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Indonesia: Urban $Ervices Sector Report FLE COFY ReportNo. 4800-IND Indonesia:Urban $ervicesSector Report (In TwoVolumes) Volume I Main Report Public Disclosure Authorized June25, 1984 EastAsia and Pac tic Regional Office Resident Mission in Indonesia and Urban and Water Supply Projects Division FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized FILECOPY Public Disclosure Authorized Documentof the WorldBank This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents mav not otherwise be disclosedwithout World Bankauthorization CURRENCY EQUIVALENTS Currency Unit = Rupiah (Rp) US $1.00 = Rp 970 (Since March 1983) US $1.00 = Rp 625 (Nov. 1978 - March 1983) US $1.00 = Rp 450 (Before November 1978) FISCAL YEAR April 1 to March 31 t FOR OFFICIALUSE ONLY FOREWORD This report was prepared by a team consisting of Andrew Steer (team leader) and David Williams, with Jaime Biderman (housing), Brian Binder (consultant, urban finance), John Taylor (consultant, administration and manpower development), Wim Stolte (consultant, infrastructure), Beatrijs Muller (public transport), Fitz Ford (housing), and Kreszentia Duer (manpower development). Lenny Siagian assisted in the preparation of the report in Jakarta and was supported by Grace Medrano and Elizabeth Hellman in Washington. The team was greatly assisted by Indonesian officials in the Departments of Public Works, Home Affairs and Finance, in BAPPENAS, and in the National Housing Authority (PERUMNAS) and the National Housing Bank (BTN). In particular, the mission would like to extend its thanks to Ir Sunarjono Danudjo (Director General, Cipta Karya), Hendropranoto Suselo (Director of Programming, Cipta Karya), Sugiarso Padmopranoto (Director, Binakota), and Dr. J. B. Kristiadi (Director, National Wealth, Department of Finance), and to their staff. In addition, mission members were greatly helped by local government officials in DKI Jakarta, Surabaya (East Java), Malang (East Java), Cirebon (West Java), Bekasi (West Java), Bogor (West Java), Pekanbaru (Riau), Bukittinggi (West Sumatera), Padang (West Sumatera), and Ambon (Maluku). A draft version of the report was discussed with the Indonesian Government in March 1984 by a mission consisting of Messrs. Steer, Williams and Biderman. Messrs. Jeurling, Ford, Khalilzadeh-Shirazi, and Kilby of the Bank's Resident Mission in Indonesia also participated in these discussions. Thisdocument has a restricteddistribution and maybe usedby recipientsonly in the performanceof their officialduties. Its contents may not otherwisebe disclosedwithout World Bank authorization. ABSTRACT Urbanization in Indonesia has accelerated over the last decade and, for a number of economic and social reasons, is not expected to slow down before the end of the century. Despite good progress in the provi- sion of urban services over the last decade, there remain huge service deficiencies even for the existing population, let alone for the 40 million new urban dwellers who will arrive in the 1980s and 1990s. However, at a time when investment needs are greatest, financial resources available to the Government are much less then earlier anticipated and are certain to grow less rapidly than the investment requirements. This Report describes and endorses the Government's overalL strategy towards the provision of urban services in the coming Five-Year Plan period (1984/85-1989/90) and suggests ways in which the program might be implemented and financed. Chapter 1 presents a profile of Indonesia's urban areas, describing recent trends in urbanization and economic activity, poverty alleviation and access to services in urban and rural areas, and discussing their implications for an urban strategy. Chapter 2 reviews recent progress in the provision of urban services and, in the light of the discussion in Chapter 1, assesses the size and composition of an appropriate investment program for the coming five-year development plan for the major urban services (water supply, sanitation, Kampung improvement, urban roads, public transport and housing). Chapter 3 discusses questions of administration and manpower for each of the major services and suggests how the process of implementation may have to evolve in the coming years. Finally, Chapters 4 and 5 explore how the expanded program might be financed in view of the slow growth of central government resources; Chapter 4 assesses the scope for increased local government taxation and borrowing, and Chapter 5 discusses the potential and affordability of increased cost recovery. INDONESIA URBAN SERVICES SECTOR REPORT TABLE-OF CONTENTS VOLUMEI - MAIN REPORT Page INTRODUCTION i EXECUTIVE SUMMARY ii I: A Profile of Urban Areas iii II: Urban Services - Progress and Prospects vi III: Implementing