country partnership framework the republic of indonesia€¦ · 3/11/2015 · the republic of...
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Document of The World Bank Group
FOR OFFICIAL USE ONLY
Report No. 99172
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL FINANCE CORPORATION
MULTILATERAL INVESTMENT GUARANTEE AGENCY
COUNTRY PARTNERSHIP FRAMEWORK
FOR
THE REPUBLIC OF INDONESIA
FOR THE PERIOD FY16 – FY20
November 3, 2015
Indonesia Country Management Unit East Asia Pacific Region The International Finance Corporation The Multilateral Investment Guarantee Agency
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization.
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The last Country Partnership Strategy was discussed by the Board on December 13, 2012 (Report No. 72906-IND)
CURRENCY EQUIVALENTS Currency Unit = Indonesian Rupiah (IDR)
IDR 13,491 /US$1.00 (as of 23 October 2015)
FISCAL YEAR January 1 to December 31
ABBREVIATIONS AND ACRONYMS
ADB Asia Development Bank AFD Agence Française de Développement ASA Advisory Services Analytics ASEAN Association of Southeast Asian Nations APBN National Budget/Anggaran Pendapatan dan Belanja Negara Bappenas Ministry of National Development Planning BI Indonesia’s Central Bank BPS National Statistics Agency CGAP Country Gender Action Plan CLR Completion and Learning Review COSO Committee of Sponsoring Organizations CSO Civil Society Organization CTF Climate Technology Funding DAK Specific Purpose Grants DPD Regional Representatives' Council DPL Development Policy Lending DPR House of People's Representatives FAO Food and Agriculture Organization FCS Fragile and Conflict-Affected Situations FDI Foreign Direct Investment FHH Female-headed Households GDP Gross Domestic Product GEF Global Environment Facility GHG Green House Gas GoI Government of Indonesia GP Global Practice GW Gigawatts IDR Indonesia Rupiah IGF Investment Guarantee Fund IIF Indonesia Infrastructure Fund IPF Investment Project Financing (IPF) IPP Independent Power Producers IsDB Islamic Development Bank IUU Illegal, Unreported, and Unregulated (fishing)
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JICA Japan International Cooperation Agency Kabupaten Regencies, cities KfW German Government-Owned Development Bank Kota Municipality LUCF Land-use Change and Forestry MCA Marine Conservation Area MDF Multi Donor Fund MFI Multilateral Financial Institutions MoF Ministry of Finance MPR People’s Consultative Assembly MPW Ministry of Public Works MSMEs Micro, Small and Medium Enterprises NAWA CITA GoI’s nine priorities agenda NPL Nonperforming Loan NUSP National Slum Upgrading Program NUWSP National Urban Water Supply Program OSS One-Stop-Shop P2B The Umbrella of Graduation Programs PAMSIMAS Community-Led Water and Sanitation Program PELINDO Indonesia Port Corporation PERISAI Program for Economic Resilience, Investment and Social Assistance PFM Public Financial Management PforR or P4R Program for Results PLN State Owned Power Utility PMO Project Management Office PMU Performance Management Unit PNPM National Program for Communities Empowerment PPP Public-Private Partnership PUSKESMAS Public Primary Health Facility RAS Reimbursable Advisory Services R&D Research and Development REDD+ Program to Reduce Emissions from Deforestation and Degradation REKOMPAK A Community-driven Disaster Reconstruction and Resettlement program RER Real Exchange Rate RPJMN Mid-term Development Plan SCD Systematic Country Diagnostic SJSN Health Insurance-National Social Security System SME Small Medium Enterprise SOE State-Owned Enterprises UHC Universal Health Coverage VAT Value-Added Tax YOY Year-On-Year
IBRD IFC MIGA
Vice President: Director: Task Team Leader:
Axel van Trotsenburg Rodrigo A Chaves Josephine M. Bassinette
Dimitri Tsitsiragos Vivek Pathak Sarvesh Suri
Keiko Honda Ravi Vish Timothy James Histed
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TABLE OF CONTENTS
I. Introduction and key messages ..................................................................................... 5
II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA .................................... 8
II.1. Political and Social Context ................................................................................... 8 II.2. Growth, Poverty and Shared Prosperity ................................................................. 8 II.3. Recent Economic Developments ........................................................................ 12 II.4. Lessons from CPS Completion Report ................................................................ 15
III. PROPOSED WBG PARTNERSHIP FRAMEWORK ............................................... 16
III.1. Building the Partnership Strategy ...................................................................... 16 III.1.a. Government’s Development Agenda: Selectivity Filter One .............................. 17 III.1.b. Development Challenges and Approaches Identified in the SCD: Selectivity
Filter Two ...................................................................................................................... 19 III.1.c. Impact and WBG Comparative Advantage: Selectivity Filter Three ................. 21
III.2. Proposed Partnership Strategy ........................................................................... 21 III.2.a. Engagement Area 1: Infrastructure Platforms at the National Level .................. 22
III.2.c. Engagement Area 3: Maritime Economy and Connectivity ................................. 28
III.2.d. Engagement Area 4: Delivery of Local Services and Infrastructure ................... 30
III.2.e. Engagement Area 5: Sustainable Landscape Management ................................... 34 III.2.f. Engagement Area 6: Collecting More and Spending Better ................................. 37 III.2.g. Supporting Beam I: Leveraging the Private Sector: Investment, Business
Climate and Functioning of Markets ......................................................................... 40 III.2.h. Supporting Beam II: Shared Prosperity, Equality and Inclusion ......................... 44
IV. Implementing the CPF ................................................................................................ 47
IV.1. Focus and selectivity within the CPF Strategy ................................................... 47 IV.2. Implementing the WBG Program ....................................................................... 48
V. MANAGING RISKS TO THE CPF PROGRAM ....................................................... 53
V.1. Political Economy and Governance Risks ........................................................... 53 V.2. Macroeconomic Uncertainty ................................................................................ 53 V.3. Implementation and Capacity Constraints .......................................................... 54
ANNEXES .............................................................................................................................. 56
Annex 1. CPF Result Framework ................................................................................ 56 annex 2: key macroeconomic indicators...................................................................... 78 Annex 3. Completion and Learning Report ................................................................. 79 Annex 4. Selected Indicators of Bank Portfolio Performance and Management ..... 160 Annex 5. Operations Portfolio (IBRD/IDA and Grants) ........................................... 161 Annex 6 Statement of IFC’s Held and Disbursed Portfolio Committed and
Outstanding Portfolio ................................................................................ 162 Annex 7. Consultations of the Draft CPF .................................................................. 163 Map of Indonesia ....................................................................................................... 165
III.2. . Engagement Area : .................. 2
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LIST OF FIGURES
Figure 2.1: Evolution of official poverty rate, 1996-2013 ........................................................................ 10 Figure 2.2: Change in poverty rates 2000-12*, Indonesia versus EAP countries .................................. 10 Figure 2.3: Close to 40 percent of the population was poor and vulnerable in 2012 ............................. 11 Figure 2.4: 75 percent of poor households fail to move out of poverty or vulnerability over a three-year period ............................................................................................................................................ 11
Figure 3. 1: CPF Strategy Emerges from the Intersection of Three Selectivity Filters......................... 16 Figure 3. 2: Government of Indonesia’s RPJM Development Strategy ................................................ 17 Figure 3. 3: The Three Pathways Identified in Indonesia SCD ........................................................... 19 Figure 3. 4: CPF Strategy Emerges from Applying Selectivity Filters ................................................. 22 Figure 3. 5: In-year variance of capital from original budget .............................................................. 38 Figure 3. 6: Indonesian firms are lagging in size, technical prowess, training, and formality............ 42
LIST OF TABLES
Table 3. 1: Indonesia ranks low in key aspects of tourism competitiveness ....................................... 24
Table 4. 1: Draft IBRD Indicative Lending Pipeline FY2016-20* ........................................................ 51
Table 5.1: Risk in Indonesia ............................................................................................................... 55
LIST OF BOXES
Box 3.1: Client Survey Result ................................................................................................................ 19 Box 3. 2: Using a Platform Approach to Deliver Clean Water and Sanitation Nationwide ................ 23 Box 3.3: How One World Bank Group Can Help Deliver Sustainable Energy and Access ................ 27 Box 3.4: Tourism’s Unrealized Potential in Indonesia ........................................................................ 43 Box 3.5: Delivering as a World Bank Group ........................................................................................ 44
Box 4.1: Selectivity in the CPF: What WBG Plans To Do Differently ................................................. 48 Box 4.2: Experience of REKOMPAK .................................................................................................. 50
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I. INTRODUCTION AND KEY MESSAGES
1. Seventy years after independence and more than a decade of political and institutional reforms, Indonesia has emerged as a stable democracy. With a population of 250 million living across over 6000 inhabited islands, Indonesia is the world’s fourth most populous nation. This archipelago nation, which spans three time zones and nearly 6000 kilometers, is the tenth largest economy in terms of purchasing power parity, endowed with remarkable natural resources from its land and seas, and the only Southeast Asian member of the G-20. It has made significant gains in poverty reduction with its poverty rate more than halved from 24 percent at the time of the Asian financial crisis down to 11 percent by 2014. For a decade up until 2015, it had a growth rate of about 6 percent annually, an active private sector and a burgeoning middle class. Its adult literacy is at almost 95 percent, with primary, secondary and tertiary education gross enrollment rates of 100, 83 and 32 percent respectively. The share of female school enrollment exceeds that of males at each level. Life expectancy at birth increased from 68 years in 2002 to 71 years 2012.
2. Indonesia’s achievements are now under stress, with a slowdown in its commodity driveneconomy, stagnant rates of poverty reduction and rapidly rising inequality. Poverty reduction has begun to stagnate, with a near zero decline in 2014, the smallest reduction in over a decade. As measured by the current national poverty rate of 11.3 percent, there are 28 million poor people in Indonesia. At the same time, inequality is increasing. Between 2003 and 2010, consumption of the bottom 40 percent1 grew at 1-2 percent annually, while that of the two richest quintiles grew by about 6 percent. Consequently, the Consumption Gini coefficient, an indicator of inequality, rose from 30 to 42 over this period, amongst the fastest widening of inequality in East Asia. The future of the bottom 40 percent of the population is further clouded by high inequality of opportunity, one-third of which is attributable to circumstances of birth (gender, ethnicity, birthplace or family background). The levels of maternal mortality (190 per 100,000 live births) and child malnutrition (37 percent of under-five children are stunted) are more aligned with the poorest countries of the world than with the vast majority of middle income countries. Indonesia is also facing rapid rates of deforestation and land degradation which have a disproportionate impact on the poor.
3. The government of President Joko Widodo, which was inaugurated in October 2014,recognizes that the country is undergoing a period of profound economic transition. While GDP growth averaged a solid 5.8 percent per year over 2004-2013, it moderated to 5.0 percent in 2014 and current estimates show growth of about 4.7 percent for 2015. While many factors impact growth, the commodities sector, which has weakened globally, is significant. Prices of key commodity exports have fallen by 40 percent since their 2011 peak, contributing to a current account deficit since 2013. Domestic private consumption which has been the main driver of growth, has softened in the last year. In short, the economic tailwinds of the past decade—rapid growth in Indonesia’s key trading partners particularly China, high commodity prices, and significant growth in consumption of an emerging middle class—have now become headwinds. Indonesia therefore is focusing on shifting its economy away from its dependence on commodities towards one that depends much more heavily on productive sectors and services. The Government’s Mid-term Development Plan (RPJMN 2015-2019), reflects its strategy to meet these development challenges by focusing on human and community development, narrowing the income gap through increased productivity and poverty reduction measures, and increasing development without environmental degradation.
4. The Development Policy Review, completed in 2014, and the Systematic Country Diagnostic(SCD)2, completed in 2015, explain the limited window of opportunity for Indonesia to reach high per capita income levels. To keep up with a young population entering the labor market, Indonesia’s economy must create some 2 million new jobs annually to absorb new workers. Moreover, Indonesia’s demographic dividend will end in approximately 15 years. No country has ever gotten rich after it has gotten old; meaning
1 In other words, the fifth and fourth quintiles combined. 2 The DPR 2014 (Indonesia: Avoiding the Trap) and the SCD (Connecting the Bottom 40 Percent to the Prosperity Generation)
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that for Indonesia to reach its aspirations, it will need an accelerated growth path of some 8 percent over the coming years.
5. The government and the World Bank Group (WBG) share a vision of an equitable and prosperous Indonesia aligned with the twin goals of eliminating extreme poverty and increasing shared prosperity. During six decades of partnership, Indonesia has been a testing ground and an inspiration for a range of innovations that have shaped the WBG. The Indonesia office was one of the first decentralized offices and today is one of the largest offices outside of Washington DC. Indonesia brought into focus the need to systematically address the environmental and social impacts of projects. It hosted the first IFC advisory services team, and introduced ground-breaking initiatives in community-driven development, microfinance and disaster response, which have become models for countries across the globe. The Indonesia program also has a long history of working with development partners by mobilizing bilateral financing and expertise in order to enhance and leverage traditional WBG products and pilot innovative development solutions. This platform, built in partnership with the Government of Indonesia (GoI) and the private sector, underpins the implementation of the proposed engagement areas and delivers innovation which would be impossible using only traditional World Bank Group sources of financing and products.
6. This CPF, covering the period FY2016-20, builds on the previous Country Partnership Strategy (CPS) FY2013-15 and the long-term operational and policy-based support that has been a hallmark of WBG’s engagement with the GoI for the past decade. For example, the continuation of the World Bank’s long record of support to Government in economic policy making will remain important. At the same time, the CPF, guided by the twin goals of eliminating poverty and enhancing shared prosperity, brings a greater degree of selectivity by improving the focus on consistent public policy reforms to shore up Indonesia’s economic fundamentals, helping create a more enabling environment for the private sector that is the main source of growth and creation of new jobs, and making growth sustainable and shared more widely. Addressing the country’s massive infrastructure gap will play a prominent role in the CPF and will require not only a scaling up of financing but also better implementation and forward-looking management of Indonesia’s natural resources. Inequality of opportunity, which accounts for one-third of total inequality, will have to be addressed through attention to the prioritization of spending, the accountability for service delivery particularly for health and education, and attracting the private sector. 7. Drawing on the lessons from the CPS, the CPF will be more selective in its scope and will deploy new ways to deliver ongoing programs and engagements. For example, in the area of governance, the SCD highlights the centrality of getting reform priorities right, refocusing public administration on better implementation, and building in more accountability and transparency at the local government level to ensure better service delivery. To respond to these needs, the CPF has mainstreamed support for governance and anticorruption in each of the engagement areas and supporting beams to maximize opportunity for impact. Examples where WBG looks to strengthen the governance framework within engagements include technical assistance for streamlining of business licensing which reduces the costs of doing business whilst decreasing the opportunities for corruption, land administration reforms to support the more efficient delivery of infrastructure and better manage the landscape and improved financial management systems to support increased Government transfers to the village level to ensure more transparency and better service delivery. Focusing the reform agenda around making more space and a more reliable and enabling environment for the private sector, in all our engagements, is another way for this CPF to focus better WBG reform efforts. The importance of working at the subnational level, particularly in support of health and education, will be strengthened through a dedicated local service delivery engagement area that seeks to make improvements at the point of delivery. Inclusion and shared prosperity, including social protection for the most vulnerable, will be a recurrent theme across the CPF engagements.
8. As described in the SCD, enhancing prosperity for the bottom 40 percent rests in large part on shifting the economy to a more productivity-based growth path which can create more and better jobs. This suggests that the CPF requires a heavier emphasis on infrastructure and on an enabling environment
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for the private sector. Therefore, the CPF concentrates on areas of infrastructure necessary to better connect the economy, provide sustainable energy, help the country reap benefits from the rapid pace of urbanization and improve equality of opportunity through better access of the poor and vulnerable to essential water and sanitation services. For growth and job creation, improvements to the business environment could be transformational. More consistent and less restrictive trade and investment regulations would help unlock private capital and increase the opportunities for the public and private sectors to work together to improve implementation and fill the enormous infrastructure financing needs which cannot be addressed using public financing alone. A deepening of capital markets will likewise be essential to provide the finance to fill the infrastructure gap and invest in higher productivity sectors such as manufacturing.
9. The CPF will seek to maximize synergies across the WBG and take advantage of allinstruments in support of the CPF goals. Particularly because of its focus on infrastructure investment, and the need to support the private sector as the engine of job creation, the government has requested that WBG bring the balance sheets of all three institutions— IBRD, IFC and MIGA—to bear, along with technical assistance and policy reform support. The decision of Government in 2015 to support direct lending by multilateral organizations to state-owned enterprises (SOEs) with sovereign guarantee has increased the opportunity for increased financing especially in infrastructure. In other areas, WBG’s value may be primarily through knowledge services and the sharing of global experience most often supported through partnerships with other bilateral and multilateral development partners. Moreover, engagement areas will move at different speeds. Some, particularly those that build on long-running engagements such as in water, can be expected to have greater impact on the ground within the CPF period. Others will require a longer time horizon to produce results. The potential for impact, rather than the time horizon for visible outcomes, will be an important filter in this regard. There are risks to development outcomes which might arise from the difficulty of maintaining reform momentum in the face of political economy, governance and macroeconomic challenges amongst others. The sequencing of interventions within engagement areas, and the ability to adjust during the CPF implementation period, will be important tools for mitigating risks.
10. The proposed CPF would require a larger financing package than the previous CPS, althoughWBG’s total contribution would still be a very small percentage of overall borrowing needs. The CPF, if fully implemented, could entail a scaling up of IBRD lending of an indicative amount of about US$7.5 billion, new IFC engagements of up to US$3 billion in equity, loans, guarantees and mobilization and a more active MIGA program that expands the use of political risk and non-payment guarantee instruments. For the IBRD, lending would average some US$1.5 billion per annum although actual lending volumes will depend on country demand, choice of instrument, overall performance during the CPF period and IBRD’s financial capacity and demand from other Bank borrowing countries. Should these volumes be reached, Indonesia would potentially reach and then exceed the $16.5 billion threshold above which a 50 basis point surcharge on incremental exposure would apply. Indonesia would potentially also reach the Single Borrower Limit (SBL) of US$19 billion towards the end of the CPF period depending on the actual commitments. Given that about one-third of the indicative lending pipeline is fast disbursing development policy lending and possible P4R, it will be necessary for the government and the Bank to take stock of the situation with regard to the SBL midway through the CPF period and consider possible measures to continue IBRD financing under different scenarios within the limits of the SBL. The experience of other large IBRD borrowers will be helpful in this regard.
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II. COUNTRY CONTEXT AND DEVELOPMENT AGENDA
II.1. POLITICAL AND SOCIAL CONTEXT
11. Indonesia is the largest economy in Southeast Asia, the tenth largest in the world as measuredby purchasing power parity and the only Southeast Asian member of the G-20. With a GDP per capita of US$3,510 (current prices), Indonesia has emerged over the last decade as a vibrant middle-income economy with growing regional and global influence. With a population of over 250 million, it is the fourth most populous in the world and the world’s largest Muslim majority country, with a constitution that embraces democracy and pluralism. Its people come from some 300 distinct native ethnic groups speaking over 700 languages and dialects and live on some 6000 islands amongst an archipelago of some 17,500 islands. Indonesia has the most volcanoes of any country in the world and is plagued by a number of natural hazards that include earthquakes, volcanic eruptions, tsunamis, floods and droughts. The island of Java, where 58 percent of the population lives, is the world’s most densely populated island. Eleven Indonesian cities have over one million inhabitants. The largest is Jakarta with approximately 10 million people. Except for Medan in Sumatra, the four other cities of over 2 million people, are all located in Java.
12. Following the historic elections in 2014, President Joko Widodo began a five-year term inOctober 2014. The presidency is the highest executive office, with authority to appoint the cabinet. The People's Consultative Assembly (MPR) consists of a 560-member House of People's Representatives (DPR) and a 136-member Regional Representatives' Council (DPD). After more than three decades of the Soeharto regime’s centralized authority that ended in 1998, Indonesia is today one of the world’s most decentralized countries, with elected local governments in 34 provinces, 511 districts/cities and some 72,000 villages.
13. The election of President Widodo, who in less than 5 years went from small city mayor toGovernor of Jakarta and then to the President of the Republic, was widely viewed as a reformist victory. But the challenges facing the new Administration were great. It was faced with the urgency of a fundamental economic transition necessitated by the need to adjust to the end of a 10-year commodity boom, to implement long-standing structural reforms and to tackle endemic corruption. The new administration implemented bold energy subsidy reforms within weeks of taking office. Maintaining reform momentum, however, is challenging and will require unified positions within government and with parliament. Long-standing special interests can be expected to stand as counter forces to the reform efforts.
II.2. GROWTH, POVERTY AND SHARED PROSPERITY
14. The past decade saw robust economic growth, as Indonesia benefited from a boom incommodity exports, increased investor confidence and capital inflows and a young population. Rapid growth in China, India and other emerging economies translated into rapid increases in demand for commodities that created a boom in Indonesia from 2003 to 2011. Benchmark international prices for coal, crude palm oil, rubber and crude oil—all important export commodities for Indonesia—rose threefold between 2000 and 2010 in real terms. As a result, terms of trade and net exports increased sharply, investments recovered to pre-1997 Asian financial crisis levels, and rising household incomes significantly boosted private consumption.
15. A key feature of Indonesia’s commodity boom was the rise in the (largely non-tradable)services sector reflecting in part a sharp appreciation of the real exchange rate (RER). The services sector, broadly defined, contributed an average 3.3 percent to total GDP growth against 1.8 percent for industry and 0.6 percent for the primary sector in 2003-12. The expansion of the services sector is associated with the appreciation of Indonesia’s RER, following more than two decades of overall sharp depreciation, a period during which investments in manufacturing export industries boomed. In contrast, the appreciation of the RER
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in 2002-12 led to a decline of investments flowing into these sectors and a rise of investments in domestically-oriented sectors, chiefly services. There is also evidence that the liberalization of retail trade in 1998, telecoms from 1999 and air transport in 2004 contributed to the rise of investment and growth in these sectors.3 Between 2001 and 2010, the share of transport and communications, financial services and retail trade, and hotel and food services in total foreign investment flows almost doubled to an average of 63 percent of GDP in 2010. A large part of the services sector is composed of micro, small and medium-sized enterprises which typically are a large source of employment for youth and women. The MSME sector contributed around 57 percent to GDP and 47 percent of total employment.
16. Since 2012, Indonesia has been experiencing the expected macro-fiscal effects of commodityprice declines in a resource-driven economy. The prices of key export commodities in net terms peaked in 2011 and had dropped by about 57 percent by September 2015. This sharp decline in export commodity prices, coinciding with a rapid increase in oil imports, sharply reduced Indonesia’s trade surplus and led to the opening of a significant current account deficit for the first time in 15 years. On the fiscal side, softer export commodity prices, combined with lower production of oil and gas and revenues, increased fiscal pressures through 2014. Government nominal revenues growth dropped from 22.7 to 7.7 percent. At the same time, due to high crude oil prices until mid-2014 and a sharp depreciation of the rupiah in the second half of 2013, government spending on energy subsidies increased significantly. Facing both external and fiscal pressure, the government needed to adjust its policy setting and focus on maintaining macroeconomic stability.
17. Indonesia’s macro policies have been significantly adjusted since mid-2013. Bank Indonesia(BI), the country’s central bank, tightened monetary policy up until November 2014 (a cumulative increase of 200 basis points), contributing to a halving of credit growth, before easing its key reference interest rate by 25bp to 7.25 percent in February 2015. At the same time, in order to avoid a decline in foreign reserves, and to help reduce the current account deficit and make it easier to absorb possible external shocks, BI kept the exchange rate flexible. In the second half of 2013, the rupiah depreciated by 26 percent. The rupiah has continued to trend lower against the US dollar by about 17 percent in the year to September 2015. However, US dollar strength has been broad-based and Indonesia’s domestic prices have increased at a relatively faster pace.
18. The fiscal sector has also had to adjust to the effect of lower oil and gas revenues and highenergy subsidies to support macro-fiscal stability. Faced with the challenge of slowing revenues and mounting energy subsidies, the government increased domestic fuel prices by an average 33 percent in June 2013. However, much of the fiscal savings from this reform was lost by the end of 2013 due to the sharp depreciation of the rupiah. The fuel subsidy thus kept increasing, reaching Rp 246 trillion in 2014. In November 2014, the new government decisively increased fuel prices by 30 percent. This was followed by the complete removal of the subsidies for gasoline and the capping of subsidies for diesel through a new market-based price determination formula.
19. During this period, financial sector stability remained a priority of government. Given thedominance of banks over capital markets, and the overall smaller size of the Indonesian financial system relative to its economy, financial stability is predicated on deepening and broadening the system further, to better cushion global economic shocks as well as intermediate funds and manage risks for the country’s growth needs. Lending is constrained by structural impediments to mobilisation of longer-term sources of funds outside of banking’s short term deposits (most deposits are 1-3 month term only). This has created maturity mismatch risk as the country’s infrastructure funding needs to expand, adding upward pressure to existing non-performing loans as well as sectoral concentration in bank lending exposure. Foreign investment in Indonesian financial markets increases the complexity of mitigating risks to external shocks. Bank Indonesia has encouraged hedging of forex liabilities of the private sector but more data and risk management of these instruments the
3 See, for instance, Dharmawan, Gusti, Ngurah, Irwan (2012). The Effect of Air Transport to Economic Development in Indonesia. Erasmus University of Rotterdam, Erasmus School of Economics.
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risks associated with currency volatility will be required as their use increases will impact inflation, foreign currency debt servicing and economic growth. Risks associated with the coordination of financial sector regulation, regulatory uncertainty, and data transparency are being addressed with integrated risk assessments and supervisory models, a stronger bank resolution process and capacity building. 20. The cumulative impact is that Indonesia’s GDP growth has been slowing since 2012. Weaker global commodity prices and demand, and tighter domestic financing conditions, have weighed on the economy, with fixed investment growth roughly halving since 2012 (up 4.1 percent in 2014) and exports contracting slightly (a 1 percent decrease in 2014 from 13.6 percent growth in 2011). The pace of consumption growth also slowed to 4.8 percent in 2014 from 5.6 percent in 2013. Consistent with slower output growth since 2012, net job creation has slowed to an annual average of 0.9 percent, only just enough to keep the share of working age Indonesians in employment stable at 62.6 percent (based on the most recent two labor force surveys conducted in August 2013 and 2014). Poverty reduction has also been slowing, with the official poverty rate4 falling by an average of only 0.3 percentage points per annum since 2012, compared to relatively larger average annual declines of 1.0 percentage point between 2007 and 2011. The March 2015 poverty rate was 11.22%, effectively flat compared to the March 2014 rate of 11.25%. The extreme poverty rate based on the international poverty line of PPP $1.90 per day is estimated by the World Bank to be 8.3% for 2014. 21. Indonesia is facing significant economic and social development challenges. As noted above, poverty in Indonesia more than halved from 24 percent in 1999 to 11 percent in 2014, using the national poverty line (Figure 2.1). This progress is in line with other high performing EAP countries since the Asian financial crisis (Figure 2.2). But further progress is proving stubborn and lifting the “hard core” poor permanently out of poverty will require greater focus and new programs. Economic growth and agricultural expansion, for example, have not translated into improved nutritional outcomes over the past 10 years. In terms of geographical distribution, poverty rates are highest in eastern Indonesia (30 percent in Papua) and lowest in Kalimantan, a resource-rich and low-density region. Poverty rates are also highest for households living in and on the edge of forests and amongst those living in coastal areas. But all areas are impacted even relatively well-off Java and Bali, which account for about 60 percent of the total population, are home to just over half of Indonesia’s poor.
Figure 2.1: Evolution of official poverty rate, 1996-2013 (Percent of population)
Figure 2.2: Change in poverty rates 2000-12*, Indonesia versus EAP countries (international poverty lines, percentage point)
Source: PovCalNet. International poverty line of $1.90 per person per day, 2011 PPP *Thailand and Malaysia are excluded because poverty was less than 5% in 2000.
4 As published by Statistics Indonesia using a set of provincial poverty lines. The national average poverty line for March 2015 was
IDR 330,776 per person per month.
0
5
10
15
20
25
2002 2004 2006 2008 2010 2012
Urban Rural
0.01.02.03.04.0
Annualized poverty rate reduction, Indonesia versus EAP countries
(international poverty lines)Food price shock
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22. The relative success in reducing extreme poverty masks the extreme vulnerability of thebottom 40 percent of households which are not officially poor but are prone to falling back into poverty. Together, the poor and the vulnerable amount to 38 percent or very close to the WBG’s “bottom 40 percent” of the population (Figure 2.3). The ability of the poor to permanently exit poverty is proving extremely difficult. In 2008, only 25 percent of the poor escaped poverty within two years, and those who did manage to exit remained vulnerable to falling back into poverty. While productive employment was a significant factor, so was the precariousness of ‘prosperity’ amongst the bottom 40 percent, where shocks prompted by food price increases, illness or loss of a job often put families back into poverty (Figure 2.4). In 2009, 15 percent of the poor escaped poverty, but were poor again in 2010 (Susenas data).5 Not only can shocks prevent those with jobs from escaping poverty, but fear of risk—and a lack of insurance and savings mechanisms to effectively deal with risk—can lead people to avoid what they perceive as risky but potentially higher return activities.
Figure 2.3: Close to 40 percent of the population was poor and vulnerable in 2012 Percent of the population (percent) and number (million)
Figure 2.4: 75 percent of poor households fail to move out of poverty or vulnerability over a three-year period Status in 2010 of households who were poor in 2008 (percent)
Source: Susenas data, World Bank staff calculations Source: Susenas data, World Bank staff calculations
23. Gender differences in terms of job status imply that women tend to be more vulnerable thanmen.6 Women constitute the majority of the self-employed and unpaid family workers, making them more susceptible to personal and financial insecurity. The gender wage gap in Indonesia is larger than in other countries in East Asia, with women earning about 70 percent of what men earn, in part because female workers tend to have less secure terms of employment and are more likely to be self-employed, doing unpaid family work or working in the informal sector. Compared to men, women have a 24 percent higher probability of working in the informal sector7. However, in the formal sector, the unexplained gender wage gap is only around 10 percent, which is relatively low by world standards. Women-owned SMEs are mostly self-employed by necessity. Indonesia ranks 108 out of 142 countries for women’s economic participation and opportunity sub-index according to the World Economic Forum’s Global Gender Gap Report for 2014. Indonesia’s social assistance programs do favor female-headed households (FHH), but because FHH typically have a sole income
5 The World Bank has recently conducted a study of risk and risk management in Indonesia. Drawing primarily on original qualitative evidence from four rural and peri-urban sites, this study explores in-depth the risks faced and risk management practices adopted at the household and community level in Indonesia. Preliminary findings show that the rural poor and near-poor face a wide variety of risks and shocks. Among these, food price and health shocks are the most important but they also arise from the high cost of participating in customary lifecycle rituals.
6 The World Bank’s World Development Report (2011) framework for analyzing gender issues emphasizes four dimensions: endowment, opportunities, voice and agency, and cross-cutting dimensions. Gender disparities in endowment (e.g., education and health) have been significantly reduced as shown in the next section.
7 World Bank Indonesia Jobs Report (2010).
0
5
10
15
20
25
30
35
40
45
Poor: 29m
Vulnerable: 65m
0
20
40
60
80
100
Moved out ofpoverty andvulnerability
Moved out ofpoverty butremain vulnerable
Moved out ofpoverty but fallback in
Always Poor
12
earner, usually with children to care for and support, female-headed households are more vulnerable to shocks and their poverty rates are more volatile. 24. Indonesia’s increase in inequality is amongst the highest in the EAP region over the past decade. Between 2003 and 2010, consumption of the bottom 40 percent grew at 1 to 2 percent annually, while that of the two richest quintiles grew by about 6 percent. Consequently, the Consumption Gini coefficient, an indicator of inequality, rose from 30 to 42 over this period, amongst the fastest widening of inequality in East Asia. Education and ownership of assets are the key factors explaining inequality in Indonesia. Inequality increased because members of affluent Indonesian households have access to higher education and assets, such as real estate and stocks that allowed their wealth to grow rapidly. With better education, they are able to find better jobs and benefit from the increasing “skills premium” in the labor market. Compared with workers with a primary education or less, those with junior secondary education enjoy a 20 percent premium, those with senior secondary education a 40 percent premium, and those with tertiary education earn double.8 Individuals from poor households, however, lack financial assets and can only improve their income through work. Most of the jobs created in Indonesia since 2001, and indeed most current jobs, are in low productivity sectors, resulting in low real labor incomes. In addition, these workers have limited access to formal worker protection making them more vulnerable to shocks. 25. About one-third of inequality in recent years can be traced back to circumstances that children are born into, or develop soon after—inequality of opportunities. The latter can be seen by comparing a child born in Jakarta to non-poor parents who have at least high school education with a child born in a rural area of Papua or Maluku to a poor family with little education. The former has only a 6 percent chance of lacking proper sanitation, compared with 98 percent for the rural child. These differences extend across all other indicators of opportunity, such as access to clean water, housing, quality health services and education. The combination of unequal access to quality services to build human capital and the rising skill premium in the labor market, has resulted in an unequal access to good jobs and ultimately increasing inequality.
II.3. RECENT ECONOMIC DEVELOPMENTS
26. GDP decelerated to below 5 percent in the first half of 2015 and private consumption expenditure, Indonesia’s growth engine in recent years, is also slowing. Despite gradually improving global economic conditions, the balance of international risks to Indonesia’s outlook remains on the downside. Persistently low global commodity prices mean that, in the near term, net commodity-exporting countries are likely to face both weaker economic activity and deteriorating fiscal balances relative to the period before 2012 when global commodity prices were rising. In addition to growth and fiscal risks, commodity-dependent economies may need to manage risks arising from further currency depreciation. (See Annex 2: Key Macroeconomic Indicators.) 27. Return to higher economic growth depends on stable fiscal management, successful implementation of the government’s ambitious infrastructure development plans, and on further improvement of the business environment to reignite private investment. Support to the economy from the fiscal sector is impeded by weak revenues and low capital spending year-to-date. On the expenditure side, allocations to priority infrastructure projects should be safeguarded so that these can move ahead. This requires a fiscal deficit that is higher than the 1.9 percent of GDP planned in the 2015 revised budget, while still within the 3 percent of GDP which is Indonesia’s legal limit. According to a revised revenue outlook in July 2015, the Ministry of Finance expects the 2015 deficit to reach 2.2 percent of GDP. On the revenue side, the government has already introduced important measures such as electronic tax return submission and improvements in the income tax audit strategy. There is significant scope to optimize the tax regime, improve corporate income taxation, and revise value-added tax (VAT) exemptions to increase equity. At the same time,
8 World Bank (2014): “Hard Choices”, Indonesia Economic Quarterly, World Bank, July, 2014
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improving the business environment hinges on greater consistency and simplification of regulations that define the functioning of markets, including firm entry, competition, recruitment of workers, and trade.
28. Underinvestment in infrastructure over the past decade has left Indonesia with a largeinfrastructure gap. Total infrastructure investment—that is, investment by the central government, subnational governments, state-owned enterprises and the private sector—has remained unchanged at only 3 to 4 percent of GDP for a decade. This is half of what it was in Indonesia before the 1997 Asian financial crisis, and well below China’s 10 percent and India’s 7.5 percent share in GDP. This underinvestment has impacted infrastructure in every sector of the economy—from rural irrigation to urban housing—and across the entire archipelago.
29. Under-investment in infrastructure has manifested itself into extreme problems of congestionand poor logistics performance, power shortages, lack of clean water and sanitation and other basic services, which together have seriously undermined productivity growth, competitiveness, poverty reduction efforts, and the health and well-being of the people. Moreover, even where public spending has increased, improvements in outputs and outcomes have generally been below expectations. In roads, for example, a six-fold increase in spending resulted in only 20 percent more kilometers of roadway. Implementation of large-scale infrastructure is impeded by bottlenecks ranging from difficult land acquisition procedures, inefficient procurement, planning, and project management to chronic issues of sub-standard regulation and corruption.
30. The infrastructure gap is also a result of the underdeveloped role of the private sector inproviding infrastructure, both in terms of quantity and quality of investment. This situation is a result of several factors including: a complex and non-transparent regulatory framework for implementation of infrastructure projects, an unclear framework for Public-Private Partnerships making it extremely difficult to mobilize private funds for investment, a lack of appropriate financial instruments and markets to support a flow of private financing to infrastructure sectors, and the lack of mechanisms to appropriately manage risks.
31. GDP growth in Indonesia declined to 4.7 percent year-on-year in the first half of 2015, drivenmainly by low levels of fixed investment but also by a softening of growth in private consumption. Low fixed investment growth continues to drive Indonesia’s slowdown, contributing only 1.4 percent yoy to GDP growth in the first quarter, which is about half of the average quarterly growth contribution in 2010-2012. At the same time, private consumption expenditure growth, which had previously remained resilient, is also moderating, to 4.7 percent yoy in the first half. Since its share in total GDP expenditure is about 55 percent, weakening private consumption is likely to weigh heavily on overall growth. In addition, the sizable decline in nominal consumption growth to 7.6 percent yoy in the first quarter, from 9.4 percent in the previous quarter and from 12.3 percent a year ago, has had a negative impact on the government’s VAT receipts.
32. This slowdown in economic growth, as well as lower global oil prices, helped narrow thecurrent account deficit to 1.8 percent of GDP in the first half of 2015. The government’s ambitious plans to ramp up infrastructure spending, if successful, could push up overall investment and increase Indonesia’s current account deficit when growth strengthens. Running moderately-sized current account deficits appears sustainable for Indonesia, especially if supported by policy measures to boost international competitiveness and to raise the efficiency of given levels of investment in generating growth, jobs and incomes. Securing a resilient mix of external financing sources, including foreign direct investment (FDI), and mobilizing more domestic saving, by improving access to finance and strengthening the domestic financial sector, can also reduce Indonesia’s vulnerabilities to volatile global financial market conditions and maintain financial stability which is critical for economic growth.
33. Macroeconomic management has remained prudent and broadly appropriate to mitigaterisks and facilitate the adjustment of Indonesia’s external balances to weaker exports and more challenging external financing conditions. Most recently, in September 2015 global asset and commodity
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markets experienced further volatility triggered by uncertainty about China’s economic growth prospects amidst renewed steep falls in Chinese equity prices. Global equity, commodity and emerging market currency markets also fell sharply, but have subsequently generally recovered ground in volatile trading. Indonesian financial markets were also affected, although not disproportionately in the context of the global sell-off. In the currency market, while the rupiah’s depreciation of 17 percent against the U.S. dollar between January and September poses challenges, the rate of depreciation does not stand out globally9. As part of a proactive financing strategy in the face of ongoing weakness in commodity revenues and uncertain market conditions, the Ministry of Finance requested the disbursement of the US$2 billion Program for Economic Resilience, Investment and Social Assistance in Indonesia DPL DDO (PERISAI) on September 21, 2015. Further depreciation of the rupiah, tightening financing conditions, downward pressures on commodity prices, and the potential impact of El Nino are among the major risks that the government will have to manage going forward. 34. Looking ahead, five mega-trends will shape economic prospects which policy reforms can turn into powerful drivers of growth and long-term economic transformation. These factors are Indonesia’s demographics, the urbanization trend, commodity prices, developments in China, and the potential impact of climate change.
DDemographic factors. Indonesia has abundant labor. Between 2013 and 2020, the working-age population will increase by 14.8 million, reaching 189 million from the current 174 million. Today, 50 percent of the population is under the age of 30. This increasingly educated and IT-savvy youth is an asset that can be used to boost overall productivity and economic growth. With the right policies in place to utilize this labor, Indonesia could be poised to benefit from a demographic “dividend” before the population starts to age in 2025-30.
Rapid urbanization. Indonesia’s urban population is increasing at an annual pace of about 4 percent, and by 2025, 68 percent of the population is projected to live in urban areas, compared to 52 percent in 2012. As income rises and existing large metropolitan areas such as Jakarta and Surabaya become saturated, the demand for consumer durables, shopping space and housing will increase significantly in smaller cities. Connecting these cities and their inhabitants to rural areas, metropolitan areas and the global economy will be essential to attracting firms and achieving shared prosperity. Empirical evidence shows that urbanization supports growth and poverty in Indonesia only if it is in the presence of adequate infrastructure.
Global commodity prices. The softening of commodity prices since 2011 poses challenges for Indonesia in the short term, as seen in their impact on Indonesia’s trade balance and revenue collection, but it offers an opportunity to enhance the quality and diversity of investments in Indonesia. Over the past decade, high commodity prices tilted investment incentives in favor of the resource sector and non-tradable sectors (e.g., the real estate sector) against manufacturing and other tradable sectors. Going forward, lower commodity prices should increase the relative profitability and attractiveness of manufacturing and can help Indonesia develop its industrial base. With reforms to reduce the constraints faced by manufacturing firms, weaker commodity prices can be a blessing in disguise. Moreover, given the role of resources in GDP, lower commodity prices are shifting the political economy in favor of reforms that would improve natural resource management. For example, lower prices are an opportunity to make more sustainable the growth trajectory of the palm oil industry.
Developments in China. China’s rapidly rising wages present Indonesia with potential in regaining a comparative advantage in labor-intensive export sectors. China’s nominal wages have grown by an annual average of almost 15 percent since 2001 which, together with slowing productivity growth in low-skilled sectors in recent years, has seen Chinese unit labor costs grow by almost 70 percent since 2005 according to the Economist Intelligence Unit, 2011. This pressure, combined with slower overall economic growth as China rebalances, is likely to prompt investors to look beyond China’s coastal areas, including to ASEAN countries.
9 For example, compared with the 30.9 percent depreciation of the Brazilian real.
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CClimate Change: The impact of the changing global climate bringing higher temperatures, changes inprecipitation, flooding and rising sea levels are expected to build in Indonesia over the next 20 years, withespecially negative consequences for the poorest people. These impacts will be felt in food and watersecurity and on all those who are dependent on climate-sensitive livelihoods such as fisheries andagriculture. Adapting to these threats, together with measures to mitigate the country’s contribution toGHG especially through the burning of peat forests, will be major challenges running throughout thecountry’s development choices.
II.4. LESSONS FROM CPS COMPLETION REPORT
35. The lessons of experience, including those from implementation of the previous CPS, havebeen taken into account both in determining the areas in which the WBG will work as well as in how the CPF will be implemented. These lessons have also been considered in identifying the risks to the CPF. In particular, the FY13 – FY15 CPS Completion and Learning Review (CLR) highlighted the importance of the following:
Political economy drivers, as much as technical constraints, impact the likelihood and directionof reform. Understanding these drivers and the ability of WBG interventions to influence them areimportant considerations in determining the scope of WBG support. Government ownership,commitment, resources and champions for reform agendas are major determinants of success. Whetheror not there is the ability to engage with the right level of government and whether there is a counterpartwith the responsibility and accountability to deliver should be considered in choosing engagement areas inthis CPF.
In a country as large and diverse as Indonesia, a comprehensive approach has the best chance ofimpact. Indonesia is the largest economy in Southeast Asia with a heterogeneous society, wide disparity inincome and an extraordinary degree of geographic dispersion. Therefore, a small or one-off interventionis not likely to have a meaningful impact unless it can be brought to scale. The CPS has successful examplesof such impact including PNPM Urban, PNPM Rural, PAMSIMAS and DAK, and IFC’s advisoryprograms in palm oil and corporate governance, all of which started as smaller engagements with WBGsupport and went on to become platforms for delivery of services nationwide. It also means emphasizingthe WBG value proposition in the combination of financial products, knowledge services andimplementation support, including through the strategic use of country specific trust funds, and employingthe synergies amongst IBRD, IFC, and MIGA in large or complex engagement areas as relevant. This CPFlooks to use this approach as much as possible.
The ability of government to implement reform and projects will be one of the key indicators ofsuccess during the next CPF period. This is particularly true for programs that are heavy ininfrastructure, institution building and long-term reform challenges such as PPPs. Experience from thecurrent CPS has shown that shortcomings in project readiness—particularly in terms of advanceprocurement, land acquisition, safeguard requirements, sponsor commitment, andownership/commitment—contribute to delays in implementation, partial achievement of results andsometimes failure. This CPF is cognizant of these issues. The government and WBG have agreed toaddress implementation constraints upfront in order to improve success rates.
Governance challenges remain a key impediment to eliminating poverty and enhancing sharedprosperity. Experience from the implementation during the CPS, as well as the results of the SCD,indicates that efforts to tackle the governance challenges that get in the way of development success shouldbe an integral part of future engagement areas. As explained in the SCD, this could entail among otherthings focusing on supporting effectiveness of public institutions, supporting improved service deliveryand responsiveness and accountability to the citizens at the local level. Similarly, governance and qualityof sponsors are needed for well-functioning private sector companies and projects. These focus areas, alongwith the mainstreaming of appropriate governance support within engagement areas, should help maximize
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opportunities for success.
The WBG could seek opportunities to pursue a more holistic approach for greater impact on Indonesia’s natural resource and environmental challenges in partnership with government counterparts, private sector players and civil society. This CPF, working with a new government, provides an opportunity for the WBG to develop a more comprehensive engagement if aligned with the new Government’s policy direction and reform commitment.
The future results framework should try to address some of the difficulties in measuring a Country Program that combines long-term policy reform objectives and more immediate project level results. Government and WBG are aware of the M&E challenges associated with operationalizing this CPF both on the project and the aggregate level. These were considered in the preparation of the Results Framework (Annex 1). In addition, greater attention to individual project level M&E and assessing the adequacy of the results framework will be considered during the course of implementation and adjusted in response to realities in the field.
Greater selectivity: Cumulatively, the lessons from the previous CPS support the need for this CPF to be more selective in its design, scope and results. While the government’s development agenda is necessarily broad and the country’s needs are great, the WBG must have fewer engagements if it is to bring scale and impact through the program over the next four years. Difficult choices up front and a willingness to correct course during the CPF period are required.
III. PROPOSED WBG PARTNERSHIP FRAMEWORK
III.1. BUILDING THE PARTNERSHIP STRATEGY
36. Within the country’s economic and social context and the lessons of experience, the CPF uses three selectivity filters to improve focus and maximize the chances for transformational change over the medium and longer-term. The first filter is that the CPF supports the priorities and the ambitions of the government to build a more prosperous, equal and economically independent Indonesia. The second focuses on the pathways identified in the SCD to address the constraints to eliminating extreme poverty and boosting shared prosperity. The third relates to the potential for impact and WBG’s comparative advantage. Finally, the strategy was refined in the light of consultations with a broad range of stakeholders including the private sector, development partners, and CSOs. Each is described in the sections below (see also Error! Reference source not found.).
Figure 3. 1: CPF Strategy Emerges from the Intersection of Three Selectivity Filters
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III.1.a. Government’s Development Agenda: Selectivity Filter One
37. The priorities of government are broadly set out in the Mid-term Development Plan (RPJMN2015-2019), which was issued in early 2015 reflecting the current Administration’s strategy to meet Indonesia’s development challenges. The government’s vision is focused around the realization of a self-reliant nation that maintains its unique national characteristics whilst existing in mutual cooperation and respect within the global community. The main paths by which the government looks to achieve this vision are: (i) a strengthened national security that protects the sovereignty of the nation, sustains its economic independence by securing its maritime resources, and is reflective of Indonesia as an archipelago state; (ii) achieving a country that is more equitable, democratic and law-abiding; (iii) improving the quality of life for all Indonesian people within a more advanced and prosperous economy; (iv) making the nation more economically competitive; and (v) preserving Indonesian culture and identity.
38. The RPJMN serves as a framework for the medium term development plan and aims toimprove the quality of human life and address disparity and inequality. The main objectives of the RPJMN are human being and community development, narrowing the income gap through increased productivity and poverty reduction measures, and increasing development without environmental degradation. These objectives are channeled through three development dimensions: (i) human development (ii) main sectors, and (iii) territorial and equity dimensions as shown below (Figure 3. 2)
Figure 3. 2: Government of Indonesia’s RPJM Development Strategy
39. Government is keen that the CPF is drawn from the RPJMN of 2015-2019, particularly that allthe areas of engagement are aligned with the three development dimensions and the supporting ‘necessary conditions’ described above. GoI appreciated that the interim FY13-15 CPS mirrored the former RPJMN’s pro-growth, pro-jobs, pro-poor, and pro-green pillars which helped align the WBG’s program results against those expected by the RPJMN 2010-2014. Acknowledging that it was necessary for the World Bank
QUICK WINS AND OTHER CONTINUED PROGRAMS
HUMAN DEVELOPMENT DIMENSION
1) Development for human beings and community2) Effort to increase welfare, prosperity, productivity should not lead to create a wider gap;3) Main focus is addressed to increase the productivity of middle-lower society, without preventing, hampering,
lowering, and reducing the flexibility of major actors to continue to be an agent of growth;4) Development activity should not harm and decrease the environmental support and the balance of
ecosystem.
DEVELOPMENT NORM
MAIN SECTOR DEVELOPMENT
DIMENSION
TERRITORIAL AND EQUITY DIMENSION
NECESSARY CONDITION
Health
Education
Housing
Mental/Character
Food Sovereignty
Energy power Sovereignty
Maritime and Marine
Tourism and Industry
Among Group of Income
Among region: (1) Village, (2) Borderland. (3) Outside
Java, (4) East Region
Law Certainty and Enforcement
Security and Peaceful Politic and DemocracyGovernance and
Bureaucratic Reform
3 DEVELOPMENT DIMENSIONS
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Group to use selectivity criteria in the light of the expansive needs set out in RPJMN 2015-2019, the government supported the process whereby the CPF engagement areas and supporting beams are those where WBG has a comparative advantage, are fully aligned with the development dimensions in the RPJMN, and in those cases where IBRD financing would be provided, Bappenas, line ministries and IBRD were in agreement on project choices and were reflected in the government’s “Blue Book”. Government and WBG are particularly interested to ensure that the CPF results framework objectives and indicators are obtainable, monitorable, and will assist government evaluate the success of its partnership with WBG. 40. In addition to the priorities set out in the RPJMN, WBG has consulted and discussed widely with senior policy makers including the President and Vice President, ministers and government officials, private sector leaders and civil society on which priorities would most benefit from WBG support and the best ways for achieving results. These discussions have taken place since early 2014 and have helped the new government refine its own thinking on some of the key challenges facing the country in terms of growth and equality of opportunity. Government has shown particular interest in understanding how other countries have approached similar development issues and challenged WBG to bring together financing, global knowledge and the highest quality expertise to deliver solutions. Likewise, the private sector looks to WBG not only for equity, loans and guarantees, which IFC and MIGA can provide to individual firms, but to the provision of evidence-based advice and support on a range of regulatory issues and practices that hold back private sector growth and its ability to operate effectively and efficiently. Before the drafting of the CPF, the formulation of the SCD was informed by more than a year of outreach with universities, media, and civil society at large on Indonesia’s development challenges and priorities. Consultations on the Bank’s approach to safeguards, procurement, and gender, as well as the Client Survey (see Box 3.1 below), were also opportunities for in-depth discussions of WBG programs and priorities which helped inform the design of the new CPF. 41. In addition to the partnership with government, extensive consultations on the draft CPF were held with stakeholders within government, the private sector, civil society and development partners. Formal sessions were held in locations in Jakarta and in other large metropolitan areas as well as through the internet. (See Annex 7 for details). In summary, there was support for the WBG’s engagement in Indonesia and a desire for WBG assistance in knowledge services, the sharing of global expertise, capacity building and financing in support of some of government’s key development objectives. Whilst the direction of the CPF and the areas of engagement resonated broadly with those consulted, there were specific areas which were identified as of being of particularly high priority by the different groups:
a. Civil society participants emphasized concern for the unmet needs and the inequality of access suffered by people living in the forest, coastal, and remote areas. It was felt that central government-led programs were not able to reach the neediest and that WBG programs should also prioritize interventions at the local government level and support holistic strategies to reduce inequality, especially in these remote areas. It was felt that access to energy and improved infrastructure could likewise be strengthened by bottom-up approaches including empowering villages. CSOs expressed strong support for improving the quality of local services, particularly teacher quality and access to quality healthcare. CSOs looked to WBG to provide necessary data on poverty and inequality and to promote its use in policy-making.
b. Leaders of the private sector expressed concern about the lack of proper education and skills of the Indonesian workforce. They stressed the need for government to improve the educational system to deliver the specialized skills needed in a modern economy. They also highlighted the lack of investment in essential infrastructure including power generation and transmission and the slow progress in the regulatory reform necessary to unlock private capital for investment. The manufacturing sector pointed out the need to improve Indonesia’s competitiveness, particularly compared to regional competitors, through better infrastructure, logistics, skills and incentives (including tax).
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c. Development partners supported the analysis in the SCD and the ambitiousness of theengagement areas defined by the CPF. They looked to WBG to lead the way on some of the mostdifficult development challenges where progress had been disappointing over the last several yearsparticularly in the area of environment, implementation of large scale infrastructure, and the businessclimate. They agreed that the mode of delivery was essential and that filters regarding impact,accountability and government ownership would be determinants of success. They expressed interestin working closely with WBG in coordinating the assistance provided by development partners,supporting the implementation models where bilateral grant assistance either through World Bank trust fund or in parallel programs were leveraged by WBG investment projects and implementation support.They proposed a realistic results framework to assess progress against an ambitious program.
Box 3.1: Client Survey Result
III.1.b. Development Challenges and Approaches Identified in the SCD: Selectivity Filter Two
42. The SCD identifies the pathways for the elimination of extreme poverty and increasing sharedprosperity through the creation of better jobs, improving equality of opportunity, and helping Indonesia manage its vast endowment of natural resources in a sustainable way (Error! Reference source not found.). It identifies six reform priorities in this regard including: (i) shifting the economy to a productivity based growth path, (ii) boosting investment in infrastructure and energy, (iii) improving the business environment, (iv) improving the delivery of local services and infrastructure including health and education, (v) strengthening and expanding the social assistance programs and (vi) better management of natural resources. Delivering on these priorities will require continued focus on reforms to support and grow the private sector, greater financial resources generated by improvements in medium term tax and non-tax resource mobilization and allocation, and enhancing implementation capacity, inter-governmental coordination and cooperation, as well as tackling governance challenges.
Figure 3. 3: The Three Pathways Identified in Indonesia SCD
PATH 2Economic
growth
Taxes& Gov. Spending
Job Creation
Service Deliveries, Opportunities for all
Natural Resource Management (e.g.
forests, coastal resources)
PATH 1
PATH 3
Poverty Reduction & Shared prosperity
From March to May 2015, the WBG invited a wide range of stakeholders to participate in a country opinion survey. Participants were drawn from government, bilateral and multilateral agencies, private sector, CSOs, media, academia and parliament. A total of 316 out of 1089 invited stakeholders participated in the survey.
Views of the WBG are relatively positive and have improved since the last survey, which took place in 2012. Stakeholders report that the Bank is effective in its collaboration with government, citing positive developments in responsiveness, and staff accessibility. Perceptions of the WBG’s relevance and how realistic its program is both increased significantly.
The survey reported that participating stakeholders viewed governance and education as development priorities, followed by rural development, transport and corruption.
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43. PPath 1. The private sector is the main engine of economic growth but the government plays a critical role by devising and implementing policies that encourage private sector participation and through the provision of key public goods. Three key factors have constrained more rapid growth and creation of jobs in the higher productivity sectors over the past decade: (i) large infrastructure gaps which led to a shortage of electricity, poor irrigation to support agriculture, serious congestion on roads and ports, lack of public transport, and high logistics costs which discourage manufacturing; (ii) skills gaps, with more than 60 percent of Indonesian firms reporting that skills are a constraint; and (iii) a weak business and financing environment, with investment and trade regulations that are generally restrictive, often inconsistent, and uncertain. Realizing return on investment will depend on how projects are implemented with efficient and cleaner procurement, attention to planning and project management, and tackling chronic issues of corruption. For example, the top constraint highlighted by upstream oil and gas companies is uncertainty about government policies and the timeline for reform. Government policy support to attract private investments both in infrastructure as well as in inclusive business models will also be important, in order to leverage private sector’s efficiencies and innovativeness in tackling poverty and increasing inclusion. 44. Path 2. The second pathway to poverty reduction and shared prosperity is service delivery and opportunity for all. The provision of decent housing, transportation services, water and sanitation, and quality education and health care is constrained by a combination of weak tax collection leading to suboptimal levels of public expenditure, poor public spending mix and service delivery challenges at the central and subnational levels. Over the past decade, large energy subsidies have crowded out public spending on infrastructure and social programs, reducing shared prosperity. In 2012, spending on energy subsidies accounted for more than one-fifth of the central government’s budget, more than three times the allocation for infrastructure such as roads, water, electricity and irrigation networks, and three times government-wide spending on health. In agriculture, public spending has increased substantially in recent years, but has gone to private input subsidies (e.g., fertilizer, seeds, credit) rather than public goods (e.g., irrigation schemes, research and extension). Moreover, where spending has been increased, improvements in outputs and outcomes have been disappointing. Most of the public funding for basic services and infrastructure like education, health, water and sanitation is decentralized. Decentralized spending on these services has increased substantially but their quality remains low and unevenly distributed across regions. Opportunities for the private sector to help fill the gap in water, sanitation, healthcare and education remain limited due primarily to regulatory hurdles. Going forward, spending public money in the right areas and doing so efficiently and effectively will be crucial in providing equal opportunities for all citizens through increased access to quality health and nutrition services, education and infrastructure. 45. Path 3. The special nature of poverty in forest and coastal areas suggests that pathways 1 and 2 need to be supplemented by a third one: natural resource management. Indonesia is endowed with one of the most valuable forest capital wealth and the largest mangrove and sea grass ecosystems in the world. Yet poverty is highest in forest and coastal areas. Six million out of the thirty-two million people that live in remote forest areas are poor. Similarly, poverty rates among the 140 million people that depend on marine and coastal resources for livelihood is high.10 Poverty reduction efforts in these areas are constrained by the challenges imposed by remoteness, low population density and dispersed locations as well as weak governance leading to an overexploitation of natural resources. Over the past decades, the combination of rapid deforestation, overexploitation of resources, peat fires, floods and landslides has threatened the livelihoods of people living in forest and coastal areas. At the same time, in areas where there are population concentration, vulnerability to disaster and climate risk continued to be high with around 40 percent of Indonesia’s population living in areas at risk from multiple hazards.11 For the country as a whole, better management of natural resources is
10 While the poverty rate of this population scattered around the archipelago is not available, it is deemed high. According to the
Ministry of Maritime Affairs and Fisheries, about 90 percent of coastal fishers live in poverty. 11 See World Bank, Natural Disaster Hotspots, A Global Risk Analysis (Washington DC: Disaster Risk Management Series, 2005), table
1.2.
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necessary to reduce poverty and share prosperity for these populations and to ensure that Indonesia’s vast resources are used in a way that brings greater benefit to all Indonesians.
III.1.c. Impact and WBG Comparative Advantage: Selectivity Filter Three
46. Political economy realities, the capacity of the World Bank Group operating with finiteresources (financial and human), and the depth and breadth of development challenges in a country as large and diverse as Indonesia requires an additional filter to those of government and SCD priorities. Therefore the potential for impact and WBG’s comparative advantage is used as a third determinant in deciding not only the pillars of the strategy, but choices of activities within each area. The opportunity to be impactful requires the ability to address issues at the right level of government, receptivity of the private sector and its willingness to engage in selected areas, working with empowered counterparts and other stakeholders and a clear request for WBG support. Impact is not a time bound concept. Engagement areas, and various interventions within each, will move at different speeds. Some, particularly those that build on long-running programs such as in water and urban slum upgrading, can be expected to have substantial impact on the ground within the CPF period. Others will need a longer time horizon to bear fruit. In practice, this would mean that the quality of the engagement—and therefore the potential for impact—rather than the time horizon for visible outcomes, should be a determining factor. In addition, the World Bank Group must have a comparative advantage and the capacity, including the requisite financing and other development tools, as well as human resources and global knowledge, to deliver high quality solutions in a timely manner. Introducing this filter requires that difficult trade-offs be made, that some important areas are left to others, at least in the near term, and that WBG resources be handled whenever possible for maximum impact.
III.2. PROPOSED PARTNERSHIP STRATEGY
47. Together the three filters have led to the development of a CPF strategy with an objective tooperationalize WBG support to the GoI to eliminate extreme poverty, generate prosperity and share this more widely amongst all its people. As depicted in the figure below (Figure 3.4), the proposed WBG program has been organized around six engagement areas which are supported by two beams.
48. In line with the SCD and government’s top priorities, infrastructure development featuresprominently within the engagement areas of the proposed CPF. This is justified given that reducing the infrastructure gap would help (i) alleviate the constraints that infrastructure bottlenecks impose to competitiveness, growth and creation of jobs; (ii) support the delivery of services including health and education and (iii) provide inclusion and connectivity across the country’s vast archipelago. Even with this infrastructure emphasis, WBG resources will form a small portion of overall need. Investment of over US$100 billion a year will be required over the next five year period to close the infrastructure gap. Of this, the state budget, including foreign borrowing, is expected to finance about one-third, with the remaining needing to come from the private sector and from SOEs. Through a package of loans, equity and targeted TA, the WBG will aim at increasing privately financed infrastructure (including those with partial or full private sector financing or benefiting from a government guarantee) and through demonstration projects which could help jumpstart the market.
49. To organize WBG engagements in this broad area of infrastructure, Indonesia’s own systemsand organizational structures are used. In Indonesia, the development of strategies, national programs and policy formulation in all development areas is the responsibility of the central government. However, with decentralization, the delivery or execution of most national development programs is the primary responsibility of subnational governments (Provinces, Regencies (kabupaten), municipalities (kota) and villages). There are some cases where the delivery of programs is still largely the responsibility of the central government level via line ministries (housing, irrigation and dams, water and sanitation, national roads, tourism) or SOEs (maritime and ports, energy). Therefore, to respond in a way that is best aligned to our client, one engagement is associated with national platforms and one with local governments. Two areas—energy and maritime and logistics—are
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separate engagement areas given their top priority by government and that underinvestment, institutional challenges, and operational inefficiencies in these sectors are the chief bottlenecks to growth, competitiveness and creation of more productive jobs in the economy as a whole. 50. In addition to infrastructure, the pathways to the twin goals and priorities of government are addressed through three additional engagement areas and two supporting beams. Challenges to equality of opportunity, especially for health and education, are addressed at the ‘point of delivery’ in the “Local Service Delivery” engagement. Natural resource management is addressed under the sustainable landscape management engagement. Supporting improved revenue collection and more efficient and better targeted spending outcomes is under “Collecting More and Spending Better”. There are two supporting beams. Leveraging the Private Sector and Inclusion help provide the necessary underpinnings for efficient and effective delivery of all the engagement areas and ensure that outcomes have the desired focus and impact on creating jobs, eliminating poverty and promoting inclusive growth and prosperity.
