Financing Slum Upgrading in Indonesia : Can Sustainability Reinvestment Help?

Sheltering for the urban poor of developing countries, like Indonesia, has been facing problems. Slums, characterised by crowded, unhealthy environment, poor quality buildings, and lacking public facilities and infrastructure have been of much concern. Around 24-62% of urban population in developing countries live in this kind of housing with no sign of decreasing trend. Despite promising progresses, sustainability is still the main challenge for slum upgrading, in which financing is an important aspect.The paper seeks a theoretical foundation of utilising sustainability reinvestment scheme, a somewhat forgotten function in Indonesia, to help financing slum upgrading. Sustainability reinvestment is among the methods of ensuring intra- and inter-generational equity in development, in which a significant portion of development benefits is reinvested for sustaining development. It is usually applied for restoring environmental damage caused by the development activities based, among others, on polluters pay principle. However, since hardly are people living in slums out of their freewill, inequity in development process must have something to do with it. Slum inhabitants are most probably deprived from their rights to get equitable benefits from development.Therefore, the application of sustainability reinvestment can be extended to include financing slum upgrading. By this, slum upgrading becomes an integrated part in ensuring sustainable development. Among the policy implications is tax policy reformulation. A new post in the tax yield, namely sustainability reinvestment pool, can be created. Equitable compensation for slum dwellers should be available from this post, and this would help financing slum upgrading