Overview

Despite slowing down in recent years, Indonesia’s growth trajectory remains impressive. The country’s gross national income per capita has steadily risen, from $2,200 in the year 2000 to $3,524 in 2014. Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20.  It has made enormous gains in poverty reduction, more than halving the poverty rate since 1999, to 11.3 percent in 2014.

Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, each with different development priorities. The current medium-term development plan – the third phase of the the long-term plan -- runs from 2015 to 2020, focusing, amongst others, on infrastructure development and improving social assistance programs in education and health-care.  Such shifts in public spending has been enabled by a reform of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor.

Considerable challenges remain in achieving Indonesia’s goals.

Out of a population of 252 million, more than 28 million Indonesians currently live below the poverty line and approximately half of all households remain clustered around the national poverty line set at 292,951 rupiahs per month ($24.4).

Employment growth has been slower than population growth. Public services remain inadequate by middle income standards. Indonesia is also doing poorly in a number of health and infrastructure related indicators, and as a result, may fail to reach some Millennium Development Goals (MDG) targets.

For example, data from 2013 shows that Indonesia still suffers 228 infant deaths for every 100,000 live births, while the MDG aims to reduce this to 105 deaths by 2015. At 190 maternal deaths for every 100,000 live births, maternal mortality also remains high.

Also, despite recent progress, access to improved sanitation facilities currently stands at 68 percent of the population, which remains significantly short of the MDG target of 86 percent.

The investment climate, though generally positive, faces continued regulatory uncertainties, shortcomings in infrastructure provision, and adjustments in minimum wages. However, the establishment by the Investment Coordination Board of a One-Stop-Service for business licensing has encouraged investors.

Last Updated: Apr 17, 2015

The partnership between Indonesia and the World Bank Group has evolved over six decades to become one of our most significant in terms of lending, knowledge services and implementation support. Since 2004, World Bank support for Indonesia has moved towards supporting a country-led and owned policy agenda, consistent with Indonesia’s status as a middle-income country.

To remain relevant and responsive to the needs of Indonesia, the Bank Group continues to call on a broad range of instruments and knowledge services to respond to the country’s diverse challenges.

Currently, a new Country Partnership Framework (CPF) is taking shape, following the beginning in late 2014 of a new government.  The formulation of this framework is being developed in consultation with various stakeholders, from government counterparts to the private sector and civil society groups.  The CPF will govern the World Bank Group’s program from fiscal years 2015 to 2019. 

The World Bank’s lending portfolio in Indonesia consisted of 22 active projects as of April 2015, with a total commitment of worth $6.8 billion, comprising of engagements in community empowerment, government administration, energy, and infrastructure development.

Engagement of the World Bank Group

International Finance Corporation (IFC), a member of the World Bank Group, has invested approximately US$1.5 billion in Indoensia, and its advisory services have about US$23.5 million funds managed.  The top three investments in IFC are in finance and insurance, chemicals, and energy.  The IFC are committed to improving access to finance for 1.6 million people and 5,000 small and medium enterprises, and to increase access to infrastructure for more than 8.5 million people. Through our work advising the Indonesian agribusiness sector, IFC helped improve the productivity of more than 11,000 smallholder farmers. 

The World Bank Group remains the largest provider of development finance and advice for Indonesia, and continues to positively impact development in many sectors.

The World Bank continues to support PNPM Mandiri, Indonesia’s lauded community-driven development program. PNPM Generasi, an off-shoot of the umbrella PNPM Mandiri program, focuses on addressing three lagging Millennium Development Goals: maternal health, child health, and universal education. PNPM Generasi is currently active in 5,488 villages throughout 11 provinces. Some of the program’s results include helping hