More money is needed. This is the oldest story in the world. Health workers need vaccines. Farmers need wider access to water. Children need education. What has changed is our mind-set. All stakeholders — government, businesses and communities — have roles and responsibilities for improving human development. To tackle those needs, it will require innovative financing.
Indonesia’s growth has been impressive, averaging over 5 percent for the past five years despite a global environment weakened by an economic slowdown. Indonesia’s financial market is getting stronger. Reaching over 5 percent growth per year is not an achievement that governments can take on alone. Indonesia’s performance will depend on the government’s ability to improve the business climate and its effort to attract private investment.
The key to financing development lies with engaging the private sector. Private investment is a powerful and essential source of long-term financing for infrastructure and other sectors to generate growth, create jobs and promote sustainable development. $500 to 600 billion is needed to build Indonesian roads, railways, and ports. Three million more jobs per year could be created, halving the 22 percent of youth unemployed in Indonesia. To the 13 percent Indonesian households with no access to electricity, private investments in solar and wind energy can be decisive. The private sector can make the difference building upon the foundations laid by the government.
Businesses “have enormous power to create decent jobs, open access to education and basic services, unlock energy solutions and end discrimination” according to UN Secretary-General Ban Ki-moon. There is a significant capital available that lies with private sector, which is far greater than what donors, local financial institutions, official development assistance in developing countries, are able to provide.
We must work on finding ways to combine available financial instruments into new packages and scale up investments. With a huge untapped potential, innovative finance is key for a stronger growth. From big investors to small holders, the interface between those who want to invest money and those who need it should be simplified.
With only 22 percent of Indonesians possessing bank accounts, micro-finance is crucial to improve access for people in remote areas and small islands. Meanwhile, peer-to-peer finance or crowd funding provide needs of funding to the growing number of small and medium-sized enterprises in a digital age where 82 million Indonesians are Internet users.
The United Nations is already at the vanguard of those growing movements. In many places, increasing development will have to start with extending access to clean water. One out of eight Indonesians do not have access to clean water. With its first ever online Sustainable Development Goals (SDG) crowd funding campaign “Bring Water For Life,” the United Nations Development Program (UNDP) in Indonesia is aiming to raise $25,000 to support the purchasing and installation of a solar-powered water pump in an East Sumba village.
Innovative financing has leveraging effects. Consider the bond market. Green bonds are from a global perspective growing dramatically. They have provided the opportunity for wider investment essential to not only confront climate change but to achieve better sustainability in many sectors. With an estimated value of almost $130 billion, the bond market in Indonesia holds tremendous potential. This is why we support climate-friendly investments like REDD+ aiming at financing sustainable land use in Indonesia.
Philanthropic activity keeps growing in Indonesia. Partnerships with philanthropic foundations provide a much needed boost to the SDG agenda. In Indonesia, UNDP has partnered with Tanoto Foundation to support collaborative work with the Riau provincial governments in piloting sustainable development goals implementation at provincial and district levels. The Ford Foundation meanwhile is working with the Indonesian government and UN to support the implementation of the SDGs on the national level.
And yet, though promising efforts are underway, they fall short of what is needed. More work can be done. We know that stakeholders in Indonesia can, and must, do more.
More companies and entrepreneurs must take more responsibilities for those most marginalized. The challenge is to channel these funds toward poverty alleviation and sustainable development that is attractive to investors. It can finance the growth of small enterprises and give an appropriate return to shareholders, boost employment, and improve the lives of poor people. Meeting those needs will require fostering a trusting, reliable and credible environment for enabling innovation.
As Indonesia looks to seize the opportunities ahead in terms of investments, continued reform implementation will be essential. Stronger commitments and sufficient budget allocation for development combined with efficient policies could fasten project implementation such as Village Fund, to improve service delivery at the local level and reduce inequality and poverty. Government investment in UN agencies as a development partner will ensure a greater access to technical expertise and lessons learned from other countries.
A new story is being written. The world needs investment for development. The money is here already. The total cost of the SDGs is estimated to be over $4.5 trillion per year while the world economy amounted to $77 trillion in 2014.
Looking at those numbers, if we make all the right choices, it won’t cost more to make those smart investments for the next 15 years. Instead, it will help sustain the world for generations to come. This will be a matter of finding the right innovative financing to work together to end poverty.
Douglas Broderick is the United Nations resident coordinator in Indonesia.