Figure 3. 4: CPF Strategy Emerges from Applying Selectivity Filters
51. Each of these engagement areas and supporting beams are described in the sections below.
III.2.a. Engagement Area 1: Infrastructure Platforms at the National Level
INFRASTRUCTURE PLATFORMS AT THE NATIONAL LEVEL
At the national level engagement, we will seek to work in those sectors where we can have impact through ‘platforms’ in partnership with government and development partners to reach scale, and where relevant, the private sector. This will most likely concentrate on the following sectors:
Water and sanitation Irrigation and dams Affordable housing Integrated tourism
This engagement links with SCD Pathway 1 Job Creation by addressing one of the biggest constraints to growth and the creation of high productivity jobs and Pathway 2 Service Delivery and Opportunity for All particularly by addressing the shortfalls in decent housing, transportation, water and sanitation.
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52. IInfrastructure Platforms at the National Level Infrastructure involves those sectors where thecentral government, mostly through the Ministry of Public Works, has responsibility for policy and/or implementation, where government or the private sector have expressed a strong interest in working with the World Bank Group and where supporting or expanding ‘platforms’ in partnership with government and, where relevant, the private sector can make a meaningful impact. The CPF makes a distinction between delivery at the local and national level not so much because the geographical coverage of the projects are different, but mainly because the delivery model is different and therefore so are the bottlenecks and solutions. While there remains the possibility to work in other sectors during the CPF period if conditions change, it is currently expected that the WBG engagement at the national level will be concentrated in water and sanitation, irrigation and dams, housing and integrated tourism development.
53. Water and sanitation. The RPJMN specifically sets an ambitious target of eliminating slumsand providing universal access to water and sanitation (100-0-100 target), including the end to open defecation, by 2019. WBG proposes to directly support several expanding and new national-level programs. These include the Community-Led Water and Sanitation Program (PAMSIMAS III), the National Slum Upgrading Program (NUSP) and the National Urban Water Supply Program (NUWSP). The role of WBG would be to help establish regional water supply systems which will increase water sources and production capacity, as well as encourage regional collaboration amongst local governments for a more effective and economically viable service delivery mechanism. Similarly, work is planned in urban wastewater management and a solid-waste program for serving metropolitan areas. The WBG’s involvement in all these programs is designed not just to fill the financing gap, but to assist the Ministry of Public Works and Housing in setting up well-designed platforms of delivery which also strengthen the capacity of local government, supported by strong monitoring and evaluation systems. IFC is considering to support private sector companies providing water and sanitation services in select locations, where the concessions have been granted in a transparent manner and the firms provide services in sustainable and socially responsible ways. In addition, IFC is also considering assisting select municipalities in structuring and bidding out waste-to-energy power projects for private sector participation. Of the national platforms, this area of the engagement has the strongest links to local government implementation and the expected results are explained further under Engagement Area 4.
Box 3. 2: Using a Platform Approach to Deliver Clean Water and Sanitation Nationwide
54. Irrigation and dams. Under the RPJMN 2015-2019 the government has set ambitious goals forthe modernization of irrigation infrastructure including rehabilitating 3 million hectares of irrigation channels and constructing 1 million new hectares of irrigation channels. GoI plans to build 49 new dams in the next five years in addition to the 16 dams which are currently under construction. Within these ambitious targets, WBG’s engagement would focus on using IBRD resources to rehabilitate existing schemes, with complementary R&D and extension services, and enhancing user participation to improve the quality of irrigation services, better maintain the infrastructure and support a more diversified pattern of production to boost farmer incomes and nutritional outcomes. At the same time, IFC would assist the Ministry in identifying irrigation dams which can be upgraded to also generate power and, where appropriate, help bid out some of
Beginning in 2008, WBG has been helping GoI address the serious challenges of providing water and sanitation to Indonesia’s rural population. This assistance evolved into the formation of a national platform (PAMSIMAS) which has extended access to sustainable water and sanitation services to approximately 8 million Indonesians to date. Within this CPF period, the PAMSIMAS platform provides the means of transforming Indonesia’s ambitious national goal of “100-0-100” into a reality. Through the platform approach under this CPF engagement area, WBG technical assistance and implementation support, provided primarily through Australian trust fund financing, together with IBRD lending, are the catalysts for a much larger financing envelope from government’s own budget which allows PAMSIMAS to reach national scale. It is expected that within the first year of the CPF, additional financing from the IBRD of some US$300 million could be matched by approximately US$1 billion of government financing to provide access to sustainable water to an additional 10.5 million Indonesians and sanitation services to an additional 7.5 million Indonesians by the year 2020.
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these projects as PPPs to bring in private sector participation which has been missing in development and operations. 55. HHousing. The government has made reducing the housing backlog and delivering affordable housing an explicit policy priority. With the Satu Juta Rumah (One Million Homes) initiative, launched in April 2015, the administration has set an ambitious target of delivering one million homes annually to meet new household demand and to address the housing deficit. WBG will aim to work both through the private and the public sector to support the provision of affordable housing through a mix of lending and technical assistance on both the supply and demand sides including encouraging private sector financing of affordable housing projects, as well as to support to financial institutions in extending mortgages.
Table 3. 1: Indonesia ranks low in key aspects of tourism competitiveness Indonesia Tourism Competitiveness Rankings, 2015 Ranking out of 141 countries
Environmental Sustainability 134 Safety and Security 83 Health and Hygiene 109 Air Transport Infrastructure 39 Ground and Port Infrastructure 77 Tourist Service Infrastructure 101 Price Competitiveness 3 Human Resources and Labor Market 53 Natural Resources 19 Cultural Resources 25
56. Integrated Tourism Development through Infrastructure, Institutions and Skills. Indonesia is endowed with spectacular and extensive natural and cultural resources which make tourism potentially one of the most important sectors for job creation. Yet Indonesia lags well behind its neighboring countries in exploiting its competitive advantage. Indonesia attracts about 9 million international visitors annually compared to over 25 million in both Malaysia and Thailand. If it could attract 20 million tourists a year by 2019, as is the Government’s target, Indonesia could significantly reduce its current account deficit by earning an additional US$21 billion in tourism generated foreign exchange. Attracting an additional 10 million tourists would create some 700,000 new tourism jobs, many for women and youth. In addition, for every job directly created in Indonesia’s tourism sector, nearly two jobs are created indirectly, through supply chain impacts, or induced through the additional spending by those newly employed12] Indonesia could take advantage of these opportunities in the tourism sector if it could address some key constraints: (i) poor tourism infrastructure including access, quality of facilities, and environmental sustainability; (ii) institutional bottlenecks, lack of public-private and cross-ministry/agency coordination, and (iii) insufficient skills to provide a full range of tourism experiences in a profitable and sustainable manner. WBG is proposing to support Indonesia with a comprehensive approach, focusing on priority ‘hub’ destinations to start and later expanding to more sites as part of a national tourism program. The program would draw on IBRD, IFC and MIGA resources, together with other development partners, to support the development of sustainable tourism destinations via a sequenced process of policy and planning coordination, development of infrastructure, promotion at the national and local level and skills development. It would have particularly strong links to the private sector including private sector investments possibly with support from IFC and MIGA financial products as well as
12 Calculations based on 2013 international tourist receipts per tourist, according to World Economic Forum Travel and Tourism
Competitiveness Report 2015. For every US$1 million in Travel & Tourism spending, 198 jobs are supported (67 direct, 84 indirect, and 47 induced), according to WTTC 2015 Indonesia.
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services to support local communities in delivering quality experiences, including SME financing and skills development needed to create a competitive tourism-based economy.
57. Proposed development outcomes for this engagement area include:Increase access to water irrigation and dam safety
The number of people benefiting from improved irrigation and dam safety.Area provided with improved irrigation and drainage services
Increase access to affordable housing Number of low-income households with access to affordable ‘core starter’ public housing unitsNumber of households with access to affordable housing through credit-linked down paymentsubsidies
Development of integrated tourism development Number of integrated tourism destinations establishedNumber of integrated tourism master plans prepared
III.2.b. Engagement Area 2: Sustainable Energy and Universal Access
SUSTAINABLE ENERGY AND UNIVERSAL ACCESS
Over US$50 billion investment deficit, 60 million people with no dependable access, limited success usingrenewables for generation.GoI has committed to:
Reduce/target energy subsidies to improve efficiency of resource allocationExpand accessIncrease share of renewable energy to 23 percentIncentivize industrial enterprises to convert to energy efficient technologies.
WBG’s engagement will use a full set of interventions including private sector investment, lending, DPLs,knowledge services to:
improve operational efficiency and reliability of services through transmission and distribution, pumpedstoragesupport renewable energy and low carbon developmentincrease access to Modern Energy Services
Support improvements in governance, competitiveness and efficiencyThis engagement links with SCD Pathway 1 Job Creation by addressing one of the biggest constraints to growthand the creation of high productivity jobs and Pathway 2 Service Delivery and Opportunity for All particularlyin its access agenda.
58. Developing the energy sector is at the top of the government’s priorities and is identified inthe SCD as one of the major bottlenecks to growth, shared prosperity and human capital formation. Chronic underinvestment and subsidies have left Indonesia with a power deficit and, with demand continuing to increase at an annual rate of about 8 percent, government has projected that the country will need at least 35 gigawatts (GW) of new generation capacity together with associated transmission and distribution capacity over the next five years. Moreover, with an electrification ratio of 84.3 percent of the population, Indonesia lags behind neighbors like Thailand, Vietnam and China which have achieved universal access. Government is looking to simultaneously increase generation capacity to meet demand and assist growth, substantially increase the share of renewables in the energy mix, and provide universal access to all Indonesians.
59. The power sector in Indonesia is dominated by the state-owned power utility PLN that ownsand operates 39.3 GW of the 51.6 GW of installed generating capacity, as of 2014, making it arguably the biggest power utility in the world. Independent Power Producers (IPPs) represent a much smaller 7.9 GW of installed capacity, and the balance is from captive generation. Investment in energy will be critical for
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supplying an expanding economy and for increasing coverage to 60 million Indonesians without reliable access to electricity. With energy contributing almost a quarter of total CO2 emissions, reducing the heavy reliance on fossil fuel sources to meet rising demand is both central to Indonesia’s development plan as well as to support the global climate change agenda. To improve the efficiency and sustainability of the energy sector, constraints to greater investment by the state-owned enterprises (SOEs) and the private sector will need to be overcome. 60. The sector until recently was characterized by subsidized electricity tariffs, and high fiscal transfer to PLN. These subsidies, projected at 0.6 percent of GDP in 2015, are unsustainable at current levels, and the government has embarked upon a tariff rationalization effort aimed at targeting subsidies only to low income consumers. Additional energy sector challenges include an increase of coal in power generation imposing environmental costs on the economy and on society and energy efficiency programs that have yet to gain significant traction. Coal accounted for about 52 percent of the generation fuel mix at the end of 2014 and, without support to the renewable sector, could increase to some 60 percent by 2019. 61. Addressing these large challenges will require new business models and changes to the role of the government, SOEs, and the private sector. For instance, PLN alone is expected to finance up to US$40 billion in generation (5 GW), transmission and distribution. The remaining 30 GW is to be designed, built, financed and operated by the private sector. Past delays come from a string of regulatory uncertainties and ambiguities, and excessive administrative processes. The government is making efforts to streamline and coordinate processes. For instance, it has created a Performance Management Unit (PMU) under the Ministry of Energy and Mineral Resources and an inter-ministerial Project Management Office (PMO) under the President and Vice President to drive delivery of the program. Additionally, it has committed to a number of long term measures around (i) reducing, and better targeting, energy subsidies to improve productive and resource allocative efficiency; (ii) expanding electricity access; (iii) scaling up renewable energy deployment by 2025; and (iv) mobilizing a partnership program on energy conservation to incentivize industrial enterprises to convert to energy efficient technologies. In the last two years, GoI have been increasing electricity tariffs. In addition, they have undertaken or initiated a number of measures to improve the speed and efficiency by which they make investments in generation, transmission and distribution and to improve the ability to attract private sector investors, including reducing permits and red tape associated with licensing. 62. Against this background, WBG’s engagement will focus primarily in four areas, drawing on all members of the World Bank Group (see Box 3.3 below) and a range of instruments from trust-fund financed technical assistance to investments with the private sector. • Energy Infrastructure: improving operational efficiencies, reliability of services through among
others transmission and distribution, pumped storage • Renewable energy and low carbon development: accelerating geothermal and other renewables
complemented with sustainable development of hydropower and the gas sector • Access to modern energy services, potentially through grid extension, possible off grid solutions, modern
cooking solutions • Sector governance, competitiveness and efficiency, particularly through the DPL series, project delivery
TA. 63. A recent Presidential decree has provided the basis for direct IBRD lending to PLN with sovereign guarantee. Along with this instrument, WBG support to the sector would comprise a mix of financing instruments, such as Investment Project Financing (IPF), Development Policy Loans (DPLs), Program for Results (PforRs), IFC equity and loans for private sector projects, and a combination of MIGA’s political risk insurance and Non-Honoring products in the renewable energy sector. In addition, the program proposes to leverage Climate Technology Funding and GEF resources. Technical assistance and knowledge services will be funded primarily through Indonesia specific and regional trust funds and working with other development partners. Policy lending is expected to support reforms to improve the regulatory and implementation framework which in turn will make more productive public and private sector participation in renewable generation, gas, and increased electrification nationwide. The engagement will focus on moving the
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power and gas sectors toward a more secure and sustainable development path. Coal and nuclear generation will be specifically excluded, but more importantly, many elements of the program, including the proposed development policy lending, will help mitigate the risk of increasing the use of coal-fired power generation to meet fast-growing demand and achieve universal access to electricity.
Box 3.3: How One World Bank Group Can Help Deliver Sustainable Energy and Access
This engagement area illustrates well the successful model of collaboration across the World Bank Group organizations. The energy engagement area is an opportunity to increase sustainable generation, increase access and create an environment conducive to private investment and faster implementation in support of Government’s national goals. Building on a long history of interaction with the public and private sectors, this WBG engagement uses a diverse and sequenced set of development tools to deliver results. Starting with economic and sector work and dialogue with policy makers and other stakeholders, WBG helps identify the key physical and regulatory bottlenecks. This knowledge is then used to support substantive reform of the sector through a proposed IBRD financed Energy DPL which includes IBRD and IFC experts in the task team and is delivered in coordination with other development partners including ADB, KfW, AfD, and JICA in order to leverage IBRD financing. Such reform improves the impact of WBG lending for generation of renewable energy. A P4R is proposed to support enhanced PLN corporate governance, procurement and environmental and social sustainability which is necessary for PLN’s ability to increase access for the roughly 60 million people who are under-served. The reform efforts simultaneously improve IFC’s ability to come in with financing and syndications from commercial banks to support additional renewable generation (particularly geothermal and hydro), better transmission and access through investment of the private sector, while further improvements for both SOE and private sector operators can be supported through MIGA guarantees. Since IBRD financing will be increasingly constrained as Indonesia approaches its Single Borrower Limit (SBL), IFC and MIGA financing is an essential means for leveraging additional financing.
64. Together these elements are expected to create a more enabling environment for cleanerenergy (gas, renewables and hydropower) investments, which opens opportunities for displacing the use of coal fired power generation to meet fast-growing demand. At the same time, it should be recognized that improvements in the early years will be incremental, particularly in relation to large scale infrastructure and institutional and regulatory reform. Given the extensive political economy issues, gas sector development strategy reform, building incentives for investment and efficient service delivery will take time and will not always move in a straight line. As in other sectors, there is a long list of regulations that are to be issued, but the absence of implementing regulations may slow the pace of reform.
65. Proposed development outcomes for this engagement area include:Increase supply and access to energy
Number of households receiving improved access to reliable energyIncremental geothermal power installed capacity (MW)Incremental pumped storage installed capacity (MW)Incremental electricity sales of PLN (Gwh)Non coal (hydro, gas) power produced (Gwh)
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III.2.c. Engagement Area 3: Maritime Economy and Connectivity
MARITIME ECONOMY AND CONNECTIVITY
Investment gap in excess of US$50 billion. If logistics costs were on par with Thailand (16 percent vs 24 percent of GDP), Indonesia would save US$70 billion annually that would be available for more productive uses. The government made ‘Maritime Nation’ a pillar of its development agenda, but progress is delayed due to a lack of a coordinated response across regulatory, operational and investment aspects and overlapping mandates. Possible WBG interventions include a blend of investment lending, DPLs, possible IFC investment, MIGA guarantee and knowledge services to support:
creation of an improved regulatory and operating environment which supports investment by both public and private sectors port development and operation hinterland connectivity in port areas including land and air-based transport development of the blue economy.
This engagement links with SCD Pathway 1 Job Creation by addressing one of the main constraints to growth and the creation of high productivity jobs, Pathway 2 Service Delivery and Opportunity for All particularly in improving connectivity in eastern regions and Pathway 3 in providing infrastructure and regulatory environment to make use of natural resources, especially in coastal and marine areas and fisheries, more sustainable and the benefits more evenly shared.
66. Good connectivity is a vital prerequisite to supply domestic markets efficiently and to compete internationally. It is all the more important in an archipelago nation where the sea can become a tool of cohesion or a source of fragmentation and isolation. Good freight logistics—both in terms of speed and dependability—involve a wide range of elements including hard infrastructure and technology, good regulation and efficient operations and quality of human capital. In Indonesia, poor logistics act as both a drag on growth and a major contributor to inequality. The costs of logistics—moving goods around the country, as well as imports and exports in and out of Indonesia—is about 24 percent of GDP. Thailand, on the other hand, spends about 16 percent of GDP doing the same. For Indonesia, this difference amounts to some US$70 billion per year that could be used more productively. 67. Poor connectivity and logistics weighs most heavily on Indonesia’s poor. Especially in eastern Indonesia, which has the highest incidence of poverty, maternal mortality and childhood stunting, lack of connectivity to the rest of the country, as well as to the world, make it difficult to support a diversified economy despite the presence of vast natural resources. At present, eastern Indonesia cannot tap into the potential of shipping backload to make their products available in densely populated western Indonesia. Port-hinterland connections are also a major contributor to high logistics costs and uncertainty in the movement of goods. Basic commodities are frequently not available throughout the year. The poor state and unreliability of port-hinterland connections is particularly problematic given the shortage of cold storage facilities throughout the country partially as a result of energy shortfalls. This hampers the ability to maintain a cold chain for high value products such as fish and fresh produce. 68. But even in Indonesia’s biggest and richest population centers in Java and Sumatra, the time to reach and trade through ports is generally higher than in other major ASEAN countries. The movement of goods around the main ports of Jakarta and Surabaya, despite significant investment and professional port management, is frequently congested. The costs of bringing containers to the Jakarta ports from nearby industrial areas are about twice those in Malaysia although distances are similar. In the era of ‘just in time’ manufacturing, the inability to predict the arrival of imports or the ability to export, puts Indonesia at a significant disadvantage to other countries even those where labor costs are higher. Much of this problem is associated with connectivity. Roads which are the predominant mode of transport and land connectivity in
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Indonesia, accounting for 70 percent of freight ton-km and 82 percent of passenger-km, suffer from inefficient investment, poor quality and inadequate maintenance. The air freight industry provides a good example where a better enabling regulatory environment promotes trade internationally and domestically. But, air freight is the exception rather than the rule.
69. Indonesia’s marine and coastal natural resources are among the richest in the world, but thecountry is not benefitting in terms of growth, livelihoods and the environmental services which they provide. Moreover, coastal populations are disproportionately represented amongst Indonesia’s poor. Indonesia is the world’s second largest producer of wild-capture fish, accounting for 6.5 million tons produced in 2011, 60 percent of which was from small-scale fishers. FAO estimates that fishers, fish farmers and those supplying services and goods from marine and coastal ecosystems contribute to the livelihoods of 140 million Indonesian citizens. However, the sector is seriously underperforming, contributing only 3 percent to GDP, primarily through accelerated and largely unsustainable growth in aquaculture. Production targets for 2015-19 would be achieved through heavily polluting expansion of aquaculture and with unsustainable levels of wild capture fisheries output. Pollution entering marine and coastal ecosystems has spiked across the country and Indonesia is now the second largest contributor to marine plastics in the world. At present, of the 20 million tons of aquaculture and wild capture produced each year, only 5.6 million tons are processed post-harvest in Indonesia due to a poor investment environment and lack of necessary infrastructure, such as cold storage facilities and electricity. Seven of Indonesia’s 11 fisheries management areas are already fully exploited. In addition, government estimates that illegal, unreported, and unregulated (IUU) fishing results in upwards of US$20 billion lost revenue annually, compared with reported revenues from fisheries of only US$4 billion.
70. Recognizing these challenges, President Widodo, in his first days in office, made makingIndonesia into a ‘Maritime Nation’ a pillar of his development agenda. This has included initial attempts to address the problems of institutional coordination by creating a new Coordinating Ministry for Maritime Affairs that aims to bring together the various line ministries and agencies that are involved in ports, shipping, transport and fisheries. The RPJMN 2015-2019 presents a maritime strategy with substantial investments in ports infrastructure and hinterland connections as well as fisheries and coastal ecosystems and calls for improvement of port efficiency including targets for the reduction of dwell time in major ports in Indonesia. The government is preparing several Presidential Decrees on upgrading ports, building new ports and improving port efficiency.
71. Against this background, WBG’s engagement in this area would focus on a number of themost critical challenges where the government has requested our help. These include: (i) the creation of an improved regulatory and operating environment which supports investment by both public and private sectors; (ii) port development and operation; (iii) hinterland connectivity possibly including supporting improvements in roads and air-based transport; and (iv) support for the blue economy. These areas would be supported using a full suite of WBG financial and knowledge products to build synergies across the program and with government funded projects. A proposed Development Policy Loan would support the government in identifying and implementing a reform package to promote better maritime logistics, improve the climate for private and public investment and strengthen technical capacity for better policy making and implementation. Reimbursable Advisory Services and other knowledge products would be used to support the collection of data and evidenced-based policy making and to help prioritize investments. IFC is considering assisting Pelindo-II, an SOE, in identifying good PPP candidate: port projects in the eastern Indonesia corridor. This would help underpin expected investments by the Bank, IFC and MIGA in port construction and operations, air connectivity, and hinterland connectivity. WBG will also look to help integrate sustainable marine and fisheries natural resources into the overall maritime approach. It is expected that particular emphasis will be in eastern Indonesia and other lagging regions in line with government priorities and to promote shared prosperity.
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72. By working as a World Bank Group, we would draw on the various strengths of eachorganization to create synergies among the various interventions. As an example, it is expected that IFC could support port operators whilst the Bank leads in investment in port development, hinterland infrastructure and blue economy. IFC and MIGA could potentially support better air connectivity.
73. Proposed development outcomes for this engagement area include:Improve maritime logistics and connectivity
Reduction of container handling time in selected international and domestic terminalsReduction in travel time for selected links to ports
Improve fisheries management practices Sustainable fisheries management implemented in fisheries management areasPercentage health status of coral reefs in intervention areas improved
III.2.d. Engagement Area 4: Delivery of Local Services and Infrastructure
DELIVERY OF LOCAL SERVICES AND INFRASTRUCTURE
One third of income inequality can be traced to inequality of opportunity in access to health and educationservices and basic infrastructure such as sanitation. Half of GoI spending is at the local level where capacityand accountability are the weakest.Solutions lie in enhancing the way central, provincial, district and village government work together to deliverthese services.Eliminating extreme poverty and boosting shared prosperity in the longer-term would require improvingopportunities today particularly in terms of education, health and nutrition to ensure a healthy and productivepopulation in the future.This engagement will be organized around three pillars using investment and knowledge services:
Strengthening the decentralization framework to improve local service deliverySupporting the delivery of quality education and health services, water and sanitation in rural areas todirectly address inequality of opportunity.Supporting the sustainable urbanization of cities, particularly through infrastructure development.
This engagement links with SCD Pathway 2 Service Delivery and Opportunity for All in supportingimprovements in quality, access and accountability for health, education, sanitation and other infrastructureprovided through local governments.
74. Inequality of opportunity from birth accounts for a persistently high share of income inequalitylater in life. One-third of all consumption inequality in Indonesia is due to factors that are outside of an individual’s control. The most significant of these factors are differences amongst households based on parental education and, to a lesser extent, where they were born. Inequality of opportunities has remained high despite the significant gains in access to key services like health, education, water and sanitation. This is due to a combination of unequal access to quality services to build human capital, which leads to inequalities in child health and nutrition as well as skills, and the rising skill premium in the labor market, which results in increasing unequal access to good jobs and ultimately increasing inequality.
75. Rapid urbanization has not been the engine for reducing poverty and boosting sharedprosperity which it might have been had there been adequate investment in urban infrastructure. The urban population has been increasing at an average rate of 4.1 percent per year between 2000 and 2010 and already accounts for about half of the country’s population. Yet, for every 1 percent increase in urbanization, Indonesia achieved only 2 percent GDP growth, below the return to urbanization in other Asian countries like
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China, Vietnam and Thailand which, unlike Indonesia, have benefited from the economies of agglomeration. The number of urban poor is quickly catching up with the number of rural poor—currently, out of the 25 million extreme poor in Indonesia, 10 million live in urban areas—and inequality in urban areas is higher and increasing more rapidly than in rural areas.
76. Despite significant investments and gains in access, the quality of services is persistently lowand unevenly distributed across regions. The large regional disparities have less to do with levels of spending in these services then with ability of local governments to deliver.
EEducation services. Government spending has tripled in the last 10 years but little has changed in theclassroom. More than half of the teachers do not meet minimum competency levels, contributing to 40percent of 15 year-olds, mostly poor, performing below the lowest competency level in PISA-math. Thisranks Indonesia the second lowest country globally.
Health-related services. Government spends only 1.2 percent of GDP on health, the fifth lowest rateglobally. Moreover, this spending is not improving services to an acceptable level. No single public primaryhealth facility (Puskesmas) in the country is equipped with the mandated human resources and equipmentnecessary to provide basic health services. Some 41 percent of the population lacks access to safe water(down from 48 percent despite a six-fold increase in spending in the last seven years) and 35 percent of thepopulation practice open defecation. These realities contribute to persistently high rates of maternalmortality (190 deaths per 100,000 live births, below the MDG target of 102 maternal deaths per 100,000live births by 2015) and of child malnutrition (37 percent of under-five children are stunted).
Urban infrastructure. Government spending is insufficient to keep up with the degradation of local public assets which are already generally of low quality. To date, implementation of large-scale infrastructureinvestments have been slow. Together this has resulted in low access and generally poor quality of servicesin water, transportation (public transport services, if existent, are mostly provided by old and badlymaintained microbuses, three-wheelers, motorcycles and ordinary taxis), centralized sanitation (onlyavailable to 2 percent of the urban population) and sewerage (only present in 11 cities nationwide). Onlyhalf of urban roads are considered of ‘reasonable quality’. Private sector companies provide sometransportation services (motorcycle or car taxi services), but their participation in mass transit water andsanitation remains low.
77. Improving the quality of services requires overhauling the current system for delivery by localgovernments. In order to get to a future free of extreme poverty and one where prosperity is shared more widely, the inequality of access that exists today needs to be addressed. Indonesia’s big bang decentralization transferred the financing (about half of total government spending) and responsibility for the provision of most basic services to district governments. At the same time, most local governments do not yet have adequate capacity to deliver services, nor are they accountable for results to the central government or to their constituents. Therefore, solving the problems of service delivery and provision of local infrastructure require building the capacities of local government to deliver, moving towards a more performance-based transfer system, providing the tools for citizens to monitor local service delivery, as well as differentiated approaches for different types of regions. It also requires combining the current top-down approach to reform, whereby local government implement national policies, with more local focus which uses frontline services as the entry to develop solutions and working out ways to identify and align supporting interventions at each levels of government. Ultimately, improving local service delivery is about enhancing the way central, provincial, district, and village government work together to deliver results on the ground. There are some cases, particularly in disaster recovery, where good local governments and engaged communities have joined forces to deliver good services and infrastructure. This is evident in the success in rebuilding Aceh after the tsunami and in Yogyakarta where 300,000 houses in an area devastated by the eruption of Mt Merapi were rebuilt. But there are fewer examples in terms of health and education services.
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78. The World Bank engagement in local service delivery is organized around three pillars which would be supported through the use of both knowledge services and investment lending.
PPillar 1: Strengthening the decentralization framework to improve local service delivery. This pillar would focus on supporting efforts to establish a performance-based fiscal transfer system, strengthening the capacity of central government agencies to support and oversee the performance of local governments, strengthening the back-office functions of local governments to deliver local services and infrastructure, and developing tools for citizens to monitor local service delivery. WBG financial support would focus on the gradual roll out of performance incentives in fiscal transfers to local governments for priority sectors (infrastructure, health and education for example).
Under this pillar, IFC would help support private sector models of delivering some of the services. In several countries, including Indonesia, private sector healthcare providers (hospitals, diagnostic centers) complement the government to improve services for citizens. WBG would seek to support such models, as well as promote other inclusive healthcare models such as e-consultations through the private sector to ramp-up services especially to disadvantaged regions.
Pillar 2: Supporting the delivery of quality education and health services, water and sanitation in rural areas. The WBG would support the local implementation of national programs that provide performance-based funds and technical assistance to districts and villages in disadvantaged regions in order to ensure universal access to education and health-related services (including water and sanitation) that meet minimum quality standards. IFC would seek private sector models for utilizing new technologies to expand healthcare and education services to the base of the pyramid populations in remote regions.
Health service readiness for Universal Health Care (UHC) focuses on equipping Puskemas with the physical inputs and human resources needed to provide basic health services, particularly maternal and child health and nutrition services. WBG would support efforts to reduce child malnutrition through the improvement of relevant health services as well as the expansion of the National Rural Water and Sanitation Program (PAMSIMAS) which is referenced in Engagement Area 1. Further interventions in relation to malnutrition are included in the Inclusion beam detailed in Section III.2.h.
12 years of quality education for all focuses on ensuring schools meet minimum quality standards, teachers show basic competencies and school expansion is efficient.
Implementation of the 2014 Village Law. In the transition from the long-running community driven PNPM program, this intervention focuses on ensuring that an increased flow of financing to villages can be absorbed in a transparent, following the community focused process so that they are well used to fill gaps in infrastructure to complement investments by district. Within this context, attention would be paid to improving access for indigenous communities (specifically adat villages) by capitalizing on recent changes in the Village Law in the identification and outreach to these communities.
Pillar 3: Supporting sustainable urbanization. Given the scale of the problem, this pillar acknowledges the need for different approaches in various urban areas and seeks to have interventions focused around two types of local delivery areas: (a) very large metropolitan areas which provide a high percentage of national economic activity (Jakarta and Surabaya), and (b) rapidly urbanizing secondary cities.
a. Supporting Jakarta and Surabaya to become world class cities. These two cities are Indonesia’s
largest and face complex and unique challenges requiring a more “retail approach”. Both cities are examples of good local governments that can provide a demonstration effect to the rest of Indonesia. WBG would support the implementation of the reform programs already underway through a package of knowledge services (e.g. budget management and financing, PFM, investment planning, education, social protection) and financing (for infrastructure). IFC may support select urbanization
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infrastructure projects which are in natural monopolistic sectors and are being developed by municipalities/sub-national government agencies.
b. Supporting the sustainable urbanization of secondary cities. This would focus on key infrastructure sectors including: urban transport, water supply and sanitation, drainage, urban flood and disaster risk management, slum upgrading, solid waste management and urban pollution. Interventions would support national programs that provide results-based financial assistance and capacity building to cities to implement national policies and goals such as 100 percent access to water and sanitation as discussed under Engagement area One. While the focus of this engagement will be infrastructure development, WBG would also support efforts to improve social services, jobs and inclusion more generally for the poor in these cities. IFC will work with selected municipalities to assist them in corporatizing and in issuing municipal bonds and to bring private sector solutions to infrastructure investment when appropriate.
79. This engagement area represents a major enhancement and scaling up of WBG intervention. Previously, there had been relatively little support to the central government agenda to reform the decentralization framework. Likewise, past interventions have tended to focus on supporting sector-specific solutions when the root causes are most often associated with how national laws and guidelines for different services are actually financed, implemented and monitored by local governments. In other cases, previous WBG support was provided directly to communities, but with relatively little connection to local governments. In this new engagement area, the policy framework for improving local service delivery will cut across interventions while ensuring the synergy among sector interventions in the same geographical area. In all cases, the goal is to demonstrate reform across regions. 80. Proposed development outcomes for this engagement area include:
Improve local service delivery Number of DAK-financed physical outputs reported, verified, and meeting eligibility criteria in districts where the performance incentive is introduced
Improve access to basic services in targeted cities Increase in people with improved access to urban infrastructure and services in the targeted slums, disaggregated by gender Increase in households with new access to improved piped water services in targeted cities Increase in households with access to improved sanitation services in targeted cities Increase in household receiving improved solid waste management in targeted cities
Improve access to quality education and health related services in targeted rural areas Increase in percentage of mothers and children receiving maternal and child health services in targeted areas Increase in number of students enrolled in schools meeting minimum service standards in targeted areas, disaggregated by gender Increase in people having access to improved water services in targeted areas, disaggregated by gender Increase in people having access to improved sanitation services in targeted areas, disaggregated by gender
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III.2.e. Engagement Area 5: Sustainable Landscape Management
SUSTAINABLE LANDSCAPE MANAGEMENT
One fifth of Indonesia’s poor live in coastal and forest regions. Insecure access to land and over-exploitation and degradation of natural resources has a direct link to poverty in Indonesia as well as global impact in terms of climate change. Government has introduced some ambitious initiatives and regulatory change, but a piecemeal approach, weak capacity, and institutional and governance failures mean degradation of forests and peat areas continues unabated with increasingly devastating effect nationally and globally. This engagement will seek to change WBG approach from incremental to one that focuses on managing landscapes through improved spatial planning and land allocation to help shift the development trajectory through:
Support for design and implementation of programs to improve management and benefits of terrestrial natural assets. Support land management and spatial planning to address problem of dual land management system With private sector, create demonstration models of sustainable development of natural resources Disaster management, mitigation and preparedness
This engagement links with SCD Pathway 3 Natural Resource Management.
81. Indonesia is one of the world’s largest GHG producers, primarily due to high rates of deforestation and land degradation. Based on emissions data through 2011—the last year for which comprehensive global emissions data are available—Indonesia is the fifth-largest emitter when its land-use change and forestry (LUCF) emissions are included in its profile and the eighth-largest emitter when these emissions are excluded.13 The vast majority (62 percent) come from LUCF, with emissions from this sector increasing 65 percent in absolute terms since 1995. The activities primarily responsible for this are deforestation and peat degradation, most recently associated with the expansion of palm oil plantations.14 Greenhouse gases from mangrove and sea grass destruction are a potentially important, but not currently measured, source of emissions. Emissions from energy (26 percent), the country’s second-largest source, are significantly less important but growing fast, increasing 80 percent in absolute terms since 1995. Future energy emissions are likely to continue rising due to planned expansion of coal-fired power generation and a slower uptake of renewables. Overall, transport (7 percent) and waste (3 percent) are much smaller contributors to GHG emissions.15 82. Prone to drought, floods, landslides, and sea-level rise, Indonesia is susceptible to all major climate-related risks except cyclones. In the near term, Indonesia is at risk of higher temperatures, changes in precipitation patterns, and flooding caused by a combination of land use change and rising sea levels, in turn negatively impacting agriculture and food and water security. Government risk analysis suggests that about 61 million people in 315 districts and municipalities live in areas with medium-to-high risk of flooding. Climate change will exacerbate the already high exposure of the population to flooding and, in the longer term, risks to lowlands will intensify as sea-level rise could increase by 35 cm by 2050 and by 75 cm by the end of the 21st century.16 Failure to adapt to a changing climate is expected to have substantial economic costs. The Asian
13 Based on 2011 data, Indonesia is behind China, the United States, India and Russia when land use change and forestry (LUCF)
emissions are counted and the eighth largest GHG emitter when LUCF are excluded (behind China, the United States, India, Russia, Japan, Brazil and Germany). Data source: CAIT Climate Data Explorer, 2015, Washington, DC: World Resources Institute. Available online at: http://cait.wri.org. CAIT data are derived from several sources. Full citations are available at http://cait.wri.org/faq.html#q07. LUCF data come from FAO 2014, FAOSTAT Emissions Database and CO2 emissions from fuel combustion data come from ©OECD/IEA, 2014.
14 National Council on Climate Change, 2010. 15 Based on 2012 CAIT data. 16 WACLIMAD, February 2012. “Thematic Paper 2: Impact of Sea Level Rise on the Lowlands.”
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Development Bank estimated in 2009 that by the end of this century, climate change could cost Indonesia, the Philippines, Thailand and Vietnam between 2.5 percent and 7 percent of GDP annually.17 For Indonesia, increased climate-related disasters will come on top of the roughly US$1.5 billion already spent annually on post-disaster recovery. 83. Failure to adapt to a changing climate is hurting Indonesia’s poor the most. Over 110 million people in about 60 Indonesian cities are exposed to negative impacts of climate change. The greatest impacts fall on the poorest people, specifically those who are dependent on climate-sensitive livelihoods, such as agriculture, fishing, and forest activities. The poor lack the assets and resilience to easily adapt to the impacts of climate change. In this context, Indonesia has been an early proponent of climate adaptation and resiliency action. 84. As set out in the SCD, the quality of natural resource governance and management will influence how effectively Indonesia’s growth strategy lifts people out of extreme poverty and boosts shared prosperity. The special nature of poverty in forests areas requires an approach that works with management of natural resources. The remoteness, low population density and dispersed community locations warrants an approach that recognizes the linkages between the fate of people dependent on these areas and natural resource activities and changes in ecosystem services resulting from deforestation, overexploitation of resources, floods, landslides, and natural disasters. 85. An estimated 20 percent of income of rural populations stem from agriculture and other natural resource based livelihoods. A key element of lifting the extreme poor out of poverty requires permanent sustainable management of natural resources. Inadequate land-use and access rights leave local populations at a disadvantage in negotiations with large businesses seeking access to the land held or controlled by these people. In addition, Indonesia is a mega-biodiversity nation, supporting two of the world’s 25 biodiversity hotspots. Economic development needs to ensure sustainability of this rich natural asset base. 86. To address poverty in Indonesia requires focusing on all regions in the country and maximizing the use of the country’s abundant natural resources and beauty for the good of all Indonesian people. Unsustainable land use practices, including palm oil and timber plantations, mining and agriculture, and poorly planned infrastructure projects have led to land and forest degradation, increased air, soil and water pollution and scarcity and conflict. Although agriculture and forest plantations, specifically pulp and paper and palm oil activities, result in significant economic benefits for the country and its citizens (for examples the palm oil subsector provides livelihoods to between three and five million people and contributes 4.5 percent to GDP), many companies still expand into sensitive areas such as primary forests and peat lands, and related economic benefits are not shared equitably. Although there are employment benefits, forest dependent communities suffer from marginalization and increasing lack of access to natural resources due to insecure land rights and lack of legal rights to traditional and customary forests on which they depend. Eradicating poverty and boosting shared prosperity will require accelerating land registry and beginning the challenging task of improving natural resource management in order to make agriculture, forestry and extractive industries more sustainable. 87. Insecure access to land and resources is a major cause of poverty in rural communities. The major impediment to providing security of tenure is the complex and inconsistent legal framework, and the institutional arrangements which support a dual system of land administration, separately administering forest and non-forest lands. There are an estimated 110 million land parcels eligible for land registration, of which only 40 million parcels are officially registered, and just 12 million officially surveyed and titled. In addition, around 15 percent of the land mass is not accounted for, and the institutional responsibilities for its public administration are unclear.
17 Asian Development Bank (ADB) (2009), “The Economics of Climate Change in South East Asia: A Regional Review.”
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88. The main underlying causes of deforestation and inefficient land use are weak governance, poor land-use planning and administration and adverse financial and fiscal incentives. Conflicting and unenforceable regulations between sectors, lack of law enforcement, conflicting data and maps and lack of clarity of land rights favor corruption, lead to land conflicts and inefficient land use, generating high public costs and preventing Indonesia’s natural resources from contributing effectively to increasing national wealth. Some examples of perverse incentives include undervalued and inconsistent non-tax revenue fees, decentralized retention schemes by which local revenues are largely dependent on unsustainable natural resource extraction, fertilizer and biofuel subsidies, and food crop and log trade restrictions. 89. GoI has initiated a number of initiatives and started some regulatory change processes which, if successfully implemented, would begin to address these issues nationally. This includes reorganization at the ministerial level and commitments to more equitable resource management, decentralization of forest management, spatial planning, peat fire management, and more transparent and efficient licensing processes. At the same time, the government has limited capacity to implement these policies and legislation, particularly where they require cross-ministerial coordination. While the previous government launched important initiatives in this area, indicators of landscape performance have degraded, with continued high deforestation rates, and persistent pockets of poverty amongst those communities living in and around forest and coastal areas. 90. In terms of global climate change, Indonesia has pledged to reduce its GHG emissions by 29 percent by 2030 compared with a 2010 baseline.18 The country aims to be a leader in efforts to reduce emissions from deforestation and degradation (REDD+), and has since 2011 had a moratorium on new forest concessions. However, despite a bilateral agreement with Norway that would provide financing of up to US$1 billion, the REDD+ agenda has not yet thrived. Given the high emissions from peat fires, Indonesia has also prioritized regulatory action on peat lands, where the policy and regulatory framework, coupled with management and enforcement capacity, are relatively weak. On the energy front, the country’s primary action to address related emissions has been to set a target for renewable energy generation of 23 percent by 202519, a significant increase from the 3.2 percent of renewable capacity in 2014. In particular, geothermal energy stands out as an untapped resource with existing capacity at only about 1.36 GW. 91. Managing landscapes through improved spatial planning and land allocation could shift the development trajectory toward a more resilient path. Experiences from recent disaster events showed that poor site and land use planning may result in adverse economic losses when disaster strikes. Events such as tsunami and flood, whose locations are relatively predictable, could be better mitigated to reduce impacts to livelihoods and production. 92. Bank assistance to GoI under this engagement would cover support for design and implementation of a landscape program focused on improving management of, and benefits from, terrestrial natural assets. The Sustainable Landscape Management Engagement could involve investments and support for policy reforms pertaining to land and forest governance and administration to reduce poverty, create a better investment climate for infrastructure investment, establish a cooperation framework for sustainable livelihood and agricultural development, and increase jobs and income while maintaining the natural asset base. It also would address the underlying drivers of deforestation and forest degradation which could unlock the enabling conditions for Indonesia’s REDD+ Agenda. The landscape program would also support Indonesia’s global commitment to reduce greenhouse gas emissions by 2020 by 41 percent as compared to “business as usual” and will improve resilience of Indonesia’s communities to the impacts of climate change and natural disasters. 18 Based on Indonesia’s final draft INDC published August 30, 2015. A final version of the INDC is expected to be published end-
September. 19 National Energy Policy 2014-2050.
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93. A particular emphasis would be on supporting land management and spatial planning and reducing the constraints created by Indonesia’s dual land management system. WBG would assist GoI put in place a reliable, consistent, geo-referenced national inventory of land parcels covering all lands, both state/public and private lands, and the technical assistance necessary to support harmonization of spatial plans at provincial, district and village level. It would strengthen the capacity of subnational entities to interpret spatial plans to be able to allocate, manage and monitor land and support the rights of indigenous communities within the forests. Efforts to reduce and manage disaster risk would continue as an important component of the WBG program. 94. On the private sector side, IFC would continue to support and create demonstration models of sustainable development for companies across relevant sectors such as agriculture, forestry, infrastructure, and extractive industries. This could include engaging with leading forestry and oil palm plantation companies committed to improved environmental and social performance as well as working with the private sector across the supply chain to support the pivot of large investors and their suppliers toward increased environmental and social sustainability. 95. Proposed development outcomes in this engagement area include: Improve land management and special planning
Completion and public availability of One Map in the context of national spatial data infrastructure Strengthened capacity in decentralized forest management
Land area supported by forest management units with improved management effectiveness
III.2.f. Engagement Area 6: Collecting More and Spending Better
COLLECTING MORE AND SPENDING BETTER
Indonesia’s revenue-to-GDP (14.7 percent in 2014) and tax-to-GDP (10.9 percent) ratios are very low and declining. There are significant challenges in budget execution and achieving outcomes. Government seeks to raise revenues, transform tax collection administration and improve the composition and effectiveness of public spending. This engagement would use investment and policy-based lending and knowledge services to support government in the following areas: Revenue:
Supporting the revision of select tax policies Supporting reforms to increase tax compliance and strengthening and mainstreaming non-tax revenue administration.
Improve spending through: Advancing energy (fuel and electricity) subsidy reforms Better quality through improved allocative efficiency, and better budget execution in key areas such as infrastructure. Strengthen institutional capacity to modernize procurement and contract management and control environment.
This engagement links with Pathway 2 by providing both increased revenue and better spending for the delivery of services opportunities for all, and Pathway 3 which seeks to improve the way revenue from Indonesia’s abundant natural resources can be captured and shared to improve sustainability and share resources more equitably.
96. Fiscal policy, in its revenue mobilization and quality of spending functions, were identified in the SCD as key to poverty reduction and shared prosperity. Indeed, as highlighted in many of the engagement areas above, the provision of decent housing, water and sanitation, transportation services, and quality health care remains limited due to poor public spending delivery at the central and subnational levels
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combined with lack of resources and suboptimal levels of public expenditure. Indonesia’s revenue-to-GDP (14.7 percent in 2014) and tax-to-GDP (10.9 percent) ratios are very low by international standards. This is not due to lower tax potential; by one estimate, Indonesia is collecting less than 50 percent of its total potential tax revenue20. Revenue-to-GDP could fall to as low as 13.4 percent in 2015 and stay in that range in the medium term under a “business as usual” scenario. Over the past decade, low levels of revenue (as a percentage of GDP), combined with a fiscal deficit legally capped at 3 percent of GDP, has led to a suboptimal level of public spending (16.9 percent of GDP in 2014 compared to more than 28 percent for middle-income countries in Asia). In other words, greater revenue mobilization could have allowed Indonesia to spend more within the legal fiscal limit. 97. Just as important as collecting more, however, is ‘spending better’– that is, improving both the composition and delivery/execution of public spending. Before the introduction of a major fuel subsidy reform in January 2015, central government’s public spending on infrastructure and health programs were significantly crowded out by large energy subsidies. In 2014, spending on energy subsidies accounted for more than one-fifth of the central government’s budget and more than three times the allocation for infrastructure and health. 98. The need for an improved spending mix to reflect the government’s development priorities is even more salient at the subnational level. As discussed under Engagement Area 4, subnational governments now spend over half of the national budget (net of subsidies and interest payments). Much of this spending goes to personnel and administrative expenses. In 2012, district governments spent 52 percent of their budget on personnel and only 3 percent on capital expenditures. Provincial governments did much better (24 percent on personnel and 21 percent on capital) but their spending responsibility is much more limited (34 percent of total transfers to subnational governments in 2013). In general, subnational governments’ spending is excessively dominated by spending on administration over productive sectors and on personnel over maintenance and capital spending. Improving the allocative efficiency of local government budgets by reallocating more resources to front-line service delivery would be an important step in improving the provision of key services to the population. 99. Budget execution and project implementation often fall short of the amount allocated in the budget particularly for infrastructure investment. In recent years, the execution rates of capital expenditure, most of which is for infrastructure, has averaged only 86 percent of the revised budget allocation between 2010 and 2014 (see Error! Reference source not found.). The slow pace of execution of investment programs is a major concern to the government as this hinders improving service delivery and efforts for boosting economic growth in the country. Government institutions are generally struggling to execute public investment programs in a timely and effective manner, largely due to weaknesses in preparation and implementation of investment programs, such as inadequate preparatory work, cumbersome government budget processes, weak procurement and contract management, and the absence of a performance monitoring system. The SCD also identifies transparency and accountability in the use of public funds as key ingredients in improving service delivery. In
20 Fenochietto, R. and Pessino, C., 2013, “Understanding Countries’ Tax Effort”, IMF Working Paper WP/13/244.
Figure 3. 5: In-year variance of capital from original budget
Source: MoF Audit Reports, Financial Notes and World Bank staff Calculations
-35%-30%-25%-20%-15%-10%-5%0%5%
10%15%20%
2008 2009 2010 2011 2012 2013 2014
Revised budgetActual outturn
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addition, budget preparation continues to focus on the budget year with limited consideration of the medium-term implications of current decisions and the constraints they place on future budgetary decisions. 100. The government has made progress in recent years towards strengthening the control environment and the regulatory framework for public procurement with assistance from the WBG. GoI has adopted COSO as its control framework. The internal audit function has been streamlined and an association of public sector internal auditors established. The SAI has made significant strides in its mandate, resources and performance. Revised procurement regulations have been issued that have begun the process of standardized bidding documents, use of e-procurement and putting in place dedicated procurement service units in procuring agencies. 101. Creating additional fiscal space is planned through a major effort to mobilize revenue, in particular non-oil and gas tax revenue as well as income tax, VAT and excise, by improving tax administration and compliance and optimizing tax policy. Government’s ongoing and planned revenue policy reforms aim to broaden the tax base, simplify the tax regime and strengthen the tax and non-tax revenue administration. To support these reforms, funding for the Directorate General of Taxation was significantly increased in the revised 2015 budget and through revisions of major tax laws, both the VAT and income tax laws, which are on the legislative agenda for 2016. 102. WBG’s engagement aims to help the government raise revenues while reducing economic distortions and lowering administration costs. To achieve this objective, WBG would support government in the following areas: (i) supporting the revision of selective tax policies; (ii) greater effectiveness and efficiency of tax compliance management through a move to a risk-based approach to compliance management; and (iii) strengthening non-tax revenue administration. The Bank would support reforms in these areas through a suite of complementary instruments:
KKnowledge services: (i) Analytical work to build the evidence base for reforms, for example, estimation of revenue potential and policy and compliance gaps by revenue source, and revenue impact simulations; and (ii) Technical assistance to support the design and implementation of reforms.
Policy-based lending to provide an anchor and coordination mechanism for the overall medium-term fiscal reform strategy.
Investment lending possibly to support the modernization of tax administration.
P4R instruments under engagement areas such as energy, local delivery of services and infrastructure and national level infrastructure which will improve the quality of spending.
103. Improving the quality of spending is at the core of the government’s priorities. The recent energy subsidy reforms have dramatically improved the allocative composition of public spending. With the new subsidy scheme, the cost of fuel subsidies is projected to fall sharply from 2.4 percent of GDP in 2014 to 0.6 percent of GDP in 2015. The projected fiscal savings of nearly Rp 200 trillion, or about US$16 billion, provides space for higher spending on priorities such as infrastructure, health and social programs, particularly over the longer term when rising fuel subsidy costs would otherwise have crowded out such spending. To further improve budget execution, the government has revised land acquisition regulation to accelerate the land acquisition process by facilitating timelier funding. The government announced its policy directions in the macroeconomics and fiscal policy for 2016 draft budget to further improve the efficiency and effectiveness of social programs and subsidies by gradually moving away from subsidizing goods to direct subsidies such as cash transfers. 104. In line with these government priorities, WBG would support the government to “spend better” in the following areas: (i) advancing energy (fuel and electricity) subsidy reforms through consistent implementation and improved transparency; (ii) improving quality of spending (allocative efficiency,
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effectiveness and budget execution) in key areas; (iii) improving quality of spending and service delivery of selected subnational governments and (iv) strengthening institutional capacity to modernize procurement and contract management and to improve the control environment. 105. This assistance would use several WBG instruments and would cut across several of the engagement areas already described above. In particular:
KKnowledge services: (i) Analytical work and TA to build the evidence base for and to support the design and implementation of reforms to improve the quality of spending; and (ii) Analytical work and hands-on TA to improve procurement efficiency in key ministries at national and subnational levels and to support use of modern methods and tools in procurement and contract management.
Policy-based lending through a fiscal reform DPL.
106. The analytical program would be consolidated around TA activities that have capacity building components and which support the immediate application of analytic work, thereby increasing the likelihood of better results and ensuring impact on policy formulation. Drawing on the lessons of experience, investment operations in this area would have to carefully assess government buy-in, project design and possible implementation constraints before going forward. 107. Proposed development outcomes for this engagement area include: Improve revenue collection
Increase in the compliance rate for individual and corporate taxpayers Improve efficiency and effectiveness of spending
A rise in the central government spending on health, capital expenditure (proxy for infrastructure), and social assistance A rise in central budget execution rates (realized as a percentage of APBN) of capital spending
III.2.g. Supporting Beam I: Leveraging the Private Sector: Investment, Business Climate and Functioning of Markets
LEVERAGING THE PRIVATE SECTOR: INVESTMENT, BUSINESS CLIMATE AND FUNCTIONING OF MARKETS
Creating jobs and reducing poverty will depend on a growth strategy that is supported by the private sector. Private sector growth depends on enabling and predictable regulations, infrastructure availability, and well-functioning product and factor markets. The need to improve the business and financing environment is a unifying factor cutting across the economy and impacts the efficiency and efficacy of many development solutions. WBG approach will be to work within engagement areas and through stand-alone support to:
Bring together private capital in support of public policy including through investments, PPP and other support for private sector investment in infrastructure, knowledge services and TA Support private sector companies and businesses through WBG support for entrepreneurship and innovation, IFC financing and advisory services in select areas, and MIGA guarantee products Extensive TA for regulatory reform, One Stop Shop (OSS) efforts and better functioning factor markets
108. As set out in the SCD, growth, jobs and poverty reduction will depend a great deal on the significant contributions of the private sector. Government plays a critical role by devising and implementing appropriate policies and regulations. Whilst addressing some key constraints through the various engagement areas, a weak business and financing environment cuts broadly across the economy and impacts the efficiency and efficacy of many development solutions. Contributors to the problems of the business and financial environment include investment and trade regulations which are generally restrictive, uncertain and
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often inconsistent (including between the national and local levels), and a permitting and licensing regime which is time-consuming and costly. Partnerships between the public and private sector, especially in infrastructure investment, remain extremely limited. As a result, although Indonesia’s investment-to-GDP ratio was 32 percent in 2012, higher than those South Korea (27 percent) and India (30 percent), 85 percent of gross capital formation was accounted for by construction, not productive investments in areas such as machinery and equipment. FDI grew by some 21 percent to US$23 billion in 2014, but most recent FDI has been concentrated in services (retail, trade and finance) and agribusiness, and not in infrastructure or manufacturing sectors.21 109. Regulations, licenses and permits at the national and subnational levels are complex, imposing delays and costs on investment. Along with construction permits, paying taxes and enforcing contracts Indonesia is within the bottom 40 in terms of the most cumbersome procedures globally.22 Subnational regulations are even more complex and unpredictable given the weaker capacity and lack of uniformity at the lower levels of government. Sectorally, uncertainty for investors is created by the existence of contradictory or misaligned laws and regulations and lack of information. Several attempts to support national industries to move up the value chain have fallen short, resulting in protecting uncompetitive local production and higher costs for consumers. 110. In addition to enabling and predictable regulation (as well as infrastructure availability), private sector growth is predicated upon well-functioning product and factor markets. Product markets in Indonesia are characterized by limited market information, insufficient value chain linkages, low agglomeration and uneven access to business development services, incubators, and accelerators. The market for capital is similarly underdeveloped. Enterprises in Indonesia are generally credit constrained and face a limited range of specialized products such as leasing. Formal labor markets are rigid, especially due to severance pay provisions and the minimum wage setting processes. Skills shortages and mismatches persist. Difficulties in acquiring land continue to constrain many business activities. Because of these factors, Indonesian firms are not benefitting as they should from the relatively inexpensive cost of labor, favorable demographics, large domestic market and abundant and unique natural resources which should make them more globally competitive. Instead, firm productivity is low and decreasing by regional standards, eroding export competitiveness, domestic market growth, and job creation. 111. Progress in bringing together private and public capital remains limited. Of the 56 PPP projects identified for funding in 2010-15 (valued at US$51.2 billion), only three were considered “ready for offer” and only two have been prepared for tender. The constraints are twofold. First, concerted high level coordination is required to bring together an array of GoI entities, address legal and regulatory uncertainty and lessen the procedural complexity that has arisen around PPPs. Significant capacity constraints also remain at all levels of government in relation to project structuring, implementation and monitoring. Second, more efficient and diversified capital market instruments are necessary in order to attract financing from institutional investors such as pension funds, insurers, mutual funds and sovereign wealth investors to fund investment. 112. The bulk of impact from relaxing binding constraints on the functioning of markets would benefit MSMEs which represent 99 percent of companies in Indonesia, 57 percent of GDP value-added, and provide 97 percent of all employment. Most Indonesian firms employ less than 20 workers which is significantly below the EAP average of 33. Less than 30 percent of firms are in the formal sector as compared to 95 percent in Brazil and 96 percent in China. The average Indonesian firm also uses less technology and communications, and its employees receive less training (See Figure 3. 6) then its comparator countries. There is significant scope for increasing domestic linkages as well as productivity in services sectors. Spreading production outside of Java is also among government priorities, but would require the development of “growth poles” to boost productivity. 21 The composition change of FDI can also not be defined as a trend. 22 It takes 65 separate payments and reports to pay taxes on average, and more than 200 days to get a construction permit. This
performance is below the regional (East Asia and Pacific) average and its peer countries’ performance: the Philippines ranked 95th, China 90th, Thailand 26th, and Malaysia 18th.
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Figure 3. 6: Indonesian firms are lagging in size, technical prowess, training, and formality
Source: World Bank, Enterprise Survey 2009 Indonesia and most recent (2009-2012) Enterprise Survey for other countries
113. Against this background, improving the business climate and markets is amongst the highest priorities in order to attract private sector capital that is essential for the creation of jobs and for helping to finance the country’s vast infrastructure needs. GoI started a campaign on domestic regulation simplification during the previous administration, which has been brought to the top of the policy agenda by the current government. One of the earliest actions of President Widodo was for the Investment Coordinating Board and relevant ministries to implement a central one-stop-shop for all national business licensing.23 The intended result is quick, simple, transparent, and integrated licensing services as a means to entice investors and to bring their investments in businesses and infrastructure online rapidly. Most recently, the government followed up with implementation improvements in the areas of starting a business and paying taxes. Trade agreements can be useful instruments not only to gain market access but more importantly to help address regulatory barriers in important areas, such as investment, government procurement and competition. For example ASEAN (and likely the recently signed TPP) require commitments to increase competition and protection to investors and to reduce differential treatment of foreign producers that could help attract foreign investments and strengthen domestic competitiveness. These externally imposed requirements are often effective at inducing reforms in politically sensitive areas. 114. GoI is working to strengthen the enabling environment for PPPs. The legal framework for PPPs has been amended to allow the private sector to invest in the development and operation of financially viable infrastructure projects without being obliged to enter into a joint venture with an SOE. The government’s PPP coordinating body (KPPIP) is working on a process of prioritizing and identifying projects suitable for public investment and PPPs. The Ministry of Finance is operationalizing its newly established PPP Unit and advancing the implementation of the PPP framework overall. Bappenas’ role in the PPP planning process has been strengthened. 115. GoI is also prioritizing the development of MSMEs and agriculture, but its approach may not result in simulating the highest growth, highest value-added enterprises. There are over 50 national SME programs and score of subnational ones, straining the budget without commensurate impact. Concessional initiatives tend to be poorly targeted due to lack of data and implementation capacity. The experience with special economic zones has also not been a strong one in Indonesia. To raise productivity, create jobs and to support promising sectors such as logistics, IT, and fashion, requires well-coordinated government support for better regulations, functioning product and factor markets, skills development and infrastructure. The tourism industry is an excellent case in point (see Box 3.4 below)
23 At the time of the President’s order, the Investment Coordinating Board was already operating a limited one-stop-shop which
processed 14 licenses, including the license for starting a business and the operational license.
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Box 3.4: Tourism’s Unrealized Potential in Indonesia
The tourism industry accounted for 9.3 percent of Indonesia’s GDP in 2014 and generated 9.8 million direct and indirect jobs. In 2014, visitor exports represented 48 percent of all service exports and 5.6 percent of total exports. Every US$1 spent in tourism generates US$1.7 in the wider economy, more than other major sectors. Tourism is a labor-intensive sector and generates jobs particularly for women and youth. The development of tourism as a growth pole in Bali, facilitated by WBG in the late 1970s, was successful in promoting growth beyond Java, and in leveraging public and private investment and financing. Decades later, Bali receives 40 percent of all tourists to Indonesia, and the province’s poverty rate is the second lowest after Jakarta.
Yet Indonesia is not yet expanding tourism in a comprehensive way to other destinations across the archipelago. It ranks 50th out of 141 countries in the 2015 World Economic Forum’s Travel & Tourism Competitiveness Index. The country’s competitiveness, based on its abundant resources could be vastly improved. It ranks well on price competitiveness (3rd), biodiversity (4th), and number of World Heritage natural sites (10th). But is held back by challenges with limited infrastructure (75th) and a restrictive enabling environment (80th).
116. A combination of WBG products can support the dynamic nature of private sector development and help increase productivity in a targeted set of business areas where conditions are propitious for high growth. In particular, WBG will focus on supporting reforms in the regulatory environment, and for high-growth firms within dynamic product and supportive factor markets. The choice of how the support is to be designed has been sifted through three filters—visibility, impact, and capable counterparts—in order to maximize the benefit from WBG support. Given that IFC’s and MIGA’s balance sheets are limited, whilst the needs for financing and advisory support for private sector development are immense, IFC will seek to bring in like-minded mobilization partners in supporting its private sector development agenda (See Box 3.4) 117. One of the most important interventions by WBG is to focus on bringing together private capital in support of public policy and in particular to support efforts to increase private sector financing of essential infrastructure. WBG has a fairly large existing portfolio of investment and knowledge services, including two lending operations - the Indonesia Infrastructure Fund (IIF) and the Investment Guarantee Fund (IGF), with which implementation during the CPF period should help strengthen results on the ground. It is proposed to provide additional financing for IIF and, working with other development partners, potentially increase the scope of the IGF. WBG plans to provide assistance to strengthen PPP architecture including the legal framework and coordination between the government and the private sector. WBG will also help to unlock financial markets to support project finance, level playing-field rules for funds and investment vehicles, deepen hedging markets through a simplified issuance regime for certain securities and support further development of credit registries. IFC will also continue to support private sector companies to issue corporate bonds and listing equity shares to deepen the capital markets. Through a package of loans, equity and targeted TA, the WBG will aim at increasing privately financed infrastructure (including those with partial or full private sector financing or benefiting from a government guarantee) through demonstration projects which could help jumpstart the market and could leverage some US$ 1 billion in additional private financing over the CPF horizon. 118. Within the overall framework of the CPF engagement areas, IFC will continue to support private sector companies and businesses through financing and advisory services in select areas as will MIGA through its guarantee products. In infrastructure development, IFC expects to continue support for private sector companies which adhere to high standards of governance and sustainability in power, transportation (ports, airports, toll roads), water and sanitation sectors, amongst others. Support is also expected for manufacturing and agribusiness companies which utilize domestic raw materials and add value through sustainable and efficient operations. In each of these sectors, IFC will seek to develop models that provide a demonstration effect both through investments and advisory projects, which then could be replicated by other firms and corporations.
