Indonesian Regional Infrastructure

Development Alliance
(IRIDA)

A Multi-Stakeholder Development Initiative

REGIONAL AUTONOMY AND INDONESIA’S DEVELOPMENT CRISIS

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

Outlook:
 Local Governments continue to enact ill-conceived taxes to fund politically important
projects, further crippling investment prospects / retarding development
 Key social institutions – Schools, Healthcare, SME Cooperatives – are increasingly
disenfranchised as national support decreases and isolation sets in
 Urban / rural gap grows exponentially, creating political and economic instability

Order from Chaos?

 Under regional autonomy law, a vehicle exists that could enable Local Government and
key social institutions to own local infrastructure, generate sustainable capacity building
funds, and encourage private sector investment via a financially transparent entity: a
publicly owned regional corporation, or BUMD.
 Actions to Avert an Infrastructure Crisis in Indonesia
The World Bank, Jakarta, December 2, 2003

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

Findings:
Decentralization presents enormous opportunities for improved infrastructure provision, but, unmanaged,

these opportunities remain liabilities.

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

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

“The stakes are now high. Indonesia’s failing infrastructure is already undermining growth prospects, and making it
very hard to achieve its national goals for poverty reduction. With Indonesia’s macro-economy now in sound shape,
it is time to move more boldly in addressing longer term infrastructure needs.”
Andrew Steer, World Bank Country Director for Indonesia
WHAT IS IRIDA?

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

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

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

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

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

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

 Subsequent IRIDA phases deploy additional infrastructure according to local need, including power generation, water
treatment and sanitation, etc.
BUMD STRUCTURE
IRIDA AS A KEY TO DRIVING RURAL DEVELOPMENT

“A process that gives rural communities some ownership of

infrastructure facilities provided has been shown to have
a high potential for success.”

Mainstreaming Poverty Alleviation Strategies through Sustainable

Rural Infrastructure Development - BAPPENAS / KIMPRASWIL
IRIDA PHASE ONE: ICT INFRASTRUCTURE

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

 ICT networks will enable the coordination of national to local institutional capacity building
programs, and increase transparency and accountability.
 ICT networks create significant cost savings, allow more efficient allocation of human
resources, and allow for effective, coordinated training programs.
 ICT networks vastly improve the delivery of institutional services at the local level.
 ICT networks improve reporting by local institutions and improve the flow of data from the
local to the national level, resulting in more informed decision making.
 ICT networks allow access to markets for SME and enable consolidation of supply and delivery
systems, improving local economies and creating jobs.
 ICT networks allow increased citizen access to information, education and participation in the
local decision making process.
IRIDA IN THE CONTEXT OF INDONESIA’S IT STRATEGY

SISFONAS
Goal - Integrate all government information systems at the central and district institution level
Problem – Lack of a complete network infrastructure solely for government use
Solution - Create a web enabled system to link government agencies through existing ISPs

INPRES 3, 2003 – (Presidential Decree on E- Government)

Mandates business process re-engineering and e-government to increase operational efficiencies.

The National Information Technology Framework - BAPPENAS

Guides the coordination of Information Technology planning, development and utilization.

“Five- year Action Plan For the Development and Implementation of Information and
Communication Technologies (ICT) in Indonesia”
(TKTI Infrastructure Working Group Guidelines)
Develop innovative methods to provide infrastructure that will assist in reducing the “digital divide”.
Ensure that the government can readily make use of developing private communications networks in promoting its service
delivery infrastructure.
Promote opportunities and develop infrastructure proposals that will enable government information and services to be made
more widely available, including integration of information and services from different ministries and use of Regional and
Local Government infrastructure in delivering information and services.
WHO SUPPORTS IRIDA’S FIRST PHASE?

Private Sector Public Corp Social Sector Ministries

Ernst & Young PLN LPMI KOMINFO + BAPPENAS

(legal & financial) (fiber optic network) (SME support, Madrasah (Services & Infrastructure)
education)

KampungCyber IPTEKnet CLGI Home Affairs

(broadband wireless IP / (secure gov’t network and (local governance) (E-Government)
local network mgmt) data services)

Optima Inti KPI Education + Religion

(information mgmt systems) (telecom and television (women SME owners) (Schools)
infrastructure)

Agritani/E-ASEAN UPI - UII – UMM APKASI Cooperatives and SME +

(training/SME support) (teacher training and (Kabupaten government) Womens Empowerment
distance learning) (SME)

JDI APEKSI Health + BKKBN

(content development) (Kotamadya government) (Hospitals/Clinics, Family
Planning)
UTILIZING THE ENABLING INFRASTRUCTURE:
NATIONAL/DONOR COORDINATION
DEPLOYING THE ENABLING INFRASTRUCTURE

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

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

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

PHASE 4
 Conduct Impact Studies and Refine Support Program
HOW CAN USAID HELP?

 Providing initial funding to create a local infrastructure development corporation

(BUMD) legal and financial structure.

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

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

 Provide support to IRIDA consortium members to develop curriculum preparing

young Indonesians to work in the ICT sector and with ICT in other business sectors.

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

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

FUNDING REQUEST
From DFI:
Estimated costs to create legal and
financial framework, and coordinate
stakeholder support: +/-US$200,000
 Work would be performed by Ernst &
Young with input from existing
government / donor programs focused on
regional autonomy legal issues and policy
reform.
 After legal / financial framework has been
created, financial support for widespread
rollout can be obtained from USAID
Education/Basic Services/Local
Governance funds, private infrastructure
funds, multilateral and local banks.
From Education, Basic Services and
Local Governance Funds:
Provision of grant funds to give local
schools, government, healthcare and
SME equity ownership in community
infrastructure BUMDs: +/-US$4,000,000
 Funding would enable deployment of first
phase ICT infrastructure, and e-Gov,
Education and Health Care Information
Management Systems in 40 locations
throughout Java and Bali, served by PLN
fiber optic network, under management of
KampungCyber.
 Additional funding could be provided to
establish PDAMs (local water utilities) or
strengthen existing ones.
Results of USAID Support for IRIDA

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

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

Economic Development
 Improved Basic Human Services Delivery at Local Level
 Increased Certainty in Business and Investment Environment
 Improved Investment in Public Services Supporting Private Economic Activity
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

Martin Crow, President Director

PT Kampungcyber.com
Tel: 0818637529
Email: mcrow@kampungcyber.com

David Rimbo Lim

Principal, Ernst & Young
Tel: 02152895025
Email: david.rimbo@id.ey.com