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p. 13 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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C. Implications for ADB’s Program of Assistance

100. The likely activities of the international community help define ADB’s activities. For example, the IMF’s natural focus on macroeconomic stabilization dictates that ADB’s role should be to support them. ADB must be aware of macroeconomic stabilization issues and able to support the Government,²⁴ but it is expected that the IMF and, supporting them, the World Bank will provide the major part of the needed assistance in this area.

101. Most importantly, the increasing convergence of the three large aid agencies’ programs calls for increased coordination to avoid duplication of efforts. Two approaches are possible. One is to have a sector-based division of labor. Alternatively, a geographic focus can emerge. Indonesia requires both approaches. In governance, environment, and finance divisions of labor have been set particularly between the World Bank and ADB. The Governance Partnership facilitates some of this. Separately, in finance, the World Bank has taken the lead in the banking subsector, while ADB is the lead agency in nonbank financial institutions. In environment, the heavy commitment of the World Bank and European agencies to forestry has left a clear role for ADB in maritime and coastal resources. This division of labor is particularly apt in areas in which national, not regional, policy reform is a priority.

102. A geographic focus may be particularly important to address the needs of less developed areas where the agriculture, transport, and urban subsectors demand regionally distinct investment. In Indonesia there have also been divisions of labor along geographic lines among the major agencies, especially in particular projects. For instance in the ongoing preparation for decentralized education and health projects there have been separate regional areas for the World Bank and ADB. The emergence of a more decentralized public sector raises the likely benefits of such focus. Preliminary discussion with the Government and other agencies suggests support for finding a geographic focus for ADB’s operations; however, this cannot be determined simply. The issues that need to be addressed are discussed in para. 162.

103. More active, forward-looking cooperation between the bilateral assistance programs and the multilateral funding efforts offers large benefits. The bilateral grant-based efforts can often address needs such as social protection, but are limited by the relatively small size of the overall program and, sometimes, an inability to address national policy issues. Forward-looking coordination could exploit complementarity in resources among the international community. The Partnership for Governance represents an institutionalized example of coordination efforts. In most sectors, it is likely that increased coordination of current, separately planned assistance programs would yield considerable benefits. The Government needs to assume a more active role in coordinating aid in this area.

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