with Commuter project. In the development of mass transit,
Surabaya insist on LRT rather than BRT due to urban design point a view.
Regarding the Perpres draft, the changes needed were mainly related to the wording as an example world
Policy in the beginning of the draft would be replaced by strategy or plan. The term sustainable was not
necessary since the Perpres is already specific on mass transit. For the support portion up to 100% of
infrastructure could be change to 85% of total capital investment cost. It will increase the flexibility and
doesn’t tight the ratio of the infrastructure vs system and rolling stock. For the mass transit institution
within subnational level, it was agreed to mention “having/committed to establish institution (mass
transit agency)”.
The meeting also results in conclusion to reinclude the roles of ministries to the body of Perpres, which
previously had been revoked. The technical secretariat would potentially be under CMMA while
Bappenas will act as secretary of the acceleration team chaired by CMMA.
49. 14 March 2019 - Meeting with Pak Gede Pasek Head of Planning Bureau MOT
World Bank team had a chance to present NUTSP to Pak Gede Pasek, Head of Planning Bureau of Ministry
of Transport and his staffs. At the early stage of discussion, Planning bureau (PB) explained their intention
Page 175
The World Bank
to push revitalization of public transport in cities. PB initial thought was having a subsidy support for cities
in the form of buy the service of public support. PB had conclusion that operation subsidy can be given to
city from national government based on PP 74 about Angkutan. One of the examples given was the
support from central Java provincial government to AKDP service in Central Java, which actually is under
Central Java responsibility.
Subsequently, WB team explained on why city/province should be responsible to the operational and
maintenance subsidy for urban public transport service rather than National Government, which related
to the authority and capacity of the city on areas that affecting passenger demand such as taxation policy,
tariff setting TDM measures, parking management, etc. Besides, there was a concern to the capacity of
National Government should they have to handle the public transport service provision in many cities.
PB’s Plan of buy the service program was based on the failure of bus grant program. According to them,
the problem in cities to develop their urban transport is most of them do not realized their responsibility
on that case and barely allocate budget for that. Only few cities already understand that obligation and
put effort on it. WB team revealed there were more than 10 cities have proposed mass transit project to
national government, but not realizing their responsibility of O&M cost.
Considering the timeline of NUTSP, it seems PB seeks possibility to go on with buy the service program for
city public transport while in parallel the NUTSP is being established. They aim to run the project in 2020
for 5 years’ service contract, though they also still study the detail of this plan. WB team suggested to look
at the Hibah mechanism which might be used for the program.
PB’s concerns on NUTSP were on the fact that there are still lot of things to be paid by local government
and the solution if during the implementation the regional government stop the operation due to lack of
fund. Technical aspect such as inventory of asset should also be carefully managed in the Perpres.
As the conclusion PB consider NUTSP as an important study and hope that the program can be set up
soon. For them the fiscal capacity assessment is a key to understand whether city’s commitment is
justified and realistic. PB would like to inform Secretary General on this meeting and indicated further
meeting with Secretary General and other MOT officials.
Page 176
The World Bank
A. 2 Workshops
1. 24 July 2018 – Deep Dive on Urban Transport
Background
The Government of Indonesia (GoI) is aware of the importance of urban transport for the country and has
included in the current medium-term development plan for 2015-2019 a stronger financial support for
urban transport. It has also set the ambitious target of achieving 32% of public transport share by the end
of 2019. Cities are starting to come up with their own plans to improve their transport systems. In the
meantime, the development of technology and the availability of “big data” have enabled rich analyses of
urban mobility patterns that can be tapped to enable better planning and management of urban transport
systems.
As part of IDSUN MDTF activity, World Bank arranged The Deep Dive Workshop on Urban Transport in
Palembang on July 24th, 2018. Prior to the workshop, there was a field visit to the LRT site in Palembang.
The workshop featured prominent speakers from the central and local governments of Indonesia,
technology companies, academics, and international development partners and experts. World Bank
presented NUTSP, big data used for accessibility analysis, and proper mode selection of mode which part
of NUTSP criteria.
Objectives
The objective of the workshop is to explore the topic of urban transportation in Indonesia in light of
current technological developments to provide insights for the preparation of the Indonesia Urbanization
Flagship Report and NUTSP development, as well as the preparation of future policy documents, such as
the 2020-2024 National Medium-term Development Plan (RPJM).
Key Takeaways
The attendance for the workshop was 70 people. The welcome notes were delivered by Tri Dewi Virgiyanti
(Bappenas, Director of Urban, Housing, and Settlements) and Ekowati Retnaningsih (Head of Bappeda
South Sumatra). They were also Suharmen (Bappenas, Head of Development Planning Data and
Information Center) and Risal Wasal (BPTJ, Director of Infrastructure). There were subnational
government representatives from Bandung, Banjarmasin, Makassar, and Palembang. Representatives
Page 177
The World Bank
from Ministry of Finance, Ministry of Transportation, Ministry of Agrarian Affairs and Land Use Planning/
National Land Agency, Ministry of Public Works and Housing, and Ministry of Home Affairs also attended
the workshop as well as from SECO, GIZ, ITB, UI, University of Chicago, URDI, Ruang Waktu, Pulse Lab
Jakarta, Grab, and Go-Jek.
Bappenas and SECO representative were happy with the event. Participant felt the event was very dense
with so many materials to cover but little time to discuss. Risal Wasal he was very happy with the
workshop as it helps his agency and he invited other agencies to collaborate on this issue. One of the
messages that participants kept re-emphasizing throughout the workshop was that (urban) transport
cannot be separated from urban development issues, including land use (zoning), density, and access.
There was also great interest towards the use of empirical approaches and big data for better transport
planning and management. Part of the workshop was also used to discuss financing for transport systems
while the presentation on the National Urban Transport Support Program helped to structure the
discussion. Great interest in transport financing issues is partly triggered by South Sumatra’s concern on
how to fund the high operations and maintenance costs of their new LRT.
2. 25 July 2018 – Workshop on Transit Oriented Development
Background
Jakarta Greater Area Transport Authority (Badan Pengelola Transportasi Jabodetabek [BPTJ]) hosted a
workshop on Transit Oriented Development. BPTJ invited local governments, academia, practitioners, and
NGO to this workshop held in Bogor. The speakers are from line ministries, academia, and practitioners.
World Bank Team was invited to speak about concept of TOD and international experience on TOD>
Objective
The objective of the workshop is to gather ideas around implementation of TOD in order to develop policy
and strategy on TOD in Indonesia.
Key Takeaways
The participants of the workshop were very interested with the TOD concept, especially on the use of TOD
to support development of mass transit. However, after a full day discussion the participants realized that
its implementation in Indonesia will need some supporting laws and regulations.
Page 178
The World Bank
3. 14 August 2018 - Bandung Workshop on Sustainable Transport
Background
The city of Bandung hosted a workshop about Towards a Sustainable Transport in Bandung. The workshop
was supported by UN Habitat and Global Prosperity Fund of the UK Foreign and Commonwealth Office
under Global Future Cities Programme. WB were invited by the City of Bandung to present Indonesia
NUTSP in the workshop.
Objectives
Gather inputs from participants on the development of future cities program of Bandung Cities on
Transport project through public private partnership.
Key Takeaways
The Programme has identified three integrated pillars that will address key barriers to prosperity:
1) Urban Planning, to provide technical assistance for spatial restructuring;

