Highlights

Urban resilience lending increased by 60 percent over the evaluation period, aided by Swiss-supported trust funds and catalyzed by the 2018 earthquake and tsunami. World Bank Group lending and advisory work was relevant to national policies on water, transport, solid waste management, slum upgrading, and disaster risk.

There was some success in enhancing local government capacity, especially in the water sector. A performance-based platform drove capacity gains in local governments and water utilities, while broader urban planning and subnational infrastructure projects lagged because of weak subnational capacity.

Reliance on investment projects limited addressing policy-level changes such as housing finance, tariffs, and purchasing power parity incentives, as well as supporting local government capacity under a multisectoral approach.

The World Bank’s emphasis on disaster-resilient building codes evolved meaningfully, moving from informal community checks to full compliance in later projects.

World Bank housing finance and infrastructure finance programs underperformed because they were crowded out by more attractive, though less fiscally sound, government-subsidized alternatives.

Government Priorities and Challenges

Indonesia’s rapid urbanization has created housing and service delivery challenges, while vulnerability to natural hazards in urban areas increased. The urban population grew from 132 million, or 52 percent of the population, in 2013 to 164 million, or 59 percent of the population, by 2023, exceeding sustainable levels for urban housing and services. Twenty percent of the urban population lives in slums, which are characterized by substandard housing, hazardous locations, and a lack of basic services and tenure security. About 110 million people in the 60 largest cities are exposed to floods, earthquakes, tsunamis, land subsidence, and volcanic eruptions. According to Indonesia’s city risk diagnostic, Indonesia’s urban areas, particularly slums, have poor spatial planning, haphazard construction, and weak building code enforcement, resulting in substandard buildings and increased disaster vulnerability (World Bank 2015a). The Bank Group’s policy note also highlighted weak local government capacity for risk-informed planning and limited community resilience (World Bank 2019d).

Indonesia’s RPJMN infrastructure goals included a 100–0–100 target: 100 percent household access to water supply, zero slums, and 100 percent household access to sanitation, while at the same time the country increasingly focused on advancing its disaster risk management policies. The RPJMN 2020–24 maintained the government’s emphasis on equity, infrastructure, and basic services while promoting low-carbon development and climate and disaster resilience. The plan specifically called for developing mass transit systems in six large metropolitan areas (Jakarta, Surabaya, Medan, Bandung, Makassar, and Semarang). In 2008, the government established the National Agency for Disaster Management to coordinate DRM activities and local disaster management agencies in all 34 provinces. Indonesia invested in hydrometeorological and geophysical networks and early-warning systems, becoming a regional provider for the Indian Ocean Tsunami Warning System. Furthermore, Indonesia updated its first Nationally Determined Contributions from 2016 in 2021 and submitted more ambitious second Nationally Determined Contributions in 2022. In October 2018, the Ministry of Finance introduced the National Disaster Risk Financing and Insurance Strategy to mitigate the fiscal and economic impacts of disasters and climate-related shocks.

Relevance of the World Bank Group’s Support for Resilient Urbanization

World Bank urban development strategies evolved toward greater climate resilience based on diagnostic and analytical work that identified disaster resilience and related urban development challenges. The FY13–15 CPF urban priorities included infrastructure development through community-driven development and local PFM. The FY16–20 CPF continued infrastructure and local government support but expanded into risk-informed urban planning. The evolution toward climate resilience was made explicit in the FY20–25 CPF, which focuses on climate resilience and environmental sustainability by promoting disaster risk resilience, solid waste management, and green urban mass transit. For example, the World Bank’s urban flagship study for Indonesia, Time to Act: Realizing Indonesia’s Urban Potential (World Bank 2019e), highlighted the need to improve Indonesia’s subnational governance and finance system and reduce the number of high-disaster-risk cities from 75 percent to 45 percent by 2045, as articulated under the government’s 30-year disaster management master plan.

The World Bank’s analysis informed policy-making and capacity building. The World Bank’s ASA support comprised 32 ASA products, amounting to $30.2 million. Based on a portfolio review, 59 percent of ASA products (19 out of 32) informed or strengthened policy-making. Four programmatic advisory and technical assistance projects supported local capacity in spatial planning, municipal finance, PFM, and strategic investment planning. ASA supported the medium- and long-term RPJMNs by including strategies on transport, water sanitation, and slum development.1 The ASA also provided just-in-time technical assistance to the government on housing policy and finance reform.2 IFC provided advisory services on green building certification. The World Bank, via Global Facility for Disaster Reduction and Recovery funds, provided programmatic advisory work in the early 2010s to support Indonesia’s DRM capacity and policies, helping mainstream disaster resilience in the 2015–19 RPJMN. Global Facility for Disaster Reduction and Recovery funds also supported the Indonesia Scenario Assessment for Emergencies—an open-source risk assessment platform for local disaster preparedness.

The Bank Group provided $2.2 billion in lending for resilient urbanization and broadened its lending approach during the evaluation period to include disaster-resilient urban development. This lending comprised 12 IPF projects on urban planning, housing and infrastructure, and disaster recovery and management. Two of these projects supported spatial and investment planning for local governments. Seven projects supported various government programs on community-level infrastructure, slum alleviation, and affordable housing, as well as funding pilot projects in water, transport, and solid waste management. IFC invested in two green building projects.3 The World Bank’s lending portfolio also included two emergency projects in response to the 2018 earthquake in Central Sulawesi: the first focused on reconstruction and the second on disaster risk early warning and preparedness, particularly for earthquakes and tsunamis. The World Bank followed up these projects with an additional project to build flood risk resilience in selected cities. While earlier projects targeted infrastructure needs in specific cities and communities, often through community-driven development schemes, these projects did not include the management of multihazard risks. Projects that are now being implemented fill this gap by establishing umbrella programs on disaster risk management and early-warning systems and building capacity for risk-informed planning.

Trust funds enabled increased urban development lending during the evaluation period. The Indonesia Sustainable Urbanization MDTF, with support from the Swiss State Secretariat for Economic Affairs, has helped finance the government’s urban development and resilience efforts since 2016. This support included $15.6 million for the first (2016–23) and $8.1 million for the second (2024–27) Indonesia Sustainable Urbanization MDTF. These trust funds supported the design of lending operations in disaster-resilient urban infrastructure and future sector-specific umbrella programs. This support enabled the approval of 11 lending operations between FY17 and FY23 (figure 6.1).4

Figure 6.1. Evolution of World Bank Advisory Services and Analytics and Lending Projects on Urban and Disaster Resilience, FY13–23

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Figure 6.1. Evolution of World Bank Advisory Services and Analytics and Lending Projects on Urban and Disaster Resilience, FY13–23

Source: Independent Evaluation Group.

Note: ASA = advisory services and analytics.

The 2018 earthquake and tsunami increased government demand for World Bank lending for disaster recovery and resilience. The earthquake and other disasters during the same year strained government resources, prompting a request for World Bank support. As a result, the World Bank approved two emergency operations: (i) the $150 million Central Sulawesi Rehabilitation and Reconstruction Project (CSRRP) in 2019, and (ii) the $160 million Indonesia Disaster Resilience Initiatives Project (IDRIP) in 2020. The two complementary emergency projects were supported by other development partners and fell under the umbrella of the government’s Indonesia Disaster Resilience and Reconstruction program. The projects supported disaster-related knowledge management, institutional capacity building, resilient development planning, and standardized risk management procedures. In 2022, the World Bank approved the $400 million National Urban Flood Resilience Project (NUFReP). The project adopted a holistic approach based on experiences from emergency projects and the earlier Jakarta Urgent Flood Mitigation Project. It combined hard-engineered structural solutions with nature-based solutions, as well as urban planning, policies, and processes, to enhance climate co-benefits and sustainability. The project delegated coordination and decision-making responsibilities to city-level task forces to promote collaboration among sectoral agencies and with affected communities.

The World Bank’s urban and disaster management lending relevantly targeted large, densely populated urban areas but was less active in smaller cities. Geospatial analysis revealed that the World Bank disaster resilience portfolio was more active on Java Island—particularly the National Community Empowerment Program (NCEP), the National Slum Upgrading Project (NSUP), and the National Urban Water Supply Project activities—which is home to Indonesia’s largest, densest cities, but was less active in regions such as Papua and Papua Barat, which had smaller populations but greater needs (figure 6.2 and appendix D). For example, Papua had a higher proportion of urbanites living in slums with limited access to piped water. Newer World Bank investments selectively focused on larger cities where higher technical capacity allowed it to pilot complex urban projects in mass transport and solid waste management. This selectivity created broader demand and capacity but deprioritized smaller towns where higher percentages of the population need access to basic infrastructure services.

World Bank projects and Bank Group–supported government programs used tools to target support for women and poor households. NSUP and NCEP developed databases to directly monitor beneficiaries based on conditions and poverty levels. The National Affordable Housing Program (NAHP) included reforms in eligibility criteria for subsidized housing, shifting from individual incomes to more accurate household incomes. The National Urban Water Supply Project ensured that a minimum percentage of water supply connections targeted poor communities. IDRIP and NUFReP included focused disaster preparedness training and awareness-raising efforts for women and vulnerable groups. Meanwhile, the Sustainable Cities Impact Project promoted gender-sensitive urban planning.

The lack of clean and clear land in Indonesian cities, the high cost, and the shortage of budget for land acquisition led to project delays or revisions. Clean and clear refers to land that is unoccupied (clean) and free of legal disputes (clear). Specifically, the CSRRP and the Indonesia Mass Transit Project (MASTRAN) faced delays, and NUFReP and the Improvement of Solid Waste Management to Support Regional and Metropolitan Cities Project were revised because of the lack of suitable land in selected provinces. The projects developed Land Acquisition Resettlement Action Plans as safeguards but could not avoid delays because of the lack of detailed technical designs and clean and clear land in the busy urban centers. CSRRP’s closing date was extended by six months, while MASTRAN was delayed, but still does not have an approved extension (World Bank 2025a). In addition, the World Bank canceled the landfill component in the Improvement of Solid Waste Management to Support Regional and Metropolitan Cities Project because of the lack of available land and instead focused on establishing waste recycling centers. NUFReP is also experiencing delays (World Bank 2025b) and opted to include additional cities without land acquisition challenges.

Figure 6.2. Concentration of Urban Resilience Projects by Population Density, 2020

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Figure 6.2. Concentration of Urban Resilience Projects by Population Density, 2020

Sources: WorldPop for population density data and World Bank Group for project location data.

Note: Population density is grouped into eight categories by quantile. This map has been cleared by the World Bank Group cartography unit. km = kilometer.

Procurement challenges delayed IDRIP and the Regional Infrastructure Development Fund Project. The World Bank extended IDRIP’s closing date by 10 months because of implementation delays, which were partly caused by the implementing agencies’ unfamiliarity with World Bank procurement practices, in addition to delays caused by the COVID-19 pandemic. Stakeholder interviews suggest that the high number of small procurement packages under the IDRIP also contributed to delays. Meanwhile, the World Bank extended the Regional Infrastructure Development Fund Project’s closing by two years, partially because of local governments’ limited capacity in World Bank procurement procedures. The World Bank conducted procurement capacity and risk assessments, identified risk mitigation measures, and trained government counterparts, but it still could not avoid delays.

The World Bank used technical assistance and alternate project sites to mitigate institutional capacity risks. The World Bank assessed the institutional capacity for project implementation and sustainability and deemed the risk to be substantial. The Improvement of Solid Waste Management to Support Regional and Metropolitan Cities Project attempted to address this risk by selecting cities and districts with the most committed and capable institutions. The National Urban Water Supply Project relied on a comprehensive package of technical assistance at the central, provincial, and local levels. Similarly, MASTRAN included technical assistance to strengthen the technical, operational, and administrative skills of the ministry and subnational governments. It also aims to leverage private sector expertise through public-private partnership arrangements to operate fleet systems.

Effectiveness of the World Bank’s Support for Resilient Urbanization

Infrastructure and Housing

Long-term community engagement contributed to infrastructure and housing projects’ effectiveness. The World Bank used community-driven development approaches to inform and improve the design of urban infrastructure and slum alleviation projects. For example, NSUP was designed based on long-term local experience and institutional capacity developed from predecessor operations. The project turned out to be one of the largest and most ambitious urban upgrading programs in the World Bank’s history. The World Bank applied the same approach of using community facilitators in the NAHP and CSRRP to raise community awareness, which is also applied under the government’s Integrated Special Allocation Fund program, which supports subnational governments’ development efforts. Overall, the World Bank’s community empowerment (NCEP), slum upgrading (NSUP), and housing improvement (NAHP and the Self-Help Housing Stimulant Assistance Program [Bantuan Stimulan Perumahan Swadaya; BSPS) interventions exceeded their targets (figure 6.3).

