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Joseph Eichenberger
Vice President
Asian Development Bank
20 January 2005

At the outset, I would like to express on behalf of ADB our sincere appreciation to the Government of Indonesia for its superb work in organizing and officiating both the highly successful Infrastructure Summit earlier this week as well as this important meeting of the Consultative Group on Indonesia (CGI).

We meet against a background of great tragedy and national loss, for which we extend our deepest condolences again to all of the people of Indonesia. Let me assure you of ADB's deepest commitment to do everything it can to assist the process of recovery and renewal.

One of the enduring and universal human mysteries is that out of profound tragedy can spring great hope. I believe that this is what we are seeing here in the wake of the tsunami disaster. And, without in any way diminishing the gravity of Indonesia's losses, we can also look to the future with a renewed sense of confidence, hope and promise.

Mr. Chairman, on a number of major points before us today, I can associate ADB fully with the comments just made by our colleagues from the World Bank and IMF, and have little to add beyond them in terms of specifics.

Indonesia's macroeconomic circumstances have improved in some important ways, and the foundation for further progress is stronger now than it has been in some time. We see this reflected in last year's growth performance, in key fiscal and debt indicators, in sharply lower vulnerability on the external front, in stabilization of the interest and inflation rates and the yield curve, and in the economy's perhaps unexpected robustness in the face of multiple external shocks. Yet, the hard reality of poverty still remains a basic fact of life for far too many Indonesians.

I would like to turn to a few brief comments about several significant structural challenges, the resolution of which remains crucial to Indonesia's growth and development prospects, and to meeting the legitimate aspirations of its people over the medium to longer term. They will be familiar to all, but remain fundamentally important.

The first pressing challenge is meeting Indonesia's massive investment needs. This is a multi-year proposition, and it will require the active engagement of both the public and private sectors, and availability of both foreign and - especially - domestic resources. In this connection, the fundamental policy commitments laid out by the Government during the Infrastructure Summit earlier this week could not be more welcome. No contribution is more essential than improving the legal, regulatory and administrative systems and practices that have been clearly identified as central both to the problem and the solution. Greater predictability, clarity about different administrative responsibilities and consistency in the enforcement of the legal and regulatory framework will surely trigger private investment - both foreign and domestic - that is the essential engine of sustained and equitable growth in Indonesia.

The second area I would like to mention is the implementation of decentralization. Five years after the adoption of a radically different approach, devolving major responsibilities to lower levels of government, there is no evidence that local delivery of public services has been disrupted significantly. But neither is there much evidence that the delivery of these crucial services has been improved. This is especially worrisome given the still massive challenges Indonesia faces in meeting its aspirations with respect to the Millennium Development Goals.

Further measures to improve and clarify policy, legal, regulatory and fiscal issues is both urgently needed and would pay real dividends in terms of more focused and equitable delivery of essential services. Greater clarity in these areas would also significantly improve the capacity of organizations like the ADB to work effectively and efficiently at the local levels, where clear results are most urgently needed.

These are but two important areas where we, like most of our colleagues around this table I am sure, look to the new Government with a high sense of hope and expectation. ADB's broad-based engagement in local level governance and financial management, as well as in the infrastructure sector, can be of great assistance to the Government's own reform initiatives in these areas. Certainly, the steps that have been taken by the Government thus far, and the powerful signals of change that have been delivered at the highest level, give us a higher degree of confidence than we had in some time.

Despite the recent tragedy, a brighter future beckons. You can rely on ADB for its continued support and partnership in the months and years ahead.