2) Transportation, to provide technical assistance to develop integrated multimodal public transport
systems,
3) Resilience, to provide technical assistance to develop strategies to address the impact of climate
change and ensure development is sustainable.
City of Bandung presented Bandung’s Integrated Mass Transit Plan. Bandung plans to develop 8 LRT lines
and 13 BRT lines and the plans have been accommodated in the Bandung’s Spatial Planning for 2009-
2029.
The attendances supported the NUTSP and hoped that the program could assist City of Bandung to meet
the eligibility and readiness criteria of the NUTSP as Bandung had been identified as one of the cities to
get support from NUTSP during the high-level meeting chaired by Pak Luhut in July 11, 2018.
4. 22-23 November 2018 - Indonesia Local Government Transport Officers Forum II
Background
The workshop was hosted by Tangerang Selatan City Government in Collaboration with United Cities and
Local Government Asia Pacific and followed the inaugural Forum in Salatiga last year. The Local
Governments Transport Officer Forum (LGTOF) is a forum formed to exchange experiences and ideas in
order to strengthen cooperation and strengthen networks among members of the United Cities and Local
Governments Asia-Pacific (UCLG-ASPAC) with the aim of jointly realizing Sustainable Development Goals
(SDGs) and New Urban Agenda (NUA), especially innovations in the field of transportation. Indonesian
institution participants are Bappenas, BPTJ (Greater Jakarta Transport Authority), Dishub (City Level
Department of Transportation) for Jakarta, Bogor, Depok, Tangerang, Bekasi and Bandung and
Representatives of approximately 15 various other cities from Banda Aceh to Papua. International
Organizations invited are WB, ITDP, WRI, and Busworld.
Page 179
The World Bank
The World Bank’s rationale for participating was to interact with City and Subnational Government
officials, as part of the second phase of the work on the National Urban Transport Program (P156103),
which involves technical support and capacity building to cities for implementation of mass transit
systems.
Objectives
Objectives of the workshop which were to:
1. Provide capacity building for Local Governments in the field of transportation,

2. Facilitate development and provide practical solutions to transportation problems,
3. Exchange experiences and ideas to strengthen cooperation network,
4. Understand the future directions of urban mobility development
5. Check the outcomes of LGTOF before through cities action plan presentations
6. Have short proposal for the next forum and the following action plan from the cities.
Key Takeaways
Throughout the workshop, there was a good dialogue between participants and presenters, which clearly
indicated that many cities are grappling with the technical and financial aspects of mass transit
implementation. Key messages to come out of the workshop were the need for transport systems to
match passenger demand, and not stop at administrative boundaries, the necessity of each City having an
Urban Mobility Plan to ensure that projects are not implemented to only meet the needs of a specific
corridor, and also to ensure that projects are not implemented to provide a predetermined choice of
mode or technology, and agreement on a “Push-Pull” approach where improved transport systems are
implemented in conjunction with demand management/restraint measures.
There was also definition of five pillars for improvement of the transportation system at Subnational level,
comprising: Public Transport System Reform (1. Systems and networks, 2. Operator structure, and 3.
Institutional management and Associated Actions 4. Travel demand Management and 5. Traffic
Management). Cities were asked to prepare action plans, based upon the five pillars. It was apparent that
many cities over-rated their state of readiness these five areas, which indicates that most cities are not
aware of the complexities of the reform process.
Page 180
The World Bank
The forum was only able to introduce key issues and not really provide in-depth training. It did however
seem to be useful and a good building block for further interaction. The Forum identified topics for the
next forum as including Operator Transition, where the experiences of Bogor and Surakarta could provide
useful local lessons on Angkot reform. Other topics of interest were financing mechanisms, and National
Government support.
There seems to be synergies to be gained from further collaboration between the WB and UCLG, as they
provide a mechanism for interaction with a broad range of Subnational entities. Regarding NUTSP, Wb
received support from Subnational level for the proposed Bappenas NUTSP to provide financial and
technical support. WB team will continue to interact with UCLG to engage with cities for the purposes of
the NUTSP.
5. 23 April 2019 - National Urban Transport Support Program Workshop
Background
World Bank hosted a workshop to synthesize the concept of National Urban Transport Program to the city
governments and line ministries.
Objective
The purpose of this workshop is to provide an opportunity for all stakeholders of urban transport to learn
from other countries and discuss as well as exchange opinions on: 1) the challenges in providing mass
transit and/or public transport systems in cities; and 2) the means of national support and its institutional
setup 3) the way to integrate public transport within one or multi administrative boundaries.
The aim is to stimulate awareness on the importance of cooperation in the provision of mass transit and
agree on the road map, especially on the formulation of a policies related to: the division of roles and
responsibilities between different institutions horizontally and vertically; supports needed by sub national
governments; and institutional structure.
Key Takeaways
The workshop has attracted more than 160 participants from cities, line ministries, academia,
practitioners, and NGO. The invitation was sent only to 100 participants. The workshop was opened by
Deputy Minister of Bappenas for Infrastructure and facilities. Agenda of the workshop is as follow:
Page 181
The World Bank
Time Agenda People in charge