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119. TA for regulatory reforms and the OSS will support GoI reform efforts at the national level and can be expanded to the subnational level where possible. This could be supported through analysis of regulations in areas where progress has been slow. A combination of Knowledge Services and TA to support MSME development and specialized finance (for example: leasing and credit bureaus) could support the expansion of growth poles outside of Jakarta, value chain linkages to large domestic and foreign firms, and improve access to markets. 120. Proposed development outcomes for this supporting beam include: Simplify business licensing processes to support private sector
Reduction in total time required for processing of all licenses in four priority sectors (apparel, food, IPP, and tourism)
Increase the role of the private sector in national infrastructure investment An increase in private sector investment in infrastructure An increase in total number of international tourist arrivals An increase in number of tourism-related jobs in integrated tourism destinations
Enhance access to finance An increase in percentage of populations with access to financial services Number of individuals/microenterprises reached with financial services, disaggregated by gender Number of SMEs reached with financial services
Box 3.5: Delivering as a World Bank Group
Joint Global Practices as well as the individual strengths of different WBG products come together naturally in “Leveraging the Private Sector” as well as in “Inclusion” beams. A joint team supports financial access and payments and contributes to work in social assistance programs including housing. WBG support on access to finance, national payment systems, secured transactions, credit bureaus, MSME finance, and creditor rights has contributed to an increase in financial access nationally from 20 to 36 percent of adults over the past three years. On regulatory simplification, the joint trade and competitiveness practice supports the central and subnational governments to implement simplified regulations, including business registration and operational licenses. This work spans licensing simplification for starting a business to regulations in electricity, the maritime sector to finance and taxes. Already, reforms have helped 1.7 million newly incorporated firms and Indonesia's Doing Business ranking reflects its "active reformer status" at 114 in 2015 (up from 128 three years ago). The success of WBG collaboration can be explained by working in areas that make business sense and taking advantage of each institution’s competitive advantage in an integrated engagement.
III.2.h. Supporting Beam II: Shared Prosperity, Equality and Inclusion
SHARED PROSPERITY, EQUALITY AND INCLUSION
This beam applies a lens of eliminating poverty and lessening inequality across the WBG program both for the future and to protect today’s poor and vulnerable by helping them to move into productive lives. Will provide input, including support to evidence-based policy making in other engagement areas as well as stand-alone support to the development and implementation of policies to protect the poor and vulnerable and to help them sustainably move out of poverty. This beam would mainly be delivered through knowledge services, with the support of development partners. It will be organized around three main components:
Improving the poverty and inequality focus of policies supported by other CPF engagements Improving social protection programs for the poor and vulnerable Supporting the creation of and access to productive jobs
WBG interventions with the private sector would focus on the creation of more productive jobs through cooperation with specific companies and financial inclusion.
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121. Eliminating extreme poverty and boosting shared prosperity require applying a poverty and inequality lens to government policies across the board along with dedicated policies to protect the poor and help them move out of poverty into productive lives. The policies supported by the previous engagements, if designed and implemented properly, could significantly contribute to these goals. For example, the delivery of quality services to all Indonesians will provide equal opportunities today and set the foundation for eliminating extreme poverty and boosting shared prosperity in the future. 122. But dedicated policies are also needed now to protect today’s poor and vulnerable and to help them move into productive lives. Indonesia has been building a safety net system since the 1997 Asian Financial Crisis, but coverage remains low and benefits too small to make a sustainable difference. Indonesia is now implementing one of the largest social security reforms in the world, but is challenged to make coverage more inclusive, squeeze out fraud and corruption and establish a financing mechanism that does not discourage formal employment already burdened by rapid and unpredictable increases in minimum wage levels and punitive severance pay requirements. Policies to help move the poor out of poverty into productive lives (for example by the provision of credit and savings and employment support), are currently limited, but the government has made them a priority along with complementary policies to promote the creation of more productive jobs. 123. Gender differences, particularly in terms of job status, mean that women tend to be more vulnerable than men.. Women constitute the majority of the self-employed and unpaid family workers, making them more susceptible to personal and financial insecurity. Compared to men, women have a 24 percent higher probability of working in the informal sector. Women-owned SMEs are mostly self-employed by necessity. Indonesia’s social assistance programs do favor female-headed households (FHH), but because FHHs typically have a sole income earner, usually with children to care for and support, female-headed households are more vulnerable to shocks and their exit from poverty more volatile. 124. Ensuring access to financial markets can help break the cycle of poverty and lower the risk of the near-poor slipping back. This can done by building people’s savings and providing insurance, and enabling funding of consumption and productive activities for farmers and informal workers. In Indonesia, the share of adults with access to finance has jumped from 20 percent to 36 percent over the period 2011-14,24 although access is lower in rural communities (29 percent) and for the poorest 40 percent of adults (22 percent). Geography and low levels of financial literacy are particular challenges for financial inclusion. Government is looking to implement e-money and branchless banking regulations with the objective of linking millions of additional Indonesians to finance, as well as providing additional banking and insurance products including Sharia-compliant products. 125. The proposed WBG program on inclusion aims to improve the poverty and inequality focus of government policies supported by the CPF engagement areas as well as stand-alone support to the development and implementation of policies to protect the poor and vulnerable and to help them sustainably move out of poverty. This beam will mainly be delivered through knowledge services with the support of other development partners and is organized around four components:
IImproving the poverty and inequality focus of policies supported by other CPF engagements. This would be done through analysis, measurement, capacity building and awareness raising around poverty and inequality in general, as well as support to specific policies and programs. Strengthening of safety nets, focusing on (i) the development of common systems for social assistance programs, particularly for targeting and digital payments; (ii) reform of the Rice for the Poor Program (Raskin) to improve access of the poor to nutritious foods complemented by reforms to enhance agricultural productivity and markets; (iii) transformation of existing food distribution programs into a food voucher program that protects poor households from food-price volatility, calorie scarcity, and malnutrition; and (iv) reforming existing safety nets to better respond to shocks.
24 World Bank’s Global Findex survey 2014.
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DDeveloping graduation programs for the poor and related support. This could include support to (i) the development of the umbrella of graduation programs (P2B) at the central level; (ii) the adjustment and implementation of these programs by local governments; (iii) the development of the financial infrastructure to increase access to credit, savings and insurance among the poor and vulnerable across Indonesia; and (iv) improving payment systems infrastructures to increase reach to the poor. Improving the implementation of The Social Security Program (SJSN) to provide effective protection to all citizens (health) and workers (employment programs). WBG will continue to help the government with program design and financing and building capacity to manage these programs. Increasing access of the near-poor to financial access products to help them buy productive assets and insurance to prevent them from slipping back into poverty. This could include support for micro-finance, smallholder support programs in agribusiness sectors, technical support and capacity building for implementation of newly-issued regulations, and possible support for agricultural insurance drawing on expertise across WBG.
126. Inclusion and sharing prosperity will require the creation of more productive jobs. Given the importance of job creation as a pathway to the twin goals, interventions are included throughout the engagement areas. In addition, WBG will use TA and knowledge services to support better evidence-based policy making and to help government particularly focus on: (i) addressing the bottlenecks to the reallocation of workers to more productive activities; (ii) improving the skills of the workforce; (iii) improving access of disadvantaged workers to productive employment through, for example, employment support programs; (iv) improving worker protection without discouraging formal employment; and (v) improving the protection and quality of employment of Indonesians who migrate abroad. 127. In addition, a gender focus will continue to be mainstreamed across WBG operations continuing on the significant success under the previous CPS. The Country Gender Action Plan will continue to identify, coordinate and monitor activities to promote gender issues in the broader engagement in Indonesia as well as in specific operations and knowledge products across four dimensions of gender equality: endowment, economic opportunities, voice and agency, and emerging risks areas. Areas with a particular gender focus in the CPF will include financial sector development, village law and poverty targeting, education, health, environmental sustainability and disaster mitigation. Continuation of IFC programs for female entrepreneurs and SME finance will target women in financial inclusion programs. 128. WBG interventions with the private sector will continue to focus on the creation of more productive jobs through cooperation with specific companies and particularly through financial inclusion activities drawing on both IFC and the Bank. WBG is expected to provide additional financing to banks and financial institutions to extend their support to micro, small and medium enterprises, helping to create livelihoods and jobs for poor people. IFC would work with larger corporates in infrastructure, manufacturing, food products and services sectors to support them in securing jobs, procuring raw materials and producing high quality goods for poor people through its focus on inclusive business models. WBG will increase its focus on identifying global models based on new technologies to enhance inclusion. These would include diverse subsectors such as mobile banking to enhance financial inclusion and e-consultations to provide low-cost healthcare and diagnostic services to patients in more remote areas. One of the world's largest partial credit guarantee programs for MSMEs is another outcome of this support with large outreach and good performance (12 million clients and a NPL of 3.3 percent). 129. Proposed development outcomes for this support beam include: Improve social protection programs for the poor and vulnerable
Number of households benefiting from PKH (conditional cash transfer), disaggregated by gender Increase in the number of households receiving payments digitally
Support creation of and access to productive jobs Number of jobs supported
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IV. IMPLEMENTING THE CPF 130. In practice, delivering on the CPF’s objective will mean bringing together the necessary WBG products and skills to create the momentum for positive change and comprehensive solutions. All of the engagement areas and beams will be delivered using multiple GPs and some with multiple practice groups. None will be delivered using a single financial or knowledge instrument. In many cases, the engagement areas also bring together more than one of the World Bank Group’s three organizations. This requires that the WBG work together in different ways. In some cases, a GP could be in the lead on an engagement, and for other GPs, their involvement may be in a supporting role. Moreover, the engagement areas themselves are intertwined and mutually supporting. For example, solutions to Indonesia’s energy challenges cannot be done in isolation from the impacts on landscapes and management of natural resources. Tackling Indonesia’s rapid urbanization means improving the ability of local level government to implement national policies, or supporting national policy makers to strengthen the accountability of municipal governments to provide quality education to all. Possible interventions in national infrastructure will be intended to support the government to develop means for spending better. Implementation of maritime connectivity must take into account maximizing the value of the blue economy whether for fisheries or tourism. The strength of the Indonesia WBG country team, and the excellent partnership with government, will remain an important factor in our ability to deliver.
IV.1. FOCUS AND SELECTIVITY WITHIN THE CPF STRATEGY
131. The CPF provides an opportunity to add focus, building on the foundations of WBG’s long-term engagement in Indonesia and lessons of experience:
The CPS FY2013-15 was an interim strategy that covered the last two years of former President Yudoyono’s second term and the first year of the new government. It was a time characterized by slower progress in reform initiatives, a reluctance to access foreign borrowing, and a hesitation on key decisions given the expected change in government. The CPS was, therefore, of necessity open-ended and engagements looked more for breadth than depth. With a new government, there is a desire to make more use of the WBG value proposition of combining knowledge services and project financing and implementation support. The enhanced level of access to and desire by government to work with WBG sets a strong basis for working more selectively on high impact areas overall.
Compared to the CPS, which had four widely defined areas of engagement that covered all development areas—pro-growth, pro-jobs, pro-poor, pro-green—and deliberately left space for a wide range of smaller and one-off activities, this CPF proposes more defined engagement areas and supporting beams that focus on fewer areas of intervention.
To provide more clarity on outcomes and client focus, WBG programs will be defined by engagement areas rather than by specific sectors or GPs. Moreover, the selectivity filters proposed in this CPF are not static and limited to determining only the engagement areas and beams. Selectivity will be used actively during implementation to judge whether individual WBG interventions within the engagement areas and beams are sufficiently focused and have a realistic chance of meeting their development objectives.
The CPF is explicit that we will recalibrate our efforts or exit where the selectivity criteria are not met based on the prevailing policy environment and government priorities. This is consistent with providing steady, predictable support in key development areas while remaining open to emerging priorities. For example, during the previous CPS period, the WBG had limited engagement in health. In this CPF, it is proposed to ramp up involvement through possible investment and knowledge services. Previously, there has been little support to the central government agenda to reform the decentralization framework, partly a reflection of lower commitment of past governments to this
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reform agenda. To reach scale in the urban agenda, WBG will work directly with only two large metropolitan areas and with other mid-size cities, WBG will work more “wholesale”.
Box 4.1: Selectivity in the CPF: What WBG Plans To Do Differently
Based on the current policy environment and priorities, the following are examples of what WBG will not do, and will do differently, unless conditions change:
In national infrastructure: At the national level, financing for infrastructure will be where we can support government on developing and implementing national platforms rather than any one-off investments. In the energy sector: Given the overwhelming needs in the energy sector, WBG will concentrate on renewables in geothermal and hydropower while KfW and other development partners provide leadership in areas such as solar and wind. In Roads: WBG will focus on advisory and road investment that either advances the connectivity agenda or supports reforms to increase the efficiency of public spending in the sector including attracting private sector financing rather than interventions where the emphasis is simply on expanding the physical network. In governance: Support for governance and anti-corruption remain critical, but will be delivered through engagement areas and determined by using selectivity filters to improve the chances for impact and ownership. The main focus will be through engagements focused on “collecting more and spending better” and improving the capacity of local level governments to deliver essential human services and infrastructure and away from isolated subnational initiatives which have little chance of scale or replicability. In agriculture: The current policy environment, including food policies and associated patterns of public expenditure, is not conducive for investment lending. WBG engagement will instead focus on analytic and advisory work, in parallel with working with the private sector in the agriculture sector, as part of sustainable landscape management and through helping address the ‘triple burden’ of malnutrition through the local service delivery engagement area and inclusion beam. In environment: We will direct our support to national or subnational initiatives that are embedded in a broader national landscape program, and away from relatively small, isolated, free-standing interventions with little chance of scale or for which there is not a clear and empowered champion in accordance with CPF selectivity filters. In rural development: As part of the evolution of the long-running PNPM support program, emphasis will be away from supporting a number of experimental engagements (PNPM Green, PNPM Peduli, PNPM Creative Communities) to focus on supporting implementation of the 2014 Village Law including through provision of results-based matching grants and technical assistance to districts and villages in disadvantaged regions to ensure access to basic services that meet minimum quality standards for all.
IV.2. IMPLEMENTING THE WBG PROGRAM
132. The proposed CPF would require a larger financing package than the previous CPS, although WBG’s total contribution would still be a very small percentage of overall borrowing needs. The CPF, if fully implemented, could entail a scaling up of IBRD lending of an indicative amount of about US$7.5 billion, new IFC engagements of up to US$3 billion in equity, loans, guarantees and mobilization and a more active MIGA program that expands the use of political risk and non-payment guarantee instruments. For the IBRD, lending would average some US$1.5 billion per annum although actual lending volumes will depend on country demand, choice of instrument, overall performance during the CPF period and IBRD’s financial capacity and demand from other Bank borrowing countries. Should these volumes be reached, Indonesia would potentially reach and then exceed the $16.5 billion threshold above which a 50 basis point surcharge on incremental exposure would apply. Indonesia would potentially also reach the Single Borrower Limit (SBL) of US$19 billion towards the end of the CPF period depending on the actual commitments. Given that about one-third of the indicative lending pipeline is fast disbursing development policy lending and possible P4R, it will be necessary for the government and the Bank to take stock of the situation with regard to the SBL midway through the CPF period and consider possible measures to continue IBRD financing under different scenarios within the limits of the SBL. The experience of other large IBRD borrowers will be helpful in this regard. The SBL
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exposure can be contained through various conventional measures (e.g. cancellation of undisbursed balances of existing loans, prepayment of selected outstanding loans; reduction in new borrowings or shortening of average maturities). In addition, other measures may also be deployed for example opting to use own resources to purchase IBRD Special Private Placement Bonds (SPPBs) as a means to ease the hard constraint of the SBL and to open up headroom for additional lending25. 133. In addition to financing, WBG knowledge products will remain important both as free-standing interventions and to provide the analytic underpinnings for investment operations and to support evidence-based policy making. The Bank’s knowledge and convening services will continue to be used to help move forward the policy dialogue and lay the ground work for further progress on key areas, and contribute to effective implementation of policies—such as the fuel subsidy reform and reallocation of resources to social programs and productive investments—and support the coordination across government agencies. Knowledge services will also be the main instrument of support in cases where political economy considerations may not be conducive for lending. 134. The CPF results framework will be used as a dynamic tool to define and monitor outcomes and milestones. The results framework in Annex 1 captures ongoing activities and new activities agreed upon with the government and proposed under the CPF. In line with the lessons identified in the Completion and Learning Report (CLR) in Annex 2, the results framework balances the long-term policy reform objectives of the CPF and more immediate project-level results. It is important also to recognize that given the time frame of the CPF, many of the measurable results during the CPF period will be achieved through the existing active portfolio, and the results envisioned under the proposed new projects will likely materialize in the outer years of the CPF, if not beyond the CPF period. Given the demand-driven and flexible architecture of the CPF, the results framework will be adapted at mid-point of implementation to reflect the implementation status of the World Bank Group activities and feedback from the annual program review and planning meetings that are regularly held with government. 135. The change in the partnership framework has come about because of the new government’s focused development agenda and its different approach to multilateral borrowing. Government values not only financing for priority investments, but understands the WBG value proposition in combining financial products, knowledge services and implementation support. Particularly for large and complex infrastructure investment such as energy, maritime and housing, the government has requested that the WBG bring the balance sheets of all three institutions—IBRD, IFC and MIGA—to bear. The WBG can come together in a particularly complimentary manner in these engagements for several reasons. First, this approach leverages each organization’s strengths so that for both the client and the WBG, the sum is more than the parts. For example, port construction can leverage private sector capital in commercially viable ports leaving scarce IBRD resources for those facilities where financial viability is lacking whist making the overall sector more attractive to the private sector investment. By using an approach that is strongly market driven, IFC and MIGA find it easier to offer the private sector a viable proposition for investment. The platform nature of the engagements also provides a suite of instruments that allows each institution to contribute according to its comparative advantage rather than having engagements with a single product. (See Box 3.3)
25 The SPPB option is part of the framework endorsed by the Board in August 2002 for managing IBRD exposure in countries close
to the IBRD’s SBL. The SPPB option provides for flexibility in managing exposure to borrowing countries that are close to the SBL, while respecting the rationale underlying the SBL. Under the SPPB option, highly creditworthy borrowing countries can enter into an agreement with IBRD to purchase IBRD SPPBs if gross exposure is projected to exceed the SBL by a pre-agreed limit. Through the SPPB option, IBRD’s gross exposure to a borrower with respect to loans and guarantees could be reduced by the principal amount of the outstanding SPPBs, ensuring that, on a net basis, exposure would remain within the SBL.
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136. At the same time, the government has put a high premium on speed of delivery and shorter time horizons. The tremendous needs for infrastructure financing and delivery require public and private financing to work in better synergy. This situation requires that the WBG’s engagement draws on the best global expertise and has implications for staffing and presence in country. Delivery of the CPF will require the continued large-scale presence in Jakarta, combined with support particularly from hubs such as Singapore, which locate the Bank’s top experts in infrastructure development in close proximity to the client to provide not only technical advice but hands-on implementation support. 137. This ambitious CPF is made possible by the continued partnership with bilateral development partners who, most often through country-specific trust funds for IBRD and regional programs for IFC, provide the means by which WBG in Indonesia has been able to leverage WBG-financed projects and programs and scale up coverage to reach more people. The Bank has a history of working with bilateral and multilateral partners to deliver development assistance through country-specific trust funds around core areas of infrastructure, social development, trade, poverty, and economic analysis. In many programs, for example, the community-based rural water program (Pamsimas) and the long-running PNPM program, large investments by government, substantial IBRD loans and development partners financing together provide the financing and the implementation platform for programs that can reach nearly every corner of Indonesia. Such platforms also allow GoI and development partners to work cooperatively to support experimental approaches to delivery whilst avoiding aid fragmentation. This includes cutting edge approaches to poverty monitoring and new ways of working with CSOs and the private sector. The GoI and WBG are together pursuing a policy of sharing the lessons from Indonesia around the world, particularly to IDA and fragile and conflict affected states. Similarly, IFC has significant donor financed programs in the areas of sustainable agriculture development, forestry, corporate governance, financial inclusion and capital markets development. These are areas where IFC’s interventions have substantial development impact and where IFC has distinct competitive advantages in working with the private sector. The World Bank’s well-established knowledge program will retain its central role in the delivery of the WBG program during the CPF period. 138. In addition to bilateral partners and their development agencies, the technical and financial needs of the government’s development strategy will require that the WBG continues to expand its cooperation with other MFIs. The World Bank Group has long worked with the ADB in cofinancing. Going forward, it is expected that the government may look for additional areas where WBG, ADB, IsDB and bilateral development agencies could work in concert particularly in areas of policy reform. The Bank and the UN organizations have successfully implemented a number of programs together in Indonesia. Under this CPF, it is expected that this partnership will be particularly strong in the area of disaster recovery and mitigation, and in the areas of natural resource management, particularly in forest areas and coastal regions (see Box 4.2 below). Box 4.2: Experience of REKOMPAK
REKOMPAK, a community-driven disaster reconstruction and resettlement program started in 2005, provides a good example of how WBG can collaborate with multiple stakeholders to tackle development challenges in Indonesia. The approach was first piloted in Aceh following the massive destruction of the 2004 tsunami.
Planning and coordinating the large scale effort to rebuild Aceh was an enormously complex task. Following a request from government, the World Bank acted as trustee responsible for managing a Multi Donor Fund (MDF) which pooled together a total of US$654.5 million received from fifteen donors. These development partners, under one trust fund mechanism, provided the best for beneficiaries by putting aside individual interests and avoiding aid fragmentation.
REKOMPAK, which was financed by the MDF, provided housing for tens of thousands of people and reconstruction of several hundred settlements. It also provided the government and development partners an effective platform of collaboration for future reconstruction. When disaster struck in the aftermath of Yogyakarta earthquake, the government and communities, with support from the WBG and the MDF, and using the model developed in Aceh, were able to build 280,000 houses with almost 100 percent occupancy rate within two years, making it one of the fastest and largest settlement disaster recovery programs in history.
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Table 4. 1: Draft IBRD Indicative Lending Pipeline FY2016-20*
*Financing amounts are indicative only and will be determined over the period. Total IBRD lending cannot exceed the SBL.
Amount in $M by loan instrument
IPF DPL P4R
Engagement Area 1: Infrastructure Platforms at the National Level1 Dam Opr Rehab & Safety Improvement Project -2 (DORSIP-2) MPW&H 150-250
2 Urgent Rehabi l i tation of Irrrigation Project (URIP) MPW&H 150-200
3 Modernization Strategic Irrigation Project (MISP) MPW&H 150-200
4 National Affordable Hous ing Program MPW&H 150-200
5 Tourism Infrastructure Development MOPW&H 100-150
Engagement Area 2: Sustainable Energy ang Universal Access1 DPL Energy I MCEA 500
2 DPL Energy II MCEA 300
3 AF-Upper Cisokan 1040MW PT.PLN 150-200
4 Power Dis tribution Efficiency -P4R (PT.PLN) PT.PLN 500
5 Poko Hydro Power 130MW(PLN) PT.PLN 200-250
6 Matenggeng Power (PLN) PT.PLN 200-250
7 Geothermal I I 150MW(PT.PGE/Pertamina) PT.PGE 100-150
8 Power Dis tribution Efficiency II -P4R (PT.PLN) PT.PLN 250
Engagement Area 3: Maritime and Connectivity1 Road improvement to support Integrated land and sea tol l way - Northen area MPW&H 150-200
2 DPL Mari time, logis tics & connectivi ty-MLC MCEA 300
3 DPL Mari time, logis tics & connectivi ty-MLC II MCEA 300
4 Eastern ports development (PT.Pel indo) PT.PELINDO II 200-300
5 National program for blue economy MoFsh 100
Engagement Area 4: Delivery of Local Services and Infrastructure1 Regional Infrastructure Devevelopment Funds (RIDF) PT.SMI 200-300
2 AF- National Rura l water & sani tation (Pamsimas 3) MPW&H 300
3 National Slum Upgrading MPW&H 200
4 Improvement of Primary Health care MOH 250
5 Improvement of Sol id Waste Mgmt to Support Rgnl & metro Ci ties MPW&H 100
6 National Urban Water Supply Program MPW&H 100
7 Regional watersupply in Benteng Kobema and Durol i s MPW&H 100
8 Surabaya urban transport Pemkot Sby 100
9National Urban Waste Water Management Program (Sewerage system devt and Devt't of Sewage treatment plant faci l i ty)
MPW&H 100-150
10 Support for Del ivery of Vi l lage Infrastructure and bas ic services MOV 150-200
11 National Urban Dev't Program (NUDP) - Susta inable Urban Dev't MPW&H 100
12 DAK Reform Program MOF 100-150
13 Qual i ty Education in Disadvantaged Regions MOEC 100-150
Engagement Area 5: Sustainable Landscape Management1 Forestry Investment Program MOFr 100
2 National Land Adminis tration and Spatia l Planning MOA&SP 100
Engagement Area 6: Collecting More and Spending Better1 DPL Revenue Col lection MOF 300
2 Modernization of Tax Col lection project MOF 100
3 DPL Revenue Col lection II MOF 300
4 Dev't of Capaci ty, Qual i ty and Competency HR (SIPRIT I I) BAPPENAS 100-150
Supporting Beam 1: The Business Climate and Functioning of Markets4 AF Indones ia Infrastructure Financing Faci l i ty PT.SMI/PT.IIFF 150
Project/Program TitleExecuting
Agency
52
139. At the same time, Indonesia and WBG need to take into account the implementation challenges that will be associated with this CPF. The current IBRD portfolio is at its lowest level in 5 years with 21 projects and about US$4.3 billion (following the US$2 billion DPL DDO disbursement in September 2015) in net commitments as a result of the slowdown in borrowing towards the end of the last CPS period. In FY15, the disbursement ratio was 15 percent, lower than its historical average of over 20 percent, reflecting the higher percentage of infrastructure projects in the portfolio mix which typically take longer to implement. Commitments at risk (31 percent) are considerably higher than China (15.5 percent) and the Philippines (14 percent), although the number of projects at risk (32 percent) is comparable with Philippines (31 percent). As noted above, the CPF would potentially see the IBRD portfolio almost doubling the existing commitment levels. 140. Although implementing better and faster is one of the government’s key objectives in meeting its ambitious infrastructure goals, it has significant challenges in implementation capacity and has struggled particularly with executing large infrastructure projects. The GoI, led Bappenas, in coordination with the Bank, has already identified and initiated a number of steps to address long-standing implementation issues. Some of the most important have been launched. This includes a new Presidential decree which provides for a sovereign guarantee for direct lending by the MFIs to selected state-owned enterprises. This is essential for WBG’s engagements in energy and in maritime and logistics. In the past, working with SOEs through Subsidiary Loan Agreements caused delays for long periods at the start of the project and subsequent delays during project implementation. The government has also revised and made more flexible its process (the Blue Book) for determining which projects and programs are eligible for foreign concessional loan financing. This will bring greater certainty in line ministries and within the Bank in terms of government commitment to proposed projects and therefore will speed preparation. GoI is revamping its own procedures for project readiness, including the provision of budget support for project preparation that has not been readily available for many years. Similarly, in the Bank, steps are being taken to help government by providing more support on safeguards, M&E and use of government systems in procurement whenever possible. Maintaining a strong presence in country will be essential to provide the requisite level of implementation support for the ongoing and new portfolio along with preparing an ambitious pipeline. 141. Maintaining the successful gender focus in project design and implementation will be important. Under the last CPS, the Country Gender Action Plan met its initial target of ensuring 100 percent (from 80 percent) of the operations delivered in FY13 were gender informed. The Community Development programs met the targets for women’s participation (45 percent of women in planning/decision-making meetings; 32 percent of women in community oversight teams) and the community access to health and education services improved (91 percent of pregnant women received 4 prenatal care visit against a target of 80 percent). The water and sanitation programs have achieved impressive results, exceeding the targets set with more than 7 million people provided with access to clean water and 7.69 million (double the target) provided with access to sanitation. This was a significant achievement for the gender agenda given the higher proportion of women and children benefiting from these services. Gender specific M&E will be further strengthened in the CPF engagement areas, including outcome indicators where possible and relevant. In addition, at the project level, every effort will be made to measure gender specific outcomes.
53
V. MANAGING RISKS TO THE CPF PROGRAM 142. Risk to the implementation of the CPF in Indonesia is assessed as substantial, with four potential areas of impact. These include: (i) political economy and governance challenges, (ii) uncertainty around the macroeconomic environment both globally and domestically; and (iii) weak institutional and implementation capacity and (iv) environmental and social risks. These risks, if materialized, could singly or jointly impact the government’s willingness and ability to implement the reform necessary to support its ambitious development agenda or could make the outcome of the development agenda less successful. These risks also pose challenges to the ability to mobilize and implement the investment in infrastructure and services which are essential to deliver on a more prosperous and equal society. In turn, these factors pose risks to the scope and depth of WBG’s support particularly with respect to the investment pipeline and the intended outcomes in terms of the twin goals.
V.1. POLITICAL ECONOMY AND GOVERNANCE RISKS
143. As explained throughout the CPF, action is needed to accelerate the country’s structural transformation, including some that can be expected to generate “quick wins”, while recognizing that the full benefits of such a shift will accrue only over the longer term. Increasing infrastructure and energy investment so as to better connect the economy domestically, and boost external competitiveness by reducing logistics costs, are clear priorities. The early actions taken by the administration to eliminate fuel subsidies in order to reallocate fiscal flows for more productive uses were an excellent start. Likewise, calls for an end to corruption and misuse of public policy for private gain resulted in the establishment of the OSS to make doing business easier, and introducing steps to make the Ministry of Mining and Energy and tax administration more transparent and accountable. These steps were very well received by civil society and the private sector alike. It is in the context of these reforms that WBG’s engagement in energy, for example, is placed. Maintaining and delivering on these reforms will not be easy particularly as government will have to continue to take on special interests in many of its core sectors. Inconsistent policy directions, or expansion of protectionist tendencies in trade policy, for example, could have a negative impact on the business environment, thus reducing opportunities for private sector participation in the financing of infrastructure and in the investments needed to create jobs. In some areas, they could also set back efforts for eliminating poverty, for example, through higher food prices or the misallocation of government spending. The government is aware of these risks and is intensifying efforts to accelerate the implementation of the reform agenda to improve market sentiment and maintain investor confidence. The economic policy reform packages announced by the government over several months in 2015 provide the opportunity to restore business confidence if well implemented. Sequencing the interventions under each of the engagement areas is one way for WBG to mitigate for this risk including, for example, avoiding lending in those sectors where the policy environment is not currently conducive and using policy-based lending to help open up the space for more efficient public and private sector investment.
V.2. MACROECONOMIC UNCERTAINTY
144. Indonesia, like most emerging middle income countries, particularly those that are commodity exporters, is vulnerable to the shocks and volatility impacting the global economy. Indonesia’s government is in a position to address economic risks despite recent falls in the growth rate. At the same time, the room for maneuver is less than in the past as described earlier under Recent Economic Developments. Risks are particularly associated with employment and job creation, revenue collection, the sudden reversal of financial assets held in the Indonesian stock and bond markets, and exchange rate volatility and inflation. Food and water security could become more serious concerns in the context of the impact of the El Nino phenomenon impacting Indonesia which is expected to be as bad as or worse than in 1997. These risks, along with volatility in the global economy, could impact Indonesia more sharply if government struggles
54
with the pace of its own structural reform. For the implementation of the CPF, backsliding could risk WBG’s ability to help government with development policy lending necessary for both its fiscal space and to support its ambitious plans for infrastructure investment and improvement in service delivery since these require substantial reallocation of spending. The risk of sharp increases in food prices which would particularly hurt the poor could impact poverty outcomes. Indonesia’s economy has proven resilient and responsive to global economic risks and volatility, including with support to government from WBG financing and technical assistance. Engagements under this CPF would also help mitigate macroeconomic risks. Intensive policy dialogue through the preparation of DPLs, and broader technical assistance for macroeconomic management, for instance in financial supervision and management of fiscal and external balances, reinforce WBG’s commitment to supporting Indonesia in the analysis of key public policy opportunities and challenges, and build on a long history of support to evidence-based policy making. 145. From the perspective of interventions with the private sector, the two greatest challenges are: (i) a global investment environment where there is a general decrease in liquidity in emerging markets and investors and banks withdraw from investing in projects due to increasing interest rates and volatile local currency markets; and (ii) a decrease in Indonesia’s capacity and willingness at both government and/or state-owned enterprise level of delivering executable projects. In terms of the CPF, our ability to work with and through the private sector ultimately will depending on a conducive business climate. This requires that government can undertake the needed reforms to improve the business environment for private investment. A balanced approach towards state-owned enterprises will also be important in creating an enabling environment for the private sector to operate. In addition, the shallow domestic capital markets pose a risk. The government’s infrastructure plans alone need close to US$500-600 billion over the next four years, of which close to two-thirds are expected to come from private sector companies and state-owned enterprises. Arranging funding for the private sectors’ growth plans would also be daunting. In the face of these risks, the CPF program depends on its sequencing both to help Government manage risks, but also to have the flexibility to calibrate WBG responses.
V.3. IMPLEMENTATION AND CAPACITY CONSTRAINTS
146. As discussed in the previous section, although implementing better and faster is one of the government’s key objectives in meeting its ambitious infrastructure goals, it has significant challenges in implementation capacity and has struggled particularly with executing large infrastructure projects. This is reflected not only in the implementation status of the Bank’s current portfolio, but even more so in the government’s challenges with its own budget execution and the quality of outcomes from spending. The SCD describes in detail the challenges faced by line ministries and particularly local governments in ensuring good execution of annual budgets and the need for strengthening the capacity, particularly at the local level, to provide quality services in health, education, sanitation and water. It should be expected that improvements in the early years will be incremental, particularly in relation to large scale infrastructure and institutional and regulatory reforms. 147. WBG has considered carefully these risks and, to the extent possible, put in place mitigation measures to minimize their impact on implementation of the CPF. First, WBG has designed a CPF that is more focused on fewer areas despite the potential financing envelope being larger. By putting the engagements through the filters not only of the SCD pathways, but also through the lens of clear counterpart demand and potential impact and ability to deliver, we are less likely to be trying to support changes in areas where there is insufficient political will or where potential for success is limited. Second, by introducing a multiplicity of tools in engagement areas including analytics, development policy lending, investment and results financing, as well as engagements both with the public and private sectors whenever possible, we are able to come at the challenges from more directions and with greater firepower in order to help demonstrate impact and results. Thinking of the business environment and markets as a ‘beam’ that potentially underpins all the engagement areas is one way the CPF can achieve this. WBG’s business model in Indonesia, which combines
55
support from development partners as an integral part of the CPF and where financing and knowledge services are combined, means we are able to engage more deeply and rapidly at the analytical level to shore up government efforts at evidence-based policy making and reform than we would if doing it alone. V.4. ENVIRONMENTAL AND SOCIAL RISKS 148. Insecure access to land and over-exploitation and degradation of natural resources constitute major risks to Indonesia’s sustainable development as they have direct links to poverty in Indonesia as well as global impact in terms of climate change. The comprehensive landscape management engagement proposed in this CPF, combined with the Government’s policy direction and reform commitment, aims to address some of these challenges and mitigate the potential risks to the extent possible, acknowledging that many of these issues require sustained engagement and a longer time horizon beyond the CPF. If government’s ability to address these difficult issues wanes, the larger landscape engagement and the development outcomes associated could become more difficult to achieve. In such a case, as with all engagement areas, an appropriate realignment in direction and sequencing can be considered over the course of the CPF period. 149. Finally, in addition to these ‘man-made’ risks, Indonesia is highly vulnerable to natural disasters that can inflict significant economic and social costs. Indonesia sits on the ‘ring of fire’ and is highly vulnerable to a broad range of disruptive natural disasters, including earthquakes, volcano eruptions and flooding. Indonesia's experience has contributed to greater disaster preparedness over time, and events such as the recent eruption of Mount Kelud, have been localized in terms of socio-economic impacts and are being dealt with through the disaster mitigation institutions that the IBRD has been actively supporting in partnership with the government, the UN and the New Zealand government among others. In the face of a large-scale natural disaster, WBG can be expected to refocus the CPF as needed, seeking to work with a broad range of development partners along with government agencies. Such was the case in the highly successful efforts following the 2004 earthquake and tsunami and 2006 devastating earthquake and eruption in Jogjakarta. This refocus could be limited to a certain engagement area, for example, concentrating national infrastructure on reconstruction or as a replacement for an entire engagement if needed.
Table 5.1: Risk in Indonesia
Risk Categories Rating (H, S, M, L) Political and governance S Macroeconomic S Sector strategies and policies M Technical design of project or program L Institutional capacity for implementation and sustainability S Fiduciary M Environment and social H Stakeholders L Overall S
56
AN
NE
XE
S
AN
NE
X 1
. C
PF
RE
SUL
T F
RA
ME
WO
RK
En
gage
men
t A
rea
1: I
nfra
stru
ctu
re P
latf
orm
s at
th
e N
atio
nal
Lev
el
Def
init
ion
of
focu
s ar
ea: I
nfra
stru
ctur
e Pl
atfo
rms a
t the
Nat
iona
l Lev
el In
fras
truct
ure
invo
lves
thos
e se
ctor
s whe
re th
e ce
ntra
l gov
ernm
ent,
mos
tly
thro
ugh
the
Min
istry
of
Publ
ic W
orks
and
Pub
lic H
ousin
g, h
as r
espo
nsib
ility
for
pol
icy a
nd/o
r im
plem
enta
tion,
whe
re g
over
nmen
t or
the
priv
ate
sect
or h
as e
xpre
ssed
a s
trong
inte
rest
in w
orki
ng w
ith th
e W
orld
Ban
k G
roup
and
whe
re s
uppo
rting
or
expa
ndin
g ‘p
latfo
rms’
in p
artn
ersh
ip w
ith
gove
rnm
ent a
nd, w
here
rele
vant
, the
priv
ate
sect
or c
an m
ake
a m
eani
ngfu
l im
pact
. Th
e CP
F m
akes
a d
istin
ctio
n be
twee
n de
liver
y at
the
loca
l and
na
tiona
l lev
el no
t so
muc
h be
caus
e th
e ge
ogra
phica
l cov
erag
e ar
e di
ffer
ent,
but m
ainly
beca
use
the
deliv
ery
mod
els a
re d
iffer
ent a
nd th
eref
ore
so a
re
the
bottl
enec
ks an
d so
lutio
ns. W
hile
ther
e re
main
s the
pos
sibili
ty to
wor
k in
oth
er se
ctor
s dur
ing
the C
PF if
con
ditio
ns c
hang
e, it
is cu
rren
tly ex
pect
ed
that
the
WBG
eng
agem
ent a
t th
e na
tiona
l lev
el w
ill b
e co
ncen
trate
d in
wat
er a
nd s
anita
tion,
irrig
atio
n an
d da
ms,
hous
ing
and
inte
grat
ed to
urism
de
velo
pmen
t. L
inks
bet
wee
n th
e fo
cus
area
an
d th
e tw
in g
oals
: As s
et o
ut in
the
SCD
, era
dica
ting
pove
rty an
d in
crea
sing
shar
ed p
rosp
erity
in In
done
sia d
epen
d,
to a
larg
e ex
tent
, on
closin
g th
e co
untry
’s lar
ge in
fras
truct
ure
gap.
Red
ucin
g th
e in
frast
ruct
ure
gap
wou
ld s
uppo
rt th
ese
goals
thro
ugh
allev
iatin
g th
e co
nstra
ints
that
infr
astru
ctur
e bo
ttlen
ecks
impo
se o
n co
mpe
titiv
enes
s, gr
owth
and
cre
atio
n of
jobs
. Thi
s en
gage
men
t lin
ks w
ith S
CD P
athw
ay 1
Job
Crea
tion
by a
ddre
ssin
g on
e of
the
big
gest
con
stra
ints
to
grow
th a
nd t
he c
reat
ion
of h
igh
prod
uctiv
ity jo
bs a
nd P
athw
ay 2
Ser
vice
Deli
very
and
O
ppor
tuni
ty fo
r All.
C
oun
try
Dev
elop
men
t G
oals
: Th
e N
atio
nal
Med
ium
-Ter
m D
evelo
pmen
t Pl
an 2
015-
2019
(RP
JMN
) pu
ts a
stro
ng e
mph
asis
on in
fras
truct
ure
deve
lopm
ent
and
finan
cing,
inclu
ding
an
emph
asis
on a
cces
s to
aff
orda
ble
hous
ing,
inte
grat
ed to
urism
infr
astru
ctur
e, in
nova
tion
in in
fras
truct
ure
finan
cing
thro
ugh
PPPs
, im
prov
ed w
ater
reso
urce
man
agem
ent,
irrig
atio
n an
d fo
od se
curit
y.
Ob
ject
ive
1: I
ncr
ease
acc
ess
to
wat
er ir
riga
tion
and
dam
saf
ety
Inte
rven
tion
Log
ic:
Food
secu
rity i
s prio
ritiz
ed in
the R
PJM
N 2
015-
2019
with
a fo
cus o
n m
oder
nizi
ng ir
rigat
ion
infr
astru
ctur
e, re
habi
litat
ing
3 m
illio
n he
ctar
es o
f irr
igat
ion
chan
nels
and
cons
truct
ing
1 m
illio
n ne
w h
ecta
res
of ir
rigat
ion
chan
nels.
With
in th
ese
ambi
tious
targ
ets,
WBG
’s en
gage
men
t wou
ld f
ocus
on
usin
g IB
RD r
esou
rces
to
reha
bilit
ate
exist
ing
sche
mes
, with
com
plem
enta
ry R
&D
and
ext
ensio
n se
rvice
s, an
d en
hanc
ing
gove
rnan
ce t
o in
crea
se u
ser
parti
cipat
ion
and
sust
ainab
ility
of i
nves
tmen
ts.
At t
he sa
me
time,
IFC
will
ass
ist th
e M
inist
ry in
iden
tifyin
g irr
igat
ion
dam
s whi
ch c
an b
e up
grad
ed to
als
o ge
nera
te p
ower
and
, whe
re a
ppro
priat
e, he
lp b
id o
ut so
me
of th
ese
proj
ects
as P
PPs t
o br
ing
in p
rivat
e se
ctor
par
ticip
atio
n th
at h
as b
een
miss
ing
in d
evelo
pmen
t and
ope
ratio
ns. I
FC w
ill al
so c
ontin
ue to
assis
t agr
icultu
re c
ompa
nies
in e
mpl
oyin
g m
ore
effic
ient w
ater
ing
of th
eir fi
elds,
and
help
ing
in d
eman
d sid
e m
anag
emen
t.
57
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
WB
G P
rogr
am
The
num
ber o
f peo
ple
bene
fitin
g fr
om
impr
oved
irrig
atio
n an
d da
m sa
fety
B
aseli
ne:
TBD
(201
6)
Tar
get:
T
BD (2
020)
A
rea
prov
ided
with
impr
oved
irrig
atio
n an
d dr
ainag
e se
rvice
s (H
ecta
re)
Bas
eline
: 1
6493
7 (2
016)
T
arge
t:
TBD
(202
0)
Ope
ratio
nal w
ater
use
r ass
ociat
ion
crea
ted
or
stre
ngth
ened
B
aseli
ne:
167
4 (2
016)
T
arge
t:
TBD
(201
7)
Num
ber o
f dam
s ret
urne
d to
full
oper
atio
n w
ith re
duce
d ris
k of
failu
re af
ter r
ehab
ilita
tion
Bas
eline
: 0
(201
6)
Tar
get:
2
2 (2
020)
On
Goi
ng:
D
am O
pera
tiona
l Im
prov
emen
t (D
OIS
P) (P
0965
32)
Wat
er R
esou
rces
and
Irrig
atio
n
Man
agem
ent P
rogr
am 2
(P11
4348
) P
lann
ed N
ew:
Dam
Ope
ratio
n Re
habi
litat
ion
&
Safe
ty Im
prov
emen
t Pro
ject I
I (D
ORS
IP-2
) U
rgen
t Reh
abili
tatio
n of
Irrig
atio
n Pr
ojec
t (U
RIP)
M
oder
niza
tion
Stra
tegi
c Ir
rigat
ion
Proj
ect (
MIS
P)
Ob
ject
ive
2: I
ncr
ease
acc
ess
to a
ffor
dab
le h
ousi
ng
Inte
rven
tion
Log
ic:
Acc
ess
to h
ousin
g is
a cr
itica
l cha
lleng
e fa
cing
Indo
nesia
, par
ticul
arly
in th
e ur
ban
area
s. Th
e cu
rren
t adm
inist
ratio
n ha
s m
ade
redu
cing
the
hous
ing
back
log
and
deliv
erin
g af
ford
able
hous
ing
an e
xplic
it po
licy
prio
rity.
With
the
Satu
Juta
Ruma
h (O
ne M
illio
n H
omes
) ini
tiativ
e, lau
nche
d in
Apr
il 20
15, t
he a
dmin
istra
tion
has
set a
n am
bitio
us ta
rget
of d
elive
ring
one
mill
ion
hom
es a
nnua
lly to
mee
t new
hou
seho
ld d
eman
d an
d to
add
ress
the
hous
ing
defic
it. W
BG w
ill a
im to
wor
k bo
th th
roug
h th
e pr
ivat
e an
d th
e pu
blic
sect
or to
supp
ort t
he p
rovi
sion
of a
fford
able
hous
ing
thro
ugh
a m
ix o
f len
ding
and
tech
nica
l ass
istan
ce o
n bo
th th
e su
pply
and
dem
and
sides
inclu
ding
enc
oura
ging
priv
ate
sect
or fi
nanc
ing
of a
fford
able
hous
ing
proj
ects
, as
well
as
to s
uppo
rt fin
ancia
l ins
titut
ions
in e
xten
ding
mor
tgag
es.
IFC
will
also
pro
mot
e us
e of
gre
en b
uild
ing
conc
epts
am
ongs
t pr
ivat
e se
ctor
hou
sing
deve
lope
rs.
58
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Num
ber o
f low
-inco
me
hous
ehol
ds w
ith a
cces
s to
aff
orda
ble
‘core
star
ter’
publ
ic ho
usin
g un
its
Bas
eline
: 0
(201
6)
Tar
get:
2
00,0
00 (2
020)
N
umbe
r of h
ouse
hold
s with
acc
ess t
o af
ford
able
hous
ing
thro
ugh
cred
it-lin
ked
dow
n pa
ymen
t sub
sidies
B
aseli
ne:
0 (2
016)
T
arge
t:
300
,000
(202
0)
Num
ber o
f citi
es th
at h
ave
deve
lope
d af
ford
able
hous
ing
plan
s
B
aseli
ne:
0 (2
016)
T
arge
t:
20
(202
0)
Dev
elopm
ent o
f nat
iona
l int
egra
ted
bene
ficiar
y ta
rget
ing
syst
em fo
r hou
sing
subs
idies
B
aseli
ne:
N (2
016)
T
arge
t:
Y (2
020)
On
Goi
ng:
La
nd, H
ousin
g an
d U
rban
Set
tlem
ents
PA
AA
(P14
9874
) P
lann
ed N
ew:
Nat
iona
l Affo
rdab
le H
ousin
g Pr
ogra
m
(P14
4948
) IF
C’s f
inan
cing
and
adv
isory
sect
ors f
or
affo
rdab
le h
ousin
g/ m
ortg
ages
pro
jects
Ob
ject
ive
3: D
evel
opm
ent
of in
tegr
ated
tou
rism
des
tin
atio
n
Inte
rven
tion
Log
ic:
Indo
nesia
is e
ndow
ed w
ith sp
ecta
cular
and
ext
ensiv
e na
tura
l and
cul
tura
l res
ourc
es w
hich
mak
e to
urism
pot
entia
lly o
ne o
f the
mos
t im
porta
nt se
ctor
s fo
r cre
atin
g jo
bs, g
row
th a
nd sh
ared
pro
sper
ity w
ith a
hig
h pr
opor
tion
of e
mpl
oym
ent f
or w
omen
and
you
th.
Yet i
t lag
s well
beh
ind
its n
eighb
orin
g co
untri
es i
n ex
ploi
ting
its c
ompe
titiv
e ad
vant
age.
Indo
nesia
is
miss
ing
majo
r op
portu
nitie
s in
thi
s ke
y se
ctor
bec
ause
of
a nu
mbe
r of
sev
ere
infr
astru
ctur
e, in
stitu
tiona
l and
skill
s gap
s. W
BG is
pro
posin
g to
supp
ort G
oI w
ith a
com
preh
ensiv
e ap
proa
ch, f
ocus
ing
on p
riorit
y ‘h
ub’ d
estin
atio
ns
to st
art a
nd la
ter e
xpan
d to
mor
e site
s as p
art o
f a n
atio
nal t
ouris
m p
rogr
am. T
he p
rogr
am w
ould
dra
w o
n IB
RD, I
FC an
d M
IGA
reso
urce
s to
supp
ort
the
deve
lopm
ent o
f int
egra
ted
tour
ism d
estin
atio
ns, w
hich
are
bas
ed o
n in
tegr
ated
mas
ter-p
lans a
nd im
plem
enta
tion
stra
tegi
es th
at a
re e
ndor
sed
by a
br
oad
set o
f sta
keho
lder
s. Th
e de
velo
pmen
t of i
nteg
rate
d de
stin
atio
ns w
ould
be
via
a co
ntin
uous
pro
cess
of p
olicy
and
plan
ning
coo
rdin
atio
n, a
nd
wou
ld b
ring
toge
ther
(i.e.
inte
grat
e) th
e de
velo
pmen
t of i
nfra
stru
ctur
e, th
e pro
mot
ion
at th
e nat
iona
l and
loca
l lev
els, a
nd sk
ills a
nd S
ME
dev
elopm
ent.
It w
ould
inc
lude
priv
ate
sect
or i
nves
tmen
ts t
hrou
gh I
FC a
nd M
IGA
fin
anci
al pr
oduc
ts t
o su
ppor
t th
e to
urism
ind
ustry
and
to
supp
ort
loca
l co
mm
uniti
es in
deli
verin
g qu
ality
expe
rienc
es, i
nclu
ding
SM
E fi
nanc
ing
and
skill
s dev
elopm
ent n
eede
d to
crea
te a
com
petit
ive t
ouris
m-b
ased
econ
omy.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Num
ber o
f int
egra
ted
tour
ism d
estin
atio
ns
esta
blish
ed
Bas
eline
: 0
(201
6)
Tar
get:
1
(202
0)
Num
ber o
f int
egra
ted
tour
ism m
aste
r plan
s pr
epar
ed
Bas
eline
: 0
(201
6)
Tar
get:
3
(202
0)
Nat
iona
l Tou
rism
Dev
elopm
ent
(P15
7599
) IF
C’s i
nves
tmen
ts a
nd a
dviso
ry su
ppor
t fo
r tou
rism
and
relat
ed in
dust
ries
En
gage
men
t A
rea
2: S
ust
ain
able
en
ergy
and
uni
vers
al a
cces
s
Def
init
ion
of f
ocu
s ar
ea: I
ndon
esia
is fa
cing a
pow
er d
efici
t and
, with
dem
and
cont
inui
ng to
incr
ease
at an
annu
al ra
te o
f abo
ut 8
per
cent
. Gov
ernm
ent
has p
rojec
ted
that
the c
ount
ry w
ill n
eed
at le
ast 3
5 G
W o
f new
gen
erat
ion
capa
city t
oget
her w
ith as
socia
ted
trans
miss
ion
and
dist
ribut
ion
capa
city o
ver
59
the
next
fiv
e ye
ars.
Gov
ernm
ent
is lo
okin
g to
sim
ulta
neou
sly in
crea
se o
vera
ll ge
nera
tion
to m
eet
dem
and
and
prep
are
for
grow
th, s
ubst
antia
lly
incr
ease
the
shar
e of
rene
wab
les in
the
ener
gy m
ix, a
nd p
rovi
de u
nive
rsal
acce
ss a
s a fu
ndam
enta
l rig
ht o
f all
Indo
nesia
ns.
L
inks
bet
wee
n th
e fo
cus
area
an
d th
e tw
in g
oals
: As s
et o
ut in
the S
CD, d
evelo
ping
the e
nerg
y sec
tor i
s at t
he to
p of
the g
over
nmen
t’s in
fras
truct
ure
prio
rities
and
one
of t
he m
ajor b
ottle
neck
s to
gro
wth
, sha
red
pros
perit
y an
d hu
man
cap
ital f
orm
atio
n. T
his
enga
gem
ent l
inks
with
SCD
Pat
hway
1
Job
Crea
tion
by a
ddre
ssin
g on
e of
the
bigg
est c
onst
rain
ts to
gro
wth
and
the
crea
tion
of h
igh
prod
uctiv
ity jo
bs a
nd P
athw
ay 2
Ser
vice
Deli
very
and
O
ppor
tuni
ty fo
r All
parti
cular
ly in
its a
cces
s age
nda.
C
oun
try
Dev
elop
men
t G
oals
: The
cur
rent
RPJ
MN
201
5-20
19 p
rese
nts
a co
mpr
ehen
sive
ener
gy s
trate
gy w
ith s
ubst
antia
l inv
estm
ents
to a
chie
ve
ener
gy so
vere
ignt
y. T
he m
ain
sect
or d
imen
sion
of R
PJM
N li
sts f
our p
riorit
y sec
tors
, whi
ch ar
e (i)
ener
gy an
d po
wer
sove
reig
nty,
(ii) f
ood
sove
reig
nty,
(ii
i) m
ariti
me,
and
(iv) t
ouris
m a
nd in
dust
ry. O
ptim
izin
g th
e ut
iliza
tion
of e
nerg
y so
urce
s ins
ide
the
coun
try (g
as, h
ydro
, and
geo
ther
mal)
is th
e w
ay
to ac
hiev
e en
ergy
and
pow
er so
vere
ignt
y. To
addr
ess t
hese
cha
lleng
es, a
t a st
rate
gic
leve
l, th
e G
oI h
as c
omm
itted
to a
num
ber o
f lon
g-te
rm m
easu
res
arou
nd (i
) red
ucin
g, a
nd b
ette
r ta
rget
ing,
ene
rgy
subs
idies
to im
prov
e pr
oduc
tive
and
reso
urce
allo
cativ
e ef
ficie
ncy;
(ii) e
xpan
ding
elec
tricit
y ac
cess
; (ii
i) sc
aling
-up
rene
wab
le en
ergy
dep
loym
ent
by 2
025;
and
(iv
) m
obili
zing
a p
artn
ersh
ip p
rogr
am o
n en
ergy
con
serv
atio
n to
ince
ntiv
ize
indu
stria
l en
terp
rises
to c
onve
rt to
ene
rgy
effic
ient t
echn
olog
ies.
Ob
ject
ive
4: I
ncr
ease
su
pply
an
d ac
cess
to
ener
gy
Inte
rven
tion
Log
ic
This
objec
tive
will
be
supp
orte
d by
WBG
thr
ough
the
eng
agem
ent
in t
he a
rea
of s
treng
then
ing
sect
or g
over
nanc
e an
d su
stain
abili
ty, s
uppo
rting
re
new
able
ener
gy an
d lo
w ca
rbon
dev
elopm
ent,
expa
ndin
g acc
ess t
o m
oder
n en
ergy
serv
ices t
hrou
gh n
on-c
oal g
ener
atio
n, tr
ansm
issio
n an
d di
strib
utio
n an
d en
ablin
g ga
s se
ctor
pol
icy f
orm
ulat
ion
and
inve
stm
ent p
lanni
ng. W
BG s
uppo
rt w
ould
be
thro
ugh
a m
ix o
f fin
ancin
g in
stru
men
ts: I
nves
tmen
t Pr
ojec
t Fin
ancin
g (IP
F), D
evelo
pmen
t Pol
icy L
oans
(DPL
s), P
rogr
am f
or R
esul
ts (P
forR
s), I
FC e
quity
and
loan
s fo
r pr
ivat
e se
ctor
pro
jects
, and
a
com
bina
tion
of M
IGA
’s po
litica
l risk
insu
ranc
e an
d no
n-ho
norin
g pr
oduc
ts in
the
rene
wab
le en
ergy
sect
or.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Num
ber o
f hou
seho
lds r
eceiv
ing
impr
oved
ac
cess
to re
liabl
e en
ergy
Ba
selin
e (2
012)
: 12.
45 m
illio
n Ta
rget
(202
0):
13.9
7 m
illio
n In
crem
enta
l geo
ther
mal
pow
er g
ener
atio
n in
stall
ed c
apac
ity (M
W)
Base
line
(201
4): 0
Ta
rget
(202
0): 1
50
The
Borr
ower
issu
es a
nat
iona
l app
roac
h to
ele
ctrif
icatio
n w
ith im
prov
ed c
oord
inat
ion
of
inst
itutio
nal r
espo
nsib
ilitie
s, fin
ancin
g m
echa
nism
s and
plan
ning
Ba
selin
e (2
015)
: No
Ta
rget
(201
7): Y
es
The
Borr
ower
issu
es th
e im
plem
entin
g re
gulat
ions
for t
he 2
014
Geo
ther
mal
Law
on
the
proc
ess t
o co
nver
t geo
ther
mal
ener
gy to
ele
ctric
ity
On
goin
g P
roje
cts:
In
done
sia P
ower
Tra
nsm
issio
n D
evelo
pmen
t (P1
1732
3)
Indo
nesia
Sec
ond
Pow
er T
rans
miss
ion
Dev
elopm
ent (
P123
994)
U
pper
Ciso
kan
Pum
ped
Stor
age
Hyd
ro-
Elec
t (P1
1215
8)
Geo
ther
mal
Clea
n E
nerg
y In
vest
men
t ('P
1130
78)
IFC’
s equ
ity in
vest
men
t in
Med
co
Pow
er
60
Incr
emen
tal p
umpe
d st
orag
e in
stall
ed c
apac
ity
(MW
) Ba
selin
e (2
016)
: 0
Targ
et (2
020)
: 1,0
00
Incr
emen
tal e
lectri
city
sales
of P
LN (G
wh)
Ba
selin
e (2
014)
: 65,
361
Targ
et (2
020)
: 97,
000
Non
coa
l (h
ydro
, gas
) pow
er p
rodu
ced
(Gw
h)
Base
line
(201
4): 1
,175
Ta
rget
(202
0): 1
,300
Base
line
(201
5): N
o
Targ
et (2
017)
: Yes
IFC
- BD
SN (7
6661
7) A
saha
n I
hydr
opow
er
MIG
A-
Rajam
anda
la H
ydro
pow
er IP
P (g
uara
ntee
issu
ance
of U
S$20
0 m
illio
n)
Pla
nned
Pro
ject
s:
Geo
ther
mal
Ene
rgy
Ups
tream
D
evel
opm
ent (
CTF/
GE
F)
Pow
er D
istrib
utio
n E
ffici
ency
-P4R
D
PL E
nerg
y I
D
PL E
nerg
y II
Poko
Hyd
ro P
ower
U
pper
Ciso
kan
Add
ition
al Fi
nanc
ing
Pow
er D
istrib
utio
n E
ffici
ency
II -P
4R
Mat
engg
eng
Pow
er
Geo
ther
mal
II P
roje
ct
IFC’
s PPP
adv
isory
supp
ort f
or
deve
lopi
ng re
new
able
and
gas b
ased
IP
Ps a
nd tr
ansm
issio
n pr
ojec
ts
IFC’
s inv
estm
ents
to su
ppor
t cle
an IP
Ps
and
trans
miss
ion
proj
ects
In
done
sia R
enew
able
Ene
rgy
Prog
ram
- Bu
sines
s Dev
elopm
ent (
#60
0118
; Cr
oss-
Indu
stry
Adv
isory
Ser
vice
s)
Indo
nesia
Hyd
ro P
roje
cts (
Min
of
Publ
ic W
orks
) (#
6004
44; C
ross
-In
dust
ry A
dviso
ry S
ervi
ces)
61
En
gage
men
t A
rea
3: M
arit
ime
and
Con
nec
tivi
ty
Def
init
ion
of
focu
s ar
ea: G
ood
conn
ectiv
ity is
a v
ital p
rere
quisi
te to
supp
ly do
mes
tic m
arke
ts e
fficie
ntly
and
to c
ompe
te in
tern
atio
nally
. It
is all
the
mor
e im
porta
nt in
an ar
chip
elago
nat
ion
like I
ndon
esia
whe
re th
e se
a can
bec
ome a
tool
of c
ohes
ion
or a
sour
ce o
f fra
gmen
tatio
n an
d iso
latio
n. G
ood
freig
ht lo
gist
ics—
both
in te
rms
of s
peed
and
dep
enda
bilit
y—in
volv
es a
wid
e ra
nge
of e
lemen
ts in
cludi
ng h
ard
infr
astru
ctur
e an
d te
chno
logy
, goo
d re
gulat
ion
and
effic
ient o
pera
tions
and
the
quali
ty o
f hu
man
cap
ital.
Indo
nesia
’s co
asta
l and
mar
ine
natu
ral r
esou
rces
are
am
ong
the
riche
st in
the
wor
ld, b
ut t
he c
ount
ry is
not
max
imiz
ing
the
pote
ntial
of
thes
e re
sour
ces
in t
erm
s of
eco
nom
ic gr
owth
(ex
port
fishe
ries,
mar
ine-
base
d to
urism
), liv
eliho
ods b
enef
its (j
obs,
inco
me,
nutri
tion,
food
secu
rity)
and
the
envi
ronm
enta
l ser
vice
s (re
silien
ce to
nat
ural
disa
ster
s, fis
h nu
rser
ies) t
hey
prov
ide.