the Program xv IV: Financing the Program xix CHAPTER 1: A PROFILE OR URBAN AREAS 1 Population and Urbanization - Recent Trends 1 Defining Urban Areas in Indonesia 5 The Size of Cities 9 Components of Urban Population Growth 11 Fertility and Mortality 12 Migration to Urban Areas 15 Urbanization and Employment 21 The Quality of Life in Urban Areas 26 Urbanization in the Coming Years 35 Implications for an Urban Strategy 37 CHAPTER 2: URBAN SERVICES - RECENT PROGRESS AND NEEDS FOR THE COMING YEARS An Overview 40 A. Urban Water Supply 42 Recent Progress and Current Conditions 42 Issues for REPELITA IV 48 Investment Needs in REPELITA IV 54 B. Sanitation and Drainage 56 Recent Progress and Issues for the Future 56 Investment Needs in REPELITA IV 61 C. The Kampung Improvement Program (KIP) 65 The Kampung Improvement Program to Date 65 The Impact of KIP 67 KIP - Issues for REPELITA IV 71 KIP - The Investment Program 75 D. Urban Transport 77 Urban Roads and Traffic Management 77 Public Transport 83 Urban Transport, Conclusions 88 E. Housing and Land Development 89 Formal Housing Programs 90 Informal Housing 91 Housing Investment in REPELITA IV 92 Guided Land Development 94 F. REPELITA IV. Investments and Priorities 95 REPELITA III and REPELITA IV Comparisons 95 Priorities among Services 97 Impact on Employment 98 Metropolitan Development 100 CHAPTER 3: IMPLEMENTING THE PROGRAM A. The Administration of Urban Services 103 Overview of Central and Regional Administration 103 Organization of Individual Services 111 B. Manpower and Training 118 C. Managing the Expanding Urban Services Program 128 The Argument for City Level Management 128 Scope for Further Devolution of Responsibilities 130 Principles to Guide Administrative Changes 133 Modifications to Administrative Structures 135 Suggested Short-Term Actions 139 Suggested Medium-Term Actions 141 CHAPTER 4: FINANCING THE PROGRAM A. The Existing Pattern of Finance 142 B. Financial Needs and Availabilities in the Eighties 152 C. Raising Regional Revenues 156 Local Taxes and Charges 160 Borrowing by Local Government 170 CHAPTER 5: COST RECOVERY FOR URBAN SERVICES Water Tariffs 176 Charges for Sanitation 176 Charges for Public Transportation 185 Betterment Taxes 188 Cost Recovery for Housing 193 VOLUME II - ANNEXES ANNEX I - Urbanization and the Character of Urban Areas ANNEX II - Urban Services: Physical Progress and Future Needs ANNEX III - Administration and Manpower ANNEX IV - Finance and Expenditures - iii - List of Text Tables 1.1 - Indicators of Urbanization - International Comparisons 1.2 - Total and Urban Population and Growth Rates by Province 1.3 - Comparison of 1971 and 1980 Censuses 1.4 - Comparison of Alternative Measures of Urban Population Growth by Island 1.5 - Size Distribution of Indonesia's Cities and Towns, 1980 1.6 - Growth Rates of Kotamadya by Size 1.7 - Components of Urban Growth 1.8 - Birth and Death Rates in Urban and Rural Areas 1.9 - Age Distribution of Urban and Rural Population 1980 1.10 - Interprovincial Migration Into Urban Areas by Duration of Residence 1.11 - Age and Marital Status of Migrants 1.12 - Structure and Growth of Employment in Urban and Rural Areas, 1971-1980 1.13 - Trends in Poverty Incidence in Urban and Rural Areas 1970-1980 1.14 - Real Growth of Consumption of the Poorest 40 Percent of the Population in Urban and Rural Areas 1.15 - Diet and Nutritional Status in Urban and Rual Areas - 1978 1.16 - Incidence of Poverty as Percent of Population by Province and Island - 1980 1.17 - Proportion of Households with Different Incomes, by Size of City and Topography - 1978 1.18 - Percentage of School Age Population Attending School by Age Group 1.19 - Educational Attainment of Urban and Rural Dwellers and Recent Migrants - 1980 1.20 - Electric Power - Percentage of Households Using Electricity for Lighting in Urban and Rural Areas - 1980 1.21 - Projected Growth of Total and Urban Population in the 1980s and 1990s 2.1 - Total Annual Spending on Urban Services by Central and Local Authorities - Average 1979/80 to 1982/83 2.2 - Urban and Semi-Urban Water Supply: Increased Production Capacity in REPELITAs I, II and III by Island 2.3 - Primary Source of Water for Drinking and Washing in Urban and Rural Areas in 1980 2.4 - Urban Water Supply: The Situation in November 1980 Primary Source of Dr:inking Water for Urban Households by Island 2.5 - Urban Water Supply: Reported New House Connections and Public Standpipes in REPELITA III 2.6 - Access to Clean Water at End of REPELITA III 2.7 - Water Supply Production and Distribution Across Sample Cities 2.8 - Water Needs and Availability 2.9 - Preliminary REPELITA IV Physical Targets and Comparison with REPELITA III Achievements 2.10 - Cost of Tentative REPELITA IV Program
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