Urban areas offer more economic opportunities and have the potential to generate benefits for the residents within, but challenges such as inequality, congestion, insufficient transportation and housing backlogs remain.

In order to face such challenges, experts and stakeholders have called for a collaboration between the government and private sector.

Stephanie von Friedeburg, chief operating officer at the World Bank Group’s International Finance Corporation, said during the 2018 Annual Meetings of the International Monetary Fund and World Bank that mayors and their local administrations could not face the challenges alone.

“Mayors and cities cannot do this alone. It has to be a coalition between the private sector, the federal government and the cities,” Von Friedeburg said during a discussion on inclusive urbanization at the event over the weekend.

She went on to say that billions of dollars are spent in emerging Asian countries each year to finance infrastructure projects, which could not come only from the state budget.

Therefore, Von Friedeburg explained, while the government could enforce smarter regulations, the private sector could also finance infrastructure projects through instruments such as green bonds or public-private partnerships.

According to data from the World Bank, Indonesia has urbanized rapidly since its independence in 1945, during which the country’s urban population stood at 8.6 million. Today, the archipelago’s urban population is 148 million, or 55 percent of its population.

However, the World Bank found that Indonesia has not been able to gain as much from its urbanization than countries such as Vietnam or China in terms of income growth per capita and poverty reduction.

National Development Planning Board head Bambang Brodjonegoro said in his opening speech before the discussion that the government had dedicated more time and funding to solve urban issues, as more than 50 percent of its population lived in metropolitan cities.

He acknowledged that many challenges remained, including access to health and education, clean water, sanitation and housing. “The provision [of the aforementioned facilities] are critical to inclusive urbanization,” Bambang said.

He went on to say that technological innovations by the private sector, such as app-based ride-hailing services, have given choice to residents who do not yet have sufficient access to public transportation.

Such services have also contributed to increasing incomes for many, Bambang said.

Additionally, innovation in financial technology has also promoted financial inclusion, allowing residents in rural areas to access services without having to visit banks in cities.

However, Bambang acknowledged that the government had thus far lagged in designing responsive regulations, both in ride-hailing services and fintech.

“The question is [how the government can design] smart regulations to protect, gain benefits from and embrace [the new developments] without sacrificing inclusiveness,” he said.

Research organization McKinsey Global Institute director Jonathan Woetzel concurred, saying that technology could be a tool and an enabler to reduce negative externalities caused by urbanization.

According to the World Bank’s economic quarterly report on Indonesia published in September, Indonesia can make urbanization work through three policy principles, namely the convergence and expansion in the delivery of basic services, connectivity and integration between and within places, and customized and targeted interventions to help specific groups of people and places.

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