NUDP is an Investment Project Finance (IPF) operation in the form of a technical assistance loan to the Government of Indonesia. NUDP will develop a platform that brings together sectoral infrastructure investment programs in three ways: 1) encouraging institutional and policy coherence within the national urban development agenda to enable efficient functioning of Local Governments (LGs), 2) enhancing integrated planning for urban investments based on a spatial development framework, and 3) establishing mechanisms and criteria for prioritizing investments, identifying financing gaps, and enhancing fiscal management capacity of LGs to direct capital investments to strategic urban areas.

NUDP includes four components, namely, (1) National Urban Institutional and Policy Development; (2) Integrated Planning for Urban Development; (3) City Financial Management Capacity Development; and (4) Project Implementation Support. Component 2 is at the core of the NUDP operation, while Components 1 and 3 are enabling components to ensure sustainability. Component 2 interventions will address the quality of spatial plans in cities and introduce a shift towards a strategic spatial vision within the existing statutory plans. It will further leverage strategic spatial guidance as to the basis for the prioritization of capital investments by implementing a spatially-informed, medium-term Capital Investment Planning and Budgeting process in selected local governments, including annual tracking mechanisms for implementation of budgeted investments. This approach to integrated spatial and capital investment planning will together contribute to reducing the vulnerability of infrastructure investments and urban residents to climate-related hazards. Component 1 aims to create an enabling national environment by addressing inter-ministerial coordination and policy issues that prevent city governments from being the agents of sustainable urban development. Component 3 will focus on addressing the demand side constraints at the city level to accessing alternative sources of financing and effective implementation of capital investments, including capacity building for better project and procurement management, financial management, expenditure efficiency, and creditworthiness.