Presentation - Financing Slum Upgrading: Can Sustainability Reinvestment Help?

Financing Slum Upgrading in Indonesia: Can Sustainability Reinvestment Help? Presented at CIB-W110 Meeting and Conference Surakarta, April 16, 2009

Agung Sugiri Department of Urban and Regional Planning Diponegoro University

Organization • Slum upgrading v slum bulldozing • Challenge to sustain slum upgrading: lessons learned from KIP (Kampung Improvement Program) • Inequity and Slums: the Importance of Sustainability Reinvestment • Toward tax policy reformulation • Conclusions

2

Bulldozing v Upgrading • Indonesian paradox  recent

practices of slum bulldozing v past success of KIP • Upgrading  favorable for people • People’s complaint on slum bulldozing  even blame the World Bank’s ‘cities without slums’ program 3

Example of protest from the deprived

4

Bulldozing v Upgrading • The worse off people most probably

misunderstood about the ‘cities without slums’ program, but • Their suffering from slum removals is real • Slum Upgrading should be the choice, however, • The most difficult is to finance, especially in Indonesia. 5

Lessons learned from KIP • Kampung Improvement Program is

considered among the best practices of slum upgrading • Key factors (Chavez et al. 2000): – Governor’s initiative turned to bottom up  community empowerment – The Management – special unit; gotong royong culture; leadership structure – Helps from World Bank (esp. the finance)

6

Lessons learned from KIP • However  finally found

unsustainable • The maintenance is not good • Finance is the key; the local government has no enough money for maintenance

• Do slum dwellers have the right to

get help, not applied yet in the existing development mechanism in

7

Inequity and slums • Most of slum inhabitants are simply

forced to live in there; • Economic dualism (both global and within developing countries)  rural urban migration  urban poor  slums • Equity failures in development process must have something to do. • Equity: fairness in process, justice in distribution (see e.g. Rawls 1971)

8

Equity based development

9

Equity failures related to slums

• Those failures in Benefit Distribution

– people are deprived in terms of low welfare level despite their hard work (equity failure Ia); many slum inhabitants are easily identified as hard workers, but earn so little money. – unfair access to public infrastructure, facilities and services (equity failure Ib); hardly can slum dwellers get basic infrastructure and facilities properly. 10

Equity failures related to slums

• Failures in Sustainability Reinvestment

– people would bear negative externality costs with no or inappropriate compensation (equity failure IVa); slums are usually neglected from any compensation by, for instance, a nearby pollutive industry. – insignificant sustainability reinvestment would be insufficient to maintain the ecosystem (equity failure IVb); slum 11 dwellers would be the most vulnerable

Equity failures related to slums • Failures related to Production Function, especially

– unfair competition in the economy that would make a few stakeholders better off at the expense of the majority (equity failure IIb); job applicants from slum dwellers are less likely to be called for interviews than those from better-off neighborhoods (UN Habitat 2006). 12

Expanding the use of sustainability reinvestment • Slum dwellers are victims of

inequities • When inequities are corrected, they have the rights to be recompensed • Compensation should come from those benefitted from the related equity failures • This can be done through tax policy reformulation

13

Tax policy reformulation • The principles – – –

Apply market based instruments (MBI) The tax payers should be well identified Specific pool of tax collection  sustainability reinvestment pool – Equitable arrangement of tax distribution

14

Tax policy reformulation • The stages – National awakening  correcting inequities and the importance of sustainability reinvestment – Enrichment in the taxation system

15

Conclusions • Slum upgrading for ‘cities without

slums’ • Existing equity failures in development contribute in creating slums • Those benefitting from the inequities should be responsible  help fixing the problems  • Sustainability reinvestment  slum dwellers have the right for 16

References • Chavez, R., Gattoni, G. and Zipperer M., 2000, Indonesia,

• •

The Kampung Improvement Program (KIP): Successful Upgrading with Local Commitment, an interview with Chris Banes, Municipal Engineer at the World Bank, [Online], Available: http://www.worldbank.org/urban/upgrading/kampung.html [January 27, 2009]. Rawls, J., 1971, A Theory of Justice, Oxford: Oxford University Press. WALHI (Wahana Lingkungan Hidup Indonesia/Friends of the Earth Indonesia), 2004, Komite Masyarakat Makasar Anti Penindasan (KMMAP) Menolak Segala Program Bank Dunia (Makasar People’s Committee on Anti Deprivation (KMMAP) Refuses All World Bank Programs), [Online], Available: http://www.walhi.or.id/kampanye/globalisasi/040906_demo dprd.html [February 24, 2009]. 17

Financing Slum Upgrading in Indonesia: Can Sustainability Reinvestment Help?

THANK YOU Agung Sugiri Department of Urban and Regional Planning Diponegoro University