Rationale

rational

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.

IndII’s roots go back to Australia’s Infrastructure for Growth Initiative (IFGI), a 2007 program carried out in conjunction with the World Bank, Asian Development Bank and other multilateral agencies as well as on a bilateral basis. IndII was conceived within the IFGI framework, and the IFGI focus – assisting regional partner governments to improve their infrastructure policies and to finance high priority infrastructure in order to achieve strong economic and social benefits – was reflected in the original design of IndII.

The first phase of IndII operated from 2009 to 2011. Its rationale, which remains true today, stated that, “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 subnational 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 well-being of individuals and therefore the labour force. A modern transport system that encompasses road and sea networks, multimodal connectivity and accessible urban mobility is essential for economic stimulus. Improvements in procurement and delivery methods, financing and the associated regulatory environment underpin success in each of those areas, as well as leading to greater use of private finance to deliver infrastructure.

IndII’s work has built on the success of other Australian and multilateral initiatives in Indonesia, including the Australian Government’s Technical Assistance Management Facility (TAMF) and the Eastern Indonesia National Roads Improvement Project (EINRIP), and various water and sanitation initiatives being implemented in partnership with the World Bank.

Following the conclusion of Phase 1, IndII was extended for a second phase first scheduled to operate through June 2015, but now extended until January 2017.