L
inks
bet
wee
n th
e fo
cus
area
an
d th
e tw
in g
oals
: Thi
s eng
agem
ent l
inks
with
SCD
Pat
hway
1 Jo
b Cr
eatio
n by
addr
essin
g one
of t
he m
ain co
nstra
ints
to
gro
wth
and
the
crea
tion
of h
igh
prod
uctiv
ity jo
bs, P
athw
ay 2
Ser
vice
Deli
very
and
Opp
ortu
nity
for
All
parti
cular
ly in
impr
ovin
g co
nnec
tivity
in
east
ern
regi
ons a
nd P
athw
ay 3
in p
rovi
ding
infr
astru
ctur
e an
d re
gulat
ory
envi
ronm
ent t
o m
ake
use
of n
atur
al re
sour
ces,
espe
cially
in c
oast
al ar
eas a
nd
fishe
ries,
mor
e su
stain
able
and
the
bene
fits m
ore
even
ly sh
ared
. C
oun
try
Dev
elop
men
t G
oals
: Th
e cu
rren
t RPJ
MN
201
5-20
19 p
rese
nts
a co
mpr
ehen
sive
mar
itim
e st
rate
gy w
ith s
ubst
antia
l inv
estm
ents
in p
orts
in
fras
truct
ure,
hint
erlan
d co
nnec
tions
and
fish
eries
. The
RPJ
MN
call
s for
impr
ovem
ent o
f por
t eff
icien
cy a
nd c
lear t
arge
ts a
re se
t for
the
redu
ctio
n of
dw
ell ti
me
in m
ajor p
orts
in In
done
sia. T
he G
over
nmen
t is p
repa
ring
seve
ral P
resid
entia
l Dec
rees
on
upgr
adin
g po
rts, b
uild
ing
new
por
ts, i
mpr
ovin
g po
rt ef
ficien
cy, a
mon
g ot
her k
ey in
vest
men
ts. T
he R
PJM
N a
lso se
ts a
mbi
tious
targ
ets i
n su
ppor
t of s
usta
inab
le fi
sher
ies m
anag
emen
t and
exp
ansio
n an
d di
vers
ifica
tion
of w
ild c
aptu
re a
nd a
quac
ultu
re fi
sher
ies p
rodu
ctio
n an
d po
st-h
arve
st p
roce
ssin
g w
ith th
e aim
to d
oubl
e pr
oduc
tion
and
expo
rt by
20
19. T
he R
PJM
N in
clude
s clea
r tar
gets
for m
angr
ove
rest
orat
ion
and
incr
ease
d m
anag
emen
t of p
rote
cted
area
s and
spec
ific s
pecie
s. G
over
nmen
t has
alr
eady
issu
ed a
num
ber o
f crit
ically
impo
rtant
regu
latio
ns to
impr
ove
gove
rnan
ce a
nd m
anag
emen
t of i
ts m
arin
e an
d co
asta
l nat
ural
reso
urce
s.
Ob
ject
ive
5: I
mp
rove
mar
itim
e lo
gist
ics
and
conn
ecti
vity
Inte
rven
tion
Log
ic
As
an a
rchi
pelag
ic na
tion,
mar
itim
e lo
gist
ics a
nd c
onne
ctiv
ity p
lay a
crit
ical r
ole
in d
rivin
g gr
owth
, enh
ancin
g co
mpe
titiv
enes
s, fa
cilita
ting
shar
ed
pros
perit
y, an
d en
surin
g pr
oper
acc
ess t
o go
ods a
nd se
rvice
s for
all
Indo
nesia
n cit
izen
s reg
ardl
ess o
f the
ir lo
catio
n. F
or re
mot
e re
gion
s, hi
gh lo
gist
ics
cost
s he
lp to
incr
ease
their
isol
atio
n an
d lim
it ec
onom
ic lin
ks to
nea
rby
grow
th p
oles
; thi
s in
turn
und
erm
ines
pro
spec
ts to
redu
ce th
e de
velo
pmen
t ga
p. T
he W
BG p
rogr
am p
rovi
des s
uppo
rt to
the
GoI
in ad
dres
sing
its co
nnec
tivity
cha
lleng
es b
y out
linin
g op
tions
and
prio
rities
to im
prov
e effi
cienc
y in
nat
iona
l fre
ight
logi
stics
. Spe
cifica
lly, t
he p
rogr
am ai
ms t
o: (a
) im
prov
e the
qua
lity o
f ove
rall
logi
stics
pol
icy-m
akin
g th
roug
h ke
y sec
tor i
nter
vent
ions
an
d po
licy a
nalys
is; (b
) im
prov
e th
e cou
ntry
’s m
ariti
me c
onne
ctiv
ity b
y upg
radi
ng in
fras
truct
ure,
and
deve
lopi
ng re
com
men
datio
ns fo
r mor
e int
egra
ted
logi
stics
sol
utio
ns; a
nd (
c) r
educ
ing
logi
stics
cos
ts v
ia th
e pr
omot
ion
of p
olicy
ref
orm
s aim
ed a
t in
crea
sing
com
petit
iven
ess
and
prod
uctiv
ity b
y ov
erco
min
g ba
rrier
s tha
t inh
ibit
inve
stm
ent a
nd b
usin
ess d
evelo
pmen
t in
the
sect
or.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
WB
G P
rogr
am
Redu
ctio
n of
con
tain
er h
andl
ing
time
in
selec
ted
inte
rnat
iona
l and
dom
estic
term
inals
Ba
selin
e: 6
.5 d
ays (
2016
)
Est
ablis
hmen
t of t
askf
orce
that
pro
vide
s clea
r gu
idan
ce to
line
min
istrie
s and
age
ncies
on
coor
dina
ted
logi
stics
refo
rm
On
Goi
ng:
M
anag
ing
Logi
stic
s Cos
ts in
In
done
sia (P
1462
61)
62
Tar
get:
3
day
s (2
020)
Re
duct
ion
in tr
avel
tim
e fo
r sel
ecte
d lin
ks to
po
rts
Base
line:
TBD
(201
6)
Tar
get:
T
BD (2
020)
Base
line:
Est
ablis
hmen
t of t
askf
orce
with
clea
r m
anda
te (
2016
) Ta
rget
:
Regu
latio
ns is
sued
and
/or r
evise
d by
ta
skfo
rce
(202
0)
Num
ber
of p
orts
abl
e to
rece
ive
large
r shi
ps
Bas
eline
: TB
D (2
016)
T
arge
t:
TBD
(202
0)
Km
of r
oad
conn
ectio
ns to
por
t im
prov
ed
Bas
eline
: 0
(201
6)
Tar
get:
T
BD (2
020)
M
eter
qua
y w
all u
pgra
ded/
built
Ba
selin
e: T
BD (2
016)
T
arge
t:
TBD
(202
0)
Trad
e an
d lo
gist
ics P
A (P
1567
80)
IFC’
s loa
n su
ppor
t to
Jaka
rta
Inte
rnat
iona
l Con
tain
er T
erm
inal
Pla
nned
New
: E
aste
rn p
orts
dev
elopm
ent
(PT.
Pe
lindo
) IF
C’s i
nves
tmen
ts w
ith p
rivat
e se
ctor
por
ts d
evel
oper
s and
op
erat
ors
Road
Impr
ovem
ent t
o su
ppor
t In
tegr
ated
land
and
sea
toll
way
D
PL M
ariti
me,
logi
stic
s &
conn
ectiv
ity (M
LC I)
D
PL M
ariti
me,
logi
stic
s &
conn
ectiv
ity (M
LC II
Ob
ject
ive
6: I
mp
rove
fish
erie
s m
anag
emen
t pr
acti
ces
Inte
rven
tion
Log
ic
All
of th
e pr
ojec
ts in
dica
ted—
CORE
MA
P CT
I, CC
RES
and
the
prop
osed
Nat
iona
l Blu
e E
cono
my
Prog
ram
—ar
e d
esig
ned
to su
ppor
t im
prov
e fis
herie
s man
agem
ent p
ract
ices t
o en
hanc
e th
e ec
onom
ic co
ntrib
utio
n of
the
fishe
ries s
ecto
r and
ens
ure
resil
ience
and
long
-term
pro
visio
n of
crit
ical
ecos
yste
m se
rvic
es to
supp
ort s
hare
d pr
ospe
rity.
The
prop
osed
Nat
iona
l Blu
e E
cono
my
Prog
ram
resp
onds
to g
over
nmen
t’s re
ques
t for
a la
rge-
scale
, tra
nsfo
rmat
iona
l pro
gram
des
igne
d to
acc
elera
te su
stain
able
deve
lopm
ent o
f Ind
ones
ia’s l
ivin
g m
arin
e an
d co
asta
l res
ourc
es to
supp
ort t
he v
ision
of
a pr
ospe
rous
Mar
itim
e N
atio
n. T
he P
rogr
am w
as se
lect
ed to
resp
ond
to th
e re
ques
t to
stren
gthe
n su
stain
able
man
agem
ent o
f Ind
ones
ia’s a
bund
ant,
but s
tress
ed, w
ild c
aptu
re fi
sher
ies, m
ainst
ream
sust
ainab
ility
prin
ciples
in it
s rap
idly
expa
ndin
g aq
uacu
lture
subs
ecto
r and
help
de-
risk
the
sect
or to
su
ppor
t inc
reas
ed su
stain
able
priv
ate
sect
or in
vest
men
t in
fishe
ries i
n lin
e w
ith g
over
nmen
t’s st
rate
gic
polic
y di
rect
ives
.
63
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Sust
ainab
le fis
herie
s man
agem
ent i
mpl
emen
ted
in fi
sher
ies m
anag
emen
t are
as 26
B
aseli
ne:
0 (2
016)
T
arge
t:
2 (2
020)
Pe
rcen
tage
hea
lth st
atus
of c
oral
reef
s in
inte
rven
tion
area
s im
prov
ed 27
B
aseli
ne:
0
(201
6)
Tar
get:
7
0 (2
020)
Dev
elopm
ent o
f cor
al re
ef fi
sher
ies
man
agem
ent p
lans
B
aseli
ne:
0 (2
016)
Tar
get:
2
(202
0)
Num
ber o
f vill
age
havi
ng im
prov
ed c
oral
reef
m
anag
emen
t
B
aseli
ne:
0 (2
016)
T
arge
t:
210
(202
0)
On
Goi
ng:
Co
ral R
eef R
ehab
ilita
tion
and
Man
agem
ent P
rogr
am P
hase
III
(P12
7813
) Co
ral R
eel R
ehab
ilita
tion
and
Man
agem
ent P
rogr
am II
I (P1
3038
9)
Capt
urin
g Co
ral R
eef a
nd R
elate
d E
cosy
stem
Ser
vice
s Pro
ject -
CCR
ES
Regi
onal
Proj
ect (
P123
933)
P
lann
ed N
ew:
Nat
iona
l Blu
e E
cono
my
Prog
ram
En
gage
men
t A
rea
4: D
eliv
ery
of L
ocal
Ser
vice
s an
d I
nfr
astr
uct
ure
Def
init
ion
of f
ocu
s ar
ea:
Mor
e th
an a
dec
ade
afte
r dec
entra
lizat
ion,
whi
ch tr
ansf
erre
d th
e re
spon
sibili
ty fo
r the
pro
visio
n of
mos
t bas
ic s
ervi
ces
to d
istric
t gov
ernm
ents
, and
de
spite
sign
ifica
nt in
crea
ses i
n de
cent
raliz
ed p
ublic
spen
ding
(abo
ut h
alf o
f tot
al go
vern
men
t spe
ndin
g), t
he q
ualit
y of s
ervi
ces r
emain
s per
siste
ntly
low
an
d un
even
ly di
strib
uted
acr
oss r
egio
ns.
The
pro
blem
is th
at m
ost l
ocal
gove
rnm
ents
do
not h
ave
adeq
uate
cap
acity
to d
elive
r ser
vice
s, no
r are
they
ac
coun
tabl
e for
resu
lts to
the c
entra
l gov
ernm
ent a
nd th
eir ci
tizen
s. Im
prov
ing l
ocal
serv
ice d
elive
ry re
quire
s bui
ldin
g the
capa
cities
of l
ocal
gove
rnm
ent
to d
elive
r ser
vice
s, m
ovin
g to
war
ds a
mor
e pe
rfor
man
ce-b
ased
tran
sfer
syst
em, p
rovi
ding
the t
ools
for c
itize
ns to
mon
itor l
ocal
serv
ice d
elive
ry, a
s well
as
diff
eren
tiate
d ap
proa
ch to
diff
eren
t typ
es o
f re
gion
s. U
ltim
ately
, im
prov
ing
loca
l ser
vice
deli
very
is a
bout
enh
ancin
g th
e w
ay c
entra
l, pr
ovin
cial,
dist
rict,
and
villa
ge g
over
nmen
ts w
ork
toge
ther
to d
elive
r res
ults
on
the
grou
nd.
L
inks
bet
wee
n th
e fo
cus
area
and
the
twin
goa
ls: E
limin
atin
g ex
trem
e pov
erty
and
boos
ting
shar
ed p
rosp
erity
in th
e lon
ger-
term
requ
ire im
prov
ing
oppo
rtuni
ties t
oday
par
ticul
arly
in te
rms o
f edu
catio
n, h
ealth
and
nutri
tion
to en
sure
a he
althy
and
prod
uctiv
e pop
ulat
ion
in th
e fut
ure.
This
enga
gem
ent
links
with
SCD
Pat
hway
2 S
ervi
ce D
elive
ry a
nd O
ppor
tuni
ty f
or A
ll in
sup
porti
ng im
prov
emen
ts in
qua
lity,
acce
ss a
nd a
ccou
ntab
ility
for
hea
lth,
educ
atio
n, sa
nita
tion
and
othe
r inf
rast
ruct
ure
prov
ided
thro
ugh
loca
l gov
ernm
ents
.
26 T
he su
stain
able
fishe
ries m
anag
emen
t ind
icato
rs a
re: (
i) st
ock
of fi
sh re
sour
ces,
(ii) h
abita
t, (ii
i) m
etho
d of
cap
ture
, and
(iv)
inst
itutio
nal (
esta
blish
men
t of
cor
al re
ef m
anag
emen
t plan
s and
dist
rict s
patia
l plan
s with
clea
r man
agem
ent m
easu
res i
dent
ified
)
27 %
of l
ive
cora
l cov
er m
acro
ben
thos
, and
indi
cato
r ree
f fish
spec
ies
64
Cou
ntr
y D
evel
opm
ent
Goa
ls:
RPJM
N (
Nat
iona
l med
ium
ter
m p
lanni
ng)
aims
to im
prov
e th
e qu
ality
of
hum
an li
fe a
nd a
ddre
ss d
ispar
ity a
nd
ineq
ualit
y. O
ne o
f th
e th
ree
deve
lopm
ent
dim
ensio
ns is
ter
ritor
ial a
nd e
quity
dim
ensio
n th
at a
ims
to e
nsur
e th
at d
evelo
pmen
t co
uld
be e
quall
y di
strib
uted
am
ong
inco
me
grou
ps a
nd a
cros
s reg
ions
.
Ob
ject
ive
7: I
mp
rove
loca
l ser
vice
del
iver
y
Inte
rven
tion
Log
ic
This
enga
gem
ent
will
foc
us o
n su
ppor
ting
effo
rts t
o es
tabl
ish a
per
form
ance
-bas
ed f
iscal
trans
fer
syst
em, s
treng
then
ing
the
capa
city
of c
entra
l go
vern
men
t age
ncies
to s
uppo
rt an
d ov
erse
e th
e pe
rfor
man
ce o
f loc
al go
vern
men
ts, s
treng
then
ing
the
back
-offi
ce fu
nctio
ns o
f loc
al go
vern
men
t to
deliv
er lo
cal s
ervi
ces
and
infr
astru
ctur
e, an
d de
velo
ping
tool
s for
citi
zens
to m
onito
r loc
al se
rvice
deli
very
. W
BG fi
nanc
ial su
ppor
t will
focu
s on
the
grad
ual r
oll o
ut o
f per
form
ance
ince
ntiv
es in
fisc
al tra
nsfe
rs to
loca
l gov
ernm
ents
for p
riorit
y se
ctor
s (in
fras
truct
ure,
healt
h an
d ed
ucat
ion)
. Und
er th
is pi
llar,
IFC
wou
ld h
elp s
uppo
rt pr
ivat
e se
ctor
mod
els o
f de
liver
ing
som
e of
the
ser
vice
s. In
sev
eral
coun
tries
, inc
ludi
ng I
ndon
esia,
priv
ate
sect
or
healt
hcar
e pro
vide
rs (h
ospi
tals,
diag
nost
ic ce
nter
s) co
mpl
emen
t the
gov
ernm
ent s
et-u
p to
impr
ove t
he se
rvice
s for
citiz
ens.
WBG
will
seek
to su
ppor
t su
ch m
odels
, as
well
as
prom
ote
othe
r in
clusiv
e he
althc
are
mod
els s
uch
as e
-con
sulta
tions
per
haps
thro
ugh
the
priv
ate
sect
or to
ram
p up
ser
vice
s es
pecia
lly to
fron
tier a
reas
. C
PF
Ob
ject
ive
Indi
cato
rs
Sup
ple
men
tary
Pro
gres
s In
dic
ator
s
WB
G P
rogr
am
Num
ber o
f DA
K-fi
nanc
ed p
hysic
al ou
tput
s re
porte
d, v
erifi
ed, a
nd m
eetin
g eli
gibi
lity
crite
ria
in d
istric
ts w
here
the
perf
orm
ance
ince
ntiv
e is
intro
duce
d
B
aseli
ne:
72 (2
016)
T
arge
t:
88
(201
8)
Syst
em fo
r mon
itorin
g fis
cal a
nd se
rvice
de
liver
y pe
rfor
man
ce o
f loc
al go
vern
men
ts
fully
ope
ratio
nal
On
Goi
ng:
Lo
cal G
over
nmen
t DA
K (P
1115
77)
AF
for t
he L
ocal
Gov
ernm
ent a
nd D
ec.
Proj
ect (
P111
577)
PA
AA
“D
ecen
traliz
atio
n th
at D
elive
rs”
(P15
4976
) P
lann
ed N
ew:
P4R/
OBD
: DA
K R
efor
m p
rogr
am
Ob
ject
ive
8: I
mp
rove
acc
ess
to b
asic
ser
vice
s in
tar
gete
d c
itie
s 28
Inte
rven
tion
Log
ic
The
WBG
will
supp
ort n
atio
nal p
rogr
ams t
hat p
rovi
de re
sults
-bas
ed fi
nanc
ing
and
tech
nica
l ass
istan
ce to
citi
es to
impr
ove
prov
ision
of b
asic
serv
ices
to c
itize
ns, i
nclu
ding
wat
er sa
nita
tion,
and
solid
was
te.
28 T
arge
ted
cities
: Citi
es w
here
urb
aniz
atio
n is
happ
enin
g m
ost r
apid
ly an
d fa
ce th
e m
ost c
halle
nge
in te
rms o
f urb
an d
evelo
pmen
t
65
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Num
ber o
f peo
ple
with
impr
oved
acc
ess t
o ur
ban
infr
astru
ctur
e an
d se
rvice
s in
the
targ
eted
slu
ms,
disa
ggre
gate
d by
gen
der
Base
line:
0 (2
016)
Ta
rget
:
4 m
illio
n (2
020)
N
umbe
r of h
ouse
hold
with
new
acc
ess t
o im
prov
ed p
iped
wat
er se
rvice
s in
targ
eted
citi
es
Base
line:
0 (2
016)
Ta
rget
:
1,2
00,0
00 (2
020)
N
umbe
r of
hous
ehol
d w
ith ac
cess
to im
prov
ed
sani
tatio
n se
rvice
s in
targ
eted
citi
es
Base
line:
0 (2
016)
Ta
rget
:
750
,000
(20
20)
Num
ber o
f hou
seho
ld re
ceiv
ing
impr
oved
solid
w
aste
man
agem
ent i
n ta
rget
ed c
ities
Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
Num
ber o
f Sl
um Im
prov
emen
t Act
ion
Plan
s (S
IAPs
) at c
ity le
vel
Bas
eline
: 30
(201
6)
Tar
get:
: 1
30 (2
020)
N
umbe
r of l
ocal
gove
rnm
ent’s
ow
ned
wat
er
utili
ties (
PDA
Ms)
with
impr
oved
serv
ices
Bas
eline
: 0
(201
6)
Tar
get:
: 1
50 (2
020)
N
umbe
r of
citi
es
with
im
prov
ed s
anita
tion
serv
ices
Bas
eline
: 0
(201
6)
Tar
get:
:
5 (2
020)
N
umbe
r of i
nfra
stru
ctur
e su
bpro
jects
fin
ance
d by
RID
F fu
nd
Bas
eline
: TB
D (2
016)
T
arge
t: :
TB
D (2
020)
N
umbe
r of l
ocal
gove
rnm
ent r
eceiv
ed R
IDF
fund
B
aseli
ne:
TBD
(201
6)
Tar
get:
T
BD (2
020)
On
Goi
ng:
Ja
karta
Urg
ent F
lood
Miti
gatio
n Pr
ojec
t (P
1110
34)
Sura
baya
Urb
an C
orrid
or D
evelo
pmen
t BE
TF (P
1488
21)
Sust
ainab
le ur
bani
zatio
n PA
AA
(P15
3802
)
Pla
nned
New
: Re
gion
al In
fras
truct
ure
Dev
elopm
ent F
und
(RID
F) (P
1549
47)
Nat
iona
l Urb
an W
ater
Sup
ply
Prog
ram
N
atio
nal S
lum
Upg
radi
ng P
rogr
am
(P15
4782
) Su
raba
ya U
rban
Cor
ridor
Dev
elopm
ent
Proj
ect
Nat
iona
l Sew
erag
e Sy
stem
Dev
elopm
ent
Prog
ram
. N
atio
nal P
rogr
am fo
r Im
prov
ing
Solid
W
aste
Man
agem
ent.
Regi
onal
Wat
er S
uppl
y Pr
ogra
m
Ob
ject
ive
9: I
mp
rove
acc
ess
to q
ual
ity
edu
cati
on a
nd h
ealt
h r
elat
ed s
ervi
ces
in t
arge
ted
rur
al a
reas
29
Inte
rven
tion
Log
ic
The
WBG
will
supp
ort n
atio
nal p
rogr
ams t
hat p
rovi
de p
erfo
rman
ce-b
ased
fund
s and
tech
nica
l ass
istan
ce to
dist
ricts
and
vill
ages
in ru
ral r
egio
ns in
or
der t
o en
sure
uni
vers
al ac
cess
to e
duca
tion
and
healt
h-re
lated
serv
ices (
inclu
ding
wat
er a
nd sa
nita
tion)
that
mee
t min
imum
qua
lity
stan
dard
s. IF
C w
ill se
ek p
rivat
e se
ctor
mod
els fo
r util
izin
g ne
w te
chno
logi
es to
exp
and
healt
hcar
e an
d ed
ucat
ion
serv
ices t
o th
e ba
se o
f the
pyr
amid
pop
ulat
ions
in
rem
ote
regi
ons.
29 T
arge
ted
rura
l reg
ions
: Disa
dvan
tage
d ru
ral r
egio
ns, d
efin
ed in
term
s of p
over
ty a
nd a
cces
s to
educ
atio
n, h
ealth
, and
wat
er a
nd sa
nita
tion
66
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Perc
enta
ge o
f mot
hers
and
chi
ldre
n re
ceiv
ing
mat
erna
l and
chi
ld h
ealth
and
nut
ritio
n se
rvice
s in
com
mun
ity h
ealth
cen
ter
(pus
kesm
as) a
nd it
s net
wor
k in
targ
eted
are
as
Base
line:
TBD
(201
6)
Targ
et:
T
BD (2
020)
N
umbe
r of s
tude
nts e
nrol
led in
scho
ols m
eetin
g m
inim
um se
rvice
stan
dard
s in
targ
eted
are
as,
disa
ggre
gate
d by
gen
der
Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
N
umbe
rs o
f peo
ple
havi
ng ac
cess
to im
prov
ed
wat
er se
rvice
s in
targ
eted
are
as, d
isagg
rega
ted
by g
ende
r Base
line:
7.9
mill
ion
(201
6)
Targ
et:
2
2 m
illio
n (2
020)
Num
bers
of p
eopl
e ha
ving
acce
ss to
impr
oved
sa
nita
tion
serv
ices i
n ta
rget
ed a
reas
, di
sagg
rega
ted
by g
ende
r Ba
selin
e: 7
.7 m
illio
n (2
016)
Ta
rget
:
14.
9 m
illio
n (2
020)
Perc
enta
ge o
f prim
ary
healt
h ca
re c
ente
rs in
ta
rget
are
as u
nder
the
accr
edita
tion
prog
ram
th
at h
ave
achi
eved
acc
redi
tatio
n Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
Num
ber o
f doc
tors
/nur
ses/
mid
wiv
es in
targ
et
area
s with
bas
ic co
mpe
tenc
ies in
MCH
car
e Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
Perc
enta
ge o
f chi
ldre
n 0-
59 m
o w
eighe
d m
onth
ly Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
Num
ber o
f tea
cher
s in
proj
ects
are
as w
ith
basic
com
pete
ncies
(UPK
test
) Ba
selin
e: T
BD (2
016)
Ta
rget
:
TBD
(202
0)
Num
ber o
f vill
ages
dev
elopi
ng c
omm
unity
w
ater
supp
ly an
d sa
nita
tion
actio
n pl
ans
Bas
eline
: 10
,000
(201
6)
Tar
get:
2
7,00
0 (2
020)
On
Goi
ng:
PN
PM R
ural
2012
- 20
15 (P
1288
32)
PNPM
-Gen
eras
i (P1
3258
5)
UH
C PA
AA
(P15
3828
) V
illag
e La
w P
AA
A (P
1532
19)
ECE
D F
ront
line
PAA
A (P
1566
74)
PNPM
-Gen
eras
i Im
pact
Eva
luat
ion
(P15
2466
) ID
PA
MSI
MA
S Su
ppor
t Tru
st F
und
(P11
6236
) ID
-WSS
LIC
III (
PAM
SIM
AS)
(P
0853
75)
AF-
Nat
iona
l Wat
er a
nd S
anita
tion
Prog
ram
(PA
MSI
MA
S 2)
P
lann
ed N
ew:
Prim
ary
Hea
lth C
are
Proj
ect (
P157
150)
Q
ualit
y E
duca
tion
in d
isadv
anta
ged
regi
ons (
P4R)
V
illag
e La
w Im
plem
enta
tion
Proj
ect/
P4R
Vill
age
for S
ervi
ces P
AA
A
Teac
her Q
ualit
y an
d E
duca
tion
Fina
ncin
g PA
AA
. A
F- N
atio
nal W
ater
and
San
itatio
n Pr
ogra
m (P
AM
SIM
AS
3) (P
1294
86)
PAA
A to
supp
ort P
AM
SIM
AS
En
gage
men
t A
rea
5: S
ust
ain
able
Lan
dsc
ape
Man
agem
ent
Def
init
ion
of
focu
s ar
ea: B
ette
r har
ness
ing
pote
ntial
of n
atur
al as
sets
(lan
d, w
ater
, for
ests
) for
sus
tain
able
and
inclu
sive
grow
th th
roug
h im
prov
ed
spat
ial p
lanni
ng a
nd la
nd a
dmin
istra
tion,
impr
ovin
g go
vern
ance
and
man
agem
ent o
f th
e fo
rest
est
ate,
inte
grat
ion
of a
land
scap
e ap
proa
ch in
to th
e po
rtfol
io an
d pi
pelin
e, m
akin
g gr
owth
inclu
sive,
thro
ugh
targ
etin
g th
e vul
nera
ble a
nd p
rom
otin
g eq
uity
, and
enha
ncin
g cr
oss-
sect
oral
coor
dina
tion
and
67
inte
grat
ion
for l
ands
cape
man
agem
ent.
This
focu
s are
a co
vers
supp
ort f
or d
esig
n an
d im
plem
enta
tion
of a
Lan
dsca
pe P
rogr
am fo
cuse
d on
impr
ovin
g m
anag
emen
t of,
and
bene
fits f
rom
, ter
rest
rial n
atur
al as
sets
. L
inks
bet
wee
n th
e fo
cus
area
an
d th
e tw
in g
oals
: As s
et o
ut in
the S
CD, t
he q
ualit
y of n
atur
al re
sour
ce g
over
nanc
e and
man
agem
ent w
ill in
fluen
ce
how
effe
ctiv
ely In
done
sia’s
grow
th st
rate
gy li
fts p
eopl
e ou
t of e
xtre
me
pove
rty a
nd b
oost
s sha
red
pros
perit
y. Po
verty
rate
s are
hig
hest
for h
ouse
hold
s liv
ing
on th
e ed
ge o
f for
ests
. The
spec
ial n
atur
e of
pov
erty
in fo
rest
area
s req
uire
s an
appr
oach
that
wor
ks w
ith m
anag
emen
t of n
atur
al re
sour
ces.
The
rem
oten
ess,
low
pop
ulat
ion
dens
ity a
nd d
isper
sed
com
mun
ity lo
catio
ns w
arra
nt a
n ap
proa
ch th
at re
cogn
izes
the
linka
ges b
etw
een
the
fate
of p
eopl
e liv
ing
in th
ese a
reas
and
natu
ral r
esou
rce a
ctiv
ities
and
chan
ges i
n ec
osys
tem
serv
ices r
esul
ting
from
def
ores
tatio
n, o
vere
xplo
itatio
n of
reso
urce
s, flo
ods,
lands
lides
, and
nat
ural
disa
ster
s. Th
is en
gage
men
t lin
ks w
ith S
CD P
athw
ay 3
Nat
ural
Reso
urce
Man
agem
ent.
C
oun
try
Dev
elop
men
t G
oals
: Th
e cu
rren
t RPJ
MN
201
5-20
19 p
rese
nts
the
prio
rity
actio
ns r
elat
ed to
land
scap
e m
anag
emen
t: (i)
to o
ptim
ize
the
natu
ral r
esou
rces
and
dev
elop
regu
latio
ns to
supp
ort;
(ii) t
o st
reng
then
the
fore
stry
sect
or; (
iii) t
o bu
ild sp
atial
and
sust
ainab
ile e
nviro
nmen
t. G
oI h
as
initi
ated
a n
umbe
r of a
mbi
tious
initi
ativ
es a
nd st
arte
d so
me
regu
lator
y ch
ange
pro
cess
es, w
hich
, if s
ucce
ssfu
lly im
plem
ente
d, w
ould
beg
in to
add
ress
m
any
of t
hese
issu
es n
atio
nally
. The
se in
clude
reo
rgan
izatio
n at
the
min
ister
ial le
vel w
ith c
omm
itmen
ts t
o m
ore
equi
tabl
e re
sour
ce m
anag
emen
t, de
cent
raliz
atio
n of
fore
st m
anag
emen
t, sp
atial
plan
ning
, pea
t fire
man
agem
ent,
and
mor
e tra
nspa
rent
and
eff
icien
t lice
nsin
g pr
oces
ses.
At t
he s
ame
time,
the
gove
rnm
ent h
as li
mite
d ca
pacit
y to
impl
emen
t sou
nd p
olici
es a
nd le
gisla
tion,
par
ticul
arly
whe
re re
quiri
ng c
ross
-sec
tora
l res
pons
e.
Ob
ject
ive
10: I
mpr
ove
land
man
agem
ent
and
sp
atia
l pla
nnin
g
Inte
rven
tion
Log
ic
The
indi
cativ
e po
rtfol
io p
rovi
des s
uppo
rt to
the
GoI
in d
evelo
ping
som
e of
the
core
fund
amen
tals
for b
ette
r har
ness
ing
the
pote
ntial
of n
atur
al as
sets
as a
sour
ce o
f sus
tain
able
econ
omic
grow
th, j
obs,
and
liveli
hood
s. Sp
ecifi
cally
, the
se a
ctiv
ities
inclu
de: (
i) bu
ild c
apac
ity fo
r im
prov
ed sp
atial
plan
ning
an
d lan
d ad
min
istra
tion;
(ii)
impr
ove
gove
rnan
ce b
y im
prov
ing
trans
pare
ncy
over
the
boun
darie
s of
the
fore
st a
sset
s; an
d (ii
i) ad
dres
s ro
ot c
ause
s of
po
verty
and
natu
ral d
egra
datio
n by
impr
ovin
g sec
urity
of l
and
tenu
re an
d us
e. Th
ese a
ctiv
ities
wer
e sele
cted
bas
ed o
n th
eir cr
itica
lity t
o re
ducin
g pov
erty
in
and
aro
und
fore
st a
reas
and
impr
ovin
g fo
rest
-relat
ed re
venu
e co
llect
ion
and
man
agem
ent a
s a d
river
for b
road
er g
row
th.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Com
plet
ion
and
publ
ic av
ailab
ility
of O
ne
Map
30 i
n th
e co
ntex
t of n
atio
nal s
patia
l dat
a in
fras
truct
ure
B
aseli
ne:
0 (2
016)
T
arge
t:
1 (2
020)
Num
ber o
f pro
vinc
es w
ith ap
prov
ed sp
atial
pl
ans
Bas
eline
: 7
(201
6)
Tar
get:
9
(20
20)
Stre
ngth
enin
g of
lega
l and
inst
itutio
nal
fram
ewor
k fo
r lan
d m
anag
emen
t, te
nure
and
us
e rig
hts i
n fo
rest
est
ate
On
Goi
ng:
PA
AA
Gre
en D
evelo
pmen
t Sup
port
Prog
ram
(P14
8318
) RE
DD
+ S
uppo
rt Fa
cility
(P14
9183
) IF
C: In
done
sia G
reen
Bui
ldin
gs R
egul
atio
n (#
5891
67; T
rade
and
Com
petit
iven
ess)
30 O
ne M
ap is
a p
ropo
sed
singl
e in
corp
orat
e da
taba
se b
ringi
ng to
geth
er la
nd u
se, l
and
tenu
re a
nd o
ther
spat
ial d
ata
for I
ndon
esia
68
Bas
eline
: 0
(201
6)
Tar
get:
5
(202
0)
SE A
sia F
ores
try A
dvice
(#60
0431
; M
anuf
actu
ring,
Agr
ibus
ines
s & S
ervi
ces)
In
done
sia P
alm O
il D
evelo
pmen
t Sm
allho
lder
s (#
5940
07; M
anuf
actu
ring,
A
grib
usin
ess &
Ser
vice
s)
Follo
w o
n Pa
lm O
il Pr
ojec
t No.
2:
SCI
in P
lanta
tions
(#59
3807
; Man
ufac
turin
g,
Agr
ibus
ines
s & S
ervi
ces)
P
lann
ed N
ew:
Nat
iona
l Lan
d A
dmin
istra
tion
& S
patia
l Pl
anni
ng
PAA
A In
done
sia L
ands
cape
Pro
gram
(P
1564
89)
IFC:
For
estry
Sup
ply
Chain
Indo
nesia
(#
6001
24; M
anuf
actu
ring,
Agr
ibus
ines
s &
Ser
vice
s)
Ob
ject
ive
11: S
tren
gth
ened
cap
acit
y in
dec
entr
aliz
ed f
ores
t m
anag
emen
t
Inte
rven
tion
Log
ic
The
indi
cativ
e po
rtfol
io p
rovi
des s
uppo
rt to
the
GoI
in d
evelo
ping
som
e of
the
core
fund
amen
tals
for b
ette
r har
ness
ing
the
pote
ntial
of n
atur
al as
sets
as a
sour
ce o
f sus
tain
able
econ
omic
grow
th, j
obs,
and
liveli
hood
s. Sp
ecifi
cally
, the
se ac
tiviti
es in
clude
: 1) i
mpr
ove
gove
rnan
ce a
nd m
anag
emen
t of t
he
Fore
st E
stat
e w
ith a
focu
s on
dece
ntra
lized
man
agem
ent;
and
2) a
ddre
ss ro
ot c
ause
s of p
over
ty a
nd n
atur
al de
grad
atio
n by
impr
ovin
g se
curit
y of
land
te
nure
and
use
; and
3)
mak
e gr
owth
inclu
sive
and
equi
tabl
e, th
roug
h en
surin
g vu
lner
able
com
mun
ities
with
in f
ores
ts a
re b
enef
iting
fro
m t
hose
re
sour
ces.
The
activ
ities
wer
e se
lecte
d ba
sed
on th
eir c
ritica
lity
to re
ducin
g po
verty
in a
nd a
roun
d fo
rest
are
as a
nd im
prov
ing
fore
st-r
elate
d re
venu
e co
llect
ion
and
man
agem
ent a
s a
driv
er o
f br
oade
r gr
owth
, and
ref
lects
ong
oing
eng
agem
ent a
reas
bet
wee
n th
e W
orld
Ban
k an
d re
lated
min
istrie
s. Li
kew
ise, t
he p
ortfo
lio u
nder
pre
para
tion
refle
cts a
reas
crit
ical t
o su
cces
s whe
re th
e G
oI h
as d
emon
stra
ted
inte
rest
in e
ngag
ing.
Whi
le th
ese
area
s are
co
nsid
ered
criti
cal f
or en
gage
men
t, im
porta
nt ri
sks d
o re
main
giv
en th
e cha
lleng
ing
polit
ical e
cono
my o
f the
sect
or, a
nd th
e wea
k co
ordi
natio
n be
twee
n m
inist
ries a
nd lo
cal g
over
nmen
t.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Land
are
a su
ppor
ted
by fo
rest
man
agem
ent
units
with
impr
oved
man
agem
ent e
ffec
tiven
ess
(Hec
tare
)
Ba
selin
e (2
016)
: 0
Fore
st m
anag
emen
t uni
ts w
ith fo
rest
bo
unda
ries d
eline
ated
and
inte
grat
ed in
to
spat
ial p
lans o
f pro
vinc
es (n
umbe
rs)
Bas
eline
: 0
(20
16)
On
Goi
ng:
PA
AA
Gre
en D
evelo
pmen
t Sup
port
Prog
ram
(P14
8318
) RE
DD
+ S
uppo
rt Fa
cility
(P14
9183
)
69
Targ
et (2
020)
: 560
,000
Tar
get:
10
(202
0)
Fore
st m
anag
emen
t uni
ts go
vern
ed b
y lo
ng-
term
man
agem
ent p
lans p
repa
red
with
co
mm
unity
par
ticip
atio
n (n
umbe
rs)
Bas
eline
: 0
(201
6)
Tar
get:
6
(20
20)
IFC:
SE
Asia
For
estry
Adv
ice (#
6004
31;
Man
ufac
turin
g, A
grib
usin
ess &
Ser
vice
s)
Pla
nned
New
: Fo
rest
ry In
vest
men
t pro
gram
(P14
4269
) IF
C: F
ores
try S
uppl
y Ch
ain In
done
sia
(#60
0124
; Man
ufac
turin
g, A
grib
usin
ess
& S
ervi
ces)
En
gage
men
t A
rea
6: C
olle
ctin
g M
ore
and
Sp
end
ing
Bet
ter
Def
init
ion
of
focu
s ar
ea:
Indo
nesia
’s re
venu
e-to
-GD
P (1
4.7
perc
ent i
n 20
14) a
nd ta
x-to
-GD
P (1
0.9
perc
ent)
ratio
s ar
e ve
ry lo
w b
y in
tern
atio
nal
stan
dard
s. Th
is is
not d
ue to
low
er ta
x po
tent
ial; b
y on
e es
timat
e, In
done
sia is
col
lectin
g les
s tha
n 50
per
cent
of i
ts to
tal p
oten
tial t
ax re
venu
e. Th
e 50
pe
rcen
t of t
ax re
venu
e not
bein
g co
llect
ed is
a re
sult
of su
bopt
imal
tax
polic
y (p
olic
y gap
) and
wea
k ad
min
istra
tion
(com
plian
ce g
ap).
Just
as im
porta
nt
as co
llect
ing
mor
e, ho
wev
er, i
s ‘sp
endi
ng b
ette
r’, th
at is
, im
prov
ing
both
the c
ompo
sitio
n an
d de
liver
y/ex
ecut
ion
of sp
endi
ng.
Befo
re th
e int
rodu
ctio
n of
a m
ajor f
uel s
ubsid
y re
form
, cen
tral g
over
nmen
t’s p
ublic
spe
ndin
g on
infr
astru
ctur
e an
d he
alth
prog
ram
s w
ere
signi
fican
tly c
row
ded
out b
y lar
ge
ener
gy s
ubsid
ies. I
n 20
14, s
pend
ing
on e
nerg
y su
bsid
ies a
ccou
nted
for m
ore
than
one
-fifth
of t
he c
entra
l gov
ernm
ent’s
bud
get a
nd m
ore
than
thre
e tim
es th
e all
ocat
ion
for i
nfra
stru
ctur
e an
d he
alth.
Sub
natio
nal g
over
nmen
ts n
ow s
pend
a b
it m
ore
than
half
of t
he n
atio
nal b
udge
t (ne
t of s
ubsid
ies
and
inte
rest
pay
men
ts).
In g
ener
al, s
ubna
tiona
l gov
ernm
ents
’ spe
ndin
g is
exce
ssiv
ely d
omin
ated
by
spen
ding
on
adm
inist
ratio
n an
d pe
rson
nel o
ver
prod
uctiv
e sec
tors
and
capi
tal s
pend
ing.
Impr
ovin
g th
e com
posit
ion
of lo
cal g
over
nmen
t spe
ndin
g an
d re
alloc
atin
g m
ore r
esou
rces
to fr
ontli
ne se
rvice
de
liver
y ar
e im
porta
nt st
eps t
owar
ds im
prov
ing
the
prov
ision
of k
ey se
rvice
s to
the
popu
latio
n.
Lin
ks b
etw
een
the
focu
s ar
ea a
nd th
e tw
in g
oals
: Fisc
al po
licy,
in it
s rev
enue
mob
iliza
tion
and
quali
ty o
f spe
ndin
g fu
nctio
ns, w
ere
iden
tified
in th
e SC
D a
s key
to p
over
ty re
duct
ion
and
shar
ed p
rosp
erity
. Jus
t as i
mpo
rtant
as c
ollec
ting
mor
e, ho
wev
er, i
s ‘sp
endi
ng b
ette
r’, th
at is
, im
prov
ing
both
the
com
posit
ion
and
deliv
ery/
exec
utio
n of
spen
ding
. The
SCD
also
iden
tifies
tran
spar
ency
and
acc
ount
abili
ty in
the
use
of p
ublic
fund
s as o
ne o
f the
key
in
gred
ients
in im
prov
ing
serv
ice d
elive
ry. T
his
enga
gem
ent l
inks
with
Pat
hway
2 b
y pr
ovid
ing
both
incr
ease
d re
venu
e an
d be
tter
spen
ding
for
the
deliv
ery
of s
ervi
ces
oppo
rtuni
ties
for a
ll, a
nd P
athw
ay 3
that
seek
s to
impr
ove
the
way
reve
nue
from
Indo
nesia
’s ab
unda
nt n
atur
al re
sour
ces
can
be
capt
ured
and
shar
ed to
impr
ove
sust
ainab
ility
and
shar
e re
sour
ces m
ore
equi
tabl
y.
Cou
ntr
y D
evel
opm
ent
Goa
ls: R
PJM
N 2
015-
2019
put
em
phas
is on
: (i)
stre
ngth
enin
g st
ate
reve
nue
adm
inist
ratio
n ca
pacit
y an
d im
prov
ing
tax
polic
y to
incr
ease
the s
tate
reve
nue f
rom
tax
and
non-
tax
sour
ces;
and
(ii) s
treng
then
ing
plan
ning
and
budg
etin
g in
stitu
tions
to im
prov
e bud
get e
xecu
tion,
the
alloc
ativ
e ef
ficien
cy, a
nd th
e ef
fect
iven
ess (
impa
ct) o
f pub
lic e
xpen
ditu
re.
70
Ob
ject
ive
12:
Impr
ove
reve
nu
e co
llect
ion
Inte
rven
tion
Log
ic
By c
ollec
ting
mor
e, th
e go
vern
men
t will
be
able
to a
dequ
ately
fina
nce
the
key
prio
rity
area
s, su
ch a
s in
fras
truct
ure,
supp
orte
d by
the
CPF.
Ong
oing
an
d up
com
ing
portf
olio
item
s se
lect
ed b
ased
on
pote
ntial
impa
ct o
n th
e st
reng
then
ing
of re
venu
e ad
min
istra
tion
capa
city
(to re
duce
the
com
plian
ce
gap)
and
on im
prov
ing
tax
polic
y (to
redu
ce th
e pol
icy g
ap).
Spec
ifica
lly, W
BG’s
enga
gem
ent a
ims t
o he
lp th
e gov
ernm
ent r
aise r
even
ues w
hile
redu
cing
econ
omic
dist
ortio
ns a
nd lo
wer
ing
adm
inist
ratio
n co
sts.
To a
chiev
e th
is ob
jectiv
e, W
BG w
ould
sup
port
the
gove
rnm
ent i
n th
e fo
llow
ing
area
s: (i)
su
ppor
ting
the
revi
sion
of se
lectiv
e ta
x po
licies
; (ii)
gre
ater
eff
ectiv
enes
s and
eff
icien
cy o
f tax
com
plian
ce m
anag
emen
t thr
ough
a m
ove
to a
risk
-bas
ed
appr
oach
to c
ompl
iance
man
agem
ent;
(iii)
stre
ngth
enin
g an
d m
ainst
ream
ing
non-
tax
reve
nue
adm
inist
ratio
n.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Com
plian
ce ra
te fo
r ind
ivid
ual a
nd c
orpo
rate
ta
xpay
ers
Base
line:
59.8
% in
divi
dual,
47.
3% c
orpo
rate
(201
3 ta
x ye
ar)
Targ
et: T
BD (2
018
tax
year
)
Legi
slatio
n pa
ssed
to in
crea
se th
e ta
x ba
se
Base
line:
No
(201
6)
Targ
et: T
wo
revi
sions
of t
ax la
ws:
Inco
me
Tax
and
VA
T La
w (2
017)
Re
gulat
ion
fully
impl
emen
ted
to
elim
inat
e du
plica
te ta
x ID
s. Ba
selin
e: N
o (2
014)
Ta
rget
: Y
es (2
016)
Pr
ocur
emen
t ini
tiate
d (R
FPs)
for
acqu
isitio
n of
a m
oder
n ta
x m
anag
emen
t sof
twar
e sy
stem
. Ba
selin
e: N
o (2
015)
Ta
rget
: Yes
(201
7)
On
Goi
ng:
TA
-Rev
enue
and
Bud
get M
anag
emen
t (P
1556
48)
Pla
nned
New
: Ta
x po
licy
TA (p
art o
f mac
ro-fi
scal
PA
P132
241)
N
on-ta
x re
venu
e po
licy
and
adm
inist
ratio
n TA
(p
art o
f Nat
ural
Reso
urce
s for
Dev
elopm
ent
PA P
1561
42)
Mod
erni
zatio
n of
Tax
Col
lectio
n pr
ojec
t Su
b-na
tiona
l fisc
al TA
, inc
ludi
ng in
Ob
ject
ive
13:
Impr
ove
effi
cien
cy a
nd e
ffec
tive
nes
s of
sp
endi
ng
Inte
rven
tion
Log
ic
By im
prov
ing
the
alloc
ativ
e an
d te
chni
cal e
fficie
ncy
of p
ublic
exp
endi
ture
, the
gov
ernm
ent w
ill b
e ab
le to
red
uce
econ
omic
disto
rtion
s an
d lo
wer
ad
min
istra
tion
cost
s to
allow
for m
ore
optim
al m
ix o
f pub
lic sp
endi
ng su
ch a
s inf
rast
ruct
ure,
healt
h, a
nd e
duca
tion.
Ong
oing
and
upc
omin
g po
rtfol
io
item
s are
des
igne
d to
pro
vide
mul
tiple
inst
rum
ents
to su
ppor
t gov
ernm
ent’s
spen
ding
bet
ter a
gend
a. Sp
ecifi
cally
, WBG
aim
s to
help
the
gove
rnm
ent
in th
e fo
llow
ing
key
area
s: (i)
adv
ancin
g en
ergy
(fue
l and
elec
trici
ty) s
ubsid
y re
form
s thr
ough
con
siste
nt im
plem
enta
tion
and
impr
oved
tran
spar
ency
;
71
(ii) i
mpr
ovin
g qu
ality
of s
pend
ing
(allo
cativ
e ef
ficien
cy, e
ffec
tiven
ess,
and
impl
emen
tatio
n) in
key
are
as; (
iii) i
mpr
ovin
g qu
ality
of s
pend
ing
and
serv
ice
deliv
ery o
f sele
cted
subn
atio
nal g
over
nmen
ts; a
nd (i
v) st
reng
then
ing
inst
itutio
nal c
apac
ity to
mod
erni
ze p
rocu
rem
ent a
nd co
ntra
ct m
anag
emen
t and
to
impr
ove
the
cont
rol e
nviro
nmen
t.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Cent
ral g
over
nmen
t spe
ndin
g on
hea
lth, c
apita
l ex
pend
iture
(pro
xy fo
r inf
rast
ruct
ure)
, and
socia
l as
sista
nce
( per
cent
age
of to
tal e
xpen
ditu
re o
f ap
prov
ed n
atio
nal b
udge
t exc
ludi
ng tr
ansf
ers t
o su
bnat
iona
l gov
ernm
ents
) Ba
selin
e: he
alth
at 2
.7%
(201
4); c
apita
l exp
endi
ture
at
12.
2% (2
014)
; soc
ial a
ssist
ance
at 3
.2%
(201
4)
Targ
et (2
016
onw
ard)
: hig
her t
han
base
line
Ce
ntra
l bu
dget
exe
cutio
n ra
tes (
reali
zed
as a
pe
rcen
tage
of A
PBN
) of c
apita
l spe
ndin
g Ba
selin
e: 80
% (2
014)
Ta
rget
: 90%
(201
8)
Cont
ract
com
mitm
ents
on
capi
tal
spen
ding
mad
e in
firs
t 3 m
onth
s of y
ear
as a
% o
f tot
al pl
anne
d ca
pita
l spe
ndin
g Ba
selin
e: TB
D (2
015)
Ta
rget
: TBD
(202
0)
Chan
ge re
gulat
ions
(inc
ludi
ng a
t lea
st
PMK
157
/201
3) to
bet
ter e
nabl
e lar
ge
infr
astru
ctur
e co
ntra
cts,
inclu
ding
mul
ti-ye
ar c
ontra
cts (
as m
easu
red
by fi
scal
DPL
II).
Base
line:
No
(201
5)
Targ
et: Y
es (
2017
) Im
prov
emen
t in
the
opin
ion
expr
esse
d in
aud
ited
annu
al Ce
ntra
l Gov
ernm
ent
finan
cial s
tate
men
ts
Base
line:
Qua
lified
(201
5)
Targ
et: U
nqua
lified
(20
17)
On
Goi
ng:
PE
RISA
I DPL
-DD
O (P
1300
48)
Exp
endi
ture
pol
icy T
A (p
art o
f mac
ro-fi
scal
polic
y PA
P13
2241
) P
lann
ed N
ew:
DPL
Fisc
al Re
form
I an
d II
(P15
6655
) Su
b-na
tiona
l fisc
al TA
, inc
ludi
ng in
reso
urce
ric
h re
gion
s (pa
rt of
mac
ro-fi
scal
polic
y PA
P1
3224
1 an
d D
ecen
traliz
atio
n PA
)
Sup
port
ing
Bea
m 1
: The
Bu
sin
ess
Clim
ate
and
Fu
ncti
onin
g of
Mar
kets
As s
et o
ut in
the
SCD
, gro
wth
, job
s and
pov
erty
redu
ctio
n w
ill d
epen
d a
grea
t dea
l on
a gr
owth
stra
tegy
that
is su
ppor
ted
by th
e pr
ivat
e se
ctor
as t
he
engi
ne o
f gro
wth
. Th
e go
vern
men
t play
s a
criti
cal r
ole
by d
evisi
ng a
nd im
plem
entin
g ap
prop
riate
pol
icies
and
regu
latio
ns.
Whi
lst a
ddre
ssin
g so
me
key c
onst
rain
ts (s
uch
as th
e inf
rast
ruct
ure a
nd sk
ills g
ap) t
hrou
gh th
e var
ious
enga
gem
ent a
reas
, we s
ee a
unify
ing f
acto
r—a w
eak
busin
ess a
nd fi
nanc
ing
envi
ronm
ent—
as o
ne th
at c
uts v
ery
broa
dly
acro
ss th
e ec
onom
y an
d w
hich
impa
cts t
he e
ffici
ency
and
effi
cacy
of m
any
of th
e de
velo
pmen
t sol
utio
ns.
The s
ympt
oms o
f the
wea
k bu
sines
s and
fina
ncin
g en
viro
nmen
t are
evid
ence
d by
inve
stm
ent a
nd tr
ade r
egul
atio
ns w
hich
are g
ener
ally r
estri
ctiv
e, of
ten
inco
nsist
ent (
inclu
ding
acro
ss d
iffer
ent l
evels
of g
over
nmen
ts),
and
unce
rtain
; obt
ainin
g pe
rmits
and
licen
ses i
s tim
e-co
nsum
ing
and
cost
ly. Im
prov
ing
the
busin
ess c
limat
e an
d m
arke
ts is
amon
gst t
he g
over
nmen
t’s to
p pr
iorit
ies in
ord
er to
attra
ct p
rivat
e se
ctor
cap
ital t
hat i
s ess
entia
l for
the
crea
tion
of
jobs
and
for h
elpi
ng to
fina
nce t
he co
untry
’s va
st in
fras
truct
ure n
eeds
. Int
erve
ntio
ns ta
rget
ed to
impr
ove t
he b
usin
ess e
nviro
nmen
t and
the f
unct
ioni
ng
of m
arke
ts c
ut a
cros
s all
enga
gem
ent a
reas
inclu
ding
Nat
iona
l and
Loc
al in
fras
truct
ure,
Ene
rgy,
Mar
itim
e, an
d La
ndsc
ape
Man
agem
ent.
72
Ob
ject
ive
14:
Sim
plif
y bu
sin
ess
licen
sing
pro
cess
es t
o su
ppor
t pr
ivat
e se
ctor
Inte
rven
tion
Log
ic
A c
ombi
natio
n of
WBG
pro
duct
s will
be
used
to su
ppor
t the
dyn
amic
natu
re o
f priv
ate
sect
or d
evelo
pmen
t and
forg
e a
prod
uctiv
ity p
ull i
n a t
arge
ted
set
of b
usin
ess
area
s w
here
con
ditio
ns a
re p
ropi
tious
for
hig
h gr
owth
. In
parti
cular
, WBG
will
foc
us o
n su
ppor
ting
refo
rms
in t
he r
egul
ator
y en
viro
nmen
t, an
d fo
r hig
h-gr
owth
firm
s with
in d
ynam
ic pr
oduc
t and
supp
ortiv
e fa
ctor
mar
kets
.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Redu
ctio
n in
tota
l tim
e re
quire
d fo
r pro
cess
ing
of
all li
cens
es in
4 p
riorit
y se
ctor
s (ap
pare
l, fo
od, I
PP,
tour
ism)
Base
line:
0% re
duct
ion
(20
15)
Targ
et: 2
0% re
duct
ion
(202
0)
Redu
ctio
n in
tota
l tim
e re
quire
d fo
r pr
oces
sing
of a
ll lic
ense
s in
IPP
Base
line:
600
days
(201
5)
Targ
et: 3
00 d
ays.
(201
7)
On
Goi
ng:
In
done
sia P
rivat
e Se
ctor
Dev
elopm
ent
Refo
rm P
rojec
t (P1
4468
0, N
LTA
, D
elive
ry: F
Y17
) Re
sear
ch a
nd In
nova
tion
in S
cienc
e an
d Te
chno
logy
Pro
ject (
P121
842)
Su
stain
able
Man
agem
ent o
f Agr
icultu
ral
Rese
arch
and
Tec
hnol
ogy
Diss
emin
atio
n (P
1172
43)
Pla
nned
New
: SM
E D
evelo
pmen
t (Pr
ogra
mm
atic
AA
A,
CN fo
rthco
min
g FY
16Q
2)
Tech
nica
l ass
istan
ce fo
r reg
ulat
ory
simpl
ifica
tion
to B
KPM
O
bje
ctiv
e 15
: In
crea
se t
he
role
of
the
pri
vate
sec
tor
in n
atio
nal
infr
astr
uct
ure
inve
stm
ent
Inte
rven
tion
Log
ic
The e
ngag
emen
t to
assis
t Ind
ones
ia in
clos
ing i
ts la
rge p
ublic
infr
astru
ctur
e gap
by s
uppo
rting
the f
low
of p
rivat
e cap
ital i
nto
infr
astru
ctur
e dev
elopm
ent
and
impr
ovin
g th
e in
stitu
tiona
l, leg
al an
d re
gulat
ory
fram
ewor
k to
enh
ance
the
abili
ty o
f priv
ate
capi
tal a
nd p
ublic
inst
itutio
ns to
wor
k to
geth
er fo
r in
fras
truct
ure
deve
lopm
ent.
73
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
An
incr
ease
in p
rivat
e in
vest
men
t in
infr
astru
ctur
e (h
ighe
r priv
ate
inve
stm
ent)
Ba
selin
e: U
S$32
7 m
(201
6)
Targ
et: U
S$5,
000
m (2
020)
In
crea
se in
tota
l num
ber o
f int
erna
tiona
l tou
rist
arriv
als
Bas
eline
: 9.
44m
(201
6)
Tar
get:
1
5.0m
(202
0)
Incr
ease
num
ber o
f tou
rism
-relat
ed jo
bs in
in
tegr
ated
tour
ism d
estin
atio
ns
Bas
eline
: TB
D (2
016)
T
arge
t:
TBD
(202
0)
A re
form
ed re
gulat
ion
clarif
ying
Perp
res
(pre
siden
tial r
egul
atio
n) 7
5 &
38
Base
line:
0 0
(201
6)
Targ
et :
1 (2
020)
A
n in
crea
se in
priv
ately
fina
nced
in
fras
truct
ure
proj
ects
(pro
jects
with
pa
rtial
or fu
ll pr
ivat
e se
ctor
fina
ncin
g,
or th
ose
bene
fitin
g fr
om a
gov
ernm
ent
guar
ante
e).
Base
line:
0 (2
016)
Ta
rget
: 3
(202
0)
On
Goi
ng:
In
fras
truct
ure
Fina
nce
Facil
ity II
FF
(P09
2218
) In
done
sia In
fras
truct
ure
Gua
rant
ee F
und
(P11
8916
) P
lann
ed N
ew:
AF-
Infr
astru
ctur
e Fi
nanc
e Fa
cility
IIFF
In
done
sia In
fras
truct
ure
Fina
nce
Dev
elopm
ent (
P157
490
and
P157
491)
Te
chni
cal a
ssist
ance
for r
egul
ator
y sim
plifi
catio
n fo
r PPP
pro
jects
IF
C’s P
PP a
dviso
ry se
rvice
s Ca
pita
l mar
ket d
evelo
pmen
t, es
pecia
lly in
ar
ea o
f inf
rast
ruct
ure
finan
ce
IFC’
s dire
ct a
nd in
dire
ct in
vest
men
ts in
pr
ivat
e se
ctor
infr
astru
ctur
e pr
ojec
ts
Ob
ject
ive
16:
En
han
ce a
cces
s to
fin
ance
Inte
rven
tion
Log
ic
A c
ombi
natio
n W
BG p
rodu
cts
will
be
used
to s
uppo
rt th
e dy
nam
ic na
ture
of p
rivat
e se
ctor
dev
elopm
ent a
nd fo
rge
a pr
oduc
tivity
pul
l in
a ta
rget
ed
set
of b
usin
ess
area
s w
here
con
ditio
ns a
re p
ropi
tious
for
hig
h gr
owth
. In
parti
cular
, WBG
will
foc
us o
n su
ppor
ting
refo
rms
in t
he r
egul
ator
y en
viro
nmen
t, an
d fo
r hig
h-gr
owth
firm
s with
in d
ynam
ic pr
oduc
t and
supp
ortiv
e fa
ctor
mar
kets
. The
cho
ice o
f how
the
supp
ort i
s to
be d
esig
ned
has
been
sifte
d th
roug
h th
ree
filte
rs –
visi
bilit
y, im
pact
, and
cap
able
coun
terp
arts
– in
ord
er to
max
imiz
e th
e be
nefit
from
WBG
supp
ort.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Incr
ease
per
cent
age
of p
opul
atio
n w
ith a
cces
s to
finan
cial s
ervi
ces
Base
line:
36%
(201
6)
Targ
et:
5
0% (2
020)
Incr
ease
of f
inan
cial l
itera
cy
Base
line:
21%
(201
3)
Targ
et:
2% in
crea
se p
er y
ear u
ntil
2017
V
alue
of F
inan
cing
Facil
itate
d
On
goin
g:
IBR
D
(P15
6536
) Ind
ones
ia#C0
07 P
aym
ents
Sy
stem
s Upg
rade
(P
1513
68) I
ndon
esia
Dig
ital P
aym
ents
74
Num
ber o
f ind
ivid
uals/
micr
oent
erpr
ises r
each
ed
with
fina
ncial
serv
ices,
disa
ggre
gate
d by
gen
der
Base
line
(201
3): 1
,370
,000
Ta
rget
(201
8): 4
,767
,000
N
umbe
r of S
ME
s rea
ched
with
fina
ncial
serv
ices
Base
line
(201
4):
51,5
00
Targ
et (2
020)
: 85
,500
Base
line
(201
4): 0
Ta
rget
(201
9): U
S$ 1
85 m
illio
n IF
C
Ear
th Q
uake
Inde
x In
sura
nce
(EQ
II) f
or
Micr
ofin
ance
Por
tfolio
Pro
tect
ion
(#
5991
36; F
inan
ce a
nd M
arke
ts)
Env
ironm
enta
l & S
ocial
Risk
Man
agem
ent
for F
inan
cial I
nstit
utio
ns (#
5914
47; F
inan
cial
Inst
itutio
ns G
roup
) In
done
sia C
orpo
rate
Gov
erna
nce
Proj
ect
(#59
0107
; Env
ironm
ent,
Socia
l and
G
over
nanc
e)
Indo
nesia
Fin
ancia
l Inf
rast
ruct
ure
- Sec
ured
Tr
ansa
ctio
ns (#
5976
07; F
inan
ce a
nd
Mar
kets
) In
done
sia M
Ban
king
2 D
igita
l Inc
lusio
n (#
6004
01; F
inan
ce a
nd M
arke
ts)
Parti
al Cr
edit
Gua
rant
ee fo
r PT
Cipu
tra
Resid
ence
s’ bo
nd
IFC’
s inv
estm
ents
and
adv
isory
supp
ort f
or
vario
us p
rivat
e se
ctor
clie
nts
Pla
nned
New
: In
done
sia F
inan
cial I
nfra
stru
ctur
e - C
redi
t Re
porti
ng (#
5989
67; F
inan
ce a
nd M
arke
ts)
Indo
nesia
Micr
ofin
ance
(#59
9772
; Fin
ancia
l In
stitu
tions
Gro
up)
Indo
nesia
Mob
ile B
anki
ng P
hase
2 (D
igita
l Fi
nanc
ial In
clusio
n) (#
5998
75; F
inan
cial
Inst
itutio
ns G
roup
) Ca
pita
l mar
kets
dev
elopm
ent p
rogr
am
IFC
inve
stm
ent s
uppo
rt fo
r priv
ate
com
pani
es to
issu
e bo
nds o
r sto
cks o
n ca
pita
l mar
kets
75
Sup
port
ing
Bea
m 2
: Sh
ared
Pro
sper
ity,
Eq
ual
ity,
and
In
clu
sion
Def
init
ion
of f
ocu
s ar
ea: A
ll th
e po
licies
supp
orte
d by
the
CPF
enga
gem
ent a
reas
, if d
esig
ned
and
impl
emen
ted
prop
erly,
can
sign
ifica
ntly
cont
ribut
e to
the t
win
goa
ls. H
owev
er, d
edica
ted
polic
ies ar
e also
nee
ded
now
to p
rote
ct to
day’s
poo
r and
vul
nera
ble a
nd to
help
them
mov
e int
o pr
oduc
tive l
ives
. In
done
sia h
as b
een
build
ing
a sa
fety
net
sys
tem
sin
ce th
e 19
97 A
sian
Fina
ncial
Cris
is, b
ut c
over
age
rem
ains
low
and
ben
efits
too
small
to m
ake
a su
stain
able
diffe
renc
e. In
done
sia is
now
impl
emen
ting
one
the
large
st so
cial s
ecur
ity re
form
s in
the
wor
ld, b
ut c
over
age
is st
ill v
ery
limite
d, w
ith fr
aud
and
corr
uptio
n alr
eady
app
aren
t; hi
gh e
mpl
oyer
con
tribu
tions
are
bein
g co
mpo
unde
d by
hig
h m
inim
um w
ages
and
sev
eran
ce p
ay th
at a
re h
urtin
g fo
rmal
empl
oym
ent.