08.00 – 09.00 Registration Bappenas/WB/EO
09.00 – 09.30 Opening Speech Deputy of Infrastructure Bappenas
09.30 – 11.15 Session 1 presentation and  Presenter: PROTRAM (Carloe Mier, Banobras
discussion: NUTSP Mexico), MTA NY (Eric Turner, World Bank)
 Panelist: Deputy of Infrastructure Bappenas,
Secretary general of MOT, Head of BPTJ, Deputy
for Infrastructure CMMA
 Moderator: Farhannisa
11.15 – 11.30 Prominent public figure General Sutiyoso (Former Jakarta Governor who
initiated Transjakarta BRT)
11.30 – 12.00 Keynote Speech Minister of Bappenas
13.00 – 15.00 Session 2 Technical  Presenter: Director of Transport Bappenas, David
Presentation and Discussion Ingham (World Bank)
 Panelist: Directorate General of Land Transport,
Directorate General of Railways, Prof. Harun Al
Rasyid of ITB, Head of Indonesia Transport Society
 Moderator: Yayat Supriyatna
After learning from other countries (Mexico and New York) and also program of GOI on urban transport
and mass transit, all participants are in principle support the implementation of NUTSP and expect that
the policy can be implemented soon.
Page 182
The World Bank
A. 3 Training sessions
17 January 2019 - Big Data analysis for Urban Traffic training in BAPPENAS
Background
Half-day training held by world bank for Bappenas officials on the use of google traffic data for urban
mobility analysis. The training which initially requested by Pak Ikhwan consisted the introduction of GIS
and how to use it in sketch travel analysis. There was also discussion on the metropolitan transport
institution with the example of Sarbagita case. WB proposed the BUMD owned by Provincial/National
Government with the possibility of share ownership with Cities and Kabupaten.
Objectives
The objectives of the workshop were to:
1. Introduction of big data analysis study which currently is being done by Worldbank
2. Provide capacity building for Bappenas officials in the use of google traffic data
3. Provide capacity building for Bappenas officials in the use of GIS for spatial analysis
4. Present Worldbank thought on metropolitan transport authority arrangement
Key Takeaways
The training went well with around 20 participants mainly from Directorate of Transport but also attended
by other Bappenas Directorates consisted multilevel officials. The participants were interested to learn
how to use GIS and google data and happy with the new knowledge they get even though the training
was only able to touch the surface of the whole process of the analysis due limited time available.
Regarding the metropolitan transport authority, Bappenas was interested with the concept and keen to
bring the idea for improving Greater Jakarta and other metropolitan transport arrangement.
Page 183
The World Bank
21 February 2019 - Big Data analysis for Urban Traffic training in MOT
Background
Following the discussion in a meeting with AMM on 16 January, Sub Directorate of Urban Transport
requested World Bank to held half-day training on geospatial and big data analysis for urban mobility,
similar with the training that had been done for Bappenas. The Director invited officials from other sub
directorates to participants as well as representative of each Balai (regional branch office) in 19 areas in
Indonesia. The training was about conducting simplified transport demand analysis with help of geospatial
analysis using GIS and traffic data from Google API. As for the introduction, WB explained the work that
has been done by using this method and the introduction of NUTSP.
Objectives
The objectives of the workshop were to:

1. Introduction of NUTSP that World Bank develop with Bappenas and CMMA
2. Share knowledge and capacity building on geospatial and Big data analysis on urban mobility
3. Inform the interim output of World Bank work
4. Engage and build relationship with Sub directorate of urban transport and MOT in general
Key Takeaways
The training was opened by Reinhard, Head of Sub Directorate of Urban Transport with the number of
participants reached 40 people. The participants came from various location round Indonesia and
interested with the knowledges Worldbank shared. Participants received the introduction of NUTSP
program that Worldbank develop and the big data analysis. Within 3 hours they followed each
component of the training and most of them successfully created the spatial data with QGIS and
operated it as guided. The material on google API and result of Worldbank work were also explained and
gathered attention from the participant. The participants found this training useful despite need more
time to fully mastered the methodology and asked about the possibility to develop this method to be
used for fright transport analysis and port development. World Bank also expressed the intention to be
engaged further with the participants should the city willing to know and develop the study for their
own city.
Page 184
The World Bank
Annex B: Draft Presidential Regulation (Translation from Bahasa

