ADB Extends $35 Million for Sanitation Improvement in 2 Indonesian Cities

Jakarta Globe, July 20, 2010

Indonesia.The Asian Development Bank (ADB) is extending a $35 million loan to help Indonesia rehabilitate and expand sanitation facilities in the cities of Medan and Yogyakarta.

Medan, the capital of North Sumatra province, and Yogyakarta, the capital of Yogyakarta province, have a combined population of around 4.5 million people.

The loan will be used to build around 280 communal sanitation facilities in poor areas in the two cities, as well as two wastewater treatment systems for low-cost housing development projects in Medan.

Sewerage systems will be rehabilitated and expanded with up to 28,000 additional household connections.

The Metropolitan Sanitation Management and Health Project will also provide support to mobilize community involvement in the planning, operation and maintenance of communal facilities, and will ensure women are strongly involved in the process.

“A gender action plan in the project design will ensure women fully participate in the decision-making process for the development of facilities, and that they benefit equally with men from improved communal services,” said Rudolf Frauendorfer in ADB’s Southeast Asia Department.

Sanitation services have steadily improved in Indonesia, but still lag behind many neighboring countries, with partial sewerage coverage only available in a small number of urban centers.

Since the Asian financial crisis of 1997-1998, new sanitation investments have been postponed and existing treatment systems have deteriorated due to lack of repair and maintenance.

As a result, many of the poor living in informal settlements suffer high rates of diarrhea, skin diseases and other illnesses caused by polluted water and untreated waste.

“This project will sharply reduce pollution of surface and shallow groundwater in the two cities, resulting in improved health and quality of life particularly for women, children and the elderly who suffer the most from unclean environments,” Mr. Frauendorfer said.

The loan is structured to ensure that operating and maintenance spending on revenue-generating services can be fully funded from user tariff income by the middle of 2014, while remaining affordable to low-income communities.

Insufficient revenue for service providers and low user charges, which deter private investment in new facilities, have been a major impediment to the expansion of sanitation services.

To complement the loan, ADB will provide a $500,000 grant from its Technical Assistance Special Fund to strengthen the capacity and management capabilities of local governments, utilities and communities involved in providing or overseeing sanitation services.

Further technical assistance of $1 million in the form of a grant from the Government of Australia, will be administered by ADB.

The loan has a 25-year term, with a five-year grace period and an interest rate determined in accordance with ADB’s LIBOR-based lending facility.

The government of Indonesia will provide additional funding of $14.2 million, with regional governments committing $13.5 million, and provincial governments almost $500,000, for a total project of about $63.2 million.

The Ministry of Public Works is the executing agency for the project which is expected to be completed around December 2014.