Economic growth is essential to reduce poverty and meet the United Nation’s Millennium Development Goals, and infrastructure investment is a key driver of economic growth. Thus, the Australian Government’s strategy for overseas aid emphasises helping its regional partners to address their most urgent infrastructure needs. The Australian Government launched the Infrastructure for Growth Initiative (IFGI) in 2007 as a means to carry out such activities.
The IFGI program assists regional partner governments to improve their infrastructure policies and to finance high-priority infrastructure, in conjunction with the World Bank, Asian Development Bank and other multilateral agencies. IFGI also implements bilateral activities that can achieve strong economic and social benefits.
The Indonesia Infrastructure Initiative (IndII) was developed within the IFGI framework and is funded over a four-year time frame. It is envisioned that if it proves an effective mechanism, IndII will become the central vehicle for longer-term investment in infrastructure by AusAID over the next decade.
IndII will contribute to economic growth both directly and indirectly – directly by financing important steps in infrastructure project development and implementation, as well as by funding enhancements. But IndII’s greatest long-term impact on growth may come indirectly through its efforts to reduce uncertainty in policy and regulatory environments and improve local capacity for infrastructure investment and management. IndII is supporting both national and sub-national governments to remove barriers to infrastructure investment and efficient service delivery.
Each of IndII’s priority areas for engagement – water and sanitation, transport, and infrastructure policy and investment – has a particular role to play in supporting economic growth. Water supply and sanitation infrastructure, particularly in urban areas, is vital to industry as well as the health and wellbeing of individuals and therefore the labour force. Road, railway and port development is essential for market access. Improvements in financing and the regulatory environment underpin success in both of those areas, as well as leading to greater private investment in the country.