Indonesian)
DRAFT
PRESIDENTIAL REGULATION OF THE REPUBLIC OF INDONESIA
NUMBER: ….
ABOUT
GOVERNMENT SUPPORT IN THE DEVELOPMENT OF URBAN MASS TRANSIT
BY THE GRACE OF GOD ALMIGHTY
PRESIDENT OF THE REPUBLIC OF INDONESIA,
Consider:
a. that urban areas which have a strategic role to the national economy require integrated and
sustainable mass transit systems, in facilitating the mobility of citizens;
b. that in order to establish mass transit systems as referred in paragraph A, need acceleration
of provision and implementation in cities who have developed or obtained mobility
strategy;
c. that in order to accelerate the provision and implementation as referred to in paragraph B,
the central government needs to support the development of urban mass transit;
d. that based on the considerations referred to in paragraphs A, B, and C, it is necessary to
stipulate a Presidential Regulation Of The Republic Of Indonesia On Government Support In
The Development Of Urban Mass Transit.
Reckon:
1. Article 4 paragraph (1) of the Constitution of the Republic of Indonesia Year 1945;
2. Law Number 17 Year 2003 on State Finance (State Gazette of the Republic of Indonesia Year
2003 Number 47, Supplement to the State Gazette of the Republic of Indonesia Number
4286);
3. Act No. 1 of 2004 on State Treasury (State Gazette of the Republic of Indonesia Year 2004
Number 5, Supplement to the State Gazette of the Republic of Indonesia Number 4355);
4. Law Number 25 Year 2004 on National Development Planning System (State Gazette of the
Republic of Indonesia Year 2004 Number 104, Supplement to the State Gazette of the
Republic of Indonesia Number 4421);
5. Law No. 33 of 2004 on Financial Balance between the Central Government and Local
Government (State Gazette of the Republic of Indonesia Year 2004 Number 126,
Supplement to the State Gazette of the Republic of Indonesia Number 4438);
6. Law No. 38 of 2004 concerning Road (State Gazette of the Republic of Indonesia Year 2004
7. Law Number 17 Year 2007 on National Long Term Development Plan 2005-2025 (Official
Gazette of the Republic of Indonesia Year 2007 Number 33, Supplement to the State
Gazette of the Republic of Indonesia Number 4700);
8. Act No. 23 of 2007 on Railways (Official Gazette of the Republic of Indonesia Year 2007
Page 185
The World Bank
9. Law Number 26 Year 2007 on Spatial Planning (Official Gazette of the Republic of Indonesia
Year 2007 Number 68, Supplement to State Gazette of the Republic of Indonesia Number
4725);
10. Law Number 22 Year 2009 regarding Traffic and Road Transportation (Official Gazette of the
Republic of Indonesia Year 2009 Number 96, Supplement to the State Gazette of the
Republic of Indonesia Number 5025);
11. Law Number 23 Year 2014 About the Local Government (State Gazette of the Republic of
Indonesia Year 2014 Number 244, Supplement to the State Gazette of the Republic of
Indonesia Number 5587) as amended several times, most recently by Law No. 9 of 2015 on
the second amendment to Law number 23 Year 2014 About the Local Government (State
Gazette of the Republic of Indonesia Year 2015 number 58, Supplement to State Gazette of
the Republic of Indonesia number 5679);
12. Government Regulation No. 5 of 2005 on Balance Fund (State Gazette of the Republic of
Indonesia Year 2005 Number 137, Supplement to the State Gazette of the Republic of
Indonesia Number 4575);
13. Government Regulation No. 26 Year 2008 on the National Spatial Plan (Official Gazette of
the Republic of Indonesia Year 2008 Number 48);
14. Government Regulation No. 15 Year 2010 on the implementation of Spatial Planning (State
Gazette of the Republic of Indonesia Year 2010 Number 21);
15. Government Regulation No. 17 of 2017 on Synchronization Process Planning and budgeting
for National Development (State Gazette of the Republic of Indonesia Year 2017 Number
105, Supplement to the State Gazette of the Republic of Indonesia Number 6056);
16. Presidential Decree No. 38 of 2015 on Cooperation between the Government and Business
Entities in Infrastructure Provision (Official Gazette of the Republic of Indonesia Year 2015
Number 62).
DECIDED:
PRESIDENTIAL REGULATION OF THE REPUBLIC OF INDONESIA ON GOVERNMENT SUPPORT IN THE

