Countries and Regions

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p. 6 of 6 BACK | NEXT I. Development Context II. Government Vision and Plan III. Progress with the Adoption of the Poverty Reduction Strategy Framework IV. New Directions V. Portfolio Management VI. 2005 Operational Program

Country Strategy and Program Update 2005: Indonesia

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VI. 2005 Operational Program

30. The 2005 program provides strategic support to the Government in critical areas. ADB’s operations provide for (i) continuing support for the implementation of the Government’s decentralization policies (through a proposed local finance sector development program loan); (ii) supporting social development (through projects in water supply and sanitation, and aquaculture); (iii) promoting long-term economic growth (through infrastructure operations and private sector participation); and (iv) furthering regional cooperation (especially through investments in the transport and energy sectors).

31. Under the regular program, six projects (10 loans) are proposed for $519 million. The projects will focus on road rehabilitation, community water services, aquaculture development, local government financing and governance, microfinance, and private sector financing of urban infrastructure. Under Asian Development Fund (ADF) IX, Indonesia continues to have access to ADF lending resources, which is an important consideration for the Government.

32. ADB responded immediately to the tsunami disaster in Aceh and North Sumatra. While providing substantial assistance in damage assessment, initial rehabilitation support was agreed upon in principle through (i) reallocation of surplus funds in selected ongoing projects (about $65 million), (ii) expansion in scope of projects at an advanced stage of processing, (iii) new emergency assistance package (initially estimated at $300 million) to be financed from the Asian Tsunami Fund of ADB, and (iv) TA and Japan Fund for Poverty Reduction proposals. The Government hopes to complete its initial reconstruction strategy, with assistance from the international community, by the end of March 2005.

33. Partnerships. Partnerships with the United Kingdom’s Department for International Development (DFID), Government of the Netherlands, United States Agency for International Development, and Australian Agency for International Development have continued to flourish, resulting in considerable cofinancing. They also increasingly involve information exchange and knowledge sharing. ADB is strengthening partnerships with the World Bank, Japan (JBIC and Japan International Cooperation Agency), and Germany (Deutsche Gesellschaft für Technische Zusammenarbeit). ADB is also a partner in the DFID-funded Decentralization Support Facility.

34. In recent years, the Partnership for Innovations in Poverty Reduction with DFID has strengthened the capacity and effectiveness of ADB operations in supporting the transformation of Government actions towards achievement of the MDGs. Discussions are underway to extend the partnership. DFID, the Netherlands assistance authorities, and the Canadian International Development Agency (CIDA) have contributed grant components for Aceh to the proposed Community Water Supply and Services Project. The Netherlands authorities also have supported ADB-led efforts to develop Government capacity to audit assistance funds to Aceh and North Sumatra. Cooperation with national and regional civil society organizations has been a focus for strengthening good governance. Civil society participation in ADB activities is expected to increase through small grant facilities, such as the DFID-sponsored regional TA for nongovernment organization partnership for poverty reduction.

35. ADB is leading efforts to harmonize development partner policies and practices. The aim is to improve effectiveness and impact, while reducing transaction costs and other burdens for recipient governments. In Indonesia, ADB is working closely with JBIC and the World Bank to harmonize certain aspects of operations. Initially, these efforts are focusing on anticorruption, procurement, and contracting. An important avenue is the ADB-chaired Consultative Group for Indonesia Working Group on Aid Effectiveness.

26. In a country as large and diverse as Indonesia, with a considerable variety of development-related needs, assistance needs to become more selective to increase effectiveness and efficiency of operations. The 2002 CSP recognized the need for a geographic focus, introducing a three-tier system that encouraged the grouping of projects in common areas. In the context of the Management for Development Results agenda and the review of ADB’s Poverty Reduction Strategy, the new CSP will aim to address the selectivity issue by examining (i) selectivity of outcomes, (ii) sector selectivity, (iii) thematic selectivity, and (iv) geographic selectivity.

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