Figure 6.3. Percentage of Indicator Targets Achieved, FY13–23

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Figure 6.3. Percentage of Indicator Targets Achieved, FY13–23

Source: Independent Evaluation Group.

Note: In this figure, 0 = meeting the target. Percentage above or below the target line indicates over- or underachievement. BP2BT = Savings-Based Housing Financing Assistance Program; BSPS = Self-Help Housing Stimulant Assistance Program; NAHP = National Affordable Housing Program; NCEP = National Community Empowerment Program; NSUP= National Slum Upgrading Project; RIDF = Regional Infrastructure Development Fund.

The availability of government-subsidized lending programs limited the World Bank’s ability to scale infrastructure and housing financing. Under NAHP, the Savings-Based Housing Financing Assistance Program (Bantuan Pembiayaan Perumahan Berbasis Tabungan; BP2BT) reached only 24 percent of its target beneficiaries—a 76 percent shortfall. This shortfall was largely due to competition from more familiar, government-subsidized housing credit schemes, which reduced demand for the World Bank–supported program. A World Bank analysis found that these alternative subsidy programs carried fiscal and economic risks, with long-term liabilities. BP2BT was designed to support the government’s transition toward a more equitable and fiscally responsible subsidy model. However, most conventional schemes—except a savings-based subsidy mechanism (Subsidi Berbasis Tabungan)—continued because they were easier to implement and more familiar to banks, developers, and beneficiaries. The Regional Infrastructure Development Fund also underperformed, disbursing only half of the targeted subnational loans. This was due in part to limited subnational capacity to meet World Bank safeguards and procurement standards and due to the availability of competing subsidized government programs, particularly the National Economic Recovery (Pemulihan Ekonomi Nasional) program introduced during the COVID-19 pandemic. While the Regional Infrastructure Development Fund Project improved the regulatory framework for subnational borrowing and strengthened the capacity to lend to local governments of the state’s financial intermediary—PT Sarana Multi Infrastruktur—the abovementioned factors, combined with the project’s short duration and ambitious targets, limited the results.

The lack of effective operation and maintenance (O&M) provisions limited the long-term sustainability of infrastructure projects. NCEP and NSUP established O&M mechanisms through community self-help groups and city-level use and maintenance groups, but a document review and stakeholder interviews revealed that O&M efforts were still constrained by limited local government budgets after project closure. NUFReP required each participating city to create a multiyear urban flood resilience action plan that outlines the O&M requirements and budget for each investment. This was a more effective model for establishing sustainable O&M arrangements. Likewise, the World Bank’s MASTRAN and Improvement of Solid Waste Management to Support Regional and Metropolitan Cities Project are trying to involve the private sector in infrastructure O&M to improve post-project sustainability, but these efforts are in their early stages and not yet scalable.

Disaster Reconstruction and Resilience

Slum upgrading measures are most effective when adequate funding is acquired from multiple sources. A geospatial analysis of flood resilience in Surakarta suggests that the NSUP was effective. Spatial and temporal patterns show that drainage improvements and riverbank wall construction—completed between 2017 and 2022—may have helped reduce the extent of floods during high-rainfall periods. There was still flooding during the NSUP’s implementation period, but this was likely influenced by confounding factors such as a nearby dam overflow in 2018 and 2019. That said, 2023 and 2024 showed a sharp decline in surface water presence despite continued rainfall, suggesting that NSUP’s mitigation measures increased flood resilience (figure 6.4).5 This outcome was achieved primarily because of the local government’s ability to secure adequate funding from diverse sources, including the private sector, SOEs, and regional and central governments. Unfortunately, such fundraising was uncommon in other locations, which may mean those results were less successful. IEG’s Completion and Learning Review Validation for FY13–15 also reported enhanced disaster resilience under community development programs, but determining the impact and sustainability of these improvements requires further evaluation (appendix C).6