Polic
ies to
help
mov
e th
e po
or o
ut o
f po
verty
into
pro
duct
ive
lives
, suc
h as
thro
ugh
the
prov
ision
of
cred
it an
d sa
ving
s an
d em
ploy
men
t sup
port,
are
ver
y lim
ited,
but
the
new
gov
ernm
ent h
as m
ade
them
a p
riorit
y, as
are
com
plem
enta
ry p
olici
es to
pro
mot
e th
e cr
eatio
n of
m
ore
prod
uctiv
e jo
bs.
Lin
ks b
etw
een
th
e fo
cus
area
an
d t
he
twin
goa
ls:
Elim
inat
ing
extre
me
pove
rty a
nd b
oost
ing
shar
ed p
rosp
erity
req
uire
app
lying
a p
over
ty a
nd
ineq
ualit
y len
s to
gove
rnm
ent p
olici
es a
cros
s the
boa
rd a
long
with
ded
icate
d po
licies
to p
rote
ct th
e po
or a
nd to
help
them
mov
e ou
t of p
over
ty in
to
prod
uctiv
e liv
es.
Cou
ntr
y D
evel
opm
ent
Goa
ls: A
n ov
erar
chin
g go
al of
the
RPJM
N is
to a
chiev
e in
clusiv
e gr
owth
and
dev
elopm
ent.
One
of t
he th
ree
deve
lopm
ent
dim
ensio
ns o
f the
RPJ
MN
is te
rrito
rial a
nd e
quity
, whi
ch in
clude
s po
licies
to e
nsur
e th
at d
evelo
pmen
t is
equa
lly s
hare
d am
ong
inco
me
grou
ps a
nd
regi
ons.
Ob
ject
ive
17: I
mpr
ove
soci
al p
rote
ctio
n p
rogr
ams
for
the
poo
r an
d v
uln
erab
le
Inte
rven
tion
Log
ic: T
his
objec
tive
will
be
supp
orte
d th
roug
h pr
imar
ily k
now
ledge
serv
ices:
(i) p
over
ty a
nd in
equa
lity
focu
s: an
alysis
of p
over
ty a
nd
ineq
ualit
y in
gen
eral,
and
sup
port
to sp
ecifi
c po
licie
s an
d pr
ogra
ms s
uppo
rted
by th
e CP
F to
impr
ove
on p
over
ty a
nd in
equa
lity
redu
ctio
n; (i
i) sa
fety
ne
ts: d
evelo
pmen
t of c
omm
on sy
stem
s for
socia
l ass
istan
ce p
rogr
ams t
hrou
gh ta
rget
ing
and
paym
ents
, ref
orm
the
Rice
for t
he P
oor P
rogr
am (R
aski
n)
to im
prov
e acc
ess o
f the
poo
r to
nutri
tious
food
s, an
d th
e exp
ansio
n an
d im
prov
emen
t of I
ndon
esia’
s Con
ditio
nal C
ash
Tran
sfer
pro
gram
(PK
H);
and
(iii)
socia
l sec
urity
: des
ign,
fina
nce a
nd b
uild
capa
city t
o m
anag
e the
SJS
N em
ploy
men
t pro
gram
s, sa
fegu
ard
the s
yste
m ag
ainst
erro
r, fr
aud
& co
rrup
tion
(EFC
) and
hig
h lab
or ta
xes,
as w
ell a
s int
rodu
cing
M&
E sy
stem
and
socia
lizin
g th
e em
ploy
men
t pro
gram
s.
CP
F O
bje
ctiv
e In
dica
tors
Su
pp
lem
enta
ry P
rogr
ess
Ind
icat
ors
W
BG
Pro
gram
Num
ber o
f hou
seho
lds b
enef
iting
from
PK
H,
disa
ggre
gate
d by
gen
der
Base
line:
3 m
illio
n (2
016)
Ta
rget
:
6 m
illio
n (2
020)
Stra
tegi
c pa
per t
o in
form
the
expa
nsio
n an
d im
prov
emen
t of P
KH
pre
pare
d.
Bas
eline
: N
o (2
016)
T
arge
t:
Yes
(201
8)
Stra
tegi
c pa
per f
or d
igita
lizin
g pa
ymen
t of
socia
l ass
istan
ce b
enef
its p
repa
red.
B
aseli
ne:
No
(201
6)
Tar
get:
Y
es (2
018)
On
Goi
ng:
Pa
rtner
ship
for K
now
ledge
-bas
ed P
over
ty
Redu
ctio
n PA
AA
(P13
2247
) St
reng
then
ing
Indo
nesia
n St
atist
ics P
rojec
t (S
TATC
AP)
Co
nsum
ptio
n M
odul
e Si
mul
atio
n SU
SEN
AS
(P15
3589
) So
cial a
ssist
ance
refo
rm T
A (P
1179
75)
76
Incr
ease
in th
e nu
mbe
r of s
ocial
ass
istan
ce
bene
ficiar
ies (h
ouse
hold
s) re
ceiv
ing
paym
ents
di
gita
lly
Bas
eline
: 1
mill
ion
(201
6)
Tar
get:
7
mill
ion
(202
0)
Intro
duce
dyn
amic
upda
ting
of th
e U
nifie
d D
atab
ase
(use
d fo
r pov
erty
ta
rget
ing)
B
aseli
ne:
No
(201
6)
Tar
get:
Y
es (2
018)
G
uide
lines
and
act
ion
plan
for
impr
ovin
g sy
stem
to p
reve
nt, d
etec
t an
d co
rrec
t EFC
dev
elope
d an
d im
plem
ente
d.
Bas
eline
: Y
es (2
016)
T
arge
t:
No
(202
0)
Socia
l Sec
urity
PA
AA
(P14
4677
) (P
1513
68) I
ndon
esia
Dig
ital P
aym
ents
Ob
ject
ive
18: S
upp
ort
crea
tion
of
and
acc
ess
to p
rodu
ctiv
e jo
bs
Inte
rven
tion
Log
ic
Incl
usio
n an
d sh
arin
g pr
ospe
rity w
ill re
quire
mor
e pro
duct
ive j
obs.
Giv
en it
s im
porta
nce a
s a p
athw
ay id
entif
ied in
the S
CD, i
nter
vent
ions
that
supp
ort
that
obj
ectiv
e ar
e in
clude
d th
roug
hout
the
CPF
enga
gem
ent a
reas
. Thi
s ob
jectiv
e w
ill b
e fu
rther
sup
porte
d th
roug
h de
dica
ted
know
ledge
ser
vice
s, fo
cusin
g on
(i) a
ddre
ssin
g th
e bot
tlene
cks o
f rea
lloca
ting
wor
kers
to m
ore p
rodu
ctiv
e act
iviti
es; (
ii) im
prov
ing
the s
kills
of t
he w
orkf
orce
; (iii
) im
prov
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78
ANNEX 2: KEY MACROECONOMIC INDICATORS
2012 2013 2014 2015f 2016f 2017f 2018f Real Economy Annual percentage change, unless otherwise indicated Real GDP 6.0 5.6 5.0 4.7 5.3 5.5 5.5 Per Capita GDI (in US$ Atlas Method) 3,599 3,759 3,654 3,515 3,514 3,662 3,998 Contributions to GDP growth (ppt):
Consumption 3.5 3.6 3.1 2.8 3.1 3.3 3.3 Investment 2.9 1.7 1.3 1.2 1.6 1.9 1.9 Net exports -1.5 0.6 -0.3 0.7 0.3 0.0 0.0
Imports (real growth) 8.0 1.9 2.2 -3.2 3.6 5.9 6.2 Exports (real growth) 1.6 4.2 1.0 -0.2 4.7 5.7 5.9 Unemployment rate (ILO definition) 6.3 6.1 5.9 .. .. .. .. GDP deflator (avg.) 3.8 4.7 5.4 4.9 5.3 4.6 4.5 CPI (avg.) 4.0 6.4 6.4 6.8 5.5 5.0 4.8 Fiscal accounts* Percentage of GDP Expenditure 17.2 17.3 16.9 17.0 16.6 .. .. Revenue 15.4 15.1 14.7 15.1 14.5 .. ..
General Government Balance -1.8 -2.2 -2.2
-1.9 -2.1 .. .. General Government Debt 23.0 24.9 24.6 25.2 25.3 .. .. Selected Monetary Accounts Annual percentage change Base Money (M2) 15.0 12.8 11.9 .. .. .. .. Credit to non-government (eop) 22.4 22.1 14.2 .. .. .. .. Interest (key policy interest rate), eop 5.8 7.5 7.8 .. .. .. .. Balance of Payments Percentage of GDP, unless otherwise indicated Current Account Balance -2.7 -3.2 -2.9 -2.0 -2.6 -2.7 -2.7 Imports 23.2 23.2 22.7 20.0 20.2 19.7 21.1 Exports 23.0 22.5 22.4 20.7 20.3 19.6 20.6 Direct Investment (net, in billion US$) 13.7 12.2 15.5 10.9 12.4 13.4 14.6 Gross Reserves (in million US$, eop) 112.8 99.4 111.9 108.0 113.0 121.0 133.0
Months' import cover (goods) 7.6 6.8 8.0 9.1 9.0 9.0 9.2 As % of short-term external debt 206.4 176.6 188.8 185.5 178.8 175 182.4
External Debt 27.5 29.2 33.1 35.5 36.3 35.9 34.4
Term of Trade (index 2008=100) 94 81 85 .. .. .. .. Exchange Rate (average) IDR/US$ 9,387 10,461 11,865 .. .. .. ..
Memo items GDP nominal in (in billion US$) 918 910 889 863 916 1,012 1,116 Note: Using revised and 2010-rebased GDP. * Fiscal accounts are based on revised 2015 Budget and draft 2016 Budget. ** 2015 and 2016 are World Bank staff projection based on the Government’s primary deficit targets. Source: MoF as published by the MoF. Source: BPS; Ministry of Finance; BI; World Bank staff projections.
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ANNEX 3. COMPLETION AND LEARNING REPORT
CPS Board Discussion:
CPS Progress Report (Board Presentation):
Period Covered by CPS Completion Report:
December 13, 2012
May 29, 2014
FY13-15
INTRODUCTION
1. This Country Partnership Strategy Completion and Learning Report (CPSCLR) reviews the experience of implementing the FY13–15 World Bank Group Country Partnership Strategy (CPS) for the Republic of Indonesia (Report No. 72906, Date: December 13, 2012). The document provides a self-assessment of: (i) the extent to which the CPS was successful in achieving its stated objectives; (ii) the WGB performance in terms of the design and implementation of the program; (iii) the CPS contribution to the Corporate Twin Goals of eliminating poverty and boosting shared prosperity of the bottom forty percent of the population; and (iv) lessons learned from the implementation of the CPS program that should be considered during the preparation of the new Country Partnership Framework FY16-20. In addition to discussions with the country team and Government counterparts, this assessment is based on reference documents such as the CPS, the CPS Progress Report, Project Appraisal Documents, Implementation Status Reports, ICRs, supervision reports, and reports related to Economic and Sector Work. The findings of the CPSCLR have informed the preparation of the FY16-FY20 CPF.
SUMMARY OF KEY FINDINGS AND RATINGS
2. The CPS was prepared in FY12 on the heels of a decade long period of growth, supported by a boom in commodity exports and increased capital inflows. Output growth averaged 5.5 percent per year from 2002 to 2012, on the back of strong domestic consumption and generally robust growth in primarily commodities exports. Strong economic growth supported gains in poverty reduction and contributed to a growing middle class. Prudent economic management resulted in low budget deficits, a much reduced public debt-to-GDP ratio, and manageable inflation.
3. These tail winds, however, were beginning to turn during the CPS period and the possibility of finding itself unable to maintain momentum and escaping the middle-income trap became a growing threat for Indonesia. Despite the significant gains in poverty reduction, Indonesia still has a poor population of 30 million (almost 12 percent) below the national poverty line (PPP$1.25 a day) and amongst the highest rates of growth in inequality in the region as measured by the Gini co-efficient. Regulatory constraints, limited access to finance (particularly among small and medium size enterprises), and large infrastructure gaps were limiting the potential of the private sector to generate jobs while the education system was not able to supply the skills needed to meet the demands of the market. Fuel subsidies absorbed budget that might otherwise be available for infrastructure and social spending. Public spending and indicators on health were significantly below comparators and the poor were particularly vulnerable to health shocks. Financial markets remained vulnerable to changes in international investor sentiment, as witnessed by the macro turbulence experienced during the second semester of 2013. Poor
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governance and capacity to implement were a drag on effective spending and delivery of services and infrastructure particularly as the economy slowed. Additionally, the period of strong growth had been at the cost of significant environmental degradation and accelerated depletion of Indonesia’s natural resource base. The adverse social consequences of this “brown growth model” were showing in the vulnerability of particularly poor households to environmental shocks and natural disasters ranging from flooding in urban areas to forest fires and land use disputes in rural space to overfishing, marine pollution and coastal ecosystem degradation.
4. The FY13-15 CPS was aligned with the Government’s development priorities identified in the Medium Term Development Plan (2010-2014) and was anchored around themes of pro-growth, pro-jobs, pro-poor and pro-green. Together with the cross cutting themes of gender and governance, these focus areas aimed to support government efforts in addressing Indonesia’s key development challenges in collaboration with the private sector including (i) boosting growth and job creation by facilitating the supply response to a rising middle class and urbanization (pro-growth and pro-jobs agenda); (ii) accelerating the pace of poverty reduction and providing greater economic security for the vulnerable so that growing prosperity could be shared more widely (pro-poor and pro-jobs agenda) and (iii) enhancing sustainability in natural resource management (pro-green agenda).
5. The CPS Overall Development Outcome is rated Moderately Satisfactory. This rating is based on an aggregate assessment of the achievements under the four pillars and 15 result areas as well as the individual outcomes which formed the basis of the CPS Results Framework (Attachment 1). The program proceeded largely as anticipated and the CPS remained relevant to the country’s development challenges in promoting poverty reduction and shared prosperity.
6. The overall rating of the WBG performance is Good. Building up on its six-decade long partnership, the WBG maintained its strong collaboration with the GoI and the development partner of choice. The Bank’s work program was focused on delivering the CPS objectives, the majority of which were either mostly or partially achieved as measured by the results framework. The Bank Group delivered financial products (lending, equity, debt and guarantees), knowledge services and technical assistance which it managed in a flexible way in order to maximize development impact to the extent possible. A number of flagship knowledge products (including but not limited to Development Policy Review; Indonesia Economic Quarterly, Smallholder Survey for the Palm Oil Sector, Inequality and Shared Prosperity, Teacher Quality, Education Financing, Protecting Poor and Vulnerable Households in Indonesia, Targeting Poor and Vulnerable Households in Indonesia) as well as long-term engagements in programs such as the PNPM program which were able to influence the technical aspects of the implementation of the Village Law, were particularly relevant and directly impacted the formulation of government policy even beyond what was set out in the Results framework.
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7. Although the CPS preceded the articulation of the Corporate Twin Goals, the WBG engagement in Indonesia over the CPS period was closely aligned with the Twin Goals of eliminating extreme poverty and boosting shared prosperity. Indeed, the Development Policy Review and the Systematic Country Diagnostic that were prepared in the second half of the CPS implementation period explained the limited window of opportunity for Indonesia to reach high per capita income levels. To keep up with a young population entering the labor market, Indonesia’s economy must create some 2 million new jobs annually and will need an accelerated growth path of some 8 percent over the coming years. Accordingly, the SCD identified three pathways (private sector led growth and job creation; service delivery and opportunity for all; natural resource management) and seven priority reform areas. The CPS areas are broadly consistent with these 3 pathways and provide a degree of continuity in the new CPF in terms of WBG focus areas to advance progress towards the twin goals.
8. There are a number of lessons from the interim FY13-15 CPS to be applied to the FY16-20 CPF. These include the importance of alignment with the country's priorities in a selective way, identification of reform champions through dialogue and partnership with a broad range of stakeholders including the private sector, maintaining a clear focus on a more limited number of areas where impactful results can be achieved, the value of combining knowledge products for reform and financing, as well as of combining WBG’s complementary products and services across the three institutions—IBRD, IFC and MIGA – in improving the chances for achievement of results. These are articulated later in this CLR.
II. CPS DEVELOPMENT OUTCOME
The overall CPS Development Outcome is rated Moderately Satisfactory according to the ratings per pillar in the table below.
Outcome Rating by Pillars Development Outcome RatingPillar 1 Pillar 2 Pillar 3 Pillar 4
Moderately Satisfactory Satisfactory Satisfactory Moderately
SatisfactoryModerately Satisfactory
Pillar I. Pro-Growth: Rated Moderately Satisfactory
Objective: Promoting Prosperity
9. Under this engagement area, the WBG objective was to support development results to promote prosperity and growth across multiple sectors. This included results in macroeconomic stability and financial crisis management, the quality of public spending and financial management, increased financial access, improved competitiveness and innovation at the macro level and also within individual private companies, connectivity and logistics performance, and investment in infrastructure including through the leveraging of private sector participation. Although there were some notable successes under this pillar, the results were not uniform across all these areas. This has led to an objective rating of moderately satisfactory (see description of
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achievements and performance ratings against pro-growth indicators in Sub-annex 3.1a).
10. Development milestones to promote prosperity were mostly met. Macroeconomic management was broadly sound. The financial sector was strengthened through a variety of WBG lending and knowledge services which supported stability and crisis preparedness, as well as diversification and financial inclusion. Banking sector indicators remained sound with LDR at almost 90 percent in September 2014, above the target of 80 percent. With support from the WBG, Indonesia’s Financial Services Authority (OJK) became fully operational during this CPS period. The Financial System Stability Coordination Forum (FKSSK) was established and met on a monthly basis. During the CPS period, the Bank’s knowledge services and policy dialogue (referenced also under the Pillar “Pro-Poor”), the Bank was able to help the new Government in November 2014 usher in one of the most significant policy reforms in reallocation of budget resources away from US$2.8 billion annual fuel subsidies to temporary and long-term social assistance programs and productive investment in infrastructure.
11. In support of macro stability and crisis management, the IBRD was the lead development partner in a contingency fiscal financing package called Program for Economic Resilience, Investment and Social Assistance (PERISAI) – a DPL-DDO which lasted throughout the CPS period (closing December 2015). The DDO has been a major contributor in helping GOI weather the financial crisis with the Bank providing $2 billion in an overall package with ADB, Australia and Japan of US$5 billion. In addition, with knowledge services provided by IBRD, GoI was able to maintain continued access to market financing with net securities issuance reaching more than 100 percent of the target based on the revised budget in December 2014. In the event of a crisis, the Government was on track to use provisions in the Budget Laws to revise expenditures and/or financing sources under streamlined parliamentary approval process. To strengthen the balance sheets of companies in the private sector, IFC introduced long term financing including through equity injections. This was especially beneficial to the financial services sector with several banks such as PT Bank Danamon Tbk, PT Bank Tabungan Pensiunan Nasional Tbk, PT Bank Mayora took advantage of IFC’s longer term loan financings. IFC also continued to support the country’s digital financial inclusion agenda by assisting the OJK in launching branchless banking reforms and in convening private sector institutions to develop common codes for transactions.
12. The WBG supported the connectivity agenda through development policy lending (Connectivity DPL series), knowledge and advisory services, and support to the private sector. While there were some indications of marginal improvement—Indonesia’s Logistics Performance Index (LPI) ranking was improved to 53 in 2014 from 59 in 2012 and broadband penetration rate deepened and is expected to reach the target of 30 percent by end of CY2015, and IFC provided financing to one of the leading telecommunication tower companies in Indonesia to improve telecom and internet connectivity in remote islands, these successes were largely overshadowed by the inability to make a larger scale impact. Overall Indonesia’s logistics sector continued its poor performance and has acted as a significant drag on the economy, discouraged investment in manufacturing and failed to improve in order to have a positive impact on equality, jobs and growth.
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13. Outcomes in relation to improving the overall environment for the private sector were mixed. Whilst the IBRD and IFC joint support for the Indonesia Infrastructure Financing Fund (IIFF) was a notable success of the CPS period, the support of WBG for the creation of institutions and agencies to facilitate PPPs failed to make an impact. No PPP was launched in Indonesia during the CPS period. In terms of the business environment, Indonesia was able to improve its ranking in Doing Business to 114 in 2015, compared to 128 in 2013. At the same time, however, the CPS period witnessed a general deterioration in terms of trade policies and the regulatory environment.
WB SUPPORT TO PPPsDespite intensified effort during the CPS period through TA delivered through the Bank and advisory services by IFC, the PPP framework remains underdeveloped and has not been able yet to leverage the private sector to support any PPP vehicle. To illustrate, GOI established the Perpres 66/ 2013 and the 3rd amendment of the Perpres 67/ 2005 concerning PPP process, the application manual of VGF (MOF Decree No. Permen 143/ 2013), the establishment of the KPPIP (through the Perpes 75/ 2014), and through the KPPIP has identified 56 projects for funding through PPP schemes, defining 22 of them as priority projects, for a total value of US$51.2 billion in the period 2010-15. By 2012, however, only three projects were considered “ready for offer” and none of these have come to fruition.
Key Challenges: While the institutional and legislative developments have laid the foundation for a PPP framework, and include a set of critical PPP supporting instruments, the PPP framework requires higher-level convening power in order to become functional.Significant capacity constraints at all levels of government vis-à-vis project structuring, implementation and monitoring hinders progress on the PPP framework implementation, deals preparation and award.Land Acquisition is a major obstacle. Without faster and less conflict-ridden acquisition of land, implementation of both public and PPP infrastructure projects will remain uncertain and costly, and result in significant delays.
Key Lessons:Not having a clearly designated lead agency, tasked with moving the PPP agenda forward can create implementation risks.Lack of coordination among the central and local Governments and between ministries will slow down deal closure. Low GCA capacity results in poor project selection and preparation. Lengthy and unclear process of land acquisition will likely continue hinder implementation of infrastructure projects.
14. The Bank’s support for public financial management (PFM) had a number of positive outcomes. The DPL series of Institutional, Tax Administration, Social and Investment (INSTANSI), which concluded in December 2014, was instrumental in helping MoF strengthen financial management and budget processes in collaboration with other development partners including the EU, the Netherlands, and Switzerland. These improvements include development and use of medium-term budget forecasting tools, M&E processes to inform future budget allocations and regulations for accrual based accounting policies and chart of accounts. The roll out of the automated treasury payment and budget preparation information system (SPAN) in February 2015, after more than five years of effort, was a milestone. Other work with the procurement agency strengthening, improving e-procurement, limiting the use of unnecessary pre-qualification, and improving the capacity of the audit agencies have all contributed to PFM goals.
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15. The local government area focused on strengthening capacity and accountability of local government institutions and increasing the level and impact of public spending on service delivery. The subnational PFM program, Public Expenditure Analysis and Capacity Harmonization (PEACH), closed in August 2014 delivering six provincial updated PERs and the Sulawesi Development Diagnostics. The ongoing Local Government and Decentralization Project (LGDP/DAK), as well as the Additional Financing for LGDP/DAK, delivered during the CPS period supported improved quality of public spending on infrastructure at the local level. The 2014 mid-term evaluation for LGDP found that the performance-based design of the program incentivized participating local governments to increase matching capital investment from own-sources at a much higher rate than non-participating local governments. In the last year of the CPS a well-targeted set of subnational service delivery support initiatives, including using tools (RAAP and MiGestion) and global experience from the LCR region, were initiated. These are expected to continue in the next CPF.
16. In the infrastructure sector[1], there were some notable successes in the WBG program. A number of projects, including Pamsimas and PNPM programs, reached their objectives in providing community level infrastructure, water and sanitation with satisfactory technical quality and usually at very significant savings compared to the costs if done by private contractors or through national level infrastructure programs. Under the PAMSIMAS program, access to clean water and sanitation, a major cause of child stunting in Indonesia, advanced substantially with some 7.8 million more people provided with water and 7.62 million people with improved sanitation through the program. IFC also arranged financing of US$85 million for a private sector operator providing clean water to public water utilities. Similarly, the PNPM Urban program reached 5.5 million household beneficiaries and provided 9,115 kilometers of roads, 3349 km of drainage and irrigation canals, 131,520 units of solid waste and sanitation facilities, 1,497 community health facilities, 85,437 reconstructed poorest houses in thousands of urban wards across the country. In the water resource sector, WISMP 2 made seven national and provincial basin agencies fully functional and increased irrigated areas by 177,363 hectares. The Dam Rehabilitation project (DOISP) finalized 22 dam portfolio risk assessments and established 56 government dam portfolio management programs. In transport, a roads project (WINRIP) improved the average passenger time by large buses by 19.5% and by heavy truck by 17.5%. In flood control in Jakarta, JUFMP although still under implementation has so far removed 1,988,020 meters cubic of sludge from floodways, canal, and retention basins, repaired 29 km of embankment and 15.8 km of canals.
17. IFC also had success through its investment in individual companies associated with providing private sector finance for infrastructure. This included a hydro power project and an under-development wind farm project. IFC also successfully assisted PT Indonesia Infrastructure Finance Tbk in raising commercial financing from international banks for the first time. A number of flagship knowledge products were highly relevant in support of government reform areas. This included work related to helping the country move to a lower-carbon future by making better use of its renewable energy sources in geothermal and hydro and it gas. In terms of knowledge services, work related to access to affordable land and housing for the poor and
[1] The CPS structure and the Results Framework included several of the infrastructure projects under the Pro-Poor pillar. For the
purposes of the CLR these projects are evaluated under the Infrastructure results area of the Pro-Growth pillar to provide a more balanced view of the WBG’s engagement in the infrastructure sector.
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vulnerable living in Indonesia’s cities helped inform GoI policies and programs with a view towards increasing the access of affordable land and housing for poor and vulnerable Indonesians.Although it is still too early to show results, the launching of a programmatic Sustainable Urbanization AAA that will inform GOI policies and programs on the issue of urban infrastructure gaps particularly in transport systems, water supply and sanitation, drainage, urban flood and disaster risk management, slum upgrading and informal settlements and solid waste management.
18. On the other hand, chronic delays in infrastructure project implementation limited the results during the CPS period. In particular, the CPS results framework measured the decrease in power interruption as a proxy for energy outcomes and in this the CPS missed its target. Despite a relatively large number of power sector projects in the IBRD portfolio, all were still under implementation during the CPS period and were not yet yielding significant results. Because the CPS framework had only 5 indicators related to infrastructure, with many of these included in the pro-poor pillar, it is somewhat difficult in this CLR to measure well the cumulative impact of the infrastructure program on Pillar 1 of the CPS.
19. As discussed in the DPR and the SCD, Indonesia’s overall investment in infrastructure reached only 3-4 percent of GDP during the CPS period. Moreover, the level of the investment that was made generally did not have a commiserate impact on the provision of infrastructure in the sector. For example, nationally, spending on roads increased three fold, but only 20% additional kilometers of roadway were constructed. Similar results were found in water and sanitation with the overall percentage of the urban population’s access to clean water dropping despite increases in spending. This situation, well documented in the DPR and the SCD, was the result of a combination of issues including inadequate project preparation and technical design, poor coordination, particularly across ministries or between central and local governments, slow procurement processes, governance challenges, and particularly extreme difficulty in land acquisition despite the issuance of new regulations. Challenges to private sector investment in infrastructure, discussed above, was another binding constraint and contributor to the growing infrastructure gap. Several ongoing Bank-financed infrastructure projects suffered from many of these same constraints including experiencing extremely prolonged periods of virtually no disbursement whilst line ministries or SOE implementing agencies completed project preparation and procurement. Lack of coordination across different layers of Government caused delays in road and irrigation construction as did problems with land acquisition and procurement in power and transmission. The lessons learnt from these challenges will be a core part of the design and implementation of the future CPF particularly given its strong infrastructure focus.
Pillar II. Pro-Jobs: Rated Satisfactory
Objective: Enhancing Skills and Technology, and Improving Social Protection
20. The pro-jobs pillar complements that of the pro-growth pillar to focus on human capital development to reduce a large skills gap. While sustained growth can work to absorb more workers into the market and investment can enhance the equity of growth, improving human development is fundamental for increasing labor productivity and shared prosperity. The share of the population of productive age relative to older people is large in Indonesia, and will remain so for the next 15 years. This demographic dividend presents a window of opportunity but also one
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of Indonesia’s greatest challenges. The focus of WBG engagement was to support strengthening the overall governance and management of the education system, improving the education quality and performance of teachers, enhancing human resource capacity in R&D, and facilitating the institutional transformation required to implement a nation-wide social insurance reform. Overall rating for the pro-jobs engagements is satisfactory (see description of achievements and performance ratings against pro-jobs indicators in Sub-annex 3.1b).
21. IFC and MIGA had a direct role in job creation through engagement with individual companies and support to the SME sector. IFC in addition to its support for access to finance, worked directly with manufacturing companies that generated good quality jobs as well as with SMEs to develop supply chain linkages. IFC’s financing for food products companies had links also to hundreds of thousands of small retail and trading chain partners for these companies. IFC financing to banks such as PT Bank Danamon Tbk and PT Bank Mayora were to expand their SME financing, whereas to others such as PT Mitra Bisnis Keluarga Tbk and Bank BTPN was for expanding their microfinancing operations. IFC also provided equity support to PT Blue Bird Tbk, the leading taxi services operator in Indonesia which provides employment to tens of thousands of near poor drivers. MIGA had three active projects guaranteed for investment during the CPS period: the Rajamandala Hydropower IPP (guarantee issuance of US$200 million), the PT Natrindo Telpon Selular Network Rollout (guarantee issuance of US$450 million) and the PT Weda Bay Nickel (guarantee issuance of US$207 million).
22. The WBG also supported government efforts to increase access to quality education and training. Education has been a development priority for the Government, with public spending in education reaching 20 percent of the total budget. While Government made significant strides in education access and equity, the quality of education remains low and unevenly distributed across regions. Through a program of knowledge services, supported primarily by the Netherlands and the EU, the WBG helped to identify challenges and develop solutions to improve the quality and management of teachers, education financing and the local delivery of education services, which were incorporated in the 2015-2019 RPJMN. The BERMUTU project, which supported the implementation of the Teacher Law, contributed to increasing the number of teachers with at least S1 (bachelor) degree by more than 800,000 by the end of CY2015, well above the target. The WBG also helped the government develop a blueprint for reforming the skills training system in order to address the skills shortage in the short term. The Bank’s intervention in quality and affordable Early Childhood Education and Development (ECED) targeted local level service delivery concentrating on 6,000 ECED centers in 3,000 poor villages, increasing preschool enrollment and school readiness, particularly among poor children. During this CPS period, two operations—RISET and SMARTD—were initiated to support research and innovation and to enhance technology development and uptake. Both operations are on track to reach their targets to enhance staff capacity but it is too early to judge the impact of either operation on the pro-jobs agenda. Overall, whilst improvements in educational quality in the country are lagging, the analytic work undertaken by the Bank has provided the data and set the agenda for the next 5 year period.
23. A notable achievement of the Bank’s program under the pro-jobs pillar was in the area of social security reform. GoI is attempting a reform which will be amongst the biggest in the world and requested that the Bank assist it through a large program of knowledge services
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supported by Australian trust fund financing. The national social security reform (SJSN) aims toprovide national health insurance to all Indonesians (by 2019) and cover all workers under the national employment programs (pension, old age savings, work accident, death) at the latest by 2029. During the CPS period, the Bank worked with multiple government ministries and agencies, building capacity and contributing to the development of the roadmap for the implementation ofthe SJSN. Continuation of this work will be an important part of the Inclusion agenda in the next CPF.
Pillar III. Pro-Poor: Rated Satisfactory Objective: Promoting Communities, Protecting the Vulnerable and Improving Their Health Outcomes 24. This pillar was focused on targeted interventions to improve the social welfare of the poor and vulnerable through livelihoods and access to finance and services. Policy reform efforts supported by the Bank were aimed at improving the effectiveness of poverty reduction programs and addressing the problems associated with high levels of vulnerability by improving and extending safety nets. The WBG aimed to support development results that would enhance the design and performance of household-targeted and community development programs, improve food security through interventions in the private sector, improve health and nutrition outcomes through improved access to quality health care, including maternal and child health services, enhanced HIV/AIDS surveillance, and increased access to safe water and sanitation. The overall rating for the pro-poor pillar is satisfactory (see description of achievements and performance ratings against pro-poor indicators in Sub-annex 3.1c).
25. Development outcomes mostly achieved during this CPS period with the poverty targeting component as the top performer. Through an extensive knowledge services engagement and with support from the INSTANSI DPL, the Bank helped the government to adopt and implement reforms which were proposed in the flagship report, Targeting Poor and Vulnerable Households in Indonesia released in 2012, a series of ‘just in time’ policy notes, the Development Policy Review and a long-term dialogue established between the Bank and the Ministry of Finance. By bringing together the Bank’s high quality macroeconomic policy support with its technical assistance in creating a unified database of more than 24 million poor and vulnerable households, the Bank was able to help the new Government in November 2014 usher in one of the most significant policy reforms in reallocation of budget resources away from US$2.8 billion annual fuel subsidies to temporary and long-term social assistance programs and productive investment in infrastructure. Coverage for BSM (financial assistance for poor students) doubled from 8.7 million to 16.6 million beneficiaries, coverage for the PKH (conditional cash transfers) expanded from 1.5 million households in 2012 to 3.2 million households by 2014, and 15.5 million social protection cards were distributed to households extracted from the unified database. Assistance was also being provided to government partners to mitigate household vulnerability by developing a permanent shock/crisis monitoring system. The WBG also helped to develop a national crisis monitoring system to improve responsiveness to shocks. Finally, a major study on inequality and shared prosperity was completed, informing government policies to reduce inequality.
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26. The community-based PNPM programs—Rural, Urban and Generasi—that began over a decade ago and expanded across every rural and urban community during the period of the CPS continued to anchor the WBG’s efforts in improving sub-district and village level governance, quality of service delivery, and socio-economic conditions in rural and urban areas. With the support of the WBG and other development partners, especially the Government of Australia, PNPM has been an effective platform for channeling development resources, empowering communities and ultimately improving socio-economic conditions in the villages and urban districts where it operates. PNPM demonstrated that quality and cost effective investments in infrastructure and service delivery could be achieved by funneling financing from the central government to the local level by embedding facilitation and community participatory processes in the planning, budgeting, and implementation of activities. PNPM provided the basis for the new Village Law, which the WBG has begun to help implement under the CPS period although the deeper engagement in this area will fall into the new CPF period. The Village Law aims to substantially increase the resources available to and responsibilities of villages while strengthening the systems developed by PNPM to maximize the impact of those resources on rural development. Targets set for direct participation of community members, women involvement in decision-making, and improved community access to and utilization of health and education services in targeted areas were broadly achieved or exceeded.
27. The delivery towards enhanced food security during this CPS period came primarily through interventions with the private sector supported by IFC. Knowledge services in FY13 were used to identify (i) the causes of palm oil smallholder productivity gaps and potential solutions; (ii) current company practices and guidance for community engagement and investment in the sub-sector; and (iii) best practices and funding models to assist smallholders to access certified markets. The WBG joined the Partnership for Indonesian Sustainable Agriculture (PISAgro) with IFC leading the working group on agri-finance, and engaging a partner bank to provide a credit package for cocoa smallholders to increase productivity and farmer income. A Country Situation Analysis (CSA) for engagement in the palm oil sector was initiated to explore sustainable practices for small farmers. A Canadian supported Agribusiness Program was established at IFC for working with private banks to implement a rural business model to manage agricultural risks integral to small farmers and rural business markets. Implementation of the Bank’s Water Resources and Irrigation Management Project II, noted in the infrastructure section under the Pro-Growth pillar above, made seven national and provincial basin agencies fully functional and increased irrigated areas to 177363 hectare.
28. The WBG supported, through knowledge services and financing, government efforts to improve health outcomes particularly in the latter part of the CPS implementation period. Government introduced in January 2014 the National Health Insurance Program (JKN), which aims to provide universal health insurance by 2019. A major WBG study identified significant gaps in primary health facilities, both in terms of inputs and human resources including key services to address the persistent high levels of maternal mortality and child malnutrition. This analysis and the policy recommendations that emerged from it have substantially informed the 2015-19 RPMJM as well as ongoing efforts to increase public funding for health and to improve health service delivery. Through the HPEQ project, the WBG helped develop the first competency-focused accreditation system for health training institutions, with 168 schools being accredited by the end of CY14 and improvements in the percentage of graduates that pass the national
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competency test. Through its support to PNPM Generasi, the WBG supported the improvement of maternal and child health throughout 5,400 villages. As mentioned in the infrastructure section of “Pro-Growth”, the WBG supported major progress in the provision of clean water and sanitation which has a direct impact on health outcomes particularly given the prevalence of open defecation in Indonesia.
29. In the case of access to finance, the WBG’s long-term engagement with Bank Indonesia and OJK resulted in the almost doubling of universal financial access from 20% in 2011 to 36% in 2014 (FINDEX database). The WBG was instrumental in assisting the GoI to re-design its basic savings account (Tabungan-Ku) and the launch of a basic micro-insurance product. Seven million new accounts were established in the first few months after the launch.
Pillar IV. Pro-Green: Rated Moderately Satisfactory
Objective: Ensuring Sustainable Green Growth and Improving Disaster Resilience
30. Indonesia is well-endowed with natural capital and is a steward to some of the world’s greatest terrestrial and marine biodiversity. However, its natural wealth, resources, and quality of life are increasingly threatened by rapid, unsustainable development compounded with over-exploitation of forests and marine ecosystems. Indonesia’s total greenhouse gas emissions are estimated to account for over six percent of the global total. Forestry and land use emissions are by far the largest source. Indonesia’s emissions from energy consumption are also growing. Severe and annual forest fires, connected with the largely illegal clearing of forests and draining of peat lands, have immensely negative economic, health, and environmental impact on Indonesia and neighboring countries. Insufficient investment in institutional capacity, corruption, and inconsistent policies and practices, are contributors to these problems.
31. WBG engagements during the CPS period sought to promote sustainable green growth, climate change adaptation and mitigation, and disaster risk resilience. Bank programs were designed to promote sustainable natural resources management, mainstream adoption of green growth parameters across core growth sectors, uptake of sector specific climate change adaptation and mitigation efforts and disaster risk management actions aimed at reversing the negative consequences that have plagued the poor and vulnerable living in rural (in particular forest dependent communities and fisher and coastal communities, both amongst the poorest of the poor in Indonesia) and marginal urban areas.
32. Development targets set for the disaster risk management engagement were largely achieved. Six mid-sized cities and four high risk provinces mainstreamed adaptation and resilience measures into their respective urban development, investment, and community driven development programs. Resilience was also mainstreamed in the government funded school rehabilitation program through the formulation of technical guidelines and building capacity on earthquake resistant construction. The government-led disaster management fund (IMDFF-DR) is on track as a mechanism to institutionalize donor support in case of large scale natural disasters for which Indonesia may want assistance. US$5 million was pledged to complement the government’s US$500 million annual public reconstruction spending.
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33. Four out of five pro-Green targets during this CPS period were achieved. There were three key milestone deliverables under the sustaining the environment and climate change adaptation sub-engagement area. The REDD+ Support Facility MDTF was established at the Bank to assist the government to set up a national trust fund to implement a strategy to reduce emissions and improve governance and accountability in the forest and land sectors. The national trust fund, however, is not yet on line due to the new administration’s institutional reorganization efforts to embed the REDD+ Agenda and financing package within existing Government structures, including the newly merged Ministries of Environment and Forestry (rather than in a stand-alone REDD+ Agency). The third phase of the Coral Reef Rehabilitation and Management Program-Coral Triangle Initiative (CORMAP-CTI) was approved during this CPS period, representing the third phase of the world’s largest coral reef management and conservation program and the Bank’s Flagship engagement in marine affairs and fisheries in Indonesia. The Bank also began a strategic policy dialogue with central ministries on mainstreaming green growth principles into medium and long term investment and development planning. This work has influenced greening of the five year Medium Term Development Plan (2015-2019) with clear targets for a number of key sectors including agriculture, energy, forestry, transport, urban development, industry and marine and fisheries, among others. It has also supported engagement with the private sector through the Indonesia Chamber of Commerce and its broad membership to influence and support private sector collaboration and commitment to adopt green growth elements in their investments alongside the public sector financing.
34. IFC progressed with its Green Buildings Program. IFC’s knowledge and advisory services resulted in the Government of Jakarta launching the Green Building code for environmental and energy efficient buildings. Now, IFC is engaging with the Ministry of Public Works and with the cities of Bandung and Makassar to expand these codes to other cities. In parallel, IFC launched its EDGE certification program in Indonesia, a voluntary program allowing private sector developers to obtain green buildings certification sponsored by IFC. One of IFC’s property development clients – PT Ciputra Residences Tbk, issued a bond wherein the company committed to invest money towards green buildings projects, and they achieved EDGE certification for three of their housing development projects.
35. At the same time, however, the CPS period marked a period of very substantial loss of forest cover, continued desecration of coral reefs and fisheries, and increasing GHG emissions. Over the last 10 years, 12 million ha of forest was lost and more than 70 million ha has been degraded. 75% of main rivers, and 15 main lake eco-systems are heavily polluted by agriculture, mining and industry. Some 65% of Indonesia’s coral reefs are considered threatened from over-fishing and almost half are threatened from destructive fishing practices. Indonesians, especially the 150 million who live in coastal and forest areas, suffer from this the most without reaping any benefit. Forests which should generate over US$4 billion annually in revenue are only contributing $300 million and some $20 billion in potential revenue for local fishing communities is being lost to illegal fishing. On a global scale, Indonesia is the fifth-largest emitter of GHG when its land-use change and forestry (LUCF) emissions are included in its profile and the eighth-largest emitter when these emissions are excluded. The vast majority (62%) come from LUCF, with emissions from this sector increasing 65% in absolute terms since 1995. The activities primarily responsible for this are deforestation and peat degradation, most recently associated with the expansion of palm oil plantations. Greenhouse gases from mangrove and sea grass
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destruction are a potentially important, but not currently counted, source of emissions. Given this situation, it is essential to question whether WBG has been ambitious enough, or indeed whether we have been able to engage and have an impact on the “pro-green” agenda in a way that could impact on this downward spiral. The fact that the targets in the results framework for the CPS were largely met at the same time that the environmental and climate change indicators deteriorated so substantially, indicates that our interventions may have been at the margins. For that reason, although the results framework indicators were largely achieved, the overall rating for the pro-green pillar is rated moderately satisfactory. In addition, per the ‘lessons learnt’ section below, addressing this limitation in the WBG impact should be taken into account for the next CPF period through a more comprehensive approach for helping government make a meaningful impact on these enormous challenges. (see description of achievements and performance ratings against pro-green indicators in Sub-annex 3.1d).
Cross cutting area: Gender
36. Under the CPS, WBG strived to scale up efforts to advance the gender agenda. ACountry Gender Action Plan (CGAP) was developed to identify, coordinate and monitor activities to promote gender issues in the broader engagement with Indonesia as well as in specific operations and knowledge products. The CGAP worked across four dimensions of gender equality: endowment, economic opportunities, voice and agency, and emerging risks areas. Areas with a particular gender focus included financial sector development, community development and poverty targeting, education, and environmental sustainability and disaster mitigation. CGAP met its initial target of ensuring 100 percent (from 80 percent) of the operations delivered in FY13 were gender informed.
37. IFC launched the EAP Women in Business program to increase access to finance for women entrepreneurs by providing advisory services to financial institutions (FIs) and demonstrating that woman entrepreneurs were a profitable market segment. The program worked with women and other stakeholders (women business associations, business development service providers) to address some of the demand side obstacles to greater access to financial services for women. IFC provided finance in Indonesia is expected to result in at least 19,000 SME loans and a US$797 million portfolio catering to women entrepreneurs by the end of 2018 as well as technical assistance with regard to non-financial services to its SME customers, in particular women-owned businesses. WBG in partnership with Bank Indonesia launched a study to (i) understand the strengths and weaknesses of women entrepreneurs; (ii) address the challenges women entrepreneurs face in starting and growing their businesses; (iii) identify the kind of products (both financial and non-financial) needed by women entrepreneurs; and (iv) help develop/drive insights into policy and gender implications of SME banking.
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Cross cutting area: Governance and Anti-corruption
38. Poor governance and corruption are a binding constraint to better development outcomes across the economy. This enormous challenge is well recognized by Indonesia’s government and the SCD describes well its impact on slowing the elimination of poverty andsharing more widely Indonesia’s prosperity. The CPS looked at governance and anti-corruption as a cross-cutting area and aimed to help Government by focusing on transparency and efficiency in PFM, greater efficiency in public service delivery, promoting open and transparent competition, and strengthening subnational governments. The engagement for public service delivery, scaled up to include local communities under PNPM, focused on improved systems (including procurement) and citizen feedback mechanisms. In some of these interventions, the Bank partnered with Indonesian institutions and engaged with CSOs to strengthen accountability. To promote open and transparent competition, the Bank focused on natural resources through the Extractive Industries Transparency Initiative (EITI) and REDD+. These initiatives, as well as Indonesia’s leadership in the Open Governance Partnership (OGP), and participation in UNCAC, went some way to support Government’s efforts. Indonesia also participated in the Global Partnership for Social Accountability (GPSA) toward creating space for citizen participation. After long delays, towards the end of the end of the CPS period, direct assistance began with the Indonesia’s premier corruption fighting agency, the KPK, through support for improving the wealth reporting of Indonesian politicians and senior civil servants. Whilst it is too early to judge the results of this work, it can be expected to be extended in the next CPF.
39. IFC complemented these public sector oriented activities by promoting enhanced standards of corporate governance in the private sector. Toward this end, IFC launched a new corporate governance advisory services initiative, and worked with regulatory agencies to establish model corporate governance practices in selected private sector companies and the launching of the Indonesian Corporate Governance Roadmap and the Indonesia’s Corporate Governance Manual as a practical guidance to companies.
40. Despite these many individual efforts by the WBG, poor governance and corruption continued to be a major break on the country’s prospects from infrastructure development from the delivery of services to environmental degradation to the ability to attract private sector investment needed to create job. This was a result not of the failure of any of the WBG interventions, but rather the inability to make measurable headway on a problem that was beyond the Bank Group’s scale.
III. WORLD BANK GROUP PERFORMANCE
41. The WBG’s overall performance is rated Good. The program proceeded largely as anticipated and the CPS was relevant to the country’s development challenges in alleviating poverty reduction and promoting shared prosperity. The World Bank Group contributed solidly to the CPS results, the majority of which were either achieved or mostly achieved (see summary table below). These results were achieved in the context of global economic challenges as well as the political transition leading up to and following the 2014 elections. The work during the CPS period
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showed strong delivery of WBG financing, knowledge and convening power, and was managed in a flexible way to work where we could and maximize development impact.
Engagement AreasNumber of Indicators per CLR Rating Level
Achieved Mostly Achieved
Partially Achieved
Not Achieved
Pro-Growth (17 indicators) 7 2 5 3Pro-Jobs (4 indicators) 2 1 1 0Pro-Poor (11 indicators) 5 4 1 1Pro Green (5 indicators) 3 1 1 0
Total Number across all 4 Engagement Areas 17 8 8 4Percentage for each Rating Level 45.95% 21.62% 21.62% 10.81%
42. A Client Survey was conducted over the period of March to May 2015. Views of the WBG were relatively positive. Stakeholders reported that the Bank was effective in its collaboration with government, citing positive developments in responsiveness and staff accessibility. The survey reported that participating stakeholders viewed governance and education as development priorities, followed by rural development, transport, and corruption.
DESIGN OF THE CPS PROGRAM
43. Relevance & Alignment with the GoI Program: The CPS covered the last two years of President Susilo Bambang Yudhoyono’s (SBY) administration and the first year of President Joko Widodo’s (Jokowi) new administration that started in October 2014. In 2011, GoI launched the Master Plan for “Acceleration and Expansion of Indonesia’s Economic Development 2011-2025” (MP3EI). The CPS was specifically designed to mirror the Government’s development priorities in their pro-growth, pro-jobs, pro-poor, and pro-green focus. Figure 1 indicates the areas where WBG support was expected to contribute to development results. Cross-cutting themes included gender equity and governance and anti-corruption. A wide range of instruments and financing tools were brought to bear. The Indonesia business model looked, where possible, for the program to serve as a strategic and administrative platform for the delivery of third party financing, including multi-donor and bilateral donor trust funds and project financing which allowed the Bank to provide knowledge services on a larger scale compared to most other countries. These knowledge services helped underpin the delivery of IBRD financing for policy based and investment lending, but even more so to support economic and sector work that helped inform Government policy making.
44. Lessons Learned from the Previous CPS: The CPS design and implementation reflected the lessons learned from the Bank’s past engagement, as noted in the CPS Completion Report for FY09-12. These included (i) full alignment of the Bank program with Indonesia’s development priorities; (ii) programmatic policy lending support to allow for incremental reform progress; (iii) adopting an evidence based approach gained from sustained engagement over several years; (iv) effective knowledge products and convening power to underpin policy debate and consensus building, even in areas of diminished need for financing, diffused leadership, or poor coordination.
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45. Selectivity and Flexibility of the Program during CPS Design: Given its long partnership with GoI and other donors, a strong team on the ground and benefiting from lessons of experience, the WBG selectively took on new engagements while exiting others as priorities on the ground shifted. Disaster response programs for Aceh, Nias, and Java successfully closed during the CPS period and transformed into a non-location specific government-led standing trust fund mechanism with UN and World Bank windows, the IMDFF-DR. The Bank Group program signaled a scale down in Education and Agriculture lending in response to Government request and ramping up in infrastructure, energy, connectivity and competitiveness to align with government priorities and funding requirements during the CPS period. The design took advantage of long-standing relationships of trust with Government to work in policy areas and supported the wide scope of the program on the basis of strong partnerships with other development partners, many of whom had in place country specific trust fund agreements and financing.
46. Results Framework: The CPS was meant to be an interim strategy in anticipation of a new administration towards the end of the CPS period in FY15. Accordingly, the CPS leveraged on-going WBG engagements to prepare itself for supporting the new Government’s development and reform agenda. The CPS tried to maintain this flexibility by creating a relatively large number of engagement areas (a total of 15 engagements under 4 pillars plus 2 cross cutting areas) and a results framework that had a mix of clearly defined and measurable targets and others with relatively small deliverables or outcomes. This led to some lapses in the logic of the results chains and some project level indicators and milestones used as proxies for higher level CPS objective indicators. While this may have been inevitable during the design stage, the CPS Progress Report missed an opportunity to more aggressively revise the expected results and interim indicators for the CPS focus areas, and bring more specificity and realism to the results framework. The main change in the results indicators at mid-stream was for road maintenance and development, where the IBRD’s ability to contribute was reduced by delays in implementation of the ongoing operation and in processing an additional operation.
IMPLEMENTATION OF THE CPS PROGRAM
47. Selectivity and Flexibility during Implementation: Given WBG’s partnership with other development partners, the Indonesia country program was able to maintain a strong team on the ground and relatively flexible financing sources. This proved useful in helping WBG to respond to emerging needs and priorities. This was particularly essential given the changes in Government style and priorities that came from the handover of the 10 year administration of SBY to that of Joko Widodo in the third year of the CPS. This can be seen in the exit from some areas and the scaling up in others which will be reflected more strongly in the new CPF. Some notable examples of this include: (i) the successful closing of the disaster response programs for Aceh, Nias, and Java , (ii) the change in focus of the PNPM Support Facility (PSF) trust fund financing from piloting smaller interventions in CCD and supporting Government implementation of PNPM to a concentration on the emerging Village Law program and ensuring that the lessons learnt from years of successful facilitation and community engagement from PNPM Rural and Urban were incorporated into this potentially much larger village law program; (iii) preparing for a ramping up of infrastructure investment, but with a clearer focus on scalability and the challenges of implementation, and (iv) looking for ways where the Bank Group’s engagements in some critical
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areas could potentially have greater impact in critical areas such as in environment and good governance.
Figure 1: WBG Support For Pro-Growth, Pro-Jobs, Pro-Poor, And Pro-Green
48. WBG Commitments and Portfolio: During the CPS period, IBRD delivered US$3.8 billion in new loans, of which US$2.1 billion was Investment Project Financing and US$1.7 billion policy based support through DPLs. The overall size of the IBRD portfolio by the end of the CPS period was lower in USD terms and in the number of projects compared to the start of the period. This reflected the general approach of ‘no new borrowing’ that marked the last years of the SBYadministration and the hesitancy of the Government and the Bank to make commitments to programs that may not be priorities of the incoming administration. Projects which remained in the Bank’s preparation pipeline at the end of the SBY period were almost all dropped to make space for new priorities. IFC’s total commitments reached US$2.1 billion across 29 projects, of which US$1.1 billion for IFC’s own account and US$1 billion through mobilization from commercial banks. IFC’s portfolio accelerated particularly in the final year of the CPS with US$1.1 billion in new commitments (including US$415 million mobilization). As of June 30, 2015, IFC’s committed portfolio grew 82 percent of the CPS period (from end-FY2012), reaching US$2.3 billion, of which US$846 million was syndicated from partners under IFC’s B-Loan program. As of the end of FY15, MIGA had two active guarantees for a total of US$407 million in the energy and extractive industries. During the CPS period, one guarantee was terminated and one new guarantee was issued.
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49. IBRD Portfolio Performance: As of end of June 2015, there were 26 open projects totaling a net commitment of US$7.2 billion with an undisbursed balance of US$5.2 billion. Disbursement for FY15 was US$985 million, the lowest in five years, with a disbursement ratio of 16 percent which was below historic trends of about 20%. As mentioned above, the relative decline in new lending was a conscious choice of the Government and the Bank in anticipation of the change in Government for the first time in 10 years. At the same time, this slow-down impacted the disbursement rate which had typically been higher in Indonesia than the Bank average. This reflected the change in the composition of the portfolio towards one with more policy based lending (which disburse instantly but are not included in the disbursement ratio calculation), the winding down of annual ‘reimbursable’ programs such as BOS-KITA in education and PNPM Rural, and a proportional increase in infrastructure projects and institutional reform projects which, as mentioned earlier in the CLR, suffered from long delays between loan signing and first disbursements.
50. In an effort to proactively manage the portfolio, several restructurings and cancellations occurred during the CPS period, including the first cancellation ever in Indonesia of the PINTAR project which had failed to disburse after almost 7 years. As noted in the table below, Indonesia’s realism index had been trending upward over the CPS period, but suffered from some disconnect with the introduction of changes in IEG’s rating approach in the last year. The number of problem projects (IP) had dropped to 11 percent in FY14, but increased to 31 percent in FY15 as a result of the changes in the size and composition of the portfolio as already discussed above. The number of projects rated as problems also reflects in part greater rigor in assessing performance. During the CPS period, additional attention was brought to systemic issues in preparation, implementation, management oversight, and ownership. The FY14 CPPR was a year-long, highly detailed and collaborative process led by Bappenas and MoF in close collaboration with the Bank’s Country Team. The review identified lapses in project readiness including extremely limited advance procurement, lack of attention and understanding of safeguard mitigation measures and M&E, and unclear ownership/commitment within implementing ministries as systemic issues that determined the speed and success of project implementation. These are prominent issues, especially for large infrastructure projects, which need to be taken into account in the design and scope of the future CPF. Proactivity remained the largest challenge during the CPS period and will be the first priority in portfolio management during the start of the new CPF period.
Key Indicator FY13 FY14 FY15Number of Projects 37 32 26Net Commitment (US$m) 7,884 6,653 7,240Number of Projects at Risk 6 9 8Commitment at Risk (US$m) 810 1,939 2,106Problem Projects (DO) 9.1% 8.6% 19%Problem Projects (IP) 12.1% 11.4% 31%Realism Index 44% 90% 91%Proactivity Ratio 80% 40% 56%Disbursement Ratio 17% 24% 16%Disbursement Amount (US$m) 988 1,575 985
51. Knowledge Programs: The large program in AAA, with the vast majority of it financed through country specific trust-funds, was implemented largely as anticipated (see table below and
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Annex B4). During the CPS period, a total of 77 stand-alone ESW/TA and 6 programmatic ESW/TA were delivered with a delivery rate of 87.5% for FY13 and 77.8% for FY14. Due to the WBG corporate-wide restructuring exercise that started in FY14, there was no agreed MOU for FY15 and 37 standalone ESW/TAs and 4 programmatic EWS/TAs were delivered during this time. There were also 2 RAS for the first time in Indonesia for US$1.5 million. At the same time, a large number of ‘stale’ AAA and those not well connected to the program, especially at the start of the new administration, were dropped or closed.
Type MOU Actual DeliverablesFY13 FY14 FY15 FY13 FY14 FY15
Stand Alone
ESW 4 4 TBA 6 3 2TA 20 18 TBA 15 16 35
IE TBAKP/RF TBA 1
TE TBA 1Programmatic ESW/TA 5 TBA 2 4
Total: 24 27 TBA 21 21 43
52. IFC Portfolio: Driven by high commitment volumes during the CPS period, IFC’s investments in Indonesia reached US$1.1 billion in new commitments by FY15, which included US$415 million mobilization. As of June 30, 2015, IFC’s committed portfolio grew 52% year-on-year as of June 30, 2015, reaching US$2.3 billion, of which US$846 million was syndicated from partners under IFC’s B-Loan program. The portfolio is dominated by finance and insurance sector (US$1.18 billion), followed by chemicals (US$597 million) and electric power (US$US$239 million). In terms of product composition, loans account for 84 percent (US1.2 billion, own account only) while equity products account for 16 percent (US$228 million). The loan portfolio performed reasonably well during the review period, with one non-performing loan.
53. MIGA Portfolio: MIGA’s overall corporate focus is on supporting transformational projects, energy efficiency and climate change, and middle income countries. In Indonesia during the CPS period, MIGA was supporting guarantees in excess of US$850 million on a gross basis. This comprised two projects in the energy and extractive industries and one in the telecommunications sector. The ongoing Weda Bay Nickel project (US$207M) at issuance prior to the CPS period supports the exploration phase for a cobalt-nickel mine with a hydrometallurgical processing plant, in an innovative effort to improve social and environmental safeguards by applying MIGA Performance Standards. Eventual development of the project would allow Indonesia to become one of the world’s leading nickel producers, and would serve as a demonstration on how a major natural resource project could be developed in a socially and environmentally sustainable way to bring benefits to the local populace. This guarantee is set to expire in FY16. The ongoing Rajamandala Hydropower project ($200M at issuance during the CPS period) targets the building of Indonesia’s energy capacity to sustain its economic progress, while moving away from traditional reliance on carbon-based generation. The US$450 million guarantee in support of PT Natrindo Telpon Selular was prematurely terminated in FY14.
54. Partnerships: The WBG’s strong collaboration with development partners continued throughout the CPS period. Despite its middle income status, Indonesia continues to attract large amounts of grant assistance for particular high priority areas including poverty alleviation, strengthening of the business climate, infrastructure development, better management of natural
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resources and extractives, disaster risk management, environment and climate change, social protection and improving public financial management and governance. The WBG has been extremely fortunate to be able to partner with bilateral donors in support of Government programs and CPS objectives. These partnerships, particularly with Governments of Australia, Canada, Denmark, EU, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the UK and the US, have been instrumental in delivering on the CPS results. The Indonesia program also benefitted from partnering with a number of global trust funds including in areas of environment and climate change, financial stability and natural resource governance (CTF, CIF, FIP, EITI and FIRST amongst others). Disbursement from Bank executed trust funds in the entire Indonesian portfolio amounted to US$61 million during the CPS implementation period, primarily in the form of Bank Executed Trust Funds (BETF). Cumulatively grants for ongoing recipient executed trust funds(RETFs) totaled someUS$304 million as of June 30, 2015 (see table below).
FY13 FY14 FY15 TotalDisbursement
BETF (US$m) 18.8 22.5 19.8 61.1RETF (US$m) 55.9 78.9 31.3 166.2
Active Grants as of June 30, 2015BETF (US$m) 142.8RETF (US$m) 304.1
55. Risks and Mitigation Measures: The risks to the program identified by the CPS and endorsed by the CPS Progress Report, including vulnerability to economic shocks, natural disasters, weak institutional coordination and governance arrangements, persisted throughout the CPS implementation period but were managed in a way that kept the programs largely on track. Measures taken during the CPS period by Government to maintain macro and financial stability showed that policy makers had the tools and the support necessary to navigate these risks. Similarly, experience gained in managing natural disasters, combined with the localization of impact of disasters during the CPS period, helped to mitigate the impacts from earthquakes, volcanic eruptions, floods and landslides that plagued the country during the CPS period. To manage the institutional and governance risks, the WBG strived to engage where it had confidence in its counterparts and supported measures to strengthen accountability and build fiduciarycapacity, including in financial management and procurement, when possible. The WBG continued to emphasize governance and anti-corruption measures in all its operations through implementation support and supervision arrangements and working closely with INT, GOI accountability organizations and Government counterparts when malfeasance was found.
