ADB is helping Indonesia advance its medium term reform and development agenda. The program focuses on improving the investment climate, strengthening public financial management and governance, accelerating poverty reduction, and enhancing access to public services for the poor.
|Project Name||Sixth Development Policy Support Program|
|Project Type / Modality of Assistance||Loan
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
Private sector development
|Sector / Subsector||
Industry and trade / Trade and services
Public sector management / Economic affairs management - Public administration - Public expenditure and fiscal management
|Gender Equity and Mainstreaming|
|Description||The program will support the government's key reform priorities aimed at achieving higher and pro-poor economic growth that is sustainable over the medium term. The reform priorities include efforts to improve the investment climate, strengthen public financial management, and governance, and enhance poverty reduction and access to public service delivery.|
|Project Rationale and Linkage to Country/Regional Strategy||
The proposed program is the sixth and last of a series of Asian Development Bank (ADB) development policy support programs (DPSPs) for Indonesia, prepared jointly with the World Bank and the Government of Japan. Since its initiation, the DPSP series was designed to support the Government of Indonesia's medium-term reform agenda in core areas underpinned by its National Medium-Term Development Plan (RPJMN). The focus of the DPSP series has evolved since 2003, reflecting changes in the country's needs and priorities. In first four years, the emphasis was on ensuring medium-term macroeconomic stability and building the basic legal and regulatory framework for investment as well as public financial management and governance. As macroeconomic resilience improved, the government and development partners agreed to replace the macroeconomic pillar with support for reforms in public service delivery. Since 2007, the DPSP series has focused on three core policy areas: the investment climate, public financial management and governance, and poverty reduction and public service delivery. In 2009, some of the reforms envisaged during the last 5-year plan period remained unfinished. At the request of the government, the proposed DPSP-6 was included for 2010 in ADB's Indonesia country operations business plan, 2010-2012. The DPSP series has complemented implementation of other ADB programs, including the Public Expenditure Support Facility, Countercyclical Support Facility, and, Local Government Finance and Governance Reform.
The program completion reports for the first three programs under the DPSP series suggested that policy actions supported by the series have contributed significantly to improved economic management, albeit from a low base. Among other achievements, the program has helped the government devise a public debt management strategy, reorient budget savings from reduction in fuel subsidies toward priority social sectors and targeted poverty reduction programs, and expand the tax base through tax administration reforms. Under the fourth DPSP onward, reforms to improve the investment climate have led to the passage of an Investment Law, a significant reduction in business start-up time, a shorter time for value-added tax refunds, and enhanced access of small and medium-sized enterprises to finance. Reforms in public financial management and governance have improved budget formulation, execution, monitoring, and evaluation. The DPSP series has supported efforts to increase budget allocation for poverty programs, improve pro-poor planning and budgeting, and enhance community-driven development under the government's PNPM Mandiri.
While significant progress has been achieved, the government is committed to implementing further reforms in DPSP core reform areas. Recent economic growth remains below the level achieved before the Asian financial crisis. To achieve higher and more inclusive growth, a recent ADB study suggests the need to accelerate infrastructure development, improve governance and institutions, and enhance access to better education. Despite recent improvement in economic competitiveness indicators, efforts are needed to improve trade logistics and simplify business procedures. Continued efforts are needed to implement a modern public financial management (PFM) system. While significant progress has been achieved, poverty rates remain high. Poverty incidence declined to 13.3% in 2010, but rates vary widely among regions and about 40% of the population is estimated to be near poor (clustered just above the national poverty line), making them highly vulnerable to fall back into poverty. The government's new RPJMN, 2010-2014 adopted a three-pillar development strategy: pro-growth, pro-jobs, and pro-poor. The government recognizes the need to increase private investment to support its pro-jobs growth strategy. It also recognizes that continued improvement in the investment climate, governance, public service delivery, and poverty reduction are crucial to achieving its pro-poor objective. Therefore, the three core policy areas supported under the DPSP-6 are among the 11 priorities in the RPJMN, 2010-2014.
|Impact||The impact of the Program is to achieve higher pro-poor economic growth that is sustained over the medium term|
|Description of Outcome||Improved overall economic management anchored on good governance|
|Progress Toward Outcome|
|Description of Project Outputs||
improved investment climate
Improved public financial management and governance
Enhanced poverty alleviation and access to public services
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Summary of Environmental and Social Aspects|
|Environmental Aspects||Implementation of the program will not have envitonmental impact|
|Involuntary Resettlement||The program will not entail any land acquisition and/or physical and economic displacement of people.|
|Indigenous Peoples||The program will not benefit or negatively impact indigenous peoples.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||Extensive consultations were held between the development partners (ADB, the Government of Japan, and the World Bank) and the government, led by a steering committee chaired by the CMEA on formulating the prior actions or triggers.|
|During Project Implementation||The CMEA is the executing agency for the program, collaborating closely with the Ministry of Finance. Implementation of the DPSP-6 actions is being undertaken by a number of other ministries and agencies, including the Vice President's Office, the National Development Planning Agency (BAPPENAS), the Investment Coordination Board, several directorates general in the Ministry of Finance, BPS, and the National Public Procurement Agency, among others.Monitoring the implementation and attainment of the DPSP triggers is done through several mechanisms. These include monitoring committees and/or technical groups established by the government that are responsible for ensuring the implementation of policy actions as well as follow-up on progress; and regular joint government development partner meetings to discuss interim progress in achieving agreed milestones in the reform agenda.|
|Consulting Services||Not required|
|Responsible ADB Officer||Ginting, Edimon|
|Responsible ADB Department||Southeast Asia Department|
|Responsible ADB Division||Indonesia Resident Mission|
Coordinating Ministry for Economic Affairs
2nd Floor, Jl Lapangan
Banteng Timur 2-4
Jakarta Pusat 10710
|Concept Clearance||01 Oct 2010|
|Fact Finding||01 Oct 2010 to 31 Jan 2011|
|MRM||31 Jan 2011|
|Approval||14 Dec 2010|
|Last Review Mission||-|
|PDS Creation Date||27 Oct 2010|
|Last PDS Update||15 Dec 2011|
|Approval||Signing Date||Effectivity Date||Closing|
|14 Dec 2010||13 Oct 2011||25 Nov 2011||15 Dec 2011||-||30 Nov 2011|
|Financing Plan||Loan Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||200.00||Cumulative Contract Awards|
|ADB||200.00||14 Dec 2010||200.00||0.00||100%|
|Cofinancing||0.00||14 Dec 2010||200.00||0.00||100%|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Sixth Development Policy Support Program||Project/Program Completion Reports||Mar 2013|
|Loan Agreement for the Sixth Development Policy Support Program between Republic of Indonesia and Asian Development Bank dated 13 October 2011||Loan Agreement (Ordinary Resources)||Oct 2011|
|Sixth Development Policy Support Program||Reports and Recommendations of the President||Nov 2010|
|Sixth Development Policy Support Program||Summary Poverty Reduction and Social Strategies||Nov 2010|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
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Evaluation Documents See also: Independent Evaluation
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