The integration of resilient building standards in World Bank–supported infrastructure and housing projects has shown a positive evolution. In the early evaluation period (FY13–17), projects such as NCEP and NSUP lacked indicators to track compliance with building codes or resilience standards. They relied instead on community-driven quality control through trained facilitators, which improved local infrastructure but offered no formal assurance of structural resilience. In the middle evaluation period (FY18–21), NAHP introduced outcome indicators and quality assurance systems, particularly through BSPS and BP2BT components. These mechanisms marked a shift toward measurable resilience, although early results were weak; 2019 baseline found only 11 percent of BSPS and 16 percent of BP2BT houses met minimum construction standards. However, follow-on reforms improved monitoring and design, raising compliance to 75 percent for BSPS and 41 percent for BP2BT. In the late evaluation period (FY21–23), the CSRRP demonstrated the strongest integration of resilience standards, achieving 100 percent compliance according to the government’s Project Completion Report. Despite this progress, gaps remain; notably, IFC’s green building investments did not monitor compliance with national structural safety codes, underscoring the need for consistent monitoring and enforcement of resilience standards across all development actors working in disaster-prone areas.

Figure 6.4. Flooding Incidence at the National Slum Upgrading Project Site in Surakarta City, 2017–24

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Figure 6.4. Flooding Incidence at the National Slum Upgrading Project Site in Surakarta City, 2017–24

Source: Independent Evaluation Group.

Note: This map has been cleared by the World Bank Group cartography unit.

The World Bank effectively helped urban communities rebuild after disasters with quality and scale. The CSRRP reconstructed 3,639 homes, 18 education facilities, seven health facilities, and five other public buildings, exceeding its targets. All reconstructed buildings complied with national earthquake-resistant standards, using flood-resilient building materials and standard housing designs developed by the Ministry of Public Works and Housing. The project also rebuilt water and sanitation connections and climate-resilient access roads. It included technical audits and on-site monitoring to ensure the quality of construction. Homes built by contractors met government standards and obtained certificates of compliance. According to the government’s Project Completion Report, 94 percent of beneficiaries were satisfied with the new buildings, and 86 percent were satisfied with the infrastructure.

Local Government Capacity and Urban Planning

The Bank Group encountered challenges in building local government capacity in several urban sectors. Capacity building at the subnational level in Indonesia, which encompasses 514 local governments spread across the archipelago, is a challenge. In slum improvement under NSUP, only one-third of local governments successfully integrated city- and community-level infrastructure. Capacity building is a long-term endeavor that extends beyond a single project cycle; therefore, NSUP, the first project in a series, may have been too recent to see clear local government capacity improvements. In affordable housing, the World Bank canceled local government capacity-building initiatives because of project delays. In the regional infrastructure fund, disparities among subnational governments in technical and financial capacities led to only half of them securing project loans. Many urban projects—including MASTRAN, NUFReP, and CSRRP, among others—faced challenges in addressing land acquisition issues because of limited local government capacity and limited clear and clean land. The World Bank has been actively supporting the strengthening of land administration in Indonesia through the Program to Accelerate Agrarian Reform (One Map Project, 2019–24), which surveyed and mapped 8.3 million land parcels. This project led to the recently approved Integrated Land Administration and Spatial Planning Project that is working to build capacity on spatial planning. IFC supported the development of local green building codes, and Jakarta implemented a city-level code. However, the code was revoked after the devolution of a national certification system, reflecting regulatory constraints that hindered implementation. Moreover, limited training of accredited assessors has further limited, and will continue to limit, the application of green building practices.

The World Bank effectively applied a platform approach to build capacity in the urban water sector. NUWSP implemented a platform for allocating funds to local government-owned water utilities based on their capacity and performance. This approach met government capacity needs and incentivized governments to improve their performance. The project, in collaboration with the Ministry of Home Affairs, supported 59 cities and engaged over 100 local governments in capacity-building programs, thereby improving water service quality and utility performance. There are plans to replicate this approach in the urban infrastructure sector.