IV. ALIGNMENT WITH WBG CORPORATE GOALS
56. While the CPS predated the WBG’s twin goals, both the country’s own development program and the CPS were well aligned with eliminating severe poverty and sharing prosperity more widely. In particular:
a. The Pro-Growth pillar sought to broaden growth to include the bottom 40 percent through connectivity with lagging regions and external markets and infrastructure development. Competitiveness and financial market development sought to promote business development and access to finance for women and micro, small
99
and medium sized enterprises. Support for central and subnational governments sought to enhance the quality of public spending and redirect regressive fuel subsidies toward infrastructure, social protection, including strengthening the safety net for mitigating shocks to the poor and vulnerable, and public service delivery benefiting the lower 40 percent.
b. Pro-Jobs pillar sought to enhance labor productivity and broaden social insurance to support equality of opportunity and the access to good jobs which the SCD identifies as a major pathway to enhanced equality.
c. Engagements under Pro-Poor pillar enhanced targeting of the poor with social assistance, support for community development programs that have been proven to reduce poverty and promote the welfare of the vulnerable. Health interventions sought to promote universal health coverage to the poor who are particularly vulnerable to health shocks, and improve water and sanitation services to fight maternal and child mortality and the high rates of childhood stunting.
d. Pro-Green engagements sought to promote sustainable green growth, climate change adaptation and mitigation, and disaster risk management whose negative consequences disproportionally impact the poor.
V. LESSONS AND SUGGESTIONS FOR FY16-20 CPF
57. The analysis of the implementation of the FY13-15 CPS together with the key finding of the Development Policy Review and the SCD suggests that there are a number of important lessons that should be used to help inform the design and implementation of the CPF.
58. In particular, the following should be considered in the content and the implementation planning for the new CPF:
Reform requires a clearer understanding of and ability to impact political economy drivers: Political economy drivers, as much as technical constraints, impact the likelihood and direction of reform. Understanding these constraints and the risks they involve should be considered in determining whether and how WBG can provide support in a way that will make a meaningful difference. Government ownership, commitment, resources and champions for the reform agenda, and coordination are major determinants of success. This is demonstrated, for example, in a number of institution building projects such as PINTAR where dialogue around better revenue collection continued throughout the CPS period, but the project itself lacked sufficient support for implementation. In practice, this means that project design and external implementation support cannot substitute for the ability to engage with the right level of Government and with a dedicated counterpart with the requisite responsibility and accountability to deliver. These dimensions should be considered in determining the future engagement areas and interventions in the next CPF.
100
Comprehensive approach for impactful results. Indonesia is the 4th largest in the world with a heterogeneous society, wide disparity in income and an extraordinary degree of geographic dispersion. Therefore, a small or one-off intervention, even if highly successful, is not likely to make a meaningful impact unless it can be brought to scale. The CPS has successful examples of such impact including through PNPM Urban, PNPM Rural, PAMSIMAS and DAK, all of which started as smaller engagements with WBG support and went on to become platforms for delivery of services nationwide. However, the CPS implementation period also included several interventions where there have been ‘micro-level’ successes which did not trigger or contribute to transformational change in the sector. Our engagement in governance is one such example – while the Bank has been active and engaged for many years in a variety of interventions, the cumulative impact is not reflected in a fundamental national change. “Comprehensive” does not necessarily mean ‘bigger’ –in governance, for example, governance reform could be ‘mainstreamed’ where there is a potentially stronger incentive to bring results in individual sectors such as when investment operations are combined with regulatory improvements. In the critical area of environment and climate change, where individual results under the CPS were largely successful whilst overall the country saw very serious deterioration, indicates that an incremental approach may make relatively little impact whilst a more comprehensive landscape management approach could help bring together stakeholders in a way that results can be more visible and impactful and the interactions across disparate sectors and actors can be better coordinated. It also means emphasizing the WBG value proposition in the combination of financial products, knowledge services and implementation support, including through the strategic use of country specific trust funds, and employing the synergies amongst IBRD, IFC, and MIGA in large or complex engagement areas as relevant.
Disaster Risk readiness, in terms of both assessment and mitigation, should remain a part of any WBG strategy in Indonesia. Indonesia’s poor and near poor are highly vulnerable to shocks both economic and physical. Natural disasters such as earthquakes, tsunamis and volcanic eruptions pose a constant risk at a national or more likely, a local level. Past experience has contributed to greater disaster preparedness over time, and events such as the recent eruption of Mount Kelud have been localized in terms of socio-economic impacts and have shown that mechanisms for disaster mitigation including redirection of IBRD support, can be effective in relieving economic and social costs. In cases where the disaster is more extreme, initiating IFC’s earthquake index protection insurance could help financial institutions recover quickly from the severe impact of natural disasters. Going forward, any CPF should include disaster preparedness activities as well as an awareness in its risks assessment that programs may have to redirected on short notice in case of natural disaster.
Implementation will be one of the key indicators of success during the next CPF.Implementation constraints are a major deterrent to the achievement of development outcomes in the WBG program. This is particularly true for programs that are heavy in infrastructure and institution building. Experience from the current CPS has shown that shortcomings in project readiness – particularly in terms of advance procurement,
101
land acquisition safeguard requirements, sponsor commitment, and ownership/commitment—contribute to long delays in implementation and sometimes in project failure. Therefore, the next CPF must be cognizant of these issues and work to address constraints upfront with Government counterparts. One example could be the need to work directly with SOEs using direct lending with Government guarantee, rather than through Subsidiary Loan Agreements (SLAs) which slow implementation and cloud accountability. Government counterparts should also be prepared to provide sufficient upfront funding for project preparation and to change internal processes that have generally stalled advancing procurement preparation especially in large infrastructure projects.
Greater Selectivity: Cumulatively, these lessons suggest that the next CPF will have to be genuinely more selective in its design. Whilst the Government’s development agenda is necessarily broad, and the needs great, by definition, WBG will have to have fewer engagements if it is to bring scale and impact to bear on the program over the next four years. This will entail some difficult choices up front and a willingness to correct course during the CPF period.
102
APP
EN
DIC
ES
AN
D A
NN
EX
ES
Sub-
anne
x 3:
1In
done
sia
CPS
FY
13-1
5 R
esul
ts M
atri
x
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Pro-
Gro
wth
–Pr
omot
ing
Pros
peri
ty
Con
nect
ivity
Acc
eler
ate
grow
th a
nd
enha
nce
equi
ty th
roug
h do
mes
tic c
onne
ctiv
ity
Lack
of p
olic
y co
ordi
natio
n to
impl
emen
t pol
icy
refo
rms
in th
e co
nnec
tivity
age
nda
Reg
ulat
ory
barr
iers
that
in
hibi
t bet
ter p
rovi
sion
of
conn
ectiv
ity se
rvic
es
Inef
ficie
nt u
se o
f pub
lic
finan
ce a
nd m
anag
emen
t pr
actic
e fo
r pro
visi
on o
f co
nnec
tivity
infr
astru
ctur
e
Priv
ate
sect
or p
artic
ipat
ion
not b
eing
leve
rage
d fo
r the
ag
enda
of g
row
th a
nd
conn
ectiv
ity
1. Im
prov
ed ra
nkin
g of
Indo
nesi
a’s
Logi
stic
s Per
form
ance
Inde
x
Base
line:
in 2
012
Indo
nesi
a ra
nked
at
59
2. In
crea
se a
cces
s for
bro
adba
nd
inte
rnet
serv
ices
for p
opul
atio
n.Ba
selin
e: 5
per
cent
in 2
011
Targ
et:
30 p
erce
nt b
y 20
15
3. R
educ
ed c
ost a
nd ti
me
to e
xpor
t an
d im
port,
as i
ndic
ated
in th
e D
oing
B
usin
ess S
urve
y Ba
selin
e:20
12: E
xpor
t: 17
day
s, U
S$64
4 pe
r con
tain
er; I
mpo
rt: 2
7 da
ys, U
S$66
0 pe
r con
tain
er
Ach
ieve
d. In
done
sia’
s 201
4 LP
I ran
king
has
impr
oved
to 5
3
Ach
ieve
d. B
y en
d of
CY
2014
:B
road
band
: 34.
5%Th
e se
ctor
is g
row
ing
fast
and
a
37%
pen
etra
tion
by e
nd o
f C
Y20
15 is
exp
ecte
d
Not
Ach
ieve
d. D
oing
Bus
ines
s 20
15:
Expo
rt: 1
7 da
ys,
US$
572/
cont
aine
rIm
port:
26
days
, U
S$64
7/co
ntai
ner
Fina
ncin
g:C
onne
ctiv
ity
DPL
I &
II; I
FC U
S$50
m
illio
n to
Pro
telin
do, a
te
leco
m to
wer
ope
rato
r; IF
C
finan
ced
Win
term
ar to
pr
ocur
e of
fsho
re se
rvic
e ve
ssel
s. B
lue
Bird
Tax
i se
rvic
e pr
ovid
er fo
r urb
an
trans
porta
tion.
Kno
wle
dge:
ana
lytic
and
ad
viso
ry w
ork
ongo
ing
fund
ed b
y A
USA
ID a
nd
MD
FTIC
(Dut
ch, S
wis
s, an
d U
SAID
); ES
W o
n lo
gist
ics
and
trade
faci
litat
ion;
pol
icy
note
s on
logi
stic
s,re
gula
tory
re
form
, man
agin
g op
enne
ss.
A
AA
on
ICT
regu
lato
ry
refo
rm u
nder
way
Adv
isor
y: R
AS
for P
elin
do
II; d
igita
l fin
anci
al in
clus
ion
Com
petit
iven
ess
1. P
olic
y fr
amew
ork
adop
ted
to
Ach
ieve
d. 2
014
LPI o
n lo
gist
ics c
ompe
tenc
e: 3
.21;
LPI
Fi
nanc
ing:
Con
nect
ivity
I &
II
and
FIR
M D
PL d
eliv
ered
.
103
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Enha
nce
com
petit
iven
ess
thro
ugh
impr
oved
en
viro
nmen
t, in
clud
ing
open
, com
petit
ive,
su
stai
nabl
e an
d in
clus
ive
mar
kets
for
bu
sine
ss to
exp
and
and
incr
ease
pro
duct
ivity
Bot
tlene
cks a
nd
unde
rdev
elop
ed in
trad
e lo
gist
ics a
re h
urtin
g pr
ofita
bilit
yan
d un
derm
inin
g fir
ms’
pro
duct
ivity
; co
mpl
ex
regu
lato
ry e
nviro
nmen
t in
hibi
ts p
rivat
e se
ctor
in
vest
men
t; tim
e co
nsum
ing
and
cost
ly p
roce
dure
s to
esta
blis
h co
mpa
nies
, and
cl
ear i
mpo
rts; w
eak
coor
dina
tion
amon
g go
vern
men
t ins
titut
ions
for
inve
stm
ent p
olic
y;pr
essu
re to
us
e pr
otec
tioni
st m
easu
res t
o pr
otec
t dom
estic
ves
ted
inte
rest
; priv
ate
sect
or
com
pani
es a
re u
nder
taki
ng
proj
ects
whi
ch w
ill n
ot b
e co
st-c
ompe
titiv
e ve
rsus
gl
obal
com
petit
ion
in th
eir
targ
et m
arke
ts; p
olic
y de
cisi
ons a
re ta
ken
with
out
suff
icie
nt a
naly
sis o
f al
tern
ativ
es a
nd o
f the
ir co
sts
and
bene
fits i
nade
quat
e in
fras
truct
ure
and
ince
ntiv
e re
gim
e ha
ve li
mite
d ca
paci
ty
and
have
not
enc
oura
ged
inno
vatio
n in
priv
ate
sect
or.
impr
ove
com
petit
iven
ess t
hrou
gh
bette
r tra
de lo
gist
ics
Base
line:
Sco
re in
201
2 Lo
gist
ics
Perf
orm
ance
Indi
cato
rs (L
PI) f
or
logi
stic
s qua
lity
com
pete
nce
of 2
.85
for b
orde
r man
agem
ent o
f 2.5
3
Targ
et: I
mpr
oved
201
4 LP
I sco
re o
n lo
gist
ics c
ompe
tenc
e of
3.0
0 an
d bo
rder
man
agem
ent o
f 2.7
, N
atio
nal
Sing
le W
indo
w a
ctin
g a
s the
sing
le
refe
renc
e fo
r cro
ss-b
orde
r tra
de a
nd
intro
duct
ion
of si
ngle
sign
-on
for a
ll pa
rtici
patin
g ag
enci
es
2. I
mpr
oved
regu
lato
ry
envi
ronm
ent,
inte
rage
ncy
coor
dina
tion,
and
con
sulta
tive
proc
ess i
n bu
sine
ss e
nviro
nmen
t tha
t af
fect
com
petit
iven
ess o
f Ind
ones
ia’s
pr
ivat
e se
ctor
, fac
ilita
te in
nova
tion
and
inve
stm
ent f
acili
tatio
n an
d se
rvic
es.
Base
line:
50
days
to st
art a
co
mpa
ny; 5
70 d
ays t
o en
forc
e co
ntra
ct; w
eak
cons
ulta
tive
proc
esse
s prio
r to
issu
ance
of
regu
latio
ns; u
ncoo
rdin
ated
in
vest
men
tpol
icy;
wea
k in
vest
or
inqu
iry h
andl
ing
Targ
ets:
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ays t
o st
art a
com
pany
; le
ss th
an 5
00 d
ays t
o en
forc
e co
ntra
ct; c
oord
inat
ed in
vest
men
t po
licy
and
impr
oved
tran
spar
ency
in
on b
orde
r man
agem
ent:
2.87
; IN
SW ta
sk fo
rce
and
stee
ring
com
mitt
ee se
t up
by a
Pr
esid
entia
l Reg
ulat
ion;
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m
echa
nism
use
d by
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genc
ies
Part
ially
Ach
ieve
d.D
oing
B
usin
ess 2
015:
52.
5 da
ys to
st
art a
com
pany
; 471
day
s to
enfo
rce
a co
ntra
ct; c
onsu
ltativ
e re
gula
tory
mak
ing
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ess
rem
ains
wea
k; in
vest
men
t po
licy
coor
dina
tion
impr
oved
du
ring
the
nega
tive
inve
stm
ent
list (
DN
I) p
roce
ss; i
nves
tor
inqu
iry h
andl
ing
syst
em
impr
oved
at t
he In
vest
men
t C
oord
inat
ion
Boa
rd (B
KPM
); th
e la
w w
as re
form
ed in
201
5 bu
t DB
met
hodo
logy
reco
rded
on
ly th
e pr
actic
e, b
ut n
ot
chan
ges i
n th
e la
w, w
hich
re
quire
s a 2
9 da
y re
duct
ion
from
52.
5 to
33.
5 da
ys.
IFC
fina
nced
Pan
ca A
mar
a U
tam
a w
ith U
S$54
0 m
illio
n ow
n ac
coun
t fin
anci
ng a
nd
synd
icat
ion;
fina
nced
Win
gs’
and
May
ora’
s foo
d pr
oces
sing
ope
ratio
ns;
IFC
pro
vide
d up
to U
S$37
5 m
illio
n lo
an fi
nanc
ing
and
mob
iliza
tion
supp
ort f
or
Indo
ram
a’s f
ertil
izer
faci
lity
in N
iger
ia –
Elem
e Fe
rtiliz
ers.
IFC
fina
nced
the
Win
gs G
roup
’s d
eter
gent
pl
ant i
n N
iger
ia th
roug
h lo
an
finan
cing
.
Kno
wle
dge:
AA
A su
ppor
ted
by M
DFT
IC to
driv
e po
licy
refo
rms i
n lo
gist
ics a
nd tr
ade
faci
litat
ion,
enh
ance
refo
rm
agen
da to
impr
ove
the
busi
ness
regu
lato
ry
envi
ronm
ent
Adv
isor
y: IF
C A
dvis
ory
Serv
ices
–In
vest
men
t C
limat
e Pr
ogra
m (s
ub-
natio
nal D
oing
Bus
ines
s;
corp
orat
e go
vern
ance
; fin
anci
al in
fras
truct
ure)
In
nova
tion,
Inve
stm
ent
Gen
erat
ion
Tech
nolo
gy, a
nd
Entre
pren
eurs
hip;
Rep
ort a
nd
polic
y di
alog
ue o
nIn
done
sia’
s man
ufac
turin
g se
ctor
; Rep
ort a
nd p
olic
y
104
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
regu
lato
ry m
akin
g; im
prov
ed
perf
orm
ance
of i
nves
tor i
nqui
ry
hand
ling
dial
ogue
on
man
agin
g op
enne
ss.
Fina
ncia
l Sec
tor
Prom
ote
the
deve
lopm
ent o
f a st
able
, ef
ficie
nt a
nd in
clus
ive
finan
cial
sect
or in
In
done
sia
in o
rder
to
fost
er a
ccel
erat
ed
econ
omic
gro
wth
, re
duce
pov
erty
and
st
reng
then
eco
nom
ic
com
petit
iven
ess o
n a
sust
aina
ble
basi
s.
Ban
ks in
term
edia
tion
has
impr
oved
but
it is
still
low
to
the
size
of e
cono
my;
Ban
k lo
ans n
eed
to in
crea
se fu
rther
to
supp
ort e
cono
mic
gro
wth
N
on-B
ank
Fina
ncia
l In
stitu
tion
(NB
FI) a
sset
s nee
d to
gro
wth
furth
er to
incr
ease
ef
ficie
ncy
and
redu
ce ri
sk in
fin
anci
al se
ctor
and
cre
ate
long
-term
dom
estic
fina
ncia
l re
sour
ces/
savi
ngs
Pers
iste
nt is
sues
of l
imite
d ac
cess
to fi
nanc
e fo
r un
ders
erve
d gr
oups
(MSM
Es
and
hous
ehol
ds)
Indo
nesi
a’s n
ew F
inan
cial
Se
rvic
es A
utho
rity(
OJK
) m
ust f
unct
ion
effe
ctiv
ely
as
the
inte
grat
ed fi
nanc
ial s
ecto
r au
thor
ity;
the
trans
ition
pe
riod
has t
o be
man
aged
pr
oper
lyTh
e fin
anci
al sa
fety
net
fr
amew
ork
and
lega
l bas
is fo
r fin
anci
al c
risis
man
agem
ent
need
to b
e st
reng
then
ed;
Lim
ited
loca
l inf
rast
ruct
ure
finan
cing
cap
acity
1. M
aint
ain
finan
cial
sect
or
stab
ility
, dee
pene
d fin
anci
al se
ctor
an
d st
reng
then
ed p
rivat
e se
ctor
th
roug
h: im
prov
ed re
gula
tory
and
su
perv
isor
y fr
amew
orks
; mai
ntai
ned
soun
dnes
s of b
anki
ng se
ctor
.
Base
line:
Key
fina
ncia
l rat
ios o
f ba
nks (
Cap
ital A
dequ
acy
Rat
io
(CA
R),
Non
-Per
form
ing
Loan
ratio
(N
PL),
Net
Inte
rest
Mar
gin
(NIM
) ar
e so
und
and
LDR
(Loa
n to
Dep
osit
Rat
io)
is 7
5% (
Dec
. 201
1);
Targ
ets:
Ban
king
fina
ncia
l ind
icat
ors
rem
ain
soun
d an
d LD
R a
t min
imum
80
%
2. G
row
ing
capi
tal m
arke
t and
NB
FI
and
a hi
gher
acc
ess t
o fo
rmal
fin
anci
al se
rvic
es b
y th
e M
icro
-SM
Es a
nd u
nder
serv
ed p
opul
atio
ns
Base
line:
41%
of h
ouse
hold
s hav
e ac
cess
to b
ank
acco
unts
; ban
king
lo
an to
SM
Es is
50%
(201
1),
disb
urse
d K
UR
(cre
dit p
rogr
am fo
r SM
E) a
mou
nted
to ID
R 6
3 tri
llion
(2
011)
Ach
ieve
d. A
s of M
ar 2
015,
N
PLs a
re a
t a so
und
2.3%
. C
AR
is a
t a so
und
20%
. NIM
st
able
, LD
R a
bove
80%
the
who
le p
erio
d
Ach
ieve
d.K
UR
exc
eede
d ta
rget
in 2
013
& 2
014
thro
ugh
Oct
, dis
burs
emen
t rea
ched
IDR
33
.1 tr
illio
n or
90%
of 2
014
targ
et. T
here
was
1.7
mill
ion
new
acc
ount
hol
ders
of
Tabu
ngan
ku in
the
first
se
mes
ter o
f 201
4.O
JK is
fully
ope
ratio
nal a
s an
inte
grat
ed fi
nanc
ial s
ecto
r au
thor
ity a
s of J
an 2
014;
the
Coo
rdin
atio
n Fo
rum
for
Fina
ncia
l Sys
tem
Sta
bilit
y
Fina
ncin
g: F
IRM
DPL
de
liver
ed; I
FC c
omm
itted
lo
ans o
f up
to U
S$75
mill
ion
to B
ank
Dan
amon
and
up
to
US$
30 m
illio
n to
Ban
k H
ana
Indo
nesi
a fo
r exp
andi
ng
acce
ss to
fina
nce
for S
MEs
, an
d pr
ovid
ed fi
nanc
ing
of u
p to
US$
8.9
mill
ion
for M
itra
Bis
nis K
elua
rga
Ven
tura
(M
BK
), a
mic
ro-f
inan
ce
inst
itutio
n in
Indo
nesi
a.
Fina
ncia
l sup
port
to B
ank
Tabu
ngan
Pen
siun
an
Nas
iona
l (B
TPN
) tot
aled
U
S$50
0 m
illio
n in
clud
ing
synd
icat
ions
.IF
C F
IG is
supp
ortin
g B
TPN
in
dev
elop
ing
and
exte
ndin
g no
n-fin
anci
al se
rvic
es to
SM
Es.
IFC
pilo
t to
exte
nd
hous
ing
mic
ro-lo
ans i
s in
exec
utio
n in
par
tner
ship
with
H
olci
m In
done
sia
(a le
adin
g ce
men
t sec
tor c
ompa
ny) a
nd
Bin
a A
rtha
Ven
tura
(a m
icro
-fin
ance
inst
itutio
n).
IFC
is
furth
er su
ppor
ting
Dan
amon
B
ank
and
Ban
k M
uam
alat
to
deve
lop
and
exte
nd
inno
vativ
eag
ri-fin
anci
al
105
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Targ
ets:
Ban
k lo
ans t
o SM
E co
ntin
ue to
gro
w a
nd a
re m
aint
aine
d at
50%
of t
otal
ban
k lo
ans;
pr
opor
tion
of h
ouse
hold
s with
sa
ving
s acc
ount
incr
ease
d
(FK
SSK
) is o
pera
tiona
l. FK
SSK
mee
ting
is q
uarte
rly &
th
e D
eput
ies F
KSS
K m
eetin
g is
m
onth
ly.
Infr
astru
ctur
e Fi
nanc
e Fa
cilit
y is
pro
vidi
ng lo
ng te
rm
finan
cing
for i
nfra
stru
ctur
e pr
ojec
ts; a
s of e
nd S
ep 2
014,
II
FF, t
he so
le p
roje
ct
impl
emen
ting
agen
cy, h
as
ente
red
into
IDR
3.2
trill
ion
cred
it co
mm
itmen
ts fo
r var
ious
in
fras
truct
ure
proj
ects
such
as
toll
road
, tel
ecom
mun
icat
ions
, po
wer
gen
erat
ion
and
airc
raft
mai
nten
ance
faci
lity.
A
ltoge
ther
, the
se c
omm
itmen
ts
leve
rage
d ab
out I
DR
29
trilli
on
tota
l fin
anci
ng fr
om a
ll pa
rtici
patin
g le
nder
s
serv
ices
to S
MEs
in ru
ral
area
s.
IFC
has
als
o su
ppor
ted
the
esta
blis
hmen
t of a
new
pr
ivat
e eq
uity
fund
man
ager
(F
alco
n H
ouse
Par
tner
s) th
at
will
exp
and
the
avai
labi
lity
of
grow
th c
apita
l to
the
med
ium
-siz
ed c
ompa
nies
in
Indo
nesi
a.IF
C a
ssis
ted
com
pani
es su
ch
as P
T C
iput
ra R
esid
ence
s Tb
k an
d PT
Blu
e B
ird T
bk in
is
suin
g ca
pita
l mar
ket
inst
rum
ents
. In
the
case
of
Cip
utra
, IFC
issu
ed a
par
tial
cred
it gu
aran
tee
for t
he
com
pany
’s b
ond
offe
ring;
for
Blu
e B
ird, I
FC p
laye
d th
e ke
y le
ad in
vest
or ro
le d
urin
g th
e co
mpa
ny’s
initi
al p
ublic
of
ferin
g.
Adv
isor
y Se
rvic
esin
the
area
s of d
igita
l fin
anci
al
incl
usio
n, re
spon
sibl
e m
icro
finan
ce, f
inan
cial
in
fras
truct
ure
(cre
dit
repo
rting
and
secu
red
trans
actio
ns),
capi
tal m
arke
ts
deve
lopm
ent f
or
infr
astru
ctur
e fin
ance
, and
in
sura
nce
(ear
thqu
ake
inde
x in
sura
nce
proj
ect)
supp
ort
deve
lopm
ent a
nd e
xpan
sion
of
inno
vativ
e, in
clus
ive
and
106
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
sust
aina
ble
finan
cial
serv
ices
to
low
inco
me
hous
ehol
ds
and
MSM
Es.
Kno
wle
dge:
Fin
anci
al S
ecto
r Po
licy
dial
ogue
s; F
inan
cial
Se
ctor
Ass
essm
ent P
rogr
am
(FSA
P); M
icro
insu
ranc
e M
arke
tpla
ce; R
evie
w o
n K
UR
(Kre
dit U
saha
Rak
yat);
D
epos
it In
sura
nce
Com
pany
(L
PS);
Impr
ovin
g ac
cess
to
Fina
ncia
l Ser
vice
s in
Indo
nesi
a Em
pow
erin
g Fe
mal
e M
igra
nt W
orke
rs;
supp
ort t
o es
tabl
ish
OJK
; Fi
scal
Pol
icy
Off
ice
on
deve
lopi
ng a
cris
is
man
agem
ent p
roto
col ;
Sa
ving
and
Loa
n
Coo
pera
tives
; SM
E ac
cess
to
Isla
mic
Fin
ance
; C
apac
ity
build
ing
of S
ecre
taria
t of
Fina
ncia
l Sys
tem
Sta
bilit
y Fo
rum
.IF
C in
par
tner
ship
with
Ban
k In
done
sia
is c
ondu
ctin
g a
wom
en-o
wne
d SM
E m
arke
t st
udy
to in
vest
igat
e th
e en
ablin
g en
viro
nmen
t, su
pply
an
d de
man
d fa
ctor
s im
pact
ing
wom
en-o
wne
d SM
Es a
cces
s to
fina
nce.
107
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Infr
astr
uctu
re
Incr
ease
the
leve
l and
ef
ficie
ncy
of p
ublic
and
pr
ivat
e in
vest
men
ts in
in
fras
truct
ure
to m
eet
need
s and
stre
ngth
en
com
petit
iven
ess.
Lack
of i
nves
tmen
t in
infr
astru
ctur
e, w
hich
has
not
ke
pt p
ace
with
eco
nom
ic
grow
th; i
nves
tmen
t in
infr
astru
ctur
e fe
ll fr
om a
bout
6%
of G
DP
in 1
997
to 2
% in
20
00, b
ut re
cove
red
to a
bout
4%
of G
DP
by 2
011
Indo
nesi
a’s i
nfra
stru
ctur
e de
liver
y re
quire
men
ts a
re
mas
sive
, and
bey
ond
wha
t ca
n be
supp
orte
d th
roug
h pu
blic
inve
stm
ent a
lone
1. I
ncre
ased
effe
ctiv
e km
of
natio
nal r
oads
mai
ntai
ned
and
deve
lope
d.
Base
line:
1500
km
mai
ntai
ned
thro
ugh
bette
rmen
t wor
ks a
nd 3
000
km d
evel
oped
(200
5)
Targ
et:I
ncre
ase
by 2
5% /y
ear o
ver
2011
-201
5 pe
riod.
2. R
educ
ed p
ower
infr
astru
ctur
e bo
ttlen
ecks
to m
eet d
eman
d an
d in
crea
se a
cces
s
Targ
et: R
educ
e po
wer
supp
ly
inte
rrup
tion
time
per c
usto
mer
from
5h
/yea
r to
2h/y
ear (
2012
-201
5).
3. I
ncre
ased
priv
ate
inve
stm
ent i
n in
fras
truct
ure
thro
ugh
the
PPP
fram
ewor
k
Part
ially
Ach
ieve
d.C
umul
ativ
e M
aint
enan
ce
Ach
ieve
men
t 201
1-20
14: 4
,792
km
(44%
of t
arge
t), o
f whi
ch
3% c
ontri
bute
d by
WB
G;
Cum
ulat
ive
Roa
d D
evel
opm
ent
Ach
ieve
men
t 201
1-20
14:
12,2
70 k
m (5
7% o
f tar
get),
of
whi
ch 1
% c
ontri
bute
d by
W
BG
; Dat
a fo
r 201
5 no
t yet
av
aila
ble
Not
Ach
ieve
d.5.
76
hour
/cus
tom
er
Part
ially
Ach
ieve
d.Ex
pect
ed
to b
e on
trac
k on
ce V
iabi
lity
Gap
Fun
ding
(VG
F) a
ppro
ved
for L
ampu
ng o
r Um
bula
n w
ater
su
pply
Fina
ncin
g: In
vest
men
t; In
fras
truct
ure
Gua
rant
ee
Fund
and
Pow
er
Tran
smis
sion
II d
eliv
ered
; In
vest
men
ts b
y IF
C in
re
new
able
/cle
an p
ower
, wat
er
and
sani
tatio
n, p
orts
, shi
ppin
g an
d lo
gist
ics,
tele
com
, oil
and
gas.
IFC
supp
orte
d D
harm
a A
saha
n –
1 w
ith U
S$28
2.5
billi
on o
f equ
ity, l
oans
and
sy
ndic
atio
ns.
IFC
als
o pr
ovid
ed u
p to
US$
2 m
illio
n of
pro
ject
dev
elop
men
t ca
pita
l to
Asi
a G
reen
V
entu
res,
an u
nder
deve
lope
d w
ind
war
m in
Sul
awes
i. IF
C
has r
aise
d $2
50 m
sy
ndic
atio
n fo
r Ind
ones
ia
Infr
astru
ctur
e Fi
nanc
e (I
IF).
Kno
wle
dge:
Ass
essm
ent o
f R
oad
Con
stru
ctio
n In
dust
ry;
Roa
ds a
nd R
ailw
ays P
ER;
Dev
elop
men
t of t
he
Fram
ewor
k an
d Po
licie
s for
In
fras
truct
ure
ESW
; Adv
isor
y se
rvic
e on
ene
rgy
serv
ice
and
subs
idy;
Gas
Dev
elop
men
t M
aste
r Pla
n; L
ampu
ng W
ater
D
istri
butio
n PP
P R
evie
w;
Tech
nica
l Rev
iew
and
Su
ppor
t for
Jaka
rta F
lood
M
gt S
yste
m; V
iabi
lity
Gap
Fi
nanc
ing;
Low
-inco
me
Hou
sing
Pol
icy
and
Fina
nce;
108
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Geo
ther
mal
Pow
er S
uppo
rt Pr
ogra
m; I
FC A
dvis
ory
serv
ices
for s
truct
urin
g an
d bi
ddin
g Pu
blic
Priv
ate
Partn
ersh
ip p
roje
cts.
Loc
al G
over
nmen
t
Stre
ngth
en lo
cal
gove
rnm
ent i
nstit
utio
ns
to im
prov
e ac
coun
tabi
lity
and
incr
ease
the
leve
l and
im
pact
of p
ublic
sp
endi
ng o
n se
rvic
e de
liver
y an
d su
ppor
t m
etro
polit
an a
reas
and
m
ediu
m-s
ized
citi
es to
im
prov
e in
fras
truct
ure
Insu
ffic
ient
coo
rdin
atio
n an
d le
ader
ship
of t
he
dece
ntra
lizat
ion
agen
da a
t the
ce
ntra
l lev
el; a
lim
ited
and
uncl
ear r
ole
for t
he p
rovi
nces
A fi
scal
dec
entra
lizat
ion
fram
ewor
k th
at d
oes n
ot
prov
ide
appr
opria
te
ince
ntiv
es fo
r inc
reas
ed a
nd
high
er q
ualit
y sp
endi
ng
Wea
k ca
paci
ty o
f loc
al
gove
rnm
ents
(LG
) to
man
age
asse
ts a
nd se
rvic
e de
liver
y
An
inad
equa
te fr
amew
ork
for
and
insu
ffic
ient
fina
ncin
g of
m
ulti-
year
larg
e sc
ale
infr
astru
ctur
e pr
ogra
ms
Lack
of c
oord
inat
ion
in
plan
ning
, man
agem
ent a
nd
inve
stm
ent a
t the
m
etro
polit
an a
nd re
gion
al in
la
rger
urb
an a
gglo
mer
atio
ns
1. I
mpr
oved
fidu
ciar
y, so
cial
and
en
viro
nmen
tal m
anag
emen
t as
wel
l as
tech
nica
l per
form
ance
of L
Gs i
n th
e de
liver
y of
bas
ic se
rvic
es
finan
ced
usin
g D
AK
tran
sfer
s [th
roug
h ex
pand
ing
PEA
CH
to
addi
tiona
l pro
vinc
es]
2.
Impr
oved
cap
acity
of r
esea
rch
inst
itutio
ns, m
edia
and
CSO
s to
asse
ss a
nd m
onito
r sub
-nat
iona
l PF
M (P
EAC
H):
enha
nced
cap
acity
of
loca
l ins
titut
ions
to a
naly
ze a
nd
mon
itor p
ublic
exp
endi
ture
and
PFM
an
d to
dem
and
bette
r loc
al
gove
rnm
ent p
erfo
rman
ce in
thes
e ar
eas [
thro
ugh
PEA
CH
initi
ativ
e]
Part
ially
Ach
ieve
d. P
EAC
H
prog
ram
was
not
con
tinue
d, a
nd
a ne
w e
ngag
emen
t on
loca
l se
rvic
e de
liver
y is
cur
rent
ly
bein
g fin
aliz
ed
Mos
tly A
chie
ved.
PEA
CH
pr
ogra
m c
ompl
eted
in A
ug
2014
with
all
deliv
erab
les
incl
udin
g 6
prov
inci
al u
pdat
e PE
Rs d
eliv
ered
Fina
ncin
g:Lo
cal
Gov
ernm
ent a
nd
Dec
entra
lizat
ion
Proj
ect
(DA
K) I
&A
F; U
rban
Sec
tor
Dev
elop
men
t and
Ref
orm
Pr
ojec
t (U
SDR
P)
Kno
wle
dge:
Rep
ort o
n U
rban
A
gglo
mer
atio
ns;
PEA
CH
PE
Rs;
PEA
CH
PFM
Te
chni
cal A
ssis
tanc
ean
d C
apac
ity B
uild
ing
activ
ities
; Su
law
esi D
evel
opm
ent
Dia
gnos
tic R
epor
t; Su
bnat
iona
l Wor
ksho
ps o
n G
ende
r res
pons
ive
Bud
getin
g an
d Pl
anni
ng
Adv
isor
y: IF
C A
dvis
ory
serv
ices
for S
ub-N
atio
nal
Doi
ng B
usin
ess r
efor
ms a
nd
PPP
stru
ctur
ing
for l
ocal
go
vern
men
ts.
109
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Mac
roec
onom
ic a
nd
Fisc
al M
anag
emen
t
Stre
ngth
en c
entra
l go
vern
men
t cap
acity
for
impl
emen
ting
cont
inge
ncy
finan
cing
, cr
isis
man
agem
ent a
nd
qual
ity e
vide
nce-
base
d m
acro
and
fisc
al p
olic
y
Indo
nesi
a’s f
isca
l fin
anci
ng
posi
tion
rem
ains
vul
nera
ble
to c
hang
es in
inve
stor
se
ntim
ent.
Des
pite
Indo
nesi
a’s s
trong
re
cent
eco
nom
ic
perf
orm
ance
, sig
nific
ant
chal
leng
es in
fisc
al a
nd
mac
ro p
olic
y re
mai
n in
term
s of
the
allo
catio
n of
spen
ding
(w
ith su
bsid
ies a
ccou
ntin
g fo
r al
mos
t one
qua
rter o
f cen
tral
gove
rnm
ent s
pend
ing
in th
e pr
opos
ed 2
013
Bud
get)
and
its e
ffic
ienc
y an
d ov
er re
cent
ye
ars t
here
has
als
o be
en
fisca
l pre
ssur
es fr
om
wea
keni
ng re
venu
e gr
owth
.
1. E
nhan
ced
Gov
ernm
ent a
bilit
y to
m
eet i
ts fi
nanc
ing
need
s and
m
aint
ain
criti
cal p
ublic
exp
endi
ture
s, as
mea
sure
d by
con
tinue
d ac
cess
to
mar
kets
, and
leve
l of m
aint
enan
ce
and
capi
tal e
xpen
ditu
res.
2. B
udge
t allo
catio
ns in
form
ed b
y m
onito
ring
and
eval
uatio
n. In
crea
se
in th
e nu
mbe
r of l
ine
min
istri
es a
nd
agen
cies
repo
rting
thro
ugh
BR
ISA
(th
e m
onito
ring
and
eval
uatio
n sy
stem
) fro
m a
bas
elin
e of
zer
o in
FY
11.
Ach
ieve
d.Ta
rget
s met
for 2
012
and
2013
and
on
track
in 2
014
with
net
secu
ritie
s iss
uanc
e re
ache
d 10
4% o
f the
targ
et
base
d on
the
revi
sed
budg
et,
with
gro
ss se
curit
ies i
ssua
nce
at
100%
Mos
tly A
chie
ved.
For
ecas
ting
tool
s in
plac
e w
ith e
xpan
ded
disc
ussi
on o
f med
ium
-term
m
acro
fisc
al se
nsiti
vity
ana
lysi
s an
d pr
ojec
tions
in th
e an
nual
bu
dget
fina
ncia
l not
e. H
owev
er,
expe
nditu
re a
lloca
tions
from
th
e M
TFF
of th
e pr
evio
us y
ear
are
not u
sed
as th
e st
artin
g po
int f
or d
iscu
ssio
ns o
n th
e bu
dget
in th
e fo
llow
ing
year
. O
ptio
ns to
stre
ngth
en th
e in
stitu
tiona
l arr
ange
men
t with
in
the
MoF
for p
repa
ring
the
MTF
F ar
e be
ing
exam
ined
in
the
cont
ext o
f ong
oing
trai
ning
en
gage
men
t.
BR
ISA
is a
web
-bas
ed
Bur
eauc
ratic
Ref
orm
(BR
) M
onito
ring
and
Eval
uatio
n Sy
stem
whi
ch w
as la
unch
ed
natio
nally
in 2
012.
The
ad
min
istra
tor o
f BR
ISA
is th
e N
atio
nal B
R M
anag
emen
t Uni
t ca
lled
UPR
BN
und
er th
e M
inis
try o
f Adm
inis
trativ
e an
dB
urea
ucra
cy R
efor
m
Fina
ncin
g: IN
STA
NSI
I &
II
deliv
ered
. Pro
gram
for
Econ
omic
Res
ilien
ce,
Inve
stm
ent a
nd S
ocia
l A
ssis
tanc
e in
Indo
nesi
a (P
ERIS
AI)
ong
oing
Kno
wle
dge:
Dev
elop
men
t Po
licy
Rev
iew
; Sup
port
for
Enha
nced
Mac
ro a
nd F
isca
l Po
licy
Ana
lysi
s ins
titut
iona
l st
reng
then
ing
prog
ram
; A
naly
tical
and
Cap
acity
Su
ppor
t to
Impr
ove
Expe
nditu
re a
nd R
even
ue
Polic
y in
clud
ing
publ
ic
expe
nditu
re re
view
ana
lysi
s;
reso
urce
reve
nues
pol
icy
and
adm
inis
tratio
n te
chni
cal
assi
stan
ce; I
ndon
esia
Ec
onom
ic Q
uarte
rly re
port
110
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
(Men
PAN
-RB
). U
ntil
mid
of
2013
, the
re h
ad b
een
mor
e th
an
70 li
ne m
inis
tries
and
age
ncie
s th
at h
ave
repo
rted
thei
r BR
pr
ogre
ss to
the
Men
PAN
-RB
. H
owev
er, w
ith c
hang
e of
le
ader
ship
, thi
s M&
E sy
stem
ha
s bee
n m
ade
inac
tive
sinc
e en
d of
201
3.
Stre
ngth
enin
g th
e Pu
blic
Sec
tor
Stre
ngth
en c
entra
l go
vern
men
t ins
titut
ions
an
d sy
stem
s to
enha
nce
publ
ic fi
nanc
ial
man
agem
ent a
nd
gove
rnan
ce to
incr
ease
th
e de
velo
pmen
t im
pact
of
prio
rity
budg
et
expe
nditu
res.
The
budg
et sy
stem
is in
put-
base
d, e
xces
sive
ly d
etai
led
and
infle
xibl
e an
d st
rictly
an
nual
, ham
perin
g im
plem
enta
tion
of m
ulti-
year
pr
ojec
ts.
Con
trols
in b
udge
t exe
cutio
n pr
oces
ses a
re g
ener
ally
in
adeq
uate
and
cou
ld
jeop
ardi
ze g
ains
from
im
prov
emen
ts m
ade
in o
ther
ar
eas o
f PFM
.
The
publ
ic p
rocu
rem
ent
syst
em is
def
icie
nt a
s is t
he
capa
city
of p
rocu
rem
ent
prac
titio
ners
; col
lusi
on a
nd
corr
upt p
ract
ices
in th
e bi
ddin
g pr
oces
s con
tinue
to
exis
t, ca
usin
g le
akag
es a
nd
loss
es in
the
syst
em.
Incr
easi
ng d
eman
d fo
r im
prov
ed q
ualit
y, ti
mel
ines
s an
d re
spon
sive
ness
of d
ata
1. S
treng
then
ed m
ulti-
year
pe
rspe
ctiv
e in
fisc
al p
lann
ing,
ex
pend
iture
pol
icy
and
budg
etin
g B
asel
ine:
PEF
A P
I-12
ratin
g C
+ in
20
11
Targ
et:
impr
ove
PEFA
PI-
12 ra
ting
to a
t lea
st a
B+
by 2
015
2. N
umbe
r of l
ine
min
istri
es
rece
ivin
g un
qual
ified
opi
nion
s for
th
eir a
nnua
l fin
anci
al st
atem
ents
:
Base
line:
63%
of M
inis
tries
and
A
genc
ies i
n Fi
nanc
ial S
tate
men
t.
Targ
et:
85%
of M
inis
tries
and
A
genc
ies i
n Fi
nanc
ial S
tate
men
t for
FY
2013
3. I
mpl
emen
t new
Fin
anci
al
Man
agem
ent I
nfor
mat
ion
Syst
em i
n al
l 177
Tre
asur
y Lo
cal O
ffic
es
Not
Ach
ieve
d.N
o ne
w P
EFA
as
sess
men
t con
duct
ed. W
hile
th
ere
was
som
e pr
ogre
ss o
n im
prov
ing
the
trans
pare
ncy
of
the
MTE
F pr
oces
s, it
is
unlik
ely
to b
e su
ffic
ient
to
impr
ove
the
C+
ratin
g fo
r PI-
12
Part
ially
Ach
ieve
d. 7
6%
Ach
ieve
d.Sy
stem
dev
elop
men
t co
mpl
eted
in 2
013;
SPA
N
rolle
d ou
t to
all 2
22 tr
easu
ry
offic
es w
ith 1
00%
of a
ll fin
anci
al tr
ansa
ctio
ns
Fina
ncin
g: IN
STA
NSI
D
PLs;
Gov
ernm
ent F
inan
cial
M
anag
emen
t and
Rev
enue
A
dmin
istra
tion
Proj
ect
(GFM
RA
P); S
chol
arsh
ips
Prog
ram
for S
treng
then
ing
Ref
orm
ing
Inst
itutio
ns
Proj
ect (
SPIR
IT);
ST
ATC
AP-
CER
DA
S
Kno
wle
dge:
Pub
lic F
inan
cial
M
anag
emen
t (PF
M) M
ulti
Don
or T
rust
Fun
d (P
FM
MD
TF);
111
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
avai
labi
lity
are
ham
pere
d by
po
or IC
T in
fras
truct
ure
and
data
man
agem
ent a
nd
inef
ficie
nt b
usin
ess p
roce
sses
.
cond
ucte
d th
roug
h th
esy
stem
as
of F
eb 2
015
Pro-
Jobs
–E
nhan
cing
Ski
lls a
nd T
echn
olog
y, a
nd Im
prov
ing
Soci
al P
rote
ctio
n
Edu
catio
nPr
ovid
e go
od q
ualit
y ed
ucat
ion
to a
ll In
done
sian
s and
to
prod
uce
a sm
art a
nd
com
petit
ive
wor
kfor
ce.
Enha
nce
rese
arch
and
de
velo
pmen
t, sc
ienc
e an
d te
chno
logy
Des
pite
sign
ifica
nt in
crea
ses
in e
duca
tion
spen
ding
the
qual
ity o
f edu
catio
n re
mai
ns
low
.
Low
par
ticip
atio
n ra
tes i
n ea
rly c
hild
hood
edu
catio
n an
d de
velo
pmen
t pro
gram
sLo
w te
ache
r com
pete
ncy
Inef
ficie
nt a
lloca
tion
of
publ
ic e
duca
tion
spen
ding
Wea
k m
anag
emen
t of
educ
atio
n at
the
dist
rict a
nd
scho
ol le
vel u
nder
inco
mpl
ete
dece
ntra
lizat
ion
fram
ewor
kW
eak
links
bet
wee
n ed
ucat
ion
sect
or a
nd la
bor
mar
ket i
nclu
ding
skill
m
ism
atch
es a
nd w
eak
firm
ba
sed
train
ing
Indo
nesi
a ra
nks p
oorly
on
com
petit
iven
ess a
nd
know
ledg
e ec
onom
y in
dice
sR
esea
rch
and
Dev
elop
men
t (R
&D
) out
puts
rem
ain
low
1. I
mpr
oved
edu
catio
n qu
ality
and
pe
rfor
man
ce o
f tea
cher
s; In
crea
sed
num
ber o
f bas
ic e
duca
tion
teac
hers
m
eets
aca
dem
ic q
ualif
icat
ion
man
date
d by
the
Teac
her L
aw
Base
line
(201
1): 3
5% o
f tea
cher
s in
prim
ary
and
80%
of j
unio
r sec
onda
ry
scho
ols h
old
S1 d
egre
e or
mor
e.
Targ
et:8
2% o
f prim
ary
and
98%
ju
nior
seco
ndar
y sc
hool
teac
hers
ho
ld S
1 de
gree
or m
ore.
(Tar
get
revi
sed
base
d on
upd
ated
bas
elin
e da
ta)
2. I
mpr
oved
pub
lic R
&D
hum
an
reso
urce
cap
acity
.
Targ
et:
Mas
ters
or P
hD d
egre
e ho
lder
s in
publ
ic re
sear
ch in
stitu
tes
(LPN
K)
incr
ease
s fro
m 1
5% to
17%
LP
NK
inst
itutio
nal a
sses
smen
ts
com
plet
ed a
nd re
form
mile
ston
es se
t
Part
ially
Ach
ieve
d.D
ata
from
the
2014
NU
PTK
da
taba
se: 6
4% o
f SD
and
88%
of
SM
P te
ache
rs w
ith a
n S1
de
gree
Ach
ieve
d.A
s per
the
RIS
ET
Proj
ect
Ann
ual W
ork
Plan
20
15, t
he n
umbe
r of s
taff
with
S2
and
S3
degr
ees i
s abo
ut
3,10
0 ou
t of 1
4,49
8 to
tal s
taff,
or
abo
ut 2
1%
Fina
ncin
g: B
OS-
KIT
A II
(c
lose
d on
Dec
31,
201
2),
Early
Chi
ldho
od E
duca
tion
and
Dev
elop
men
t (EC
ED);
Bet
ter E
duca
tion
thro
ugh
Ref
orm
ed M
anag
emen
t and
U
nive
rsal
Tea
cher
Upg
radi
ng
(BER
MU
TU);
Indo
nesi
a H
ighe
r Edu
catio
n fo
r R
elev
ance
and
Eff
icie
ncy
(IM
HER
E-cl
osed
on
Dec
31,
20
12);
Res
earc
h an
d In
nova
tion
in S
cien
ce a
nd
Tech
nolo
gy P
roje
ct (R
ISET
)
Kno
wle
dge:
The
Rol
e of
Po
litic
s and
Evi
denc
ed B
ased
Po
licy
Mak
ing:
The
Cas
e of
Te
ache
r Ref
orm
in In
done
sia;
Ed
ucat
ion
PER
; Ind
ones
ian
Scho
ol G
rant
s Pro
gram
R
evie
w; E
xpan
ding
O
ppor
tuni
ties a
nd B
ld
Com
pete
ncie
s for
You
ng;
Indo
nesi
a Li
fe L
ong
Lear
ning
; Loc
al G
over
nanc
e
112
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
com
pare
d to
oth
er c
ount
ries
in th
e re
gion
Cap
acity
Ass
essm
ent S
urve
y;
Surv
ey V
ideo
Stu
dy; I
mpa
ct
eval
uatio
n of
teac
her
certi
ficat
ion;
Impa
ct
eval
uatio
n of
EC
ED p
roje
ct
with
a fo
cus o
n sc
hool
re
adin
ess;
Pro
ject
ions
and
as
sess
men
t of s
kills
dem
and;
H
ighe
r edu
catio
n st
udie
s on
fund
ing
mod
aliti
es a
nd la
bor
mar
ket l
inka
ges,
Infr
astru
ctur
e as
sess
men
t, A
ccre
dita
tion
and
qual
ity
assu
ranc
e an
d eq
uity
and
ac
cess
to h
ighe
r edu
catio
n;
TA o
n sk
ills d
evel
opm
ent
fund
; Sup
port
for 2
015
five
year
dev
elop
men
t; St
reng
then
ing
Publ
ic
Fina
ncin
g of
Indo
nesi
a's
Kno
wle
dge
Sect
or; I
CT
in
Educ
atio
n; B
uild
ing
capa
city
aw
aren
ess o
n sa
fe sc
hool
s.
Adv
isor
y: IF
C a
dvis
ory
serv
ices
to tr
ain
fam
ers f
or
impr
ovin
g th
eir y
ield
s and
to
finan
cial
sect
or e
mpl
oyee
s for
la
unch
ing
new
fina
ncia
l pr
oduc
ts
Soci
al In
sura
nce
Prov
ide
univ
ersa
l co
vera
ge o
f soc
ial
insu
ranc
e to
pro
tect
w
orke
rs a
nd th
e po
or
Onl
y 50
% o
f the
pop
ulat
ion
curr
ently
has
hea
lth in
sura
nce
and
only
abo
ut 1
2% o
f the
po
pula
tion
has a
ny k
ind
of
pens
ion,
old
age
savi
ngs,
1. C
onve
rsio
n of
Jam
sost
ek to
a
not-f
or-p
rofit
inst
itutio
n th
at c
an
adm
inis
ter t
he S
JSN
pen
sion
and
old
ag
e sa
ving
s pro
gram
s
Ach
ieve
d. R
oadm
ap h
as b
een
com
plet
ed a
nd la
unch
ed.
Gov
ernm
ent r
egul
atio
ns
rega
rdin
g th
e ro
adm
ap h
as b
een
issu
ed
Kno
wle
dge:
Adv
isor
y se
rvic
es to
Bap
pena
s, D
JSN
(n
atio
nal s
ocia
l sec
urity
co
unci
l), th
e M
inis
try o
f
113
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
from
adv
erse
life
eve
nts
or e
xter
nal s
hock
s th
roug
h th
e fiv
e na
tiona
l soc
ial
insu
ranc
e (S
I) p
rogr
ams
outli
ned
in th
e SJ
SN
(nat
iona
l soc
ial s
ecur
ity
syst
em) L
aw a
nd th
e B
PJS
(nat
iona
l soc
ial
secu
rity
adm
inis
trato
rs)
Law
, cov
erin
g al
l fo
rmal
and
info
rmal
se
ctor
wor
kers
.
deat
h be
nefit
or w
ork
acci
dent
insu
ranc
e.
Com
plex
ity o
f ass
urin
g fis
cal
sust
aina
bilit
y in
clud
ing
prop
er in
vest
men
t of p
rogr
am
asse
ts.
Nee
d to
qui
ckly
tran
sfor
m th
e le
gal s
truct
ure
and
busi
ness
pr
oces
ses o
f the
ad
min
istra
tors
.
Com
plex
ity o
f exp
andi
ng
mem
bers
hip
and
colle
ctin
g co
ntrib
utio
ns fr
om th
e fo
rmal
an
d in
form
al se
ctor
s and
pr
oper
ly tr
acki
ng th
ose
cont
ribut
ions
ove
r tim
e.
Lack
of g
over
nmen
t cap
acity
an
d ex
perie
nce
with
m
anag
ing
the
risks
of S
I pr
ogra
ms.
2. E
xpan
d m
embe
rshi
p an
d im
prov
e co
ntrib
utio
n co
llect
ion
from
the
form
al a
nd in
form
al se
ctor
s.
Part
ially
Ach
ieve
d. T
he S
JSN
H
ealth
pro
gram
beg
an o
n Ja
nuar
y 1,
201
4 an
d is
not
ex
pect
ed to
ach
ieve
uni
vers
al
cove
rage
unt
il th
e en
d of
201
9.
Mos
t eff
orts
wer
e fo
cuse
d on
in
stitu
tiona
l tra
nsfo
rmat
ion
and
prog
ram
con
solid
atio
n.
Nev
erth
eles
s, so
me
prog
ress
w
as m
ade
in e
nrol
ling
info
rmal
se
ctor
wor
kers
and
exp
andi
ng
the
num
ber o
f wor
kers
pai
d fo
r by
the
gove
rnm
ent.
Mem
bers
hip
expa
nsio
n w
ill
rece
ive
mor
e at
tent
ion
in C
Y15
an
d C
Y16
. The
BPJ
S Em
ploy
men
t pro
gram
s do
not
begi
n un
til Ju
ly 1
, 201
5, a
nd
ther
efor
e m
embe
rshi
p ex
pans
ion
is n
ot y
et a
n is
sue.
A
ccor
ding
to th
e go
vern
men
t ro
adm
ap, m
embe
rshi
p ex
pans
ion
will
take
pla
ce m
ore
slow
ly, b
y 20
19.
Labo
r, th
e M
inis
try o
fFi
nanc
e an
d ot
hers
Pe
nsio
n an
d ol
d ag
e sa
ving
s ro
adm
apD
raft
Whi
te P
aper
on
SJSN
pe
nsio
n co
mpl
eted
. O
ther
s in
prog
ress
)B
ackg
roun
d pa
pers
on
retir
emen
t age
, cov
erag
e of
th
e po
or in
em
ploy
men
t pr
ogra
ms,
and
use
of su
rplu
s in
adm
inis
trato
rs a
nd so
cial
in
sura
nce
fund
s com
plet
ed)
Mod
elin
g co
mpl
eted
. In
put
files
nee
ded
for t
estin
g al
tern
ativ
e as
sum
ptio
ns a
nd
desi
gns i
n pl
ace
Dev
elop
men
t of P
olic
y N
otes
on
var
ious
asp
ects
of S
JSN
(f
ive
Polic
y N
otes
com
plet
ed
and
publ
ishe
d so
far)
114
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Pro-
Poor
–Pr
omot
ing
Com
mun
ities
, Pro
tect
ing
the
Vuln
erab
le a
nd Im
prov
ing
Hea
lth O
utco
mes
Pove
rty
Tar
getin
g
Red
uce
abso
lute
po
verty
and
impr
ove
inco
me
dist
ribut
ion
thro
ugh
soci
al
prot
ectio
n th
at is
bas
ed
on th
e fa
mily
, co
mm
unity
em
pow
erm
ent a
nd
expa
nsio
n of
eco
nom
icop
portu
nitie
s of t
he lo
w
inco
me
popu
latio
n.
From
12%
pov
erty
in
2012
, Gov
ernm
ent i
s ta
rget
ing
for s
ingl
e di
gits
by
2014
.
Aro
und
110
mill
ion
peop
le
still
live
und
er U
S$2
a da
y (B
ank
estim
ate)
; lar
ge
num
ber o
f urb
an a
nd ru
ral
poor
due
to la
ck o
f inc
ome
and
inad
equa
te p
rodu
ctiv
e em
ploy
men
t opp
ortu
nitie
s;
lack
of q
ualit
y se
rvic
e de
liver
y to
poo
r peo
ple;
ac
cess
to e
arly
chi
ldho
od
educ
atio
n re
mai
ns lo
w,
parti
cula
rly fo
r the
poo
r; w
ide
regi
onal
dis
parit
ies
(par
ticul
arly
, eas
tern
pr
ovin
ces)
; poo
r are
vu
lner
able
to sh
ocks
such
as
food
pric
e in
crea
ses,
natu
ral
disa
ster
s
1.
Nat
iona
l sho
ck m
onito
ring
syst
em d
evel
oped
and
ope
ratio
nal.
2. P
over
ty p
rogr
ams m
anag
emen
t un
its u
sing
the
natio
nal r
egis
try o
f po
or a
nd v
ulne
rabl
e ho
useh
olds
to
iden
tify
bene
ficia
ries.
Targ
et: 4
pro
gram
s by
2015
Ach
ieve
d.A
nat
iona
l cris
is
mon
itorin
g sy
stem
was
co
mpl
eted
and
ado
pted
by
the
Nat
iona
l Tea
m fo
r the
A
ccel
erat
ion
of P
over
ty
Red
uctio
n (T
NP2
K),
hous
ed in
th
e O
ffice
of t
he V
ice
Pres
iden
t. Th
e da
shbo
ard
was
up
load
ed to
thei
r int
erna
l w
ebsi
te d
urin
g ea
rly 2
014
and
is n
ow in
use
.
Ach
ieve
d. 4
pro
gram
s use
d th
e re
gist
ry to
iden
tify
bene
ficia
ries:
1) T
he U
DB
was
use
d in
201
3 fo
r ide
ntifi
catio
n of
the
15.5
m
illio
n ho
useh
olds
that
re
ceiv
ed a
soci
al p
rote
ctio
n ca
rd (K
artu
Per
lindu
ngan
So
sial
), w
hich
ent
itled
them
to
rece
ive
a te
mpo
rary
un
cond
ition
al c
ash
trans
fer
(Ban
tuan
Lan
gsun
g Se
men
tara
M
asya
raka
t, B
LSM
)(ii
) add
ition
al a
lloca
tions
of
rice
dist
ribut
ed th
roug
h th
e R
ice
for t
he P
oor (
Bera
s M
iski
n, R
aski
n) p
rogr
am(ii
i) fin
anci
al a
ssis
tanc
e fo
r po
or st
uden
ts (B
antu
an u
ntuk
Si
swa
Mis
kin,
BSM
)
Fina
ncin
g: I
NST
AN
SI D
PL;
ECED
STA
TCA
P-C
ERD
AS,
an
d IF
C in
vest
men
ts in
to
mic
rofin
ance
inst
itutio
ns
Kno
wle
dge:
AA
A
supp
ortin
g H
ouse
hold
shoc
k m
onito
ring
and
resp
onse
pr
ojec
t; in
tegr
atio
n of
po
verty
redu
ctio
n pr
ogra
ms;
so
cial
ass
ista
nce
refo
rm;
PNPM
Rur
al E
cono
mic
Im
pact
Sim
ulat
ion;
Vill
age
Infr
astru
ctur
e C
ensu
s;
Inci
denc
e of
Ben
efits
of
Hou
seho
lds;
IFC
adv
isor
y se
rvic
es fo
r ben
efitt
ing
smal
l fa
rmer
s and
out
-gro
wer
s.
115
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
3. I
ncre
ased
par
ticip
atio
n in
EC
ED
serv
ices
par
ticul
arly
for t
he p
oor
Base
line
(201
0): G
ross
enr
ollm
ent
rate
of 3
3 %
of 4
-6 y
ear o
lds e
nrol
led
in E
CED
Targ
et: 7
2%
(iv) t
he d
atab
ase
was
als
o us
ed
to e
xtra
ct b
enef
icia
ry li
sts f
or
the
expa
nsio
n of
Pro
gram
K
elua
rga
Har
apan
(PK
H),
the
cond
ition
al c
ash
trans
fer
prog
ram
.
Mos
tly A
chie
ved.
Bas
ed o
n D
ata
Poko
k PA
UD
201
4: G
ER
for 3
-6 y
ear-
olds
is 6
5.16
%
(sin
ce th
e fig
ure
of 6
5.16
% is
fo
r 3-6
rath
er th
an 4
-6 a
nd w
ith
3 ye
ar-o
lds l
ess l
ikel
y to
be
in
ECED
pro
gram
s, th
e 72
%
targ
et fo
r 4-6
yea
r-ol
ds m
ay
have
act
ually
bee
n m
et)
Com
mun
ity
Dev
elop
men
t
Impr
oved
loca
l-lev
el
(sub
-dis
tric
ts a
nd
villa
ges)
gove
rnan
ce,
qual
ity o
f ser
vice
de
liver
y an
d so
cio-
econ
omic
con
ditio
ns in
ru
ral a
reas
thro
ugh
wid
er im
plem
enta
tion
of p
over
ty re
duct
ion
and
com
mun
ity
empo
wer
men
t pro
gram
s an
d th
e pr
ovis
ion
of
inve
stm
ent r
esou
rces
to
supp
ort p
ropo
sals
de
velo
ped
by
com
mun
ities
, usi
ng a
Com
mun
ity D
evel
opm
ent
thro
ugh
the
PNPM
pro
gram
ha
s bee
n ex
pand
ed to
reac
h ov
er 6
0,00
0 vi
llage
s. Im
pact
ev
alua
tion
show
s it t
o be
an
effe
ctiv
e pr
ogra
m, b
ut it
ne
eds t
o co
nsol
idat
e pr
ogra
m
man
agem
ent,
enha
nce
parti
cipa
tion,
par
ticul
arly
by
wom
en a
nd m
argi
naliz
ed
grou
ps.
