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LESSONS:

Indonesia: Metropolitan Bogor, Tangerang, and Bekasi Urban Development (Sector) Project [Loan: 1511-INO]

sector: Water and Other Urban Infrastructure and Services | country: Indonesia

1. Under a decentralized form of government, a more streamlined approval process (which outlines specific criteria, indicators and checkpoints) could facilitate subproject selection, approval and implementation. The project encountered difficulties due to many layers of government approvals under decentralization. The government allowed financing of urban infrastructure projects with official development assistance, however, to avail of the ADB loan, almost all details in subproject selection, approval, and funding flow needed to pass through the local, provincial and central levels of government. [Main text, paras. 50,52]

2. There is a need to maintain various project impact data, including health and socioeconomic data, to continuously monitor improvements in the public health and livelihood that social infrastructure projects will yield. In the case of the urban development projects in Bogor, Tangerang and Bekasi, the benefit monitoring and evaluation report failed to capture the magnitude of project impact. Even with the physical infrastructure like urban road investment, the government and ADB also need to agree on how to measure benefits and economic value. [Main text, paras. 43,52]

3. To achieve better results, reducing nonrevenue water (NRW) will need continuous efforts from both the management and technical divisions of the local government water supply enterprise. The independent evaluation mission observed that initiatives to reduce NRW did not result in the target figure of 20% in Tangerang, which had the largest coverage among the eight targeted local areas. Reducing NRW is not limited in technical losses from leakage, but also includes financial losses from inaccurate meters and inappropriate billings. [Main text, paras. 40,52]

4. Project experience highlighted the adverse impact of lack of demand analysis on the project design and allocation of scarce concessional resource to high priority projects. This, being an important issue with potential risk to economic viability, should have been done at the very outset. In cases of loans for improving water supply, neighborhood upgrading (kampung improvement program), drainage and flood alleviation, sanitation (showers, laundries, toilets), and/or home improvement, in-depth analysis of demand and affordability is necessary to ensure economic viability. The findings should be part of an initial baseline survey in the project preparatory technical assistance. [Main text, paras. 21,39,52(iv)]

5. Private sector participation (PSP) should be treated carefully, not as a major component, particularly in smaller urban development projects. A prerequisite to PSP is the establishment of profit incentives and improved regulatory capacity of sector institutions. These requires, among others, assurances of rate of return in a given time period as well as adequate provision of support in legal and financial transaction advisories. As such, the process entails a well founded analysis and full knowledge of issues. In this urban development project in Indonesia, the lack of these factors has resulted to the unsuccessful implementation of PSP initiatives. [Main text, paras. 38,39,52 items (v) & (vi)]

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