The heavy reliance on the investment financing instrument hindered the development of a comprehensive and cohesive approach for building capacity at the subnational level and achieving key sector reforms. While the urban water sector was successful in implementing a platform approach to incentivize utilities for improved performance, a coherent approach was lacking to address varying needs and capacities of local governments to plan and implement various infrastructure projects. In addition, using only IPF limited the ability to support key policy reforms, such as housing finance reforms. The use of a broader range of World Bank instruments could have helped integrate multiple sectors into programmatic approaches, address higher-level policy reforms, and incentivize local governments for improved performance.

The World Bank’s support for data-driven approaches to urban planning proved valuable. For example, the World Bank supported a slum database and the Housing and Real Estate Information System to target beneficiaries and track government programs. It also piloted efforts to develop municipal spatial data infrastructure, improving the government’s ability to carry out risk-informed planning. There are plans to scale up these efforts through the National Urban Development Project, which aims to integrate these data systems across sectors and levels of government.

Climate Change Adaptation and Mitigation

The Bank Group’s urban portfolio aligns with recommendations from the 2023 Country Climate and Development Report (CCDR) for Indonesia. The CCDR highlighted two major challenges: first, growing demand for carbon-intensive resources due to urban expansion and sector growth in energy, transport, and industry, and second, high exposure and vulnerability to natural disasters, with 70 percent of disasters between 1990 and 2021 linked to climate change. To address these challenges, the CCDR recommended enhancing flood resilience through spatial planning, investments in resilient infrastructure, groundwater control, and integrated early-warning systems. The urban portfolio reflects this by financing disaster-resilient infrastructure, relocating vulnerable housing to safer locations, upgrading hydrometeorological and early-warning systems, and supporting risk financing and institutional capacity for disaster risk reduction. The CCDR also recommended decarbonizing urban areas by shifting to integrated public transport, improving urban services, and promoting energy-efficient buildings. The portfolio aligns with these recommendations by including investments in low-emission public transport, modern waste systems, energy-efficient water utilities, and certified green buildings. These interventions together support a more resilient and lower-carbon urban development path, directly aligned with CCDR guidance.

Climate outcome monitoring could be improved. Only half of lending projects monitored climate results. Five out of six projects focused on climate action were effective at capturing results. Their project documents and monitoring frameworks presented climate results in project development objectives, high-level objectives, or theory of change. In contrast, only one out of six projects that included climate action as a secondary component did not explicitly report climate results, thereby understating climate-related impacts. Improved monitoring in such projects could provide valuable insights for future climate-related project design and implementation.

Coordination and Collaboration

The World Bank effectively collaborated with development partners to support large government initiatives. The World Bank collaborated with the Islamic Development Bank on NCEP. It undertook joint efforts with the Asian Development Bank, the Islamic Development Bank, and the Asian Infrastructure Investment Bank on NSUP. It cooperated with the Asian Development Bank, the Japan International Cooperation Agency, and the Export-Import Bank of Korea on reconstruction efforts in Central Sulawesi. The World Bank’s partnership with the Australian government’s Department of Foreign Affairs and Trade was fruitful in the water sector.

There were examples of effective internal collaboration, but a better coordinated Bank Group approach could avoid the duplication of initiatives. The World Bank and IFC effectively collaborated in the housing sector through the EDGE certification for green buildings. Likewise, the World Bank’s Finance, Competitiveness, and Innovation Global Practice partners with other Global Practices on disaster risk financing under the Indonesia Disaster Risk Finance and Insurance Project. That said, there were also instances of Global Practices implementing similar initiatives with competing conditions or approaches, overwhelming local-level counterparts. A more coordinated approach within the Bank Group could better align interventions with local government needs and ensure that World Bank efforts are complementary rather than competitive. IFC and the World Bank could enhance their collaboration to incentivize private sector investments in infrastructure, and Global Practices could coordinate more effectively in supporting the government’s ambitious housing agenda.

The World Bank missed opportunities to foster coordination among government programs. The World Bank initially planned to align its slum alleviation and housing improvement projects, but the lack of collaboration between the two government programs (Kotaku and BSPS) prevented a more holistic approach. IEG’s stakeholder interviews indicated that differences in the implementation and budgetary cycles of the two programs, along with the government preferring support to BSPS over Kotaku areas, were sources of the disjointedness. This limited the World Bank’s efforts to maximize the two projects’ impacts by combining slum upgrades with complementary housing improvements.