1. 2
.5m
com
mun
ity m
embe
rs
parti
cipa
te d
irect
ly in
mee
tings
; 80%
be
nefic
iarie
s fee
l tha
t pro
ject
in
vest
men
ts re
flect
ed th
eir n
eeds
; >5
0% o
f poo
rest
com
mun
ities
in
volv
ed in
pla
nnin
g an
d de
cisi
on-
mak
ing;
35%
of v
illag
es p
rovi
ded
feed
back
on
heal
th a
nd e
duca
tion
2. W
omen
act
ivel
y in
volv
ed in
de
cisi
on-m
akin
g
Targ
et: 5
0% o
f wom
en in
pl
anni
ng/d
ecis
ion-
mak
ing
mee
tings
; 30
% o
f wom
en in
com
mun
ity
over
sigh
t tea
ms
Mos
tly A
chie
ved.
No
data
on
bene
ficia
ries’
opi
nion
s on
whe
ther
pro
ject
inve
stm
ents
re
flect
ed th
eir n
eeds
; 50%
of
poor
est c
omm
uniti
es in
volv
ed
in p
lann
ing
and
deci
sion
-m
akin
g m
eetin
gs; 3
3% o
f vi
llage
s pro
vide
d fe
edba
ck o
n he
alth
and
edu
catio
n se
rvic
es
Mos
tly A
chie
ved.
45%
of
wom
en in
pla
nnin
g/de
cisi
on-
mak
ing
mee
tings
; 32%
of
wom
en in
com
mun
ity o
vers
ight
te
ams
Fina
ncin
g:PN
PM R
ural
IV;
PNPM
Rur
al 2
012-
2015
; PN
PM G
ener
asi;;
PSF
M
DTF
; JSD
F; K
DP
Sula
wes
i; Ju
stic
e fo
r the
Po
or; C
PDA
; IFC
inve
stm
ent
in M
BK
is e
xpec
ted
to a
ssis
t th
is m
icro
-fin
ance
inst
itutio
n to
reac
h on
e m
illio
n lo
w-
inco
me
wom
en e
ntre
pren
eurs
at
the
base
of t
he p
yram
id b
y 20
17. S
imila
rly, I
FC’s
en
gage
men
t with
BTP
N is
ex
pect
ed to
als
o le
ad to
si
gnifi
cant
reac
h of
MSM
E cl
ient
s.
Kno
wle
dge:
PN
PM R
ural
Ec
onom
ic Im
pact
Sim
ulat
ion;
116
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
parti
cipa
tory
pla
nnin
g pr
oces
s.
Enha
nce
acce
ss to
he
alth
and
edu
catio
n se
rvic
es a
mon
g th
e po
or
3. I
mpr
oved
com
mun
ity a
cces
s to
and
utili
zatio
n of
hea
lth a
nd
educ
atio
n se
rvic
es in
the
targ
eted
ar
eas.
Targ
ets:
>80
% o
f pre
gnan
t wom
en
rece
ivin
g 4
pren
atal
car
e vi
sit;
80%
of
chi
ldre
n un
der 5
wei
ghed
m
onth
ly; 5
0% o
f pre
gnan
t wom
en
atte
ndin
g nu
tritio
n co
unse
ling
sess
ion;
50%
of c
areg
iver
s of
child
ren
unde
r 2 a
ttend
ing
nutri
tion
coun
selin
g se
ssio
n; 7
0% ju
nior
se
cond
ary
enro
llmen
t rat
e
Mos
tly A
chie
ved.
91%
of
preg
nant
wom
en re
ceiv
ing
4 pr
enat
al c
are
visi
t; 75
% o
f ch
ildre
n un
der 5
wei
ghed
m
onth
ly; n
o da
ta o
n pr
egna
nt
wom
en a
ttend
ing
nutri
tion
coun
selin
g se
ssio
n; n
o da
ta o
n ca
regi
vers
of c
hild
ren
unde
r 2
atte
ndin
g nu
tritio
n co
unse
ling
sess
ion;
90%
juni
or se
cond
ary
enro
llmen
t rat
e
Vill
age
Infr
astru
ctur
e C
ensu
s;
Inci
denc
e of
Ben
efits
of
Hou
seho
lds;
Loc
al L
evel
In
stitu
tions
III;
Com
mun
ity
Man
agem
ent o
f Dev
elop
men
t Po
rtfol
io; R
evol
ving
Loa
n Fu
nd S
tudy
; Gov
erna
nce
Rev
iew
; Int
egra
ted
MIS
for
PNPM
; TA
to P
okja
Pe
ngen
dali,
Bap
pena
s, K
PDT;
TA
to A
ceh
Loca
l G
over
nmen
t; Pa
pua
anal
ytic
al w
ork;
PN
PM R
ural
Se
ntin
el V
illag
e St
udy
Food
Sec
urity
and
R
ural
Dev
elop
men
t
Incr
ease
food
secu
rity
and
cont
inue
the
revi
taliz
atio
n of
ag
ricul
ture
to e
nhan
ce
self-relian
ce in
food
, in
crea
se th
e co
mpe
titiv
enes
s of
agric
ultu
ral p
rodu
cts,
incr
ease
the
inco
me
leve
l of f
arm
ers,
and
cons
erve
env
ironm
ent
and
natu
ral r
esou
rces
Red
uce
depe
nden
ce o
n im
ports
for s
tapl
e fo
ods
whi
le d
iver
sify
ing
food
co
nsum
ptio
n
The
polic
y of
rice
self-
suff
icie
ncy
limits
the
amou
nt
of re
sour
ces a
vaila
ble
for
farm
div
ersi
ficat
ion
and
agric
ultu
ral d
evel
opm
ent
syst
ems.
Lim
ited
acce
ss to
tech
nolo
gy
and
mar
ketin
g se
rvic
es d
ue to
w
eak
capa
city
of l
ocal
and
na
tiona
l gov
ernm
ent R
&D
an
d ex
tens
ion
serv
ices
pr
even
ts th
e em
erge
nce
of
viab
le a
grib
usin
ess
ente
rpris
es a
nd fa
rm
dive
rsifi
catio
n.
Com
mod
ities
are
exp
orte
d w
ith li
mite
ddo
mes
tic v
alue
ad
ditio
n an
d is
sues
of q
ualit
y,
mar
ket p
ositi
onin
g, a
nd
1. M
oder
nize
d cl
ient
and
mar
ket
orie
nted
mar
ketin
g an
d ex
tens
ion
serv
ices
acc
essi
ble
by sm
allh
olde
rs.
Base
line:
less
than
10%
of f
arm
ers’
ac
cess
tech
nolo
gy a
nd m
arke
t in
form
atio
n th
roug
h IC
T.
2. I
ncre
ased
val
ue a
dditi
on in
sm
allh
olde
r-ba
sed
agric
ultu
ral e
xpor
tva
lue
chai
ns (e
.g. c
offe
e, c
ocoa
, and
te
a) c
oupl
ed w
ith h
ighe
r pro
duct
ivity
an
d m
ore
effic
ient
mar
ketin
g sy
stem
s.
Base
line:
Reg
ulat
ory
and
polic
y fr
amew
ork
of v
alue
cha
ins o
f sm
allh
olde
r-ba
sed
expo
rtabl
e co
mm
oditi
es is
wea
k w
ith lo
w
capa
city
of s
uppo
rt sy
stem
s.
Ach
ieve
d.10
% o
f IA
AR
D’s
re
sear
ch a
nd m
anag
emen
t sta
ff
unde
rtook
adv
ance
d tra
inin
g in
ac
cred
ited
fore
ign
inst
itutio
ns
thru
the
SMA
RTD
pro
gram
Ach
ieve
d. M
oT la
unch
ed
Act
ion
Plan
s for
enh
anci
ng th
e su
stai
nabi
lity
and
com
petit
iven
ess o
f at l
east
one
sm
all-h
olde
r bas
ed b
ever
age
crop
(e.g
. cof
fee,
coc
oa, o
r tea
)
Fina
ncin
g:Fa
rmer
Em
pow
erm
ent t
hrou
gh
Agr
icul
tura
l Tec
hnol
ogy
and
Info
rmat
ion
(FEA
TI) t
o en
hanc
e ac
cess
to te
chno
logy
an
d m
arke
t inf
orm
atio
n fo
r fa
rmer
s; S
usta
inab
le
Man
agem
ent o
f Agr
icul
tura
l R
esea
rch
and
Tech
nolo
gy
Dis
sem
inat
ion
Proj
ect
(SM
AR
T-D
) to
enha
nce
R&
D a
nd te
chno
logy
di
ssem
inat
ion
in A
gric
ultu
re;
Wat
er R
esou
rces
and
Ir
rigat
ion
Sect
or M
gmt
(WIS
MP2
) to
enha
nce
wat
er
secu
rity
and
wat
er se
rvic
e de
liver
y in
14
prov
ince
s and
10
1 di
stric
ts;
117
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Impr
ove
inco
me
of
smal
lhol
ders
and
ex
pand
opp
ortu
nitie
s fo
r non
farm
inco
me
activ
ities
.
com
petit
iven
ess i
n th
e va
lue
chai
ns p
ersi
st.
Mec
hani
sms t
o pr
omot
e im
prov
ed se
rvic
e pr
ovis
ion
and
plan
ning
in ir
rigat
ion
and
wat
er re
sour
ces m
anag
emen
t no
t yet
ope
ratio
nal.
3. Im
prov
ed w
ater
reso
urce
and
irr
igat
ion
infr
astru
ctur
e an
d se
rvic
e de
liver
y an
d pa
rtici
pato
ryan
d pl
anni
ng a
nd c
oord
inat
ion
mec
hani
sms e
stab
lishe
d.
Targ
et:W
ater
secu
rity
impr
oved
in
at le
ast 5
0 irr
igat
ion
Dis
trict
s.
Part
ially
Ach
ieve
d.Th
e G
over
nmen
t iss
ues a
serv
ice
orie
nted
irrig
atio
n po
licy
and
esta
blis
hes a
con
cept
for
mod
erni
zatio
n of
irrig
atio
n m
anag
emen
t of l
arge
scal
e na
tiona
l irr
igat
ion
syst
ems.
Dam
Ope
ratio
nal
Impr
ovem
ent a
nd S
afet
y Pr
ojec
t (D
OIS
P); t
o en
hanc
e sa
fety
and
wat
er se
curit
y in
ar
eas c
over
ed b
y 34
dam
s and
re
serv
oirs
;
IFC
inve
stm
ents
in
agrib
usin
ess c
ompa
nies
with
a
view
to e
nhan
ce fo
od
secu
rity
or to
pro
vide
su
stai
nabl
e liv
elih
oods
to
poor
farm
ers.
IFC
’s
inve
stm
ent i
n th
e W
ings
G
roup
and
May
ora
Inda
h su
ppor
t the
pro
duct
ion
of n
ew
food
and
nut
ritio
nal p
rodu
cts.
Kno
wle
dge:
TA o
n Fo
od
Secu
rity
to M
oA;
TA to
the
MoP
W o
n irr
igat
ion
man
agem
ent
mod
erni
zatio
n [r
epor
t su
bmitt
ed N
ov 2
013]
and
po
licy
deve
lopm
ent;
Enha
ncin
g Su
stai
nabi
lity
of
Ind’
s Maj
or A
gric
ultu
ral;
Adv
isor
y:IF
C a
dvis
ory
serv
ices
wor
k in
sust
aina
ble
palm
oil
to im
prov
e su
stai
nabl
e liv
elih
oods
for
outg
row
ers
Hea
lth O
utco
mes
H
igh
out-o
f-po
cket
spen
ding
fo
r hea
lth.
1. Q
ualit
y as
sura
nce
polic
ies
gove
rnin
g th
e ed
ucat
ion
of h
ealth
pr
ofes
sion
als w
ith e
stab
lishm
ent o
f
Not
Ach
ieve
d.C
ompr
ehen
sive
an
alys
is o
f sup
ply
side
av
aila
bilit
y an
d re
adin
ess
Fina
ncin
g: O
ngoi
ng a
nd
deliv
ered
: H
ealth
Pr
ofes
sion
als E
duca
tion
118
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Impr
oved
pop
ulat
ion
heal
th o
utco
mes
, in
clud
ing
impr
ovem
ents
in
life
exp
ecta
ncy
and
redu
ctio
ns in
mat
erna
l m
orta
lity
and
mal
nutri
tion
to m
eet
MD
G ta
rget
s by
2015
Acc
ess t
o sa
fe w
ater
an
d sa
nita
tion
is a
maj
or
fact
or in
the
heal
th a
nd
over
all w
elfa
re o
f In
done
sian
s and
ex
pand
ing
cove
rage
is a
pr
iorit
y
Low
and
var
iabl
e le
vels
, di
strib
utio
n an
d su
pply
of
heal
th se
rvic
es, e
spec
ially
in
poor
and
rura
l are
as.
Ris
ing
HIV
/AID
S ep
idem
ic,
espe
cial
ly in
sele
ct p
rovi
nces
Slow
redu
ctio
n in
mat
erna
l m
orta
lity,
des
pite
rela
tivel
y hi
gh le
vels
of s
kille
d bi
rth
atte
ndan
ce a
nd in
stitu
tiona
l de
liver
ies
Chr
onic
mal
nutri
tion
and
stun
ting
rate
s
Acc
ess t
o sa
fe w
ater
has
st
agna
ted
sinc
e 20
01 a
t les
s th
an h
alf t
he p
opul
atio
n, in
pa
rticu
lar u
rban
cov
erag
e fr
om 6
0 pe
rcen
t to
abou
t 50
perc
ent b
y 20
09
Acc
ess t
o sa
nita
ry fa
cilit
ies
sign
ifica
ntly
low
er th
an o
ther
co
mpa
rabl
e co
untri
es in
the
regi
on
inde
pend
ent N
atio
nal A
ccre
dita
tion
Age
ncy,
and
Nat
iona
l Age
ncy
for
Com
pete
ncy;
acc
redi
tatio
n of
7
heal
th p
rofe
ssio
nal s
choo
ls.
2. 7
mill
ion
peop
le p
rovi
ded
with
pi
ped
wat
er su
pply
and
3.4
mill
ion
peop
le p
rovi
ded
with
impr
oved
sa
nita
tion
unde
r PA
MSI
MA
S
com
plet
ed; s
tudy
of h
uman
re
sour
ces f
or h
ealth
(HR
H)
polic
ies c
ompl
eted
; ana
lysi
s of
Jam
pers
al/J
amke
smas
pol
icie
s to
ach
ieve
UH
C o
f mat
erna
l he
alth
car
e co
mpl
eted
; sec
ond
Inte
grat
ed B
iolo
gica
l and
B
ehav
iora
l Sur
vey
(IB
BS)
in
Papu
a pr
ovin
ces c
ompl
eted
; ec
onom
ic a
naly
sis o
f H
IV/A
IDS
prog
ram
s co
mpl
eted
; ana
lysi
s of
mul
tisec
tora
l det
erm
inan
ts o
f do
uble
bur
den
of m
alnu
tritio
n (D
BM
) com
plet
ed.
Ach
ieve
d. 7
.8 m
illio
n pr
ovid
ed
with
pip
ed w
ater
supp
ly a
nd
7.69
mill
ion
with
impr
oved
sa
nita
tion
unde
r the
PA
MSI
MA
S pr
ogra
m
Qua
lity;
PA
MSI
MA
S A
F;
Urb
an W
ater
Sup
ply
&
Sani
tatio
n TF
; GPO
BA
Ja
karta
and
Sur
abay
a ;
WA
SAP;
IFC
arr
ange
d fin
anci
ng o
f U
S$85
mill
ion
for M
oya
Wat
er, a
priv
ate
sect
or
oper
ator
pro
vidi
ng c
lean
w
ater
to T
anga
reng
and
oth
er
publ
ic w
ater
util
ities
, whi
chw
as su
bseq
uent
ly c
ance
lled
Kno
wle
dge:
Pol
icy
dial
ogue
on
uni
vers
al h
ealth
cov
erag
e;
supp
ly si
de a
vaila
bilit
y an
d re
adin
ess a
sses
smen
t; H
RH
st
udy;
HIV
/AID
S IB
BS
surv
ey; H
IV/A
IDS
econ
omic
an
alys
is; D
BM
ana
lysi
s.To
tal S
anita
tion
and
Sani
tatio
n M
arke
ting,
Urb
an
Was
tew
ater
Man
agem
ent;
Sura
baya
wat
er p
olic
y ad
vice
; W
ASA
P; W
ater
and
Sa
nita
tion
Fina
ncin
g Pr
ogra
m; A
sses
smen
t for
W
ater
Fin
anci
ng F
acili
ty;
Lam
pung
wat
er p
roje
ct T
As.
IFC
adv
isor
y se
rvic
es fo
r st
ruct
urin
g w
ater
sect
or P
PP
proj
ects
119
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
Pro-
Gre
en –
Ens
urin
g Su
stai
nabl
e D
evel
opm
ent a
nd Im
prov
ing
Dis
aste
r Res
ilien
ce
Env
iron
men
t, N
atur
al
Res
ourc
es a
nd
Clim
ate
Cha
nge
Con
serv
atio
n an
d ut
iliza
tion
of th
e na
tura
l en
viro
nmen
t tha
t su
ppor
ts su
stai
nabl
e ec
onom
ic g
row
th a
nd
incr
ease
d w
elfa
re o
f the
pe
ople
GH
G e
mis
sion
re
duct
ion
of 2
6% b
y 20
20 a
ccom
pani
ed b
y th
e co
ntro
l and
m
anag
emen
t of d
isas
ter
risks
, in
orde
r to
prep
are
for t
he e
xpec
ted
impa
cts
of c
limat
e ch
ange
.
Prom
ote
rene
wab
le
ener
gy so
urce
s as p
art
of a
sust
aina
ble
deve
lopm
ent s
trate
gy
Def
ores
tatio
n, p
eat b
urni
ng,
habi
tat l
oss;
glo
bally
si
gnifi
cant
em
issi
ons:
for
ests
an
d la
nd u
se c
hang
e.
Frag
men
ted,
ove
rlapp
ing
and
dece
ntra
lized
land
use
au
thor
ity h
ampe
rs a
bilit
y to
m
anag
e fo
rest
and
pea
t lan
ds.
Clim
ate
chan
ge:
thre
at to
de
velo
pmen
t, es
peci
ally
the
poor
; vul
nera
bilit
y in
ag
ricul
ture
, wat
er
man
agem
ent,
heal
th,
prep
ared
ness
, res
ilien
ce.
1. F
und
for R
EDD
est
ablis
hed
with
le
gal,
tech
nica
l and
man
ager
ial
capa
city
to su
ppor
t and
fina
nce
Indo
nesi
a’s N
atio
nal R
EDD
+ St
rate
gy
2. P
hase
III o
f CO
REM
AP
prov
idin
g ex
pand
ed su
ppor
t for
cor
al
and
mar
ine
prot
ectio
n.
3. G
over
nmen
t of J
akar
ta la
unch
ing
gree
n bu
ildin
gs c
ode
for c
omm
erci
al
build
ings
in th
e ci
ty.
Part
ially
Ach
ieve
d.R
EDD
+ Su
ppor
t Fac
ility
MD
TF
esta
blis
hed
at th
e W
B to
su
ppor
t GoI
to se
t up
a na
tiona
l TF
for R
EDD
+ im
plem
enta
tion
Ach
ieve
d. P
hase
III o
f C
OR
EMA
P de
liver
ed a
nd
unde
r im
plem
enta
tion
Ach
ieve
d. G
over
nmen
t of
Jaka
rta la
unch
ed G
reen
B
uild
ing
regu
latio
n nu
mbe
r 38,
ef
fect
ive
2013
Fina
ncin
g:R
EDD
+ Su
ppor
t Fac
ility
M
DTF
; Gre
en G
row
th
Dev
elop
men
t Sup
port
Prog
ram
; FC
PF R
eadi
ness
G
rant
;AM
AN
–G
rant
with
JS
DF
Supp
ort;
AA
A o
n M
appi
ng a
nd C
usto
mar
y La
nd ri
ghts
; FIP
For
est
Man
agem
ent D
evel
opm
ent
Proj
ect;
FMU
supp
ort s
yste
m
MD
TF (c
o-fu
ndin
g FI
P fu
nd);
DG
M fo
r Ind
igen
ous
Peop
les a
nd L
ocal
C
omm
uniti
es (u
nder
pr
epar
atio
n w
ith F
IP fu
nd);
Day
ak d
evel
opm
ent P
roje
ct –
Gra
nt (u
nder
pre
para
tion
with
JS
DF
Supp
ort);
Par
tner
ship
fo
r Mar
ket R
eadi
ness
(PR
M)
gran
t was
und
er p
repa
ratio
n;In
do-W
AV
ES P
rogr
am w
as
unde
r pre
para
tion;
HC
FC P
hase
Out
Man
agem
ent P
lan;
CO
REM
AP
CTI
Pha
se 3
;C
CR
ES (G
EF);
Solid
Was
te M
anag
emen
tIm
prov
emen
t Pro
ject
for
Reg
iona
l and
Met
ropo
litan
C
ities
was
und
er p
repa
ratio
n (m
ight
not
mak
e it
into
the
blue
boo
k];
120
Gre
at re
new
able
ene
rgy
pote
ntia
l rel
ativ
ely
unta
pped
du
e to
nee
d fo
r im
prov
ed
pric
ing
and
inve
stm
ent
clim
ate
ince
ntiv
es.
Pow
er se
ctor
is fa
stes
t gr
owin
g so
urce
of e
mis
sion
s, m
ainl
y fr
om c
oal b
ased
po
wer
gen
erat
ion.
Lack
of c
oord
inat
ion
of
polic
ies a
nd in
cent
ives
for
envi
ronm
enta
lim
prov
emen
t an
d cl
imat
e ch
ange
m
itiga
tion;
wea
k ec
onom
ic
ince
ntiv
es; p
olic
y di
stor
tions
.
Lim
ited
ince
ntiv
es fo
r firm
s to
dev
elop
fore
st p
lant
atio
n an
d cl
imat
e ch
ange
miti
gatio
n pr
ogra
m o
n de
grad
ed
gras
slan
ds a
nd to
app
ly b
est
prac
tices
bec
ause
of h
igh
cost
s and
risk
s, as
wel
l as
lack
of k
now
ledg
e an
d ex
perie
nce
in b
lend
ing
fore
st-
base
d cl
imat
e ch
ange
m
itiga
tion
and
com
mer
cial
fo
rest
ry in
vest
men
t
Lim
ited
acce
ss to
fina
nce
for
priv
ate
sect
or fo
rest
ry
ente
rpris
e, p
artic
ular
ly a
long
su
pply
cha
ins b
etw
een
upst
ream
and
dow
nstre
am
activ
ities
.
Land
fill G
as R
ecov
ery
proj
ect;
IFC
com
plet
ed th
e fo
ur-y
ear
Indo
nesi
a Su
stai
nabl
e Fo
rest
ry P
roje
ct, w
ith
indu
stria
l for
est p
lant
atio
n fir
ms a
nd th
e In
done
sia
Woo
d Pr
oduc
ers A
ssoc
iatio
n.IF
C su
ppor
ted
for C
iput
ra
Dev
elop
men
ts, f
or se
lect
G
reen
bui
ldin
gs.
IFC
supp
orte
d C
iput
ra
Res
iden
ce ,
in d
evel
opin
g
Gre
en B
uild
ings
pro
ject
s.Pr
ivat
e se
ctor
FIP
fina
ncin
g fo
r for
estry
ent
erpr
ise
Kno
wle
dge:
RED
D+
Adv
isor
y Se
rvic
es o
n FR
EDD
I (A
AA
and
TA
);R
EDD
+ Su
ppor
t Fac
ility
to
supp
ort N
atio
nal R
EDD
+ im
plem
enta
tion;
Polic
y di
alog
ue a
nd A
AA
on
Gre
en G
row
th D
evel
opm
ent
Supp
ort t
o B
APP
ENA
S on
ke
y po
licy
reco
mm
enda
tions
fo
r the
nex
t RPJ
MN
; AA
A o
n Fo
rest
and
Non
-For
est L
and;
Fore
st C
arbo
n Pa
rtner
ship
Fa
cilit
y (A
AA
and
TA
);W
AV
ES P
rogr
am to
supp
ort
Gre
en D
evel
opm
ent A
gend
a w
as u
nder
pre
para
tion;
AA
A o
n B
enef
it Sh
arin
g; T
A
and
Inpu
ts to
ong
oing
Pa
rtner
ship
for M
arke
t R
eadi
ness
(PM
R),
AA
A o
n m
appi
ng, a
nd c
usto
mar
yla
nd
Rig
hts
121
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
IFC
adv
isor
y se
rvic
es in
are
as
of c
lean
ene
rgy
deve
lopm
ent,
sust
aina
ble
ener
gy fi
nanc
e,
gree
n ba
nkin
g, su
stai
nabl
e fo
rest
ry/ a
grib
usin
ess,
gree
n bu
ildin
g de
velo
pmen
t etc
.
Dis
aste
r R
isk
Man
agem
ent
Enha
nce
capa
bilit
ies t
o im
prov
e di
sast
er ri
skpr
epar
edne
ss,
miti
gatio
n m
easu
res,
and
post
-dis
aste
r re
cove
ry a
nd
reco
nstru
ctio
n re
spon
sive
ness
to
stre
ngth
en su
stai
nabi
lity
Dup
licat
ion
of e
ffor
ts d
ue to
th
e pl
etho
ra o
f dev
elop
men
t pa
rtner
s in
Dis
aste
r Ris
k R
educ
tion
(DR
R);
new
D
isas
ter M
anag
emen
t A
genc
y st
ruct
ure
may
not
ha
ve th
e ca
paci
ty to
m
ains
tream
DR
R
1. C
reat
e ev
iden
ce-b
ased
exa
mpl
es
of p
ract
ical
and
con
cret
e di
sast
er a
nd
clim
ate
risk
redu
ctio
n an
d ad
apta
tion
mea
sure
s (e.
g., s
afer
scho
ols,
resi
lient
vill
ages
and
urb
an w
ards
w
ith D
RR
pla
n an
d in
vest
men
t pr
ogra
m) t
hat c
an b
e sc
aled
up
and
repl
icat
ed n
atio
nally
2. C
omm
unity
-bas
ed se
ttlem
ent
reco
nstru
ctio
n in
corp
orat
ed a
s a
Gov
ernm
ent p
rogr
am
Ach
ieve
d. M
ains
tream
ing
adap
tatio
n an
d re
silie
nce
issu
es
into
PN
PM in
urb
an a
reas
in 4
hi
gh ri
sk p
rovi
nces
, and
in sa
fe
scho
ol re
habi
litat
ion
usin
g G
over
nmen
t’s D
AK
Mos
tly A
chie
ved.
GoI
led
disa
ster
fund
(IM
DFF
-DR
) as
new
mec
hani
sm to
in
stitu
tiona
lize
dono
r sup
port
with
Dis
aste
r Man
agem
ent
Fund
(DM
F) e
stab
lishe
d an
d op
erat
iona
l with
Wor
ld B
ank
as
trust
ee, p
rovi
ding
gra
nt c
o-fin
ance
to g
over
nmen
t rec
over
y pr
ogra
m
Fina
ncin
g:O
ngoi
ng Z
ero
Con
tinge
nt a
nd D
isas
ter
Miti
gatio
n C
ompo
nent
s in
WIN
RIP
and
PN
PM U
rban
II
I; PN
PM R
ural
III A
F. C
o-fin
anci
ng o
f GFD
RR
in
PNPM
-Urb
an II
I for
co
mm
unity
bas
ed p
reve
ntio
nan
d pr
epar
edne
ss in
vest
men
t,.
Add
ition
al F
inan
cing
from
D
isas
ter M
anag
emen
t Fun
d (D
MF)
to C
SRR
P fo
r hou
sing
an
d se
ttlem
ent r
ehab
ilita
tion
in M
t. M
erap
i
Kno
wle
dge:
GFD
RR
N
atio
nal r
isk
asse
ssm
ent
stud
y/m
appi
ng a
s the
bas
is
for G
oI’s
Nat
iona
l Dis
aste
r M
anag
emen
t Pla
n 20
09-2
014
and
Nat
iona
l Act
ion
Plan
for
DR
R 2
009-
2014
. Ind
ones
ia
Dis
aste
r Ris
k Fi
nanc
ing
Stud
y an
d po
licy
dial
ogue
, C
apac
ity B
uild
ing
mod
ule
on
PDN
A a
nd P
ost D
isas
ter
Rec
over
y; IF
C a
dvis
ory
serv
ices
to P
T A
sura
nsi
Mai
park
Indo
nesi
a to
dev
elop
a
new
inde
x-ba
sed
insu
ranc
e
122
Indo
nesi
a’s L
onge
r-te
rm
Obj
ectiv
esIs
sues
and
Obs
tacl
esD
evel
opm
ent R
esul
ts T
o W
hich
the
WB
G W
ill C
ontr
ibut
eA
ctua
l Ach
ieve
men
ts a
t end
of
CPS
Per
iod
WB
G M
odes
of E
ngag
emen
t
prod
uct c
alle
d Ea
rthqu
ake
Inde
x In
sura
nce.
Dev
elop
men
t and
util
izat
ion
of In
aSA
FE ri
sk a
naly
sis
geos
patia
l too
l inc
ludi
ng
met
hodo
logy
for h
azar
d m
appi
ng. P
ublic
atio
n of
Saf
e Sc
hool
Tec
hnic
al G
uide
lines
.
123
Sub-annex 3:1a: Achievements for the Pro-Growth Engagement
1. Under this engagement area, the WBG objective was to support development results to promote prosperity and growth across multiple sectors: strengthened macro stability and crisis management, improved the quality of public spending and financial management, maintained financial sector stability while enhancing access, improved the regulatory environment for competition and innovation, supported private sector companies in increasing competitiveness, improved connectivity and logistics performance, and increased the quantity and efficiency of investment in infrastructure while leveraging private sector participation. Overall performance under the pro-growth engagements was uneven resulting in an objective rating to be moderately satisfactory (see performance ratings against pro-growth indicators in the table below).
2. In support of macro stability and crisis management, the IBRD provided knowledge services to support crisis preparedness and led in late FY11 a package of contingency fiscal financing of approximately US$5 billion that included US$2 billion Program for Economic Resilience, Investment and Social Assistance (PERISAI) DPL-DDO, around US$3 billion from the Government of Japan (JPY120 billion), AUD1 billion from the Government of Australia, and US$500 million from the Asian Development Bank. Monitoring and coordination mechanisms facilitated a flexible response, including crisis-related provisions in the budget that allowed revision for expenditures and financing sources under a streamlined parliamentary approval process. The PERISAI DPL-DDO has been extended a number of times with the current closing date in December 2015.
3. IBRD engagement on the quality of spending and institutional capacity included development policy lending and knowledge services. There was a significant breakthrough on the fiscal side, with dialogue and knowledge services supporting politically difficult and long delayed measures to reduce fuel subsidies. Following the one-off 34 percent average gasoline and diesel price increase in November 2014, a new fuel subsidy scheme came into effect on January 1, 2015 under a Presidential Regulation (Perpres No. 191/2014). This adjustment is expected to help improve the quality of spending by switching resources to needed investment in infrastructure and social protection, among other areas. Still, shortfalls in executing the capital budget highlight continuing challenges in implementing public infrastructure, which is plagued by poor coordination, slow procurement processes, and delays in regulating new land acquisition legislation.
4. Bank support through the DPL series of Institutional, Tax Administration, Social and Investment (INSTANSI), supported by AAA financed by the EU, the Netherlands, and Switzerland, concluded in December 2014. This policy based lending helped strengthen financial management and budget processes. GoI has introduced medium-term budget forecasting tools and M&E processes to inform future budget allocations and regulations for accrual based accounting policies and chart of accounts. The roll out of the integrated budget and treasury management information system (SPAN) to 222 treasury offices was completed and the system operational since February 2015. AAA and TA provided by the Bank through Swiss trust fund financing introduce support to a Government Debt and Risk Management (DGRM) advisory program for risk modeling, contingent liabilities and asset liability management. Bank technical assistance also successfully supported a government/data portal and regulation on e-government/e-services.
124
5. Other institution building interventions during the CPS were somewhat less successful including for improved tax administration (Project for Indonesia Tax Administration Reform/PINTAR) which had to be cancelled and data sharing and coordination (Statistical Capacity Building Change and Reform for the Development of Statistics Project/STATCAP-CERDAS) which continues to struggle despite a restructuring.
6. The subnational PFM program, Public Expenditure Analysis and Capacity Harmonization (PEACH), closed in August 2014 after delivering six provincial updated PERs and the Sulawesi Development Diagnostics. IBRD lending supported the Local Government and Decentralization Project (DAK) program which is successfully providing incentives to local governments for better quality local infrastructure delivery. This is likely to become one of the Government flagship programs aimed at the one of the core problems of infrastructure delivery with additional financing provided in 2014 to further scale up the program and further extension expected in the next CPF period. This will be augmented by a better targeted set of subnational service delivery support using innovative tools first used by the Bank in LCR (RAAP and MIGESTION). IFC worked sub-nationally through subnational Doing Business reforms and PPP structuring for local governments.
7. Financial Sector - The WBG delivered a variety of lending and knowledge services to support financial sector stability and crisis preparedness, diversification, financial inclusion and support for economic development in collaboration with Australia, Canada, Finland, the Netherlands, Switzerland, and the USA. Box 1 describes the joint IBRD/IFC program to help transform the financial sector.
Box 1: The World Bank-IFC Joint Approach in the Financial Sector
Drawing upon the full range of WBG products for the financial sector.
For the World Bank, this included extensive use of AAA products such as sector diagnostics, policy notes, policy advice, and discrete technical assistance, investment lending and development policy lending in support of the GoI’s medium-term reform agenda.
For IFC, this included US$525 million Investment Services committed in FY15 for expanding access to finance for micro and agri-finance, micro, small and medium enterprises & sustainable finance. In FY15, IFC FIG AS supported BTPN in developing and extending non-financial services to SMEs. IFC pilot to extend housing micro-loans was a partnership with Holcim Indonesia (a leading cement sector company) and Bina Artha Ventura (a micro-finance institution). IFC further supported Danamon Bank and Bank Muamalat to develop and extend innovative agri-financial services to SMEs in rural areas. IFC had also supported the establishment of a few new private equity fund managers (e.g. Falcon House Partners) that would expand the availability of growth capital to the medium-sized companies in Indonesia.
F&M GP (IFC) supported development and expansion of innovative, inclusive and sustainable financial services to low income households and MSMEs in the areas of digital financial inclusion, responsible microfinance, financial infrastructure (credit reporting and secured transactions), capital markets development for infrastructure finance, and insurance (earthquake index insurance project).
125
Strengthening synergies.
With a focus on active collaboration, as well as coordination, the IBRD took the lead on legislative and regulatory reforms and institutional development, while the IFC focused on building private sector capacity. The financial sector policy dialogue was led respectively by IBRD with the relevant regulators and GoI while IFC facilitated feedback from private sector stakeholders on the policy making process.
In selected areas, IBRD and IFC joined their resources to provide advice and support under single engagements with financial regulators. The most recent example was the advisory services engagement with Bank Indonesia where both IFC and IBRD experts were deployed in 2012 to produce a joint report with findings and recommendations related to “branchless banking”/agent banking reforms. These recommendations were taken into account by BI in its guiding principles for the five bank pilots in “branchless banking”/agent banking in 2013. In 2014, IBRD and IFC continued to join their resources in supporting the BI and OJK to issue the respective regulations. IBRD and IFC continued to collaborate closely in all areas of the financial sector development under the joint IBRD-IFC Finance and Markets Global Practice Group.
Expected Impact
Efforts were expected to have a transformational influence on the financial sector and supported the GoI in building a sound, stable and inclusive financial sector. The expected long term impact are: (i) Increased resilience and stability of the financial sector; and (ii) A deeper financial sector supporting an inclusive and sustainable growth. (Specific targets for the CPS period are found in the Results Matrix).
8. Development milestones were mostly met and reflected a stable banking sector that has continued to increase lending in a sound manner, with credit growth of 21 percent in 2013. The reformed fuel pricing system allowed lower economic fuel prices to be transmitted to consumers at 34 percent average increase in gasoline and diesel prices in November 2014. Inflation pressures were subsequently contained with credit growth decelerated to 11.4 percent year-on-year in December 2014, almost halving its 2013 high. Non-bank financial institutions kept pace and represented around 20 percent of financial assets.
9. Indonesia’s new Financial Services Authority (OJK) became fully operational and the Financial System Stability Coordination Forum (FKSSK) started to function. With the support of IBRD and Toronto Centre, the FKSSK conducted a financial crisis simulation, which identified gaps in the GoI crisis management framework. The PERISAI DPL-DDO and the Financial Sector Reform and Modernization DPL (FIRM) supported this process with the latter completed in December 2013. IFC assisted OJK in launching a Corporate Governance Road Map, which detailed a series of planned regulatory changes expected to enhance corporate governance performance in capital markets. To promote greater access, IFC had committed almost US$637 million to five financial institutions targeting SME and micro-finance in the past three years. IFC supported pilots for a new financial instrument to provide micro-lending to small farmers, and partnering with a leading cement sector company and a micro-finance institution to extend micro-housing loans.
10. The WBG supported a greater role for the financial sector in economic development through the joint IBRD-IFC financed Indonesia Infrastructure Finance Facility (IIFF) for long term financing. In 2013, IIFF leveraged IDR2.5 trillion in commitments to a number of projects in the transportation, energy, and telecommunications. The WBG also assisted Bank Indonesia in facilitating a market study relating to proposed branchless banking regulations.
126
11. Competitiveness - The WBG engagement, in collaboration with Australia, Canada, Finland, the Netherlands, New Zealand, Switzerland, and the USA, focused on contributing to improving competiveness through better trade logistics and ease in Doing Business. IBRD support went beyond expectation of the Investors Relation Unit to include investment facilitation more broadly, some of which had shown positive impact. These were now part of a broader set of reforms included in a policy package announced in October 2013. This accelerated effort to improve the business environment, especially related to small- and medium-enterprises, consisted of 17 actions across eight Doing Business areas. IFC had been supporting the Jakarta Provincial Government in streamlining business start-up procedures and cutting the time from 29 days down to 3 days.
12. However, despite the reform measures outlined above, significant concern remains with regard to the investment climate. A series of measures resulted in increased regulatory uncertainty. The government finally issued the long-awaited revised Negative Investment List (DNI). The new regulation includes provisions to further open a few sectors to foreign investment (increases in foreign ownership limits) and to facilitate PPPs in some sectors (e.g. energy). At the same time, new restrictions to foreign investment are added in many sectors, including energy and mineral resources, trade/distribution and horticulture. In addition, a number of legislative and regulatory changes have added to uncertainty and could worsen the investment climate overall, depending on how they are regulated and implemented. A new industry law was issued that provides the Ministry of Industry with authority to potentially intervene in the market and even in individual firm’s decisions. Legislation in the mining sector designed to enhance local value-added has similarly resulted in uncertainty among investors.
13. Connectivity - The connectivity agenda had moved forward with WBG support through development policy lending (Connectivity DPL series) and knowledge services. A National Logistics Blueprint guided relevant agencies; logistics indicators for monitoring progress in policy reform was drafted; and an action plan identified 15 quick wins. Private sector participation in logistics and telecom was advancing. The GoI issued a National Port Masterplan; new ports in Makassar and Surabaya were being tendered to private investors; and a scheduling system would improve freight shipment. IFC financed one of the country’s leading telecom tower operators to expand their services to remote areas. IFC also provided equity capital to Blue Bird, the largest taxi company in Indonesia. Regulations governing railways were enhanced to attract the private sector and use of existing infrastructure. Furthermore, performance-based contracting was being promoted for the road sector.
14. ICT has benefited from knowledge services for improved management of radio spectrum to support mobile broadband rollout in underserved areas; introduction of unified/open licensing regime; open access to passive infrastructure to support more competitive fixed broadband market. IFC provided US$50 million loan funding for a telecom tower operator to assist in establishing telecom towers and connectivity across the country, including in frontier regions. However, a broadband project in eastern Indonesia was put on hold due to a corruption case with Ministry of Communications. Overall, broadband penetration rate reached the target of 30% in 2014.
127
15. Infrastructure – New projects in the infrastructure sector for IBRD in the CPS period included Power Transmission II and Infrastructure Guarantee Fund (IIGF). In energy,implementation of a large portfolio of ongoing projects continued throughout the CPS period in addition to the signing of the new Power Transmission II. Although overall the energy portfolio suffered from serious disbursement lags, particularly in the Upper Cisokan Pumped Storage, progress started to be seen in the Geothermal Clean Energy Investment Project where PGE has developed 170MW of new geothermal capacity. In addition several pieces of important technical and advisory work were delivered including a gas development master plan, an energy efficiency financing program and just in time policy advice on tariff structures and other regulatory reforms in the sector. This work is having a direct impact on energy sector policy and has laid the foundation for the Energy sector DPL series under the proposed future CPF.
16. During FY13-14, IFC invested close to US$400 million (including mobilization) in infrastructure projects including wind and hydro power, water, logistics, and telecommunication towers sectors. MIGA’s two guarantees were also in the energy and extractives sector.
17. In other areas of infrastructure, implementation continued in projects associated with irrigation, in dam improvement, roads and flood control (Water Resources and Irrigation Management (WISMP II), Dam Operational Improvement (DIOSP) and Western Indonesian Road Improvement Project (WINRIP), and flood control (Jakarta Urgent Flood Mitigation Project). While all suffered from implementation delays, important intermediate results were achieved. In the irrigation sector, the program supported the rehabilitation of 29 large dams and the improvement of more than 200,000 hectares in irrigated command area, improving water security and contributing to continued irrigation production. On flood management in Jakarta, initial progress was made to initiating complex dredging operations on floodways, canals and retention basins. In the case of roads, with the implementation delays of WINRIP, the results indicator for expected outcomes was reduced in the Results Matrix to a more feasible level at mid-term of this CPS period. The WINRIP program successfully supported 87 kilometers of road improvements, with contracts for a further 550 kilometers of road improvements under a bidding process or implementation at the close of the CPS period.
18. In addition to IBRD lending, a large body of AAA and TA, primarily financed by and with technical support from Government of Australia, provided assistance to the Government at the central and local levels on a number of critical infrastructure issues. In urban transport, the Bank supported the city of Surabaya to develop a feasibility study for an integrated transit-oriented development (TOD) concept plan as part of the Surabaya Mass Transit System (SMART) under development. Additionally, in the roads sector, the findings of the Road Sector Public Expenditure Review (2012) supported the Ministry of Public Works, Directorate General of Highways, to focus on critical weaknesses in the maintenance of national, provincial and district roads. On infrastructure finance, the Bank has supported the development of a detailed business plan and operational model for a Regional Infrastructure Development Fund (RIDF) that will be implemented through PT. SMI to support access to debt financing for local governments for economically viable infrastructure projects. Bank supported AAA during the CPS period helped Bappenas develop a Roadmap for Housing Policy (2015), which serves as the technical and policy foundation for the GoI National Affordable Housing Program.
128
19. IFC also faced challenges in the ability to provide financing for certain infrastructure projects. For example, the financing of toll roads could not go forward given the risk allocation, in connection with areas such as termination compensation, rendered the concession agreements non-bankable according to international standards. In the water sector, IFC successfully syndicated project financing for bulk water supply to the Tangerang utility company (PDAM) alongside Indonesia Infrastructure Finance (IIF) and PT Sarana Multi Infrastruktur - Persero (PT. SMI). However, the project was put on hold after local elections, when the newly elected mayor launched an investigation of the award of the service agreement. The sponsor decided to cancel the loan while the investigation was in progress.
20. PPPs: The IIGF was established to support the institutional framework for PPPs in infrastructure and complementary IFC advisory services provide support for structuring PPP projects in water and power sector projects. Supported by knowledge services, a Government Viability Gap Funding (VGF) mechanism also became operational. However, regulatory uncertainty and lack of coordination at the national level as described in main text of this CLR continue to impact negatively on PPPs and of the writing of this CLR, no PPP has yet succeeded in Indonesia. It is too soon to judge whether the WBG investment in the VGF will bear fruit.
129
Sum
mar
y of
Ach
ieve
men
ts u
nder
the
Pro-
Gro
wth
Pill
ar
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed1.
Con
nect
ivity
: Acc
eler
ate
grow
th a
nd e
nhan
ce e
quity
thro
ugh
dom
estic
con
nect
ivity
1.1)
Impr
oved
rank
ing
of
Indo
nesi
a’s L
ogis
tics
Perf
orm
ance
Inde
x
Base
line
(201
2):
Indo
nesi
a ra
nked
at
59
Indo
nesi
a’s 2
014
LPI r
anki
ng
has i
mpr
oved
to 5
3X
1.2)
Incr
ease
d ac
cess
for
broa
dban
d in
tern
et se
rvic
es fo
r po
pula
tion
Base
line:
5%
in
2011
Targ
et: 3
0% b
y 20
15
By
end
of C
Y20
14:
Bro
adba
nd: 3
4.5%
The
sect
or is
gro
win
g fa
st
and
a 37
% p
enet
ratio
n by
end
of
CY
2015
is e
xpec
ted
X
1.3)
Red
uced
cos
t and
tim
e to
ex
port
and
impo
rt, a
s ind
icat
ed
in th
e D
oing
Bus
ines
s Sur
vey
Base
line
(201
2):
Expo
rt: 1
7 da
ys,
US$
644
per
cont
aine
r; Im
port:
27
day
s, U
S$66
0 pe
r con
tain
er
Doi
ng B
usin
ess 2
015:
Ex
port:
17
days
, US$
572
per
cont
aine
r; Im
port:
26
days
, U
S$64
7 pe
r con
tain
er
X
2. C
ompe
titiv
enes
s: E
nhan
ce c
ompe
titiv
enes
s thr
ough
impr
oved
env
iron
men
t, in
clud
ing
open
, com
petit
ive
sust
aina
ble
and
incl
usiv
e m
arke
ts fo
r bus
ines
s to
expa
nd a
nd in
crea
se p
rodu
ctiv
ity2.
1) P
olic
y fr
amew
ork
adop
ted
to im
prov
e co
mpe
titiv
enes
s th
roug
h be
tter t
rade
logi
stic
s
Base
line:
Sco
re in
20
12Lo
gist
ics
Perf
orm
ance
In
dica
tors
(LPI
) for
lo
gist
ics q
ualit
y co
mpe
tenc
e of
2.8
5 fo
r bor
der
man
agem
ent o
f 2.5
3Ta
rget
: Im
prov
ed
2014
LPI
scor
e on
lo
gist
ics c
ompe
tenc
e of
3.0
0 an
d bo
rder
m
anag
emen
t of 2
.7;
Nat
iona
l Sin
gle
Win
dow
act
ing
as
the
sing
le re
fere
nce
for c
ross
-bor
der
trade
and
in
trodu
ctio
n of
2014
LPI
on
logi
stic
s co
mpe
tenc
e: 3
.21;
LPI
on
bord
er m
anag
emen
t: 2.
87;
INSW
task
forc
e an
d st
eerin
g co
mm
ittee
set u
p by
a
Pres
iden
tial R
egul
atio
n; S
SO
mec
hani
sm u
sed
by 6
ag
enci
es
X
130
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edsi
ngle
sign
-on
for a
ll pa
rtici
patin
g ag
enci
es2.
2) Im
prov
ed re
gula
tory
en
viro
nmen
t, in
tera
genc
y co
ordi
natio
n, a
nd c
onsu
ltativ
e pr
oces
s in
busi
ness
en
viro
nmen
t tha
t affe
ct
com
petit
iven
ess o
f Ind
ones
ia’s
pr
ivat
e se
ctor
, fac
ilita
te
inno
vatio
n an
d in
vest
men
t fa
cilit
atio
n an
d se
rvic
es
Base
line:
50
days
to
star
t a c
ompa
ny; 5
70
days
to e
nfor
ce
cont
ract
; wea
k co
nsul
tativ
e pr
oces
ses p
rior t
o is
suan
ce o
f re
gula
tions
; un
coor
dina
ted
inve
stm
ent p
olic
y;
wea
k in
vest
or
inqu
iry h
andl
ing
Targ
ets:
30
days
to
star
t a c
ompa
ny; l
ess
than
500
day
s to
enfo
rce
cont
ract
; co
ordi
nate
d in
vest
men
t pol
icy
and
impr
oved
tra
nspa
renc
y in
re
gula
tory
mak
ing;
im
prov
ed
perf
orm
ance
of
inve
stor
inqu
iry
hand
ling
Doi
ng B
usin
ess 2
015:
52.
5 da
ys to
star
t a c
ompa
ny; 4
71
days
to e
nfor
ce a
con
tract
; co
nsul
tativ
e re
gula
tory
m
akin
g pr
oces
s rem
ains
w
eak;
inve
stm
ent p
olic
y co
ordi
natio
n im
prov
ed
durin
g th
e ne
gativ
e in
vest
men
t lis
t (D
NI)
pr
oces
s; in
vest
or in
quiry
ha
ndlin
g sy
stem
impr
oved
at
the
Inve
stm
ent C
oord
inat
ion
Boa
rd (B
KPM
); th
e la
w w
as
refo
rmed
in 2
015
but D
B
met
hodo
logy
reco
rded
onl
y th
e pr
actic
e, b
ut n
ot c
hang
es
in th
e la
w, w
hich
requ
ires a
29
day
redu
ctio
n, f
rom
52.
5 to
33.
5 da
ys
X
3. F
inan
cial
Sec
tor:
Pro
mot
e th
e de
velo
pmen
t of a
stab
le, e
ffici
ent a
nd in
clus
ive
finan
cial
sect
or in
Indo
nesi
a in
ord
er to
fost
er a
ccel
erat
ed e
cono
mic
gro
wth
, re
duce
pov
erty
and
stre
ngth
en e
cono
mic
com
petit
iven
ess o
n a
sust
aina
ble
basi
s3.
1) M
aint
ain
finan
cial
sect
or
stab
ility
, dee
pene
d fin
anci
al
sect
or a
nd st
reng
then
ed p
rivat
e se
ctor
thro
ugh
impr
oved
re
gula
tory
and
supe
rvis
ory
fram
ewor
ks; m
aint
aine
d so
undn
ess o
f ban
king
sect
or
Base
line:
Key
fin
anci
al ra
tios o
f ba
nks (
CA
R, N
PL,
NIM
) are
soun
d an
d LD
R is
75%
(Dec
20
11)
As o
f Mar
201
5, N
PLs a
re a
t a
soun
d 2
.3%
. CA
R is
at a
so
und
20%
. N
IM st
able
, LD
R a
bove
80%
the
who
le
perio
d
X
131
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edTa
rget
s: B
anki
ng
finan
cial
indi
cato
rs
rem
ain
soun
d an
d LD
R a
t min
imum
80
%3.
2) G
row
ing
capi
tal m
arke
t an
d N
BFI
and
a h
ighe
r acc
ess
to fo
rmal
fina
ncia
l ser
vice
s by
the
Mic
ro-S
MEs
and
un
ders
erve
d po
pula
tions
Base
line:
41%
of
hous
ehol
ds h
ave
acce
ss to
ban
k ac
coun
ts; b
anki
ng
loan
to S
MEs
is
50%
(201
1);
disb
urse
d K
UR
(c
redi
t pro
gram
for
SME)
am
ount
ed to
ID
R 6
3 tri
llion
(2
011)
Targ
ets:
Ban
k lo
ans
to S
ME
cont
inue
to
grow
and
are
m
aint
aine
d at
50%
of
tota
l ban
k lo
ans;
pr
opor
tion
of
hous
ehol
ds w
ith
savi
ngs a
ccou
ntin
crea
sed
KU
R e
xcee
ded
targ
et in
201
3 &
201
4 th
roug
h O
ct,
disb
urse
men
t rea
ched
IDR
33
.1 tr
illio
n or
90%
of 2
014
targ
et. T
here
was
1.7
mill
ion
new
acc
ount
hol
ders
of
Tabu
ngan
ku in
the
first
se
mes
ter o
f 201
4.O
JK is
fully
ope
ratio
nal a
s an
inte
grat
ed fi
nanc
ial s
ecto
r au
thor
ity a
s of J
an 2
014;
the
Coo
rdin
atio
n Fo
rum
for
Fina
ncia
l Sys
tem
Sta
bilit
y (F
KSS
K) i
s ope
ratio
nal.
FKSS
K m
eetin
g is
qua
rterly
&
the
Dep
utie
s FK
SSK
m
eetin
g is
mon
thly
.In
fras
truct
ure
Fina
nce
Faci
lity
is p
rovi
ding
long
te
rm fi
nanc
ing
for
infr
astru
ctur
e pr
ojec
ts; a
s of
end
Sep
2014
, IIF
F, th
e so
le
proj
ect i
mpl
emen
ting
agen
cy,
has e
nter
ed in
to ID
R 3
.2
trilli
on c
redi
t com
mitm
ents
fo
r var
ious
infr
astru
ctur
e pr
ojec
ts su
ch a
s tol
l roa
d,
tele
com
mun
icat
ions
, pow
er
gene
ratio
n an
d ai
rcra
ft m
aint
enan
ce fa
cilit
y.
Alto
geth
er, t
hese
co
mm
itmen
ts le
vera
ged
X
132
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edab
out I
DR
29
trilli
on to
tal
finan
cing
from
all
parti
cipa
ting
lend
ers
4. In
fras
truc
ture
: Inc
reas
e th
e le
vel a
nd e
ffici
ency
of p
ublic
and
pri
vate
inve
stm
ents
in in
frast
ruct
ure
to m
eet n
eeds
and
stre
ngth
en c
ompe
titiv
enes
s4.
1) In
crea
sed
effe
ctiv
e km
of
natio
nal r
oads
mai
ntai
ned
and
deve
lope
d
Base
line:
1500
Km
m
aint
aine
d th
roug
h be
tterm
ent w
orks
an
d 30
00 k
m
deve
lope
d (2
005)
Targ
et:I
ncre
ase
by
25%
/yea
r ove
r 20
11-2
015
perio
d
Cum
ulat
ive
Mai
nten
ance
A
chie
vem
ent 2
011-
2014
: 4,
792
km (4
4% o
f tar
get),
of
whi
ch 3
% c
ontri
bute
d by
W
BG
Cum
ulat
ive
Roa
d D
evel
opm
ent A
chie
vem
ent
2011
-201
4: 1
2,27
0 km
(57%
of
targ
et),
of w
hich
1%
co
ntrib
uted
by
WB
G
Dat
a fo
r 201
5 no
t yet
av
aila
ble
X
4.2)
Red
uced
pow
er
infr
astru
ctur
e bo
ttlen
ecks
to
mee
t dem
and
and
incr
ease
ac
cess
Targ
et:R
educ
e po
wer
supp
ly
inte
rrup
tion
time
per
cust
omer
from
5h
/yea
r to
2h/y
ear
(201
2-20
15)
2013
: 5.7
6h/c
usto
mer
X
4.3)
Incr
ease
d pr
ivat
e in
vest
men
t in
infr
astru
ctur
e th
roug
h th
e PP
P fr
amew
ork
Expe
cted
to b
e on
trac
k on
ce
Via
bilit
y G
ap F
undi
ng
(VG
F) a
ppro
ved
for
Lam
pung
or U
mbu
lan
wat
er
supp
ly
X
5. L
ocal
Gov
ernm
ent:
Stre
ngth
en lo
cal g
over
nmen
t ins
titut
ions
to im
prov
e ac
coun
tabi
lity
and
incr
ease
the
leve
l and
of i
mpa
ct p
ublic
spen
ding
on
serv
ice
deliv
ery
and
supp
ort m
etro
polit
an a
reas
and
med
ium
-siz
ed c
ities
to im
prov
e in
fras
truc
ture
5.1)
Impr
oved
fidu
ciar
y, so
cial
an
d en
viro
nmen
tal m
anag
emen
t as
wel
l as t
echn
ical
pe
rfor
man
ce o
f LG
s in
the
deliv
ery
of b
asic
serv
ices
fin
ance
d us
ing
DA
K tr
ansf
ers
Expa
nd P
EAC
H to
ad
ditio
nal p
rovi
nces
PEA
CH
pro
gram
was
not
co
ntin
ued,
and
a n
ew
enga
gem
ent o
n lo
cal s
ervi
ce
deliv
ery
is c
urre
ntly
bei
ng
final
ized
X
133
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed5.
2) Im
prov
ed c
apac
ity o
f re
sear
ch in
stitu
tions
, med
ia a
nd
CSO
s to
asse
ss a
nd m
onito
r su
b-na
tiona
l PFM
(PEA
CH
): en
hanc
ed c
apac
ity o
f loc
al
inst
itutio
ns to
ana
lyze
and
m
onito
r pub
lic e
xpen
ditu
re a
nd
PFM
and
to d
eman
d be
tter
loca
l gov
ernm
ent p
erfo
rman
ce
in th
ese
area
s
Thro
ugh
the
PEA
CH
initi
ativ
ePE
AC
H p
rogr
am c
ompl
eted
in
Aug
201
4 w
ith a
ll de
liver
able
s inc
ludi
ng 6
pr
ovin
cial
upd
ate
PER
s de
liver
ed
X
6. M
acro
econ
omic
and
Fis
cal M
anag
emen
t: St
reng
then
cen
tral g
over
nmen
t cap
acity
for i
mpl
emen
ting
cont
inge
ncy
finan
cing
, cri
sism
anag
emen
t and
qua
lity
evid
ence
-bas
ed m
acro
and
fisc
al p
olic
y6.
1) E
nhan
ced
Gov
ernm
ent’s
ab
ility
to m
eet i
ts fi
nanc
ing
need
s and
mai
ntai
n cr
itica
l pu
blic
exp
endi
ture
s, as
m
easu
red
by c
ontin
ued
acce
ss
to m
arke
ts, a
nd le
vel o
f m
aint
enan
ce a
nd c
apita
l ex
pend
iture
s
Targ
ets m
et fo
r 201
2 an
d 20
13 a
nd o
n tra
ck in
201
4w
ith n
et se
curit
ies i
ssua
nce
reac
hed
104%
of t
he ta
rget
ba
sed
on th
e re
vise
d bu
dget
, w
ith g
ross
secu
ritie
s iss
uanc
e at
100
%
X
6.2)
Bud
get a
lloca
tions
in
form
ed b
y m
onito
ring
and
eval
uatio
n. In
crea
se in
the
num
ber o
f lin
e m
inis
tries
and
ag
enci
es re
porti
ng th
roug
h B
RIS
A (t
he m
onito
ring
and
eval
uatio
n sy
stem
) fro
m a
ba
selin
e of
zer
o in
FY
11
Fore
cast
ing
tool
s in
plac
e w
ith e
xpan
ded
disc
ussi
on o
f m
ediu
m-te
rm m
acro
fisc
al
sens
itivi
ty a
naly
sis a
nd
proj
ectio
ns in
the
annu
al
budg
et fi
nanc
ial n
ote.
H
owev
er, e
xpen
ditu
re
allo
catio
ns fr
om th
e M
TFF
of
the
prev
ious
yea
r are
not
use
d as
the
star
ting
poin
t for
di
scus
sion
s on
the
budg
et in
th
e fo
llow
ing
year
. Opt
ions
to
stre
ngth
en th
e in
stitu
tiona
l ar
rang
emen
t with
in th
e M
oF
for p
repa
ring
the
MTF
F ar
e be
ing
exam
ined
in th
e
X
134
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edco
ntex
t of o
ngoi
ng tr
aini
ng
enga
gem
ent.
BR
ISA
is a
web
-bas
ed
Bur
eauc
ratic
Ref
orm
(BR
) M
onito
ring
and
Eval
uatio
n Sy
stem
whi
ch w
as la
unch
ed
natio
nally
in 2
012.
The
ad
min
istra
tor o
f BR
ISA
is
the
Nat
iona
l BR
Man
agem
ent
Uni
t cal
led
UPR
BN
und
er
the
Min
istry
of
Adm
inis
trativ
e an
d B
urea
ucra
cy R
efor
m
(Men
PAN
-RB
). U
ntil
mid
of
2013
, the
re h
ad b
een
mor
e th
an 7
0 lin
e m
inis
tries
and
ag
enci
es th
at h
ave
repo
rted
thei
r BR
pro
gres
s to
the
Men
PAN
-RB
. How
ever
, with
ch
ange
of l
eade
rshi
p, th
is
M&
E sy
stem
has
bee
n m
ade
inac
tive
sinc
e en
d of
201
3.7.
Str
engt
heni
ng th
e Pu
blic
Sec
tor:
Str
engt
hen
cent
ral g
over
nmen
t ins
titut
ions
and
syst
ems t
o en
hanc
e pu
blic
fina
ncia
l man
agem
ent a
nd g
over
nanc
e to
in
crea
se th
e de
velo
pmen
t im
pact
of p
rior
ity b
udge
t exp
endi
ture
s7.
1) S
treng
then
ed m
ulti-
year
pe
rspe
ctiv
e in
fisc
al p
lann
ing,
ex
pend
iture
pol
icy
and
budg
etin
g
Targ
et:i
mpr
ove
PEFA
PI-
12 ra
ting
to a
t lea
st a
B+
by
2015
No
new
PEF
A a
sses
smen
t co
nduc
ted.
