Improving the Infrastructure Climate in Indonesia

The Millennium Challenge Corporation (MCC), an independent US government agency, provides grants and assistance to countries that demonstrate a commitment to good governance, investments in people, and economic freedom. MCC engaged the Capstone team to research the investment climate and mechanisms for funding road infrastructure in Indonesia, at both the national and subnational levels. This research will aid MCC in developing a grant—known as a compact—to support targeted policy and institutional reforms. The team conducted an extensive literature review and in-person interviews in Jakarta with representatives from the central government agency, the World Bank, and the private sector. The final report examines the stages of the complex road infrastructure process: planning, financing and procurement, and implementation and monitoring. At each stage, the report assesses the various challenges identified by the team and offers recommendations for MCC to consider in the design of the second compact with the Government of Indonesia.