DEVELOPMENT OF URBAN MASS TRANSIT.
CHAPTER I
GENERAL TERMS
Article 1
In this Presidential Regulation shall mean:
1. Central Government, hereinafter referred to as Government, is the President of the Republic of
Indonesia and Ministers and Head of the Institutes in the Cabinet in accordance with their authority.
2. Local government is the Governor, Regent, or Mayor, and the municipalities as elements of the
regional administration.
3. Enterprise is a State-Owned Enterprises, Regional Owned Enterprises, private enterprises in form of
limited liability, foreign legal entities, or cooperative.
4. Contracting agency on cooperation project hereinafter abbreviated PJPK is the Minister / Chairman
of the Institution / Head of the Region or State-Owned Enterprises / Regional Owned Enterprises as
a provider or operators of infrastructure based on the legislation.
Page 186
The World Bank
5. Urban areas are regions that have major non-agricultural activities with the composition of area
functions as urban settlements, centralization and distribution of government services, social
services, and economic activity.
6. Metropolitan area is an urban area consisting of a stand-alone urban areas or an urban core
surrounded with other urban areas that are interconnected functionally and linked by integrated
regional infrastructure network system with the overall population of at least 1,000,000 (one
Million) people.
7. Mass Transit is a public transport that can carry high passenger capacity that operates in a fast,
convenient, safe, scheduled, and high frequency.
8. Public Private Partnership, hereinafter referred as KPBU/PPP is cooperation between government
and business entities in the provision of infrastructure for the public interest with reference to the
specifications set in advance by the Minister / Chairman of the Institution / Head of Region / State
Owned Enterprises / Regional Owned Enterprises, which partly or wholly use resources of
Enterprises by taking into account the distribution of risk between the parties.
9. Government Support is in the form of fiscal contribution and / or other forms provided by the
Minister / Chairman of the Institution / Head of the Region and / or the minister who held
government affairs in the field of finance and wealth of the country corresponding each authority
and based on the legislation in order to improve the financial viability and / or effectiveness of the
project.
10. Viability Gap Fund is Government support in the form of fiscal contribution in financial nature given
to the Project KPBU by the minister conducting government affairs in the financial sector and the
country's wealth.
11. Service Payment Availability (Availability Payment) is a periodic payment by the Minister / Chairman
of the Institution / Head of the Region to the Implementing Enterprises for the availability of
infrastructure services that match the quality and / or criteria as specified in the KPBU agreement.
CHAPTER II
OBJECTIVES AND GOALS
Article 2
Government support in the development of urban mass transportation is given with the purpose of:
a. increase competitiveness of urban areas and sustainable development;
b. accelerate the implementation of mass transit in urban areas who have developed or obtained an
urban mobility strategy and have the need and capacity to organize integrated mass transit which
are effective, efficient, on target, and punctual.
Article 3
Government support in the development of urban mass transportation is given with the target of:
integrate government support in the organization of mass transit and the development of mobility in
urban areas;
a. improve the ability of local governments in implementing an integrated mass transit which are
effective, efficient, on target and punctual;
b. optimize existing resources in local government, central government, and business entities in the
implementation of mass transit.
Page 187
The World Bank
CHAPTER III
CRITERIA
Article 4
(1) Government support is given to the urban areas that have met:
a. The eligibility criteria;
b. The readiness criteria; and
c. The project viability criteria.
(2) Eligibility criteria referred to paragraph (1) are:

a. Is the Metropolitan Region;
b. Local Government and / or some local governments associated in the Metropolitan area that
has sufficient fiscal capacity to finance part of the capital costs and all operating and
maintenance costs;
c. Commitment from Local Government and / or some local governments in the Metropolitan
region in implementing supporting policies to increase the ridership of public transport in
accordance with the regional authority;
d. Commitment from Local Government and / or some local governments in the Metropolitan
region to allocate e budget to finance part of the capital costs and all operation and
maintenance cost which is indicated by an official document of the Local Government such as
Medium-Term Development Plan, Spatial Planning Document, Local Government Regulation,
Head of Local Government Regulation, or legislative approval; and
e. Commitment from Local Government and / or some local governments in the Metropolitan
region to optimize non farebox revenue sources of the implementation of mass transit.
(3) The readiness criteria referred to paragraph (1) letter b shall include:
a. Having an urban mobility strategy document to guide a comprehensive and sustainable urban
mobility system, that is approved by relevant subnational parliament;
b. Having an institution, or committed to establish an institution that is capable to deliver
integrated, comprehensive, and sustainable mass transit service;
c. committed to acquire land for the project; and
d. Public participation in the whole process of preparation of urban mobility and mass transit
planning document.
(4) The project viability criteria referred to in paragraph (1) letter c include:
a. Having a robust demand model to estimate mass transit passenger demand
b. Having a pre-feasibility study of projects in support of the technology and mode choice of the
mass transit and its integration in the overall urban mobility system and other public transport
services, particularly in payment systems, facilities for pedestrians and non-motorized vehicles,
as well as the structure of land use;
c. Has a pre-feasibility study that describes concept design which accommodate the choice of
technology of mode and infrastructure in estimating the capital cost and operation and
maintenance cost of mass transit;
Page 188
The World Bank
d. Having a pre-feasibility study that describes / inform the projects feasibility in social,
environmental, economic, and financial aspects; and
e. Having environmental and social safeguards document;
f. Seeking and optimizing the financing sources of enterprises and / or private.
CHAPTER IV
SCOPE AND FORM OF GOVERNMENT SUPPORT
Article 5
(5) Government support in the development of urban mass transportation is given to:
a. Implementation of road-based mass transit; and / or
b. Implementation of rail-based mass transit.
(6) Government support for the implementation of mass transit as referred to in paragraph (1) is used
for part of capital cost.
(7) Government Support can also be given to the preparation of the readiness and project viability
document.
Article 6
Government support is given according to the rules of existing laws and regulations in the form of
a. Fiscal Support which cover:
1) Viability Gap Support:
i. VGF
ii. Partial support for construction
iii. Hybrid Financing
2) Tax incentives;
3) Grant;
4) Grant forwarding;
5) Loan agreement;
6) Equity capital;
7) Reimbursement cost of the direct assignment; and / or
8) Support in another form in accordance with legislation.
b. Non-Fiscal Support which cover:
1) Support in licensing;
2) Support in policies; and / or
3) Support in another form in accordance with legislation.
c. Government guarantee.
Article 7
Government Support as referred to in Article 6 letter a can be granted up to 85% of the total capital cost
or up to 100% of total infrastructure cost, depending on the project and financial structures and by
considering viability of the project;
Page 189
The World Bank
Article 8
In the event that the project is carried out using the PPP Scheme, the Minister / Head of Institution /
Regional Head involved in the project cooperated, can act together as the Government Contracting
Agency.
Article 9
In terms of Government support as referred to in Article 6 letter a in the form of availability payment,
the Government allocates budget for availability payment in each budget year in accordance with the
period of support for availability payment.
Article 10
In terms of Government support as referred to in Article 6 letter a in the form of supporting part of
construction, the Government may use a deferred payment scheme in a period of more than 1 (one)
year of the budget period.
CHAPTER V
PROCEDURES FOR THE NOMINATION, ASSESSMENT AND APPROVAL
(Suggestion)
(1) Assessment and approval of government support will be carried out by the Acceleration Team
(2) Acceleration Team as referred to in paragraph (1) consists of:
a. Coordinating Minister of Maritime Affairs;
b. Minister of National Development Planning;
c. Minister of Finance;
d. Minister of Home Affairs;
e. Minister of Transportation; and
f. Minister of Public Works and Public Housing.
(3) Acceleration team will be supported by technical team and technical secretariat
Article 11
(1) Local Government apply for government support to the Acceleration Team through the Minister
of National Development Planning.
(2) The application set forth in paragraph (1) is equipped with documents fulfilling the eligibility
criteria, the readiness criteria and viability criteria referred to in Article 4 verse (1) in the form of:
a. Inventory document which contains data on population three years back and projections of
the next five years in the administration area with a population per kelurahan explanation;
b. The official document regarding revenues, budget and fiscal capacity of Local Government
three years back and projection of the next five years.
c. Commitment Letter from the Head of Region contains
1) commitment to implement supporting policies in order to increase the market share of
public transport in accordance with the regional authority;
2) commitment in the provision of project land, in terms of land is not yet available; and
3) commitment to obtain public participation in the planning process of mass transit.
d. Commitment Letter from Head of Region in financing that contains
Page 190
The World Bank
1) commitment to allocate the budget to finance part of the capital, operation, and
maintenance cost;
2) commitment to encourage involvement of enterprises in the implementation and
financing of mass transit; and
3) commitment to optimize the sources of income in the implementation of mass transit in
the form of policy on Transit Oriented Development and land use policies (Land Value
Capture); and
e. Other supporting documents.
Article 12
Based on the proposal referred to in Article 11 paragraph (1), the Minister of National Development
Planning as Secretary of the Acceleration Team will coordinate assessment based on eligibility criteria,
readiness criteria, and project viability criteria referred to Article 4.
Article 13
Further provisions on acceleration team, procedures for the nomination, assessment, approval, and
technical assistance stipulated in the Regulation of the relevant ministries
CHAPTER VI
CLOSING
Article 14
This Presidential Regulation comes into force on the date of promulgation.
For public cognizance, it is ordered that this Presidential Decree shall be published in the State Gazette
of the Republic of Indonesia.
Set in Jakarta
on 2018
PRESIDENT OF REPUBLIC OF INDONESIA,
Signed.
JOKO WIDODO
Promulgated in Jakarta
on 2018
MINISTER OF LAW AND HUMAN RIGHTS

