Catalog

	Table of Contents
p. 12 of 27 BACK | NEXT Executive Summary I. Background II. The Government's Development Priorities and Outlook III. Strategies and Programs of Other International Funding Agencies A. Coordination Mechanisms and Forums B. Strategies of Major Aid Agencies C. Implications for ADB’s Program of Assistance IV. ADB's Development Experience V. ADB's Strategy VI. Risks, Performance, and Monitoring

Country Operational Strategy Studies - Indonesia : III. Strategies and Programs of Other International Funding Agencies

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B. Strategies of Major Aid Agencies

90. As Indonesia recovers from the worst of the economic crisis, many aid agencies are adjusting their operations from the crisis-response mode to that of addressing medium-term development challenges. Like ADB, many agencies have been reviewing and revising their operational strategies. In many respects there is increasing convergence among them, especially the three largest—JBIC, World Bank, and ADB. In what can be called a “Jakarta consensus”, nearly all programs have a heightened emphasis on addressing poverty²³ and recognizing the importance of good governance; of encouraging regional autonomy and environmental protection; and of supporting human development through social sector, social infrastructure, and social protection efforts. There are differences in sectoral content among bilateral programs and a distinction between the essentially grant-based bilateral programs and loan-based efforts of the multilaterals (and the Japanese). The operational strategies of major agencies summarized and the areas of operational emphasis shown are Appendix 6.

91. The World Bank’s operations have been guided by an interim operational strategy during the crisis period. Currently the World Bank is developing a new operational strategy to guide its medium-term operations—the new country assistance strategy (CAS) should be finalized in early 2001. The World Bank expects the annual lending volume to be around $500 million, down from the precrisis level of $1 billion per year. As part of this anticipated lending for 2000-2002, the World Bank has allocated a total of $500 million of concessional IDA resources. Discussion with the World Bank suggests that its CAS will have many of the same structural features as ADB’s country operational strategy (COS). The major strategic themes for the World Bank’s future operations will likely include (i) poverty reduction-focused investment financing; (ii) further policy and institutional support for governance reforms, especially civil service reforms and decentralization; and (iii) support for social development and environmental sustainability.

92. IMF has been leading the aid efforts to support macroeconomic stability. On 14 September 2000, the Executive Board of IMF approved the second review of SDR3.6 billion (about $5 billion) Extended Fund Facility (EFF), releasing SDR309.65 million (about $398.9 million). Under the current EFF (scheduled to end in December 2002) IMF has been regularly reviewing, in coordination with ADB and the World Bank, progress in implementing the reform program. The major operational focus of IMF’s program will continue to be in the area of macroeconomic surveillance and technical assistance in fiscal and monetary policies. IMF has also been providing advisory support in the area of fiscal decentralization and for strengthening the Central Bank.

93. JBIC is the largest bilateral source in Indonesia. Before their integration in October 1999, Overseas Economic Cooperation Fund (OECF) and Japan Export Import Bank (JEXIM) supported an extensive program, especially in social and physical infrastructure. Japanese bilateral assistance averaged $1.9 billion per year in the mid-1990s. JBIC is undertaking a comprehensive evaluation of its operations in Indonesia. Japan International Corporation Agency (JICA) has identified four major areas focusing on social and economic inequality over the medium term: (i) human resources development and education, (ii) environmental conservation, (iii) support for industrial restructuring, and (iv) industrial infrastructure development. Its operations will likely continue to emphasize financing physical and social infrastructure, covering sectors such as agriculture, education, housing and urban development, and transport and communications. Investment projects will incorporate capacity-building measures to support implementation in a decentralized environment.

94. The United States Agency for International Development (USAID) has recently revised its country operational strategy for Indonesia. The strategy lays out six operational priorities: (i) strengthening democratic transition; (ii) promoting corporate and financial sector reforms; (iii) addressing food insecurity for the most vulnerable; (iv) improving management of the urban environment; (v) supporting decentralized resource management and preserving biodiversity; and (vi) strengthening social protection particularly for women and children. USAID has increased its level of assistance from $85 million per year in 1997 to about $156 million in 2001.

95. The Australian Agency for International Development (AusAid) recently reviewed its assistance strategy and will focus on governance, education, health and rural water supply, rural development, and the environment. In 1999-2000, Australian ODA to Indonesia amounts to A$121 million ($77.7 million). A large proportion deals with the social impacts of the crisis. Most of the project assistance is focused on eastern Indonesia. Governance support is in the areas of government audit, bankruptcy and commercial law, and foreign investment and trade policies.

96. German assistance is provided through the German Agency for Technical Cooperation (GTZ) and German Bank for Reconstruction and Development (KfW). GTZ operations concentrate in: (i) capacity building, support to local authorities, reform of government administration; (ii) HRD, SME business promotion, microfinance development, and vocational training; and (iii) conservation of the environment, especially in forests and water. GTZ particularly supports the decentralization agenda and donor coordination activities in this area. In the future KfW will concentrate on the transport sector (mainly maritime and railway) and on the social sectors, education and health. German official development assistance in 1999/2000 totaled DM 150 million ($79.2 million).

97. Dutch assistance emphasizes a sectorwide approach to assistance, eschewing project financing, and targeting poverty reduction as a central goal. There is a clear focus on transition to a democratic society based on free-market principles. Support is concentrated on good governance activities and on sectors such as basic education and water resources and environment management. The Netherlands provided $65 million in grant assistance in 2000, in addition to approximately $45 million in humanitarian assistance and export credits.

98. The Canadian International Development Agency’s (CIDA) new operational focus will be on protecting the environment; developing the private sector and strengthening the capacity of key institutions for policy making and implementation; and promoting good governance and participatory development. HRD and gender equity are crosscutting themes. Annual assistance from CIDA amounts to about $25 million-30 million.

99. Assistance from the United Kingdom (UK) will follow a recently completed strategy that emphasizes (i) improving governance, (ii) mainstreaming poverty reduction within the broader activities of the Government, and (iii) sustainable management of forests. The UK has taken a lead role with ADB in assisting the Government to develop a strategy to reduce poverty and worked with ADB to this end at the recent CGI meeting.

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