Country Assistance Program Evaluation for Indonesia, 2005-2018

Evaluation Document | 23 October 2019
Country Assistance Program Evaluation for Indonesia, 2005-2018

The Indonesian economy has been growing at a steady annual rate of about 5% in recent years. Indonesia has also made great progress in reducing its poverty rate, which fell below 10% in 2018, although income inequality is high and rural poverty remains a challenge. Infrastructure bottlenecks, a weak business environment, skills shortages, and low productivity and competitiveness are among the many challenges that Indonesia faces in accelerating its economic growth. Asian Development Bank (ADB) operations in Indonesia have aimed to address these development challenges and to ease some of the binding constraints on Indonesia’s growth.

This Indonesia country assistance program evaluation (CAPE) covers operations approved by ADB during 2005–2018. These were based on three country strategies over this period, all of which had inclusive and environmentally sustainable growth as their central objective. The country program in this period comprised 72 sovereign loans, 21 grants, 23 nonsovereign loans, and 122 technical assistance operations, totalling $19.3 billion. While the country strategies favored supporting a wider range of sectors, operations focused mainly on three sectors: public sector management, energy, and finance. Public sector management operations contributed to improvements in financial management by regional governments, internal audit strengthening to improve government accountability, and macroeconomic stability in the face of economic shocks. The finance sector program helped institution building, especially the establishment of the Indonesia Financial Service Authority (Otoritas Jasa Keuangan) to carry out integrated regulation and supervision of financial markets. The energy program helped to improve transmission and distribution systems and renewable energy outputs in remote parts of the country. The results were less impressive in the smaller programs of the agriculture, water, and social sectors. In part because of a lack of progress with investments in infrastructure development, a constant priority of the strategies, progress toward the objectives of inclusive economic growth and environmentally sustainable growth was unconvincing.

Keeping in view Indonesia’s medium-term plan priorities for 2020–2024 as well as ADB’s Strategy 2030, ADB should focus more on operations with a direct impact on boosting inclusive and environmentally sustainable growth. The limited capacity of subnational governments to carry out project preparation and implementation has been a drag on infrastructure development, so strengthening local government capacity will be essential. Diversifying ADB’s financing modalities to include more investment projects to complement the policy-based lending would assist this. In particular, ADB should provide greater support to address project readiness issues such as land acquisition, safeguards, and procurement that have dogged the program in the past. This will improve the design quality and results of ADB-supported investment projects. The demand for policy-based lending is expected to continue, although at a lower level than before, given the need to address the persisting development constraints. Indonesia is a middle-income country, so knowledge services and support will play a stronger role; policy-based lending needs to be well-founded on sound and in-depth knowledge work.

Note on IED's Country Evaluations and Validations

Using its 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations, the Independent Evaluation Department (IED) intends to provide an objective and informed judgement of the performance and results of country partnership strategies (CPSs), particularly in terms of their relevance, effectiveness, efficiency, sustainability and development impacts.

In ascertaining relevance, IED considers not only the alignment of the program with country needs and government objectives, but also cross-sector CPS objectives, appropriateness of modalities and sector program designs, and sufficiency of donor coordination.

The effectiveness of a country program in delivering results is also an important aspect of an IED evaluation. Primary focus is on the achievement of the outcomes and outputs of ADB interventions (and the likelihood of achievement if the program is still ongoing), as worded in CPSs and their results frameworks. These include knowledge products and institutional development efforts.

Performance and results are likewise judged from an efficiency perspective, that is, whether the program was delivered in a cost-effective and timely manner, and generated value for money. It also considers the capacity of executing agencies that may contribute to start up and implementation delays, and cost overruns.

Another critical element of IED's evaluation is the likely sustainability of results over the medium term, technically, financially, environmentally, socially, politically, and institutionally. Further, IED looks at how results led to development impacts. Specifically, whether ADB contributed to achieving the CPS objectives, directly through its sector programs and implementing cross-cutting agenda(s) across various modalities in different sectors and by various development partners.

IED gives special importance to cross-cutting objectives by considering how the cross-sectoral and thematic objectives of the CPS are articulated in the results framework and provided with appropriate indicators and targets; and how the program achieved the cross-sector thematic results. Equal weights are given to the achievement of sector and cross-cutting objectives in the relevance and development impact assessments, in both country assistance program evaluations (CAPEs) and CPS final review validations (CPSFRVs). This aligns with ADB's increasing emphasis on achieving corporate strategic priorities.

In preparing its country evaluations and validations, IED conducts document reviews, consults with concerned departments, staff, governments and other stakeholders, and undertakes evaluation missions. IED has put in place a quality assurance system to ensure consistent application of its 2015 guidelines. In CPSFRVs, IED's primary focus is to validate the evidence presented in the CPS Final Review.