REPUBLIC OF INDONESIA,
Signed.
YASONNA H LAOLY
Page 191

Indonesia Sustainable Urbanization Multi Donor Trust Fund Component 3 1 Development of Urban Transport Support Platform

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Indonesia Sustainable Urbanization Multi Donor Trust Fund Component 3 1 Development of Urban Transport Support Platform

Uploaded by

Copyright:

Available Formats

Indonesia Sustainable Urbanization

Public Disclosure Authorized

Multi-Donor Trust Fund (IDSUN) ID: P156103

Version 2.0, May 2019

IDSUN Multi-Donor Trust Fund

© 2019 International Bank for Reconstruction and Development/The World Bank.

1 Executive Summary .................................................................................................................. 10

4.3 Colombia: National Urban Transport Program (NUTP) .............................................................. 58

7 Institutional structure ............................................................................................................. 125

Figure 36: Financial analysis for LRT Option 2 .......................................................................................... 153

Abbreviations and Acronyms

DFAT Department of Foreign Affairs and Trade (Australia)

MHCP Ministry of Finance, in Spanish (Colombia)

SHCP Secretariat of Finance and Public Credit, in Spanish (Mexico)

1.2 Description of the Program

Figure 1: Key elements of the proposed NUTSP

Source: World Bank own elaboration.

1.3 Building best practice into the Program

1.4 Institutional and regulatory structure

2.2 Contents of this report

42. The technical assistance pillar, described in Chapter 8, covers:

3.1 Urban development and transport in Indonesian cities

3.2 Urban transport performance

3.2.1 Mobility in Indonesian metropolitan areas and core cities

Figure 2: Uncongested mobility versus population per metropolitan area

Source: World Bank analysis

Source: World Bank analysis

Figure 4: Congestion intensity by time of day per metropolitan area

Source: World Bank analysis

Source: World Bank analysis

Figure 6: Daily magnitude of congestion per metropolitan area

Source: World Bank analysis

3.3 Governance of urban transport

3.3.1 Fragmentation of institutional responsibility

Table 1: Planning documents for urban transport

Types of Plan National Provincial District/City

3.3.2 National Government responsibilities

Table 2: RPJMN targets for public transport in Indonesia

Indicators Baseline Targets by 2019

3.3.3 Provincial Government responsibilities

transport between cities is responsibility of Provincial Government such as in Sarbagita Metropolitan in

3.3.4 Metropolitan Government responsibilities

102. Transportation coordination at a metropolitan level exists only in Greater Jakarta, or

3.3.5 Local Government responsibilities

3.3.6 Private sector

3.3.7 Summary of the role of different levels of Government

Figure 7: Division of responsibilities for rail-based transport

Rail-based transport consists of interprovincial, intercity, or inner-city/urban railways, with responsibility

Figure 8: Division of responsibilities for road-based transport

Figure 9: Division of roles in provision of public transport

3.4 Existing funding sources for urban transport

Source: World Bank analysis (Governance Global practice, 2017)

Box 1. Bus Distribution Program of MoT

Table 3: Existing National Government Support Programs for urban transport

Agency Programs Purpose and shortcomings

3.5 Cities’ financial and technical resources

Table 4: Characteristics of the largest Indonesian cities, 2016

Region or City Population Area (sq.km) Population GRDP18 / Capita

3.5.1 Borrowing capacity

Table 5: Maximum borrowing capacity of selected Indonesian cities

Figure 11: Borrowing capacity of the twenty largest cities

Source: World Bank analysis

3.5.2 Fiscal capacity