Whi
le th
ere
was
so
me
prog
ress
on
impr
ovin
g th
e tra
nspa
renc
y of
the
MTE
F pr
oces
s, it
is u
nlik
ely
to b
e su
ffic
ient
to im
prov
e th
e C
+ ra
ting
for P
I-12
X
7.2)
Num
ber o
f lin
e m
inis
tries
re
ceiv
ing
unqu
alifi
ed o
pini
ons
for t
heir
annu
al fi
nanc
ial
stat
emen
ts
Base
line:
63%
of
Min
istri
es &
A
genc
ies i
n Fi
nanc
ial S
tate
men
tTa
rget
:85%
of
Min
istri
es &
76%
X
135
Indi
cato
rT
arge
t/B
asel
ine
Ach
ieve
dR
atin
g as
per
CPF
CL
R R
atin
g Sc
ale
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edA
genc
ies i
n Fi
nanc
ial S
tate
men
t fo
r FY
2013
7.3)
Impl
emen
t new
Fin
anci
al
Man
agem
ent I
nfor
mat
ion
Syst
em in
all
177
Trea
sury
Lo
cal O
ffic
es
Syst
em d
evel
opm
ent
com
plet
ed in
201
3; S
PAN
ro
lled
out t
o al
l 222
trea
sury
of
fices
with
100
% o
f all
finan
cial
tran
sact
ions
co
nduc
ted
thro
ugh
the
syst
em
as o
f Feb
201
5
X
Tota
l for
Pro
-Gro
wth
En
gage
men
t:N
AN
A7
25
30
Perc
enta
ge o
f Tar
get
Indi
cato
rs fo
r Pro
-Gro
wth
En
gage
men
t:N
AN
A41
.18%
11.7
6%29
.41%
17.6
5%0%
136
Sub-annex 3:1b: Achievements for the Pro-Jobs Engagement
1. The pro-jobs engagement area complements that of the pro-growth to focus on human capital development to reduce a large skills gap. While sustained growth can work to absorb more workers into the market and investment can enhance the equity of growth, improving human development is fundamental for increasing labor productivity and shared prosperity. The share of the population of “productive” age relative to older people is large in Indonesia, and will remain so for the next 15 years. This demographic dividend presents a window of opportunity. The focus of WBG engagement was to support strengthening the overall governance and management of the education system, improving the education quality and performance of teachers, enhancing human resource capacity in R&D, and facilitating the institutional transformation required to implement a nation-wide social insurance reform. With a more direct role in job creation, IFC, apart from its support for access to finance, worked directly with manufacturing companies that generated good quality jobs as well as with SMEs to develop supply chain linkages. Overall rating for the pro-jobs engagements is satisfactory (see performance ratings against pro-jobs indicators in the table below).
2. IFC and MIGA had a direct role in job creation through engagement with individual companies and support to the SME sector. IFC in addition to its support for access to finance, worked directly with manufacturing companies that generated good quality jobs as well as with SMEs to develop supply chain linkages. Investments in companies such as PT Panca Amara Utama (greenfield ammonia manufacturing facilities) supported direct job creation in remote islands. Investments in PT Mayora Indah Tbk and the Wings Group supported job creation in hundreds of thousands of SMEs in their supply chains. IFC’s financing for food products companies had links also to hundreds of thousands of small retail and trading chain partners for these companies. IFC financing to banks such as PT Bank Danamon Tbk and PT Bank Mayora were to expand their SME financing, whereas to others such as PT Mitra Bisnis Keluarga Tbk and Bank BTPN was for expanding their microfinancing operations. IFC also provided equity support to PT Blue Bird Tbk, the leading taxi services operator in Indonesia which provides employment to tens of thousands of near poor drivers. MIGA had two active projects guaranteed for investment during the CPS period:the Rajamandala Hydropower IPP (guarantee issuance of US$200 million) and the Weda Bay Nickel(guarantee issuance of US$207 million).
3. The WBG also supported government efforts to increase access to quality education and training. The Government has made education a priority, and since 2009 allocated 20 percent of the national budget to the sector. While increases in investment have led to significant improvements in education access and equity, the quality of basic education remained persistently low and unevenly distributed across regions. In the latest OECD PISA international learning assessments, three-quarters of Indonesian 15 year olds were rated at or below the lowest benchmark—a level associated with only rudimentary levels of proficiency and a lack of higher order thinking skills. Improving access and quality of secondary education, as well as making better use of existing resources, including improvements in teacher competency, remains as significant challenges in the sector. To illustrate, student teacher ratios are very low in Indonesia compared with other middle income countries. Recent analytical work shows that raising basiceducation student-teacher ratios to the average for lower middle income countries could save as much as 16% of the total education budget.
137
4. Through a program of knowledge services, supported primarily by the Netherlands and the EU, the WBG helped to identify challenges and develop solutions to improve the quality and management of teachers, education financing and the local delivery of education services, which were incorporated in the 2015-2019 RPJMN. The BERMUTU project, which supported the implementation of the Teacher Law, contributed to increasing the number of teachers with at least S1 (bachelor) degree by more than 800,000 by the end of CY2015, well above the target. The WBG also helped the government develop a blueprint for reforming the skills training system in order to address the skills shortage in the short term. The Bank’s intervention in quality and affordable Early Childhood Education and Development (ECED) targeted local level service delivery concentrating on 6,000 ECED centers in 3,000 poor villages, increasing preschool enrollment and school readiness, particularly among poor children. During this CPS period, two operations— Research and Innovation in Science and Technology Project (RISET) and Sustainable Management of Agriculture Research and Dissemination Project (SMARTD)—were initiated to support research and innovation and to enhance technology development and uptake. Both operations are on track to reach their targets to enhance staff capacity but it is too early to judge the impact of either operation on the pro-jobs agenda. Overall, whilst improvements in educational quality in the country are lagging, the analytic work undertaken by the Bank has provided the data and set the agenda for the next 5 year period.
5. The WBG has also been the leading partner in assisting the government with the reform of its social security system. This is arguably the biggest and most extensive social security reform in the world, and the most intensive engagement on social insurance reform anywhere in the Bank. The Bank worked with multiple ministries and organizations, including Ministry of National Development Planning/National Development Planning Agency (Bappenas), National Social Security Council (Dewan Jaminan Sosial Nasional or DJSN), Financial Services Authority (Otoritas Jasa Keuangan or OJK), Ministry of Finance, Ministry of Labor, Coordinating Ministry for Human Development and Culture (Kemenko PMK) and Coordinating Ministry for Economic Affairs (Kemenko Ekonomi), as well as other partners including ADB, Australia, Germany, and the ILO, to deliver a large program of knowledge, technical assistance and capacity building services. The Bank team provided extensive assistance with capacity building, communication and consensus building and assisted the government with the design of the system and provided extensive inputs to the Roadmap for Implementation of the Employment Programs, which was launched by the government in April 2014 and was subsequently issued as part of a Presidential Regulation. Key areas of support included membership expansion, contribution collection, risk management training, improvements in governance, reductions in error, fraud and corruption (EFC) risk, and use of the unique ID (NIK) in social security administration. The Bank team used the Bank’s PROST model to provide extensive analysis of the cost, required contributions and long-term fiscal sustainability of the SJSN programs.
138
Sum
mar
y of
Ach
ieve
men
ts u
nder
the
Pro-
Jobs
Eng
agem
ent
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed1.
Edu
catio
n: P
rovi
de g
ood
qual
ity e
duca
tion
to a
ll In
done
sians
and
to p
rodu
ce a
smar
t and
com
petit
ive
wor
k fo
rce;
enh
ance
rese
arch
and
dev
elop
men
t, sc
ienc
e an
d te
chno
logy
1.1)
Impr
oved
edu
catio
n qu
ality
and
per
form
ance
of
teac
hes;
incr
ease
d nu
mbe
r of
basi
c ed
ucat
ion
teac
hers
mee
ts
acad
emic
qua
lific
atio
n m
anda
ted
by th
e Te
ache
r Law
Base
line
(201
1):
35%
of t
each
ers i
n pr
imar
y an
d 80
% o
f ju
nior
seco
ndar
y sc
hool
s hol
d S1
de
gree
or m
ore
Targ
et:8
2% o
f pr
imar
y an
d 98
%
juni
or se
cond
ary
scho
ol te
ache
rs h
old
S1 d
egre
e or
mor
e.
[Tar
get r
evis
ed b
ased
on
upd
ated
bas
elin
e da
ta]
Dat
a fr
om th
e 20
14 N
UPT
K
data
base
: 64%
of S
D a
nd
88%
of S
MP
teac
hers
with
an S
1 de
gree
X
1.2)
Impr
oved
pub
lic R
&D
hu
man
reso
urce
cap
acity
Targ
et:
Mas
ters
or
PhD
deg
ree
hold
ers
in p
ublic
rese
arch
in
stitu
tes (
LPN
K)
incr
ease
s fro
m 1
5%
to 1
7%
LPN
K in
stitu
tiona
l as
sess
men
ts
com
plet
ed a
nd
refo
rm m
ilest
ones
set
As p
er th
e R
ISET
Pro
ject
A
nnua
l Wor
k Pl
an 2
015,
the
num
ber o
f sta
ff w
ith S
2 an
d S3
deg
rees
is a
bout
3,1
00 o
ut
of 1
4,49
8 to
tal s
taff,
or a
bout
21
%
X
2. S
ocia
l Ins
uran
ce: P
rovi
de u
nive
rsal
cov
erag
e of
soci
al in
sura
nce
to p
rote
ct w
orke
rs a
nd th
e po
or fr
om a
dver
se li
fe e
vent
s or e
xter
nal s
hock
s thr
ough
the
five
natio
nal s
ocia
l ins
uran
ce (S
I) p
rogr
ams o
utlin
ed in
the
SJSN
(nat
iona
l soc
ial s
ecur
ity sy
stem
) Law
and
the
BPJS
(nat
iona
l soc
ial s
ecur
ity a
dmin
istra
tors
) La
w, c
over
ing
all f
orm
al a
nd in
form
al se
ctor
wor
kers
2.1)
Con
vers
ion
of Ja
mso
stek
to
a n
ot-fo
r-pr
ofit
inst
itutio
n th
at c
an a
dmin
iste
r the
SJS
N
pens
ion
and
old
age
savi
ngs
prog
ram
s
Roa
dmap
cov
erin
g SJ
SN p
ensi
on a
nd
old
age
savi
ngs
prog
ram
s com
plet
ed
Roa
dmap
has
bee
n co
mpl
eted
and
laun
ched
. G
over
nmen
t reg
ulat
ions
re
gard
ing
the
road
map
has
be
en is
sued
X
139
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed2.
2) E
xpan
d m
embe
rshi
p an
d im
prov
ed c
ontri
butio
n co
llect
ion
from
the
form
al a
nd
info
rmal
sect
ors
Des
ign
and
finan
cing
st
rate
gy, i
nclu
ding
in
vest
men
t pol
icy,
fo
r SJS
N p
ensi
on a
nd
old
age
savi
ngs p
lans
fin
aliz
ed.
The
SJSN
Hea
lth p
rogr
am
bega
n on
Janu
ary
1, 2
014
and
is n
ot e
xpec
ted
to
achi
eve
univ
ersa
l cov
erag
e un
til th
e en
d of
201
9. M
ost
effo
rts w
ere
focu
sed
on
inst
itutio
nal t
rans
form
atio
n an
d pr
ogra
m c
onso
lidat
ion.
N
ever
thel
ess,
som
e pr
ogre
ss
was
mad
e in
enr
ollin
g in
form
al se
ctor
wor
kers
and
ex
pand
ing
the
num
ber o
f w
orke
rs p
aid
for b
y th
e go
vern
men
t. M
embe
rshi
p ex
pans
ion
will
rece
ive
mor
e at
tent
ion
in C
Y15
and
CY
16.
The
BPJ
S Em
ploy
men
t pr
ogra
ms d
o no
t beg
in u
ntil
July
1, 2
015,
and
ther
efor
e m
embe
rshi
p ex
pans
ion
is n
ot
yet a
n is
sue.
Acc
ordi
ng to
th
e go
vern
men
t roa
dmap
, m
embe
rshi
p ex
pans
ion
will
ta
ke p
lace
mor
e sl
owly
, by
2019
.
X
Tota
l for
Pro
-Job
s En
gage
men
t:N
AN
A2
11
00
Perc
enta
ge o
f Tar
get
Indi
cato
rs fo
r Pro
-Job
s En
gage
men
t:N
AN
A50
%25
%25
%0%
0%
140
Sub-annex 3:1c: Achievements under the Pro-Poor Engagement
1. This engagement area was designed to target the poor and vulnerable with interventions to improve their social welfare, livelihoods, and access to finance and services.Policy reform efforts were aimed at improving the effectiveness of poverty reduction programs and addressing the problems associated with high levels of vulnerability by improving and extending safety nets. The WBG aimed to support development results that would enhance the design and performance of household-targeted and community development programs, improve food security through interventions in the private sector, improve health and nutrition outcomes through improved access to quality health care, including maternal and child health services, enhance HIV/AIDS surveillance, and increase access to safe water and sanitation. Overall rating for the pro-poor engagements is satisfactory (see performance ratings against pro-poor indicators in the table below).
2. Poverty Targeting: Through an extensive knowledge services engagement and with support from the INSTANSI DPL, the Bank helped the government to adopt and implement reforms which were proposed in the flagship report, Targeting Poor and Vulnerable Households in Indonesia released in 2012, a series of ‘just in time’ policy notes, the Development Policy Review and a long-term dialogue established between the Bank and the Ministry of Finance. A unified database of more than 24 million poor and vulnerable households, which was created with IBRD support, was used to select beneficiaries for the largest national social assistance programs: (i) health fee waivers (Jamkesmas), (ii) financial assistance for poor students (BSM), (iii) expansion of the conditional cash transfer programs (PKH), and (iv) subsidized rice distribution (Raskin), as well as a number of local government programs.
3. By bringing together the Bank’s high quality macroeconomic policy support with its technical assistance in creating a unified database of more than 24 million poor and vulnerable households, the Bank was able to help the new Government in November 2014 usher in one of the most significant policy reforms in reallocation of budget resources away from US$2.8 billion annual fuel subsidies to temporary and long-term social assistance programs and productive investment in infrastructure. Coverage for BSM (financial assistance for poor students) doubled from 8.7 million to 16.6 million beneficiaries, coverage for the PKH (conditional cash transfers) expanded from 1.5 million households in 2012 to 3.2 million households by 2014, and 15.5 million social protection cards were distributed to households extracted from the unified database. Assistance was also being provided to government partners to mitigate household vulnerability by developing a permanent shock/crisis monitoring system. The WBG also helped to develop a national crisis monitoring system to improve responsiveness to shocks. This national crisis monitoring system was completed and adopted by the National Team for the Acceleration of Poverty Reduction (TNP2K) and is housed in the Office of the Vice President. Finally, a major study on inequality and shared prosperity was completed, informing government policies to reduce inequality.
4. The community-based National Community Empowerment Program (PNPM) programs—Rural, Urban and Generasi—that began over a decade ago and expanded across every rural and urban community during the period of the CPS continued to anchor the WBG’s efforts inimproving sub-district and village level governance, quality of service delivery, and socio-
141
economic conditions in rural and urban areas. With the support of the WBG and other development partners, including ADB, Australia, Canada, Denmark, the EC, IsDB, Japan, the Netherlands, the UK and the USA, PNPM has been an effective platform for channeling development resources, empowering communities and ultimately improving socio-economic conditions in the villages and urban districts where it operates. PNPM demonstrated that quality and cost effective investments in infrastructure and service delivery could be achieved by funneling financing from the central government to the local level by embedding facilitation and community participatory processes in the planning, budgeting, and implementation of activities. PNPM provided the basis for the new Village Law, which the WBG has begun to help implement under the CPS period although the deeper engagement in this area will fall into the new CPF period. The Village Law aims to substantially increase the resources available to and responsibilities of villages while strengthening the systems developed by PNPM to maximize the impact of those resources on rural development. Targets set for direct participation of communitymembers, women involvement in decision-making, and improved community access to and utilization of health and education services in targeted areas were broadly achieved or exceeded.
5. Specifically, PNPM Rural helped finance community driven development projects in around 70,000 villages throughout the country and raised incomes, reduced poverty rates, and increased access to services, especially in poorer households and communities. The PNPM Urban program reached 5.5 million household beneficiaries and provided 9,115 kilometers of roads, 3349 km of drainage and irrigation canals, 131,520 units of solid waste and sanitation facilities, 1,497 community health facilities, 85,437 reconstructed poorest houses in thousands of urban wards across the country. The PNPM Generasi program supported a range of innovative activities around inclusion, frontline service delivery and local governance. The use of incentivized block grants to increase utilization of basic health and education services was tested in 5,400 poor rural villages. The WBG continued to work with donor partners, the ministries of Health and Education, and local governments to improve the quality of health and education services and foster accountability in local service delivery, and partnered with the Millennium Challenge Corporation (MCC) and the Millennium Challenge Account-Indonesia in focusing on nutrition and reducing stunting. IFC’s investment in micro-finance has been supportive and is expected to reach one million low-income women entrepreneurs by 2017.
6. The delivery towards enhanced food security during this CPS period came primarily through interventions with the private sector supported by IFC. Knowledge services in FY13 were used to identify (i) the causes of palm oil smallholder productivity gaps and potential solutions; (ii) current company practices and guidance for community engagement and investment in the sub-sector; and (iii) best practices and funding models to assist smallholders to access certified markets. The WBG joined the Partnership for Indonesian Sustainable Agriculture (PISAgro) with IFC leading the working group on agri-finance, and engaging a partner bank to provide a credit package for cocoa smallholders to increase productivity and farmer income. A Country Situation Analysis (CSA) for engagement in the palm oil sector was initiated to explore sustainable practices for small farmers. A Canadian supported Agribusiness Program was established at IFC for working with private banks to implement a rural business model to manage agricultural risks integral to small farmers and rural business markets. Implementation of the Bank’s Water Resources and Irrigation Management Project II, noted in the infrastructure section under the Pro-Growth pillar above, made seven national and provincial basin agencies fully functional and increased irrigated areas to
142
177363 hectare. In collaboration with ADB, Government of Australia, FAO, and Government of Switzerland, WB also delivered knowledge services that helped to define the medium term plan in anticipation of rapid transformations in the economy, increasing competition for resources (land and water), and the transition for subsistence agriculture to commercially viable farming. A tea revitalization report, in the form of a road map, and coffee value chain assessment were submitted to the Ministry of Trade, Coordinating Ministry for Economic Affairs, Ministry of Industry, Bappenas, Ministry of Agriculture, and Ministry of State Own Enterprises in October 2014 and April 2015, respectively.
7. The WBG supported, through knowledge services32 and financing, government efforts to improve health outcomes particularly in the latter part of the CPS implementation period. Government introduced in January 2014 the National Health Insurance Program (JKN), which aims to provide universal health insurance by 2019. A major WBG study identified significant gaps in primary health facilities, both in terms of inputs and human resources including key services to address the persistent high levels of maternal mortality and child malnutrition. This analysis and the policy recommendations that emerged from it have substantially informed the 2015-19 RPMJM as well as ongoing efforts to increase public funding for health and to improve health service delivery. Through the HPEQ project, the WBG helped develop the first competency-focused accreditation system for health training institutions, with 168 schools being accredited by the end of CY14 and improvements in the percentage of graduates that pass the national competency test. Access to clean water advanced with additional financing for the Rural Water and Sanitation Program (PAMSIMAS). Some 5.1 million people were provided with water and 5.6 million people in 20,000 villages with improved sanitation through the program. IFC had arranged financing of US$85 million for a private sector operator providing clean water to public water utilities, but this was subsequently cancelled. Technical support for an investment financing facility for local water companies is underway, but its establishment is delayed. Discussion is also underway for a linked operation to support urban water supply and sanitation.
8. In the case of access to finance, the WBG’s long-term engagement with Bank Indonesia and OJK resulted in the almost doubling of universal financial access from 20% in 2011 to 36% in 2014 (FINDEX database). The WBG was instrumental in assisting the GoI to re-design its basic savings account (Tabungan-Ku) and launching of the basic micro-insurance product. Seven million new accounts were established in the first few months after the launch.
32 The knowledge services program included a comprehensive analysis of supply side service availability and readiness, covering maternal
health and non-communicable diseases; a study of human resources for health policies; an analysis of measures under the universal health insurance program to help promote improved maternal health care; an analysis of central government expenditures to help identify lessons and inform financing options for future expansion of UHC; an economic analysis of HIV/AIDS programs; second Integrated Biological and Behavioral Survey (IBBS) in Papua provinces; Donor funding for an analysis of multisectoral determinants of double burden of malnutrition (DBM) was not realized, but the issue was brought to the attention of policymakers and the public through a comprehensive study focused on DBM in Indonesia and through the Indonesia Economic Quarterly (IEQ) released in July 2013.
143
Sum
mar
y of
Ach
ieve
men
ts u
nder
the
Pro-
Poor
Eng
agem
ent
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed1.
Pov
erty
Tar
getin
g: R
educ
e ab
solu
te p
over
ty a
nd im
prov
e in
com
e di
stri
butio
n th
roug
h so
cial
pro
tect
ion
that
is b
ased
on
the
fam
ily, c
omm
unity
em
pow
erm
ent a
nd e
xpan
sion
of e
cono
mic
opp
ortu
nitie
s of t
he lo
w in
com
e po
pula
tion.
Fro
m 1
2% p
over
ty in
201
2, G
over
nmen
t is t
arge
ting
for s
ingl
e di
gits
by
201
41.
1) N
atio
nal s
hock
mon
itorin
g sy
stem
dev
elop
ed a
nd
oper
atio
nal
A n
atio
nal c
risis
mon
itorin
g sy
stem
was
com
plet
ed a
nd
adop
ted
by th
e N
atio
nal
Team
for t
he A
ccel
erat
ion
of
Pove
rty R
educ
tion
(TN
P2K
), ho
used
in th
e O
ffic
e of
the
Vic
e-Pr
esid
ent.
The
dash
boar
d w
as u
ploa
ded
to
thei
r int
erna
l web
site
dur
ing
early
201
4 an
d is
now
in u
se.
X
1.2)
Pov
erty
pro
gram
s m
anag
emen
t uni
ts u
sing
the
natio
nal r
egis
try o
f poo
r and
vu
lner
able
hou
seho
lds t
o id
entif
y be
nefic
iarie
s
4 pr
ogra
ms b
y 20
154
prog
ram
s use
d th
e re
gist
ry
to id
entif
y be
nefic
iarie
s:1)
The
UD
B w
as u
sed
in
2013
for i
dent
ifica
tion
of th
e 15
.5 m
illio
n ho
useh
olds
that
re
ceiv
ed a
soci
al p
rote
ctio
n ca
rd (K
artu
Per
lindu
ngan
So
sial
), w
hich
ent
itled
them
to
rece
ive
a te
mpo
rary
un
cond
ition
al c
ash
trans
fer
(Ban
tuan
Lan
gsun
g Se
men
tara
Mas
yara
kat,
BLS
M)
(ii) a
dditi
onal
allo
catio
ns o
f ric
e di
strib
uted
thro
ugh
the
Ric
e fo
r the
Poo
r (Be
ras
Mis
kin,
Ras
kin)
pro
gram
(iii)
finan
cial
ass
ista
nce
for
poor
stud
ents
(Ban
tuan
unt
uk
Sisw
a M
iski
n, B
SM)
(iv) t
he d
atab
ase
was
als
o us
ed to
ext
ract
ben
efic
iary
lis
ts fo
r the
exp
ansi
on o
f
X
144
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edPr
ogra
m K
elua
rga
Har
apan
(PK
H),
the
cond
ition
al c
ash
trans
fer p
rogr
am.
1.3)
Incr
ease
d pa
rtici
patio
n in
EC
ED se
rvic
es p
artic
ular
ly fo
r th
e po
or
Base
line
(201
0):
Gro
ss e
nrol
lmen
t ra
te o
f 33
% o
f 4-6
year
old
s enr
olle
d in
EC
ED
Targ
et: 7
2%
Bas
ed o
n D
ata
Poko
k PA
UD
20
14, g
ross
enr
ollm
ent r
ate
for 3
-6 y
ear o
lds:
65.
16%
(S
ince
the
figur
e of
65.
16%
is
for 3
-6 ra
ther
than
4-6
and
with
3 y
ear-
olds
are
pro
babl
y le
ss li
kely
to b
e in
EC
ED
prog
ram
s, th
e 72
% ta
rget
for
4-6
year
old
s may
hav
e ac
tual
ly b
een
met
)
X
2. C
omm
unity
Dev
elop
men
t: Im
prov
ed lo
cal-l
evel
(sub
-dis
tric
ts a
nd v
illag
es) g
over
nanc
e, q
ualit
y of
ser
vice
del
iver
y an
d so
cio-
econ
omic
con
ditio
ns in
rur
al
area
s thr
ough
wid
er im
plem
enta
tion
of p
over
ty re
duct
ion
and
com
mun
ity em
pow
erm
ent p
rogr
ams a
nd th
e pro
visi
on o
f inv
estm
ent r
esou
rces
to su
ppor
t pro
posa
ls
deve
lope
d by
com
mun
ities
, usi
ng a
par
ticip
ator
y pl
anni
ng p
roce
ss. E
nhan
ce a
cces
s to
heal
th a
nd e
duca
tion
serv
ices
am
ong
the
poor
.2.
1) D
irect
par
ticip
atio
n of
2.
5m c
omm
unity
mem
bers
Targ
ets:
80%
be
nefic
iarie
s fee
l th
at p
roje
ct
inve
stm
ents
re
flect
ed th
eir
need
s; >
50%
of
poor
est c
omm
uniti
es
invo
lved
in p
lann
ing
and
deci
sion
-mak
ing
mee
tings
; 35%
of
villa
ges p
rovi
ded
feed
back
on
heal
th
and
educ
atio
n se
rvic
es
No
data
on
bene
ficia
ries’
op
inio
ns o
n w
heth
er p
roje
ct
inve
stm
ents
refle
cted
thei
r ne
eds;
50%
of p
oore
st
com
mun
ities
invo
lved
in
plan
ning
and
dec
isio
n-m
akin
g m
eetin
gs; 3
3%of
vi
llage
s pro
vide
d fe
edba
ck
on h
ealth
and
edu
catio
n se
rvic
es
X
2.2)
Wom
en a
ctiv
ely
invo
lved
in
dec
isio
n-m
akin
gTa
rget
: 50%
of
wom
en in
pl
anni
ng/d
ecis
ion-
mak
ing
mee
tings
;30
% o
f wom
en in
co
mm
unity
ov
ersi
ght t
eam
s
45%
of w
omen
in
plan
ning
/dec
isio
n-m
akin
g m
eetin
gs; 3
2% o
f wom
en in
co
mm
unity
ove
rsig
ht te
ams
X
145
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed2.
3) Im
prov
ed c
omm
unity
ac
cess
to a
nd u
tiliz
atio
n of
he
alth
and
edu
catio
n se
rvic
es in
th
e ta
rget
ed a
reas
Targ
ets:
>80
% o
f pr
egna
nt w
omen
re
ceiv
ing
4 pr
enat
al
care
vis
it; 8
0% o
f ch
ildre
n un
der 5
w
eigh
ed m
onth
ly;
50%
of p
regn
ant
wom
en a
ttend
ing
nutri
tion
coun
selin
g se
ssio
n; 5
0% o
f ca
regi
vers
of
child
ren
unde
r 2
atte
ndin
g nu
tritio
n co
unse
ling
sess
ion;
70
% ju
nior
se
cond
ary
enro
llmen
t rat
e
91%
of p
regn
ant w
omen
re
ceiv
ing
4 pr
enat
al c
are
visi
t; 75
% o
f chi
ldre
n un
der 5
w
eigh
ed m
onth
ly; n
o da
ta o
n pr
egna
nt w
omen
atte
ndin
g nu
tritio
n co
unse
ling
sess
ion;
no
dat
a on
car
egiv
ers o
f ch
ildre
n un
der 2
atte
ndin
g nu
tritio
n co
unse
ling
sess
ion;
90
% ju
nior
seco
ndar
y en
rollm
ent r
ate
X
3.Fo
od S
ecur
ity a
nd R
ural
Dev
elop
men
t: In
crea
se fo
od s
ecur
ity a
nd c
ontin
ue th
e re
vita
lizat
ion
of a
gric
ultu
re to
enh
ance
sel
f-reliance
in fo
od, i
ncre
ase
the
com
petit
iven
ess o
f agr
icul
tura
l pro
duct
s, in
crea
se th
e in
com
e le
vel o
f far
mer
s, an
d co
nser
ve e
nvir
onm
ent a
nd n
atur
al re
sour
ces.
Redu
ce d
epen
denc
e on
impo
rts
for s
tapl
e fo
ods w
hile
div
ersi
fyin
g fo
od c
onsu
mpt
ion.
Impr
ove
inco
me
of sm
allh
olde
rs a
nd e
xpan
d op
port
uniti
es fo
r non
farm
inco
me
activ
ities
.3.
1) M
oder
nize
d cl
ient
and
m
arke
t orie
nted
mar
ketin
g an
d ex
tens
ion
serv
ices
acc
essi
ble
by s
mal
lhol
ders
Base
line:
less
than
10
% o
f far
mer
s ac
cess
tech
nolo
gy
and
mar
ket
info
rmat
ion
thro
ugh
ICT.
10%
of I
AA
RD
’s re
sear
ch
and
man
agem
ent s
taff
un
derto
ok a
dvan
ced
train
ing
in a
ccre
dite
d fo
reig
n in
stitu
tions
thru
the
SMA
RTD
pro
gram
X
3.2)
Incr
ease
d va
lue
addi
tion
in
smal
lhol
der-
base
d ag
ricul
tura
l ex
port
valu
e ch
ains
(e.g
. cof
fee,
co
coa,
and
tea)
cou
pled
with
hi
gher
pro
duct
ivity
and
mor
e ef
ficie
nt m
arke
ting
syst
ems
Base
line:
R
egul
ator
y an
d po
licy
fram
ewor
k of
va
lue
chai
ns o
f sm
allh
olde
r-ba
sed
expo
rtabl
e co
mm
oditi
es is
w
eak
with
low
ca
paci
ty o
f sup
port
syst
ems.
MoT
laun
ched
Act
ion
Plan
s fo
r enh
anci
ng th
e su
stai
nabi
lity
and
com
petit
iven
ess o
f at l
east
on
e sm
all-h
olde
r bas
ed
beve
rage
cro
p (e
.g. c
offe
e,
coco
a, o
r tea
). [O
n tra
ck]
X
146
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed3.
3) Im
prov
ed w
ater
reso
urce
an
d irr
igat
ion
infr
astru
ctur
e an
d se
rvic
e de
liver
y an
d pa
rtici
pato
ry p
lann
ing
and
coor
dina
tion
mec
hani
sms
esta
blis
hed
Targ
et:W
ater
se
curit
y im
prov
ed in
at
leas
t 50
irrig
atio
n D
istri
cts.
The
Gov
ernm
ent i
ssue
s ase
rvic
e or
ient
ed ir
rigat
ion
polic
y an
d es
tabl
ishe
s a
conc
ept f
or m
oder
niza
tion
of
irrig
atio
n m
anag
emen
t of
larg
e sc
ale
natio
nal i
rrig
atio
n sy
stem
s
X
4. H
ealth
Out
com
es: I
mpr
oved
pop
ulat
ion
heal
th o
utco
mes
, inc
ludi
ng im
prov
emen
ts in
life
exp
ecta
ncy
and
redu
ctio
ns in
mat
erna
l mor
talit
y an
d m
alnu
triti
on
to m
eet M
DG
targ
ets b
y 20
15.
4.1)
Qua
lity
assu
ranc
e po
licie
s go
vern
ing
the
educ
atio
n of
he
alth
pro
fess
iona
ls w
ith
esta
blis
hmen
t of i
ndep
ende
nt
Nat
iona
l Acc
redi
tatio
n A
genc
y,
and
Nat
iona
l Age
ncy
for
Com
pete
ncy
Targ
et: a
ccre
dita
tion
of 7
hea
lth
prof
essi
onal
scho
ols
Com
preh
ensi
ve a
naly
sis o
f su
pply
side
ava
ilabi
lity
and
read
ines
s com
plet
ed.
Stud
y of
hum
an re
sour
ces f
or
heal
th (H
RH
) pol
icie
s co
mpl
eted
.
Ana
lysi
s of
Jam
pers
al/J
amke
smas
po
licie
s to
achi
eve
UH
C o
f m
ater
nal h
ealth
car
e co
mpl
eted
.
Seco
nd In
tegr
ated
Bio
logi
cal
and
Beh
avio
ral S
urve
y (I
BB
S) in
Pap
ua p
rovi
nces
co
mpl
eted
.
Econ
omic
ana
lysi
s of
HIV
/AID
S pr
ogra
ms
com
plet
ed.
Ana
lysi
s of m
ultis
ecto
ral
dete
rmin
ants
of d
oubl
e bu
rden
of m
alnu
tritio
n (D
BM
) com
plet
ed.
X
147
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed4.
2) Im
prov
ed sa
nita
tion
Targ
ets:
7 m
illio
n pe
ople
pro
vide
d w
ith p
iped
wat
er
supp
ly a
nd 3
.4
mill
ion
peop
le
prov
ided
with
im
prov
ed sa
nita
tion
unde
r PA
MSI
MA
S
7.8
mill
ion
prov
ided
with
pi
ped
wat
er su
pply
and
7.6
9 m
illio
n w
ith im
prov
ed
sani
tatio
n un
der t
he
PAM
SIM
AS
prog
ram
Fina
ncin
g fa
cilit
y to
supp
ort
PDA
M te
chni
cal a
ssis
tanc
e an
d in
vest
men
ts is
del
ayed
un
til F
Y15
.
X
Tota
l for
Pro
-Poo
r En
gage
men
t:N
AN
A5
41
10
Perc
enta
ge o
f Tar
get
Indi
cato
rs fo
r Pro
-Poo
r En
gage
men
t:N
AN
A45
.45%
36.3
6%9.
09%
9.09
%0%
148
Sub-annex 3:1d: Summary of Achievements for the Pro-Green Engagement
1. Indonesia is well-endowed with natural capital and is a steward to some of the world’s greatest terrestrial and marine biodiversity. However, its natural wealth, resources, and quality of life are increasingly threatened by rapid, unsustainable development compounded with over-exploitation of forests and marine ecosystems. Indonesia’s total greenhouse gas emissions are estimated to account for over six percent of the global total. Forestry and land use emissions are by far the largest source. Indonesia’s emissions from energy consumption are also growing. Severe and annual forest fires, connected with the largely illegal clearing of forests and draining of peat lands, have immensely negative economic, health, and environmental impact on Indonesia and neighboring countries. Insufficient investment in institutional capacity, corruption, and inconsistent policies and practices, are contributors to these problems. WBG engagements sought to promote sustainable green growth, climate change adaptation and mitigation, and disaster risk management. Bank programs were designed to promote sustainable natural resources management, mainstream adoption of green growth parameters across core growth sectors, uptake of sector specific climate change adaptation and mitigation efforts and disaster risk management actions aimed at reversing the negative consequences that have plagued the poor and vulnerable living in rural (in particular forest dependent communities and fisher and coastal communities, both amongst the poorest of the poor in Indonesia) and marginal urban areas. Four out of five pro-green targets were achieved during the CPS period.
2. Under the sustaining the environment and climate change adaptation sub-engagement area there were three key milestones, two of which were achieved and one was partially achieved. At the request of GoI, the Bank took a lead role in supporting and advising on the establishment of the REDD+ Agency and its institutional and funding mechanisms to facilitate mobilization of a $1 billion grant from Norway for the REDD+ Partnership. The REDD+ Support Facility MDTF was established at the Bank to assist the government to set up a national trust fund to implement a strategy to reduce emissions and improve governance and accountability in the forest and land sectors. The national trust fund, however, is not yet on line due to the new administration’s institutional reorganization efforts to embed the REDD+ Agenda and financing package within existing Government structures, including the newly merged Ministries of Environment and Forestry (rather than in a stand-alone REDD+ Agency). This result area is rated partially achieved.
3. The third phase of the Coral Reef Rehabilitation and Management Program-Coral Triangle Initiative was approved and is under implementation building on ten years of successful engagement in the sector. The third phase of this Program is designed to strengthen communities’ capacity to manage their natural resources and improve their livelihoods as well as better adapt to climate change impacts through increased economic and ecological resilience, more sustainable local livelihoods, and education and awareness. The proposed Sumatra Habitat Conservation to support terrestrial biodiversity project was transferred to UNDP for implementation due to selectivity measures to support programmatic engagement rather than small stand-alone projects during the Bank Group’s reorganization. The project is currently being implemented by UNDP. COREMAP II project focused on supporting coastal communities to sustainably co-manage use of coral reef resources to enhance community welfare in priority districts. 84% of fisher and coastal communities in program management areas confirmed that COREMAP II had a positive impact on their welfare. Target indicator was 70%. At EOP, COREMAP 2 project areas showed an
149
average increase in income of 21% since 2008, more than twice the original project target for this indicator.
4. The Bank also began a policy dialogue with central ministries on mainstreaming green growth principles into medium and long term investment and development planning. This work has influenced greening of the five year Medium Term Development Plan (2015-2019) with targets for a number of key sectors including agriculture, energy, forestry, transport, urban development, industry and marine and fisheries, among others. It has also supported engagement with the private sector through the Indonesia Chamber of Commerce and its broad membership to influence and support private sector collaboration and commitment to adopt green growth elements in their investments alongside the public sector financing.
5. IFC achieved progress on its Green Buildings Program. IFC’s knowledge and advisory services resulted in the Government of Jakarta launching the Green Building code for environmental and energy efficient buildings. Now, IFC is engaging with the Ministry of Public Works and with the cities of Bandung and Makassar to expand these codes to other cities. In parallel, IFC launched its EDGE certification program in Indonesia, a voluntary program allowing private sector developers to obtain green buildings certification sponsored by IFC. One of IFC’s property development clients – PT Ciputra Residences Tbk, issued a bond wherein the company committed to invest money towards green buildings projects, and they achieved EDGE certification for three of their housing development projects. Implementation of the ongoing Geothermal Clean Energy Development Project is advancing with several large tenders anticipated this year with support from New Zealand. IFC provided infra-venture development financing of US$2 million to a wind-energy project developer in Sulawesi, the first private sector grid-connected wind power project in Indonesia. IFC is also planning to finalize an investment of US$292 million of equity, loan and mobilized financing for a hydro power project in FY14.
6. IFC through its Environmental and Social Risk Management for Financial Institutions (ESRM for FIs) program worked with Otoritas Jasa Keuangan (OJK) since June 2013 to promote and implement a sustainable finance program. The program supported OJK with development of the “Roadmap on Sustainable Finance in Indonesia”, which was launched in December 2014. The program supported OJK on the issuance of sustainable finance policy in Indonesia. The program also supported individual banks to apply Environmental and Social (E&S) best practices when providing financing. In the long term, increasing financing screening through improved E&S standards will contribute to more sustainable green economic growth.
7. During the CPS period, the WBG’s support also expanded into forest governance. Indonesia is one of eight pilot countries of the US$70 million Forest Investment Program (FIP) of the Climate Investment Funds (CIF). IBRD and IFC worked to develop new public and private sector projects under the FIP-CIF. The Forest Carbon Partnership Facility-REDD+ Readiness Project was implemented to assist, among other activities, in developing reference scenarios and verification systems adapted to local realities. The Forestry and Non-Forestry Lands AAA, completed in FY14, reviewed policies and issues pertaining to the allocation of land rights. A grant from the Japan Social Development Fund (JSDF) Support Program was approved with the objective of helping government improve governance and participatory land mapping for indigenous communities. Building on the recently completed Indonesia Sustainable Forestry
150
Project, IFC engaged with a large private sector plantation forestry and wood processing company to further strengthen and demonstrate sound environmental and social management systems. The WBG also leveraged international climate finance in assisting Indonesia to manage its solid waste and capture methane in the CF Makassar Landfill Gas Project and CF Bekasi Landfill Gas Flaring Project. The WBG supervised the HCFC Phase-Out in the PU Foam Sector Project which aimed to help Indonesia fulfill its obligations under the Montreal Protocol. The proposed GEF supported Chiller Energy Efficiency Project, however, was dropped due to a lack of agreement on the financing mechanism.
8. Development targets under the disaster risk management engagement were largely achieved. The Bank worked in collaboration with the governments of Australia, Japan and New Zealand to support advances in mainstreaming adaptation and resilience, leveraging multi-donor contributions with government reconstruction spending, and setting regulations for executing sovereign disaster insurance. Six mid-sized cities and four high risk provinces mainstreamed adaptation and resilience measures into their respective urban development, investment, and community driven development programs. Resilience was also mainstreamed in the government funded school rehabilitation program through the formulation of technical guidelines and building capacity on earthquake resistant construction. The government-led disaster management fund (IMDFF-DR) is on track as a mechanism to institutionalize donor support in case of large scale natural disasters for which Indonesia may want assistance. US$5 million was pledged to complement the government’s US$500 million annual public reconstruction spending.
9. At the same time, however, the CPS period marked a period of very substantial loss of forest cover, continued desecration of coral reefs and fisheries, and increasing GHG emissions. Over the last 10 years, 12 million ha of forest was lost and more than 70 million ha has been degraded. 75% of main rivers, and 15 main lake eco-systems are heavily polluted by agriculture, mining and industry. Some 65% of Indonesia’s coral reefs are considered threatened from over-fishing and almost half are threatened from destructive fishing practices. Indonesians, especially the 150 million who live in coastal and forest areas, suffer from this the most without reaping any benefit. Forests which should generate over US$4 billion annually in revenue are only contributing $300 million and some $20 billion in potential revenue for local fishing communities is being lost to illegal fishing. On a global scale, Indonesia is the fifth-largest emitter of GHG when its land-use change and forestry (LUCF) emissions are included in its profile and the eighth-largest emitter when these emissions are excluded. The vast majority (62%) come from LUCF, with emissions from this sector increasing 65% in absolute terms since 1995. The activities primarily responsible for this are deforestation and peat degradation, most recently associated with the expansion of palm oil plantations. Greenhouse gases from mangrove and sea grass destruction are apotentially important, but not currently counted, source of emissions. Given this situation, it is essential to question whether WBG has been ambitious enough, or indeed whether we have been able to engage and have an impact on the “pro-green” agenda in a way that could impact on this downward spiral. The fact that the targets in the results framework for the CPS were largely met at the same time that the environmental and climate change indicators deteriorated so substantially, indicates that our interventions may have been at the margins. For that reason, although the results framework indicators were largely achieved, the overall rating for the pro-green pillar is rated moderately satisfactory. Seeking out a more ambitious agenda for the environment in the next CPF is included in the ‘lessons learnt’ section.
151
Sum
mar
y of
Ach
ieve
men
ts u
nder
the
Pro-
Gre
en E
ngag
emen
t
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
ed1.
Env
iron
men
t, N
atur
al R
esou
rces
and
Clim
ate
Cha
nge:
Con
serv
atio
n an
d ut
iliza
tion
of th
e na
tura
l env
iron
men
t tha
t sup
port
s su
stai
nabl
e ec
onom
ic g
row
th
and
incr
ease
d w
elfa
re o
f the
peo
ple.
GH
G e
mis
sion
redu
ctio
n of
26%
by 2
020
acco
mpa
nied
by
the c
ontr
ol a
nd m
anag
emen
t of d
isas
ter r
isks
, in
orde
r to
prep
are
for t
he e
xpec
ted
impa
cts o
f clim
ate
chan
ge. P
rom
ote
rene
wab
le e
nerg
y so
urce
s as p
art o
f a su
stai
nabl
e de
velo
pmen
t str
ateg
y.1.
1) F
und
for R
EDD
es
tabl
ishe
d w
ith le
gal,
tech
nica
l an
d m
anag
eria
l cap
acity
to
supp
ort a
nd fi
nanc
e In
done
sia’
s N
atio
nal R
EDD
+ St
rate
gy
RED
D+
Supp
ort F
acili
ty
MD
TF e
stab
lishe
d at
the
WB
to
supp
ort G
oI to
set u
p a
natio
nal T
F fo
r RED
D+
impl
emen
tatio
n
X
1.2)
Pha
se II
I of C
OR
EMA
P pr
ovid
ing
expa
nded
supp
ort f
or
cora
l and
mar
ine
prot
ectio
n
Phas
e II
I of C
OR
EMA
P de
liver
ed a
nd u
nder
im
plem
enta
tion
X
1.3)
Gov
ernm
ent o
f Jak
arta
la
unch
ing
gree
n bu
ildin
gs c
ode
for c
omm
erci
al b
uild
ings
in th
e ci
ty
Gov
ernm
ent o
f Jak
arta
la
unch
ed G
reen
Bui
ldin
g re
gula
tion
num
ber 3
8,
effe
ctiv
e 20
13
X
2. D
isas
ter R
isk
Man
agem
ent:
Enha
nce
capa
bilit
ies t
o im
prov
e di
saste
r ris
k pr
epar
edne
ss, m
itiga
tion
mea
sure
s, an
d po
st-di
sast
er re
cove
ry a
nd
reco
nstr
uctio
n re
spon
sive
ness
to st
reng
then
sust
aina
bilit
y2.
1) C
reat
e ev
iden
ce-b
ased
ex
ampl
es o
f pra
ctic
al a
nd
conc
rete
dis
aste
r and
clim
ate
risk
redu
ctio
n an
d ad
apta
tion
mea
sure
s (e.
g. sa
fer s
choo
ls,
resi
lient
vill
ages
and
urb
an
war
ds w
ith D
RR
pla
n an
d in
vest
men
t pro
gram
) tha
t can
be
scal
ed u
p an
d re
plic
ated
na
tiona
lly
Targ
ets:
Dis
aste
r res
ilien
ce is
in
tegr
ated
into
C
DD
, in
pos
t di
sast
er
reco
nstru
ctio
n, a
nd
in G
over
nmen
t D
AK
fund
ed sc
hool
re
habi
litat
ion
Mai
nstre
amin
g ad
apta
tion
and
resi
lienc
e is
sues
into
PN
PM in
urb
an a
reas
in 4
hi
gh ri
sk p
rovi
nces
, and
in
safe
scho
ol re
habi
litat
ion
usin
g G
over
nmen
t’s D
AK
X
2.2)
Com
mun
ity-b
ased
se
ttlem
entr
econ
stru
ctio
n in
corp
orat
ed a
s a G
over
nmen
t pr
ogra
m
Targ
ets:
Com
mun
ity-b
ased
ho
usin
g re
cons
truct
ion
is
adop
ted
as st
anda
rd
mec
hani
sm fo
r G
over
nmen
t fun
ded
post
dis
aste
r re
cons
truct
ion
GoI
led
disa
ster
fund
(I
MD
FF-D
R) a
s new
m
echa
nism
to in
stitu
tiona
lize
dono
r sup
port
with
Dis
aste
r M
anag
emen
t Fun
d (D
MF)
es
tabl
ishe
d an
d op
erat
iona
l w
ith W
orld
Ban
k as
trus
tee,
pr
ovid
ing
gran
t co-
finan
ce to
X
152
Indi
cato
rT
arge
t/B
asel
ine
Act
ual
Rat
ing
as p
er C
PF C
LR
Rat
ing
Scal
e
Ach
ieve
dM
ostly
A
chie
ved
Part
ially
A
chie
ved
Not
A
chie
ved
Not
V
erifi
edgo
vern
men
t rec
over
y pr
ogra
mTo
tal f
or P
ro-G
reen
En
gage
men
t:N
AN
A3
11
00
Perc
enta
ge o
f Tar
get
Indi
cato
rs fo
r Pro
-Gre
en
E333
ngag
emen
t:N
AN
A60
%20
%20
%0%
0%
153
Sub-annex 3:2: Key Economic & Program Indicators
Forecast in Last CAS Actual Current CPFforecast
Economy (CY) 2012a 2013b 2014b 2015b 2013 2014 2015 2016Growth rates (%)
GDP 6.0 6.3 5.3 5.5 5.6 5.0 4.7 5.3Exports 2.8 5.7 5.7 5.3 4.2 1.0 -0.2 4.7Imports 7.1 4.7 4.8 6.9 1.9 2.2 -3.2 3.6
Inflation (%) 4.4 5.1 6.2 5.2 6.4 6.4 6.8 5.5
National accounts (% GDP)
Current account balance -2.3 -1.6 -2.9 -2.1 -3.2 -2.9 -2.0 -2.6Gross investment 32.7 34.5 33.9 33.8 32.1 32.6 32.3 32.0
Public finance (% GDP)Fiscal balance -2.4 -1.7 -2.6 -2.1 -2.2 -2.2 -1.9 -2.1Foreign financing 0.7 0.6 -0.5 -0.4 0.5 0.5
International reserves(as months of imports) 6.4 6.7 6.8 6.9 5.6 6.7Program (Bank's FY) FY13 FY14 FY15 FY16 FY14 FY15 FY16 FY17
Lending ($ million) 1701 750 1000 1072 500Gross disbursements ($
million)1000 1000 1322 1100 1125
Estimated yearProjected year
154
Sub-annex 3:3 Portfolio Performance and Management
As of Date 08/21/2015
155
Sub-annex 3:4 Analytical and Advisory Activities, FY13-15
Product TF Support
Engagement Area
FY13Economic and Sector Work
Expanding Opportunities and Bld Compentencies for Young Pro-JobsIndonesia Life Long Learning Pro-JobsDevelopment of the Framework and Policies for Infrastructure Pro-GrowthPPIAF Surabaya NRW Management Strategy Pro-PoorPER: Financing Local Governments in ID Pro-GrowthTeacher Reform in Indonesia Pro-Jobs
Technical AssistanceJakarta Fiscal and Bond Issue Pro-GrowthMainstreaming DRR in Indonesia Pro-GreenPromoting Development Effectiveness: Mediation and Community Legal Empowerment Program
Pro-Poor
TF-Aceh Response TA Facility Pro-GrowthSupporting Ind Anti-Corruption Institution GACID - Health & Conflict Prevention Pro-PoorIndonesia Energy Sector Policy Dialogue Pro-GrowthEnhancing Sustainability of Ind.'s Major Agricultural E Pro-PoorSupport for Bureaucracy Reform Pro-GrowthIndonesia's Non Tarriff Measures Pro-GrowthPolicy Dialogue on Services Pro-GrowthFormulation and Implementation of Indonesian Investment Policies Pro-GrowthGeothermal Power Support Program Pro-GrowthIndonesia Viability Gap Financing Pro-GrowthLow-income Housing Policy and Finance Pro-Poor
Product TF Support
Engagement Area
FY14Economic and Sector Work
Local Level Institutions III Pro-PoorIndonesia: Urban Poverty Analysis Pro-PoorIndonesia: Avoiding the Trap Pro-Growth
Technical AssistanceEnergy Efficiency Financing Program Pro-GrowthGas Development Master Plan Pro-GrowthRapid Response Supp. on Fin. Sec. Policy Pro-GrowthDisaster Risk Financing Pro-GreenCorruption Prevention Supports GACREDD Special Advisory Service Pro-Green
156
ID - Logistics and Connectivity Pro-GrowthSupp. for Dev. Gender Engagement in ID GenderSupport for Social Security Reform Pro-JobsIndonesia SP Engagement TA Pro-JobsRapid Response Supp. on Trade Mon. & Pol Pro-GrowthJakarta Metro Transport Agency Workshop Pro-GrowthWSP-Advisory Services Pro-PoorID-TF Local Government Capacity Development Pro-GrowthWSP - Program Administration Pro-PoorLampung Water Distribution PPP Review Pro-Growth
ProgrammaticSupporting ID Corruption Pevention Supports GAC
ID-TF CPDA Implementation Support Pro-Poor
Product TF Support
Engagement Area
FY15Economic and Sector Work
ID-HE Strategic Studies Pro-Jobs
Indonesia Forestry and Non-Forestry Land Policy Stocktaking Pro-Green
Technical AssistanceID - Higher Educ Intro/Dissemination Pro-Jobs
EITI CSO support Indonesia Pro-Growth
Indonesia Clean Stove Initiative Pro-Green
Indonesia Beverage Crops Value Chains TA Pro-Poor
TA- Food Security Policies in Indonesia Pro-Poor
Technical Assistance to KPDT Pro-Poor
Indonesia #10249 Payment System Strengthening #10249 Pro-Growth
Access to Islamic Finance for SMEs Pro-Growth
Supporting Financial Sector Development Pro-Growth
PNPM Mandiri RLF Capacity Bldg & Sust. Pro-Poor
Supp. for Strengthening Sub-National PFM Pro-Growth
Technical Review and Support for Jakarta Flood Management System Pro-Growth
Support for BR Implementation and M/E Pro-Growth
ID HIV Economic Analysis Pro-Poor
ID-TF PNPM Supv. and Monitoring (Urban) Pro-Poor
PNPM Field Operations Pro-Poor
ID-TF for PNPM Communication Strategy Pro-Poor
Disaster and Climate Risk Review Pro-Green
ID: eServices Secure Govt Network Pro-Growth
Radio Spectrum Management for Broadband Pro-Growth
Broadband-ICT Fund-Advisory Support Pro-Growth
Indonesia Port and Road Sector Dialogue Pro-Growth
Structure Assessment and Dev. Op. Procedure for the Ind. Water and Sanitation Invt. Pro-Poor
Ind - Modernizing Water Management Systems Pro-Poor
Rural Sanitation Capacity Building Pro-Poor
157
Strengthening the Ind. National Water & Sanitation Info Services Center for Improved Planning
Pro-Poor
Indon. Rural Sanitation Market Expansion Pro-Poor
Support the implementation of Indonesia National Stretegy on Access Justice Pro-Poor
Prep. Of Technical Guidelines for Safe Schools Pro-Green
TA and Support to Bappenas and Kemenko Kesra (POKJA Pengendalian PNPM Mandiri) Pro-Poor
Technical Review and Support for Jakarta Flood Mgt System Pro-Growth
Supporting the transition of Key Lessons of WASPOLA Facility Pro-Poor
Knowledge Management ProductLearning from the Updated Political Economy on Sanitation in Indonesia Pro-Poor
External TrainingBuilding Performance Audit Capacity of BPK Pro-Growth
ProgrammaticRaising the quality of education Pro-Jobs
Early Childhood Education & Development Pro-Jobs
Improving PFM at the Subnational Level Pro-Growth
Indonesia Health Programmatic AAA Pro-Poor
158
Sub-
anne
x 3:
5a: O
pera
tions
Por
tfol
io (I
BR
D/I
DA
and
Gra
nts)
As o
f Dat
e 07
/31/
2015
159
Sub-
anne
x 3:
5bC
omm
itted
and
Dis
burs
ed O
utst
andi
ng In
vest
men
t Por
tfol
io (I
FC)
As o
f 07/
31/2
015
(In
USD
Mill
ions
)
160
ANNEX 4. SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT
Indicator FY13 FY14 FY15 FY16
Portfolio Assessment
29.0 26.0 22.0 22.0
3.6 3.5 4.2 4.5
17.2 34.6 31.8 31.8
10.6 28.3 31.0 31.0
17.2 34.6 31.8 31.8
10.6 28.3 31.0 31.0
Disbursement Ratio (%) 15.5 23.2 14.4 1.9
Portfolio Management
CPPR during the year (yes/no)
Supervision Resources (total US$)
Average Supervision (US$/project)
Memorandum Item Since FY80 Last Five FYs
Proj Eval by OED by Number 331 30
Proj Eval by OED by Amt (US$ millions) 33,708.4 5,058.2
% of OED Projects Rated U or HU by Number 27.7 40.0
% of OED Projects Rated U or HU by Amt 23.5 28.5
a. As shown in the Annual Report on Portfolio Performance (except for current FY).
b. Average age of projects in the Bank's country portfolio.
c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP).
d. As defined under the Portfolio Improvement Program.e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year:
Investment projects only.
As of Date 10/02/2015
* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year.
161
ANNEX 5. OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS)
355
1,562.07
of which has been repaid 47.74
Total Disbursed (Closed) 13,886.68
of which has been repaid 13,162.57
Total Disbursed (Active + Closed) 15,448.75
of which has been repaid 13,210.31
Total Undisbursed (Active) 2,830.84
Total Undisbursed (Closed) 0.00
Total Undisbursed (Active + Closed) 2,830.84
Project IDDevelopm
entObjectives
Implementation
Progress
Fiscal Year IBRD IDA Grants Cancel. Undisb. Orig. Frm Rev'd
P127813 S MS 2014 47.4 0.0 0.0 39.9 9.1 0.0
P130389 S MS 2014 10.0 0.0 8.5 1.9 0.0
P113078 S MS 2012 175.0 0.0 0.0 170.2 295.2 29.4
P085133 MS S 2005 55.0 5.0 0.0 0.0 0.0 0.0
P096532 MS MS 2009 50.0 0.0 0.0 5.4 5.4 5.4
P115763 S MS 2014 2.7 0.0 1.1 0.8 0.0
P092218 S S 2009 100.0 0.0 0.0 0.1 -99.9 0.0
P111577 S MS 2010 720.0 0.0 0.0 454.1 -45.9 14.1
P128832 MS MU 2013 650.0 0.0 0.0 253.4 253.4 55.9
P121842 MU MU 2013 95.0 0.0 0.0 83.0 30.2 0.0
P085375 S S 2006 99.9 137.5 0.0 36.4 -72.0 -9.2
P118916 S S 2013 29.6 0.0 0.0 28.6 2.5 0.0
P117323 MU MU 2011 225.0 0.0 0.0 148.5 0.0 0.0
P111034 MS MS 2012 139.6 0.0 0.0 102.5 61.6 0.0
P125405 S MS 2013 266.0 0.0 0.0 86.2 86.2 0.0
P130048 MS S 2012 2,000.0 0.0 0.0 0.0 0.0 0.0
P118150 MS MS 2011 112.7 0.0 0.0 47.1 0.0 0.0
P123994 MS MS 2014 325.0 0.0 0.0 325.0 115.0 0.0
P106384 MU MU 2011 65.0 0.0 18.0 45.6 53.6 4.4
P117243 MU MU 2013 80.0 0.0 0.0 55.2 32.7 0.0
P112158 MU MU 2011 640.0 0.0 0.0 633.5 381.0 271.0
P114348 MS MS 2011 150.0 0.0 0.0 97.4 78.9 0.0
P090990 MU MU 2011 250.0 0.0 0.0 218.8 156.3 0.0
6,275.2 142.5 12.7 18.0 2,840.4 1,346.0 371.0
a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.
As of 08/31/2015
Sustainable Management of Ag Research
Upper Cisokan Pumped Storage Hydro-E
Water Resources and Irr Mgmt Program 2
Western Indonesia National Roads Impro
Overall Result
* Disbursement data is updated at the end of the f irst w eek of the month.
Jakarta Urgent Flood Mitigation Project
National Community Empowerment Progr
Progr for Econ Resilience, Inv & Soc Ass
Scholarships Program
Second Power Transmission Developme
Strengthening Indonesian Statistics
ID-Local Government and Decentralization
ID-PNPM RURAL 2012-2015
ID-Research and Innovation in S&T
ID-WSSLIC III (PAMSIMAS)
Indonesia Infrastructure Guarantee Fund
Indonesia Power Transmission Developm
Coremap III
Geothermal Clean Energy Investment Pro
Govt Finl Mgt & Revenue Admin Project
ID: Dam Operational Improvement (DOISP
ID-HCFC Phase-out in the PU Foam Secto
ID- Indo Infrastructure Finance Facility
Supervision Rating Original Amount in US$ Millions
Project Name
COREMAP 3
Active Projects Difference BetweenExpected and ActualLast PSR
Closed Projects
IBRD/IDA*
Total Disbursed (Active)
162
ANNEX 6 STATEMENT OF IFC’S HELD AND DISBURSED PORTFOLIO COMMITTED AND
OUTSTANDING PORTFOLIO
As of 08/31/2015 (In USD Millions)
163
ANNEX 7. CONSULTATIONS OF THE DRAFT CPF
The World Bank Group carried out wide-ranging consultations with cross-section of stakeholders including civil society organizations, faith-based organizations, the private sector, and development partners. The following is a summary of comments from the consultations: With Civil Society
Consultations with the civil society organizations were conducted on September 21, 2015 in Jakarta, on September 29, 2015 in Makassar, on October 8, 2015 in Yogyakarta, and on October 12, 2015 in Jakarta. Over 160 participants attended in these four sessions.
Civil society participants emphasized concern for the unmet needs and the inequality of access suffered by people living in the forest, coastal, and remote areas. It was felt that central government-led programs were not able to reach the neediest and that WBG program should prioritize interventions at the local government level and support holistic strategies to reduce inequality, especially in these remote areas. There should be a clear strategy for regional development, especially for Eastern Indonesia, where the tourism sector could thrive.
Poverty should be viewed at the household level and not at the individual level. Programs may be more effective if they have mechanisms in place to help families manage external shocks such as rice price increases. The WBG should increase its role in optimizing the national social insurance system and improving programs to safeguard the poor and vulnerable, including groups with disabilities.
Enhanced investment in human capital, including vocational training and capacity building should be a priority and more investment could improve local service delivery. CSOs expressed strong support for improving the quality of local services, particularly teacher quality and access to quality healthcare. Several civil society organizations highlighted the need to strengthen the quality of teachers through the use of technology. Others suggested that the WBG should work directly with local governments to build their capacity. Many CSOs urged the WBG to assist in the effective implementation of the Village Law to ensure better governance and service delivery.
Some CSOs emphasized that the ‘Landscape Management’ engagement area should be careful not to marginalize farmers. 43 percent of land in Indonesia is affected by contradicting regulations and the WBG was encouraged to work directly with farmers.
Improving energy access is a priority, and the WBG could support bottom-up approaches including empowering villages and sending engineers to remote and coastal areas to teach villagers to build their own energy capacity. CSOs would also like the WBG to explore investments in solar energy and hydropower.
Governance issues were raised and it was suggested that proposed programs, particularly related to revenue collection and public spending, should put in place mechanisms to address potential irregularities. The CSOs also suggested that the WBG should encourage more public participation in pushing for social accountability in this sector.
CSOs familiar with project implementation urged the WBG to focus as much on ‘process’ as on outcomes. At the design stage, they proposed that the project approval process be streamlined to realize results sooner, and that continuity should be part of the selectivity filter for project selection. CSOs also recommended more participation of local communities and non-governmental organizations at the project planning stage and that equal attention should be paid to social cohesion as well as targets for economic growth. Consistent reviews of previous programs and proper planning for an ‘exit strategy’ was also encouraged so that programs could successfully continue without WBG involvement.
164
With the Private Sector Leaders of the private sector expressed concern about the lack of proper education and skills of the Indonesian workforce. They stressed the need for government to improve the educational system to deliver the specialized skills needed in a modern economy. They also highlighted the lack of investment in essential infrastructure including power generation and transmission and the slow progress in the regulatory reform necessary to unlock private capital for investment. Those from the manufacturing sector were particularly concerned about the need to improve Indonesia’s competitiveness, particularly compared to regional competitors, through better infrastructure, logistics, skills and incentives (including tax).
With Development Partners
Consultations with the development partners were conducted on September 16, 2015 with 20 participants.
Development partners supported the analysis in the SCD and the ambitiousness of the engagement areas. They looked to WBG to lead the way on some of the most difficult development challenges where progress had been disappointing over the last several years including in the areas of environment, implementation of large scale infrastructure, the business climate and public sector reform. They agreed that the mode of delivery was important and that filters regarding impact, accountability and government ownership would be determinants of success. They expressed interest in working closely with WBG, supporting the implementation models where bilateral grant assistance either through World Bank trust fund or in parallel programs were leveraged by WBG investment projects and implementation support.
With an ambitious program that involved substantial investment, a strong accountability framework to assess progress would be needed.
165
Map
of I
ndon
esia