Regions and Countries

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p. 32 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 V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation A. Risks B. Monitoring Process and Plan

Country Strategy and Program 2006-2009 (Draft for Consultation): Indonesia : VI. Risks and Performance Monitoring and Evaluation

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A. Risks

120. Political. Deterioration of the security situation could severely hamper development potential and slow down international assistance. Domestic security issues could create special challenges. Staff have been participating as part of the UN’s country team, exchanging information on regional conditions and assistance programs. This provides an opportunity to flexibly reorient loan and TA activities to address local assistance needs, especially in postconflict localities, in cooperation with other external funding agencies.

121. Security. Deterioration of the security situation could severely hamper development potential and international assistance. Domestic terrorist movements, and international developments, could lead to further attacks, especially aimed at foreigners. Regional strife poses special problems. Staff have been participating as part of the UN’s country team, exchanging information on regional conditions and assistance programs. This provides an opportunity to flexibly reorient loan and TA activities to address local assistance needs, especially in postconflict localities, in cooperation with other external funding agencies.

122. Large-scale Natural Disasters. Disasters on the scale of the tsunami that hit Aceh and Nias in December 2004 could have a severe impact on the economy if they hit one of the major economic centers of the country. Large scale disasters, wherever they occur, stretch the capacity of the Government and have a tendency to slow down decision making and implementation in many areas of the economy. As happened with the May 2006 earthquake in Central Java and Yogyakarta, ADB will make immediately available, in such cases, ample staff and consultant resources to the international effort in supporting the Government’s damage and loss assessment and help it plan for rehabilitation and reconstruction.

123. Governance. Continued weak public sector management will negatively impact on the Government’s capacity to deliver. The CSP recognizes this, and emphasizes support for reforms that strengthen policy and institutional arrangements for better public sector management in general (through the DPSPs), and in specific sectors (such as infrastructure and finance), coupled with investments in capacity development. A special focus is on improving management capacities at the local government levels, in close coordination with other donors in this area, through the DSF.

124. There is also a risk that the Government is not able to develop public-private partnerships in infrastructure in a transparent manner and in accordance with international best practices. This would result in a continued lack of domestic and international interest in infrastructure investments. This is the focus of ADB’s policy dialogue with the Government in the context of the Infrastructure Reform Program.

125. Decentralization. There is a risk that the Government will not fully implement the decentralization agenda as stipulated in the various laws. Implementing regulations have been slow in forthcoming and do not always create the required clarity. The result of this possible lack of progress could be that economic growth in the regions stagnates, that services delivery does not improve, and that corruption continues at current levels. ADB’s focus is to work with the other donors in the DSF and in the Donor Working for Decentralization, and have a continues policy dialogue to move the decentralization process forward. At the same time, the ongoing capacity-building initiatives in the regions, supported by ADB and other donors, will ensure increased capacity of the local governments to manage their fiscal and development processes.

126. New financing modalities. ADB plans to shift its assistance to utilize more of the new financing facilities, including sub-sovereign lending, guarantee operations and private sector operations, which may affect the quality of the Indonesia portfolio. SERD and PSOD will work closely with the Risk Management Unit to mitigate such risks.

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