Regions and Countries

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p. 23 of 33 BACK | NEXT I. Current Development Trends and Issues II. The Government's Development Strategy III. ADB's Development Experience IV. ADB's Strategy A. Summary of Key Development Challenges B. The ADB Strategy for Indonesia C. Strategic Areas of Engagement D. Operational Considerations V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation

Country Strategy and Program 2006-2009 (Draft for Consultation): Indonesia : IV. ADB's Strategy

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B. The ADB Strategy for Indonesia

76. Indonesia must adopt pragmatic and yet bold policy measures to ensure that economic growth and recovery would be efficient, sustainable and equitable in a decentralized environment. Recent policy actions have demonstrated the Government’s resolve to work towards this end. Accordingly, ADB operations in Indonesia will be guided by the twin pillars of promoting pro-poor, sustainable economic growth and improving the welfare of the people. Table 2 summarizes the strategic goals of ADB operations and outlines the issues and constraints that need to be addresses in the pursuit of these twin objectives.

77. The proposed strategic objectives of the Country Strategy and Program (CSP) is consistent with ADB’s Long Term Strategic Framework. It includes a focus on capacity development, as introduced as an additional thematic priority in ADB’s Enhanced Poverty Reduction Strategy, and the mainstreaming of gender issues. It is consistent with the strategic priorities of the Medium-Term Strategy II, including catalyzing investments, strengthening inclusiveness, managing the environment, and improving governance and preventing corruption.

78. To support the Government’s twin goals of economic growth and improved welfare, ADB’s strategy consists of two pillars and one thematic concern, and will focus its support on five areas of engagement.

79. Pillar I: Promoting pro-poor, sustainable economic growth. ADB will support the Government in bringing about higher levels of economic growth through catalyzing public and private sector investments. Support will be provided through a combination of reforms (macroeconomic, infrastructure, and financial sector reforms), selective project investments in infrastructure, and capacity development. Private sector investments will continue to focus on initiatives that are catalytic, thereby stimulating private sector development and encouraging private sector investments in the economy.

80. Pillar II: Improving Welfare. ADB support will focus on a more sustainable, transparent and equitable fiscal decentralization, which, coupled with capacity development, will provide local government with the means to improve the quality as well as the quantity of service delivery. This will ensure an effective use of the fiscal space created by private sector investments in infrastructure, as well as the continued reduction in unproductive subsidies. Support will be provided to policy and institutional reform, selective expenditure programs and investments, resource management, and capacity development. To enhance livelihood and ensure sustainable development, attention will be given to urban and marine environment issues and water resources.

81. Thematic Concern: Governance and Anti-Corruption. ADB will support improving governance and reducing corruption as a thematic concern, involving ADB operations that enhance public sector management Additional support will be provided in promoting anticorruption and accountability for improved fiscal and administrative accountability of regional governments, and enhanced fiduciary governance. Continued support will be provided to the KPK.

82. The Government values ADB’s role as a partner in and supporter of its own reform agenda through policy dialogue, technical assistance, and various types of program lending. The Government’s medium term reform agenda will help in creating the conditions for more effective project lending. This is expected to undergo two developments. First there will be a shift from public sector operations to more innovative project financing involving non-sovereign lending and public-private partnerships. Second, as capacity issues at all levels of Government are gradually addressed, as well as the adjustments in ADB’s skills mix, public sector project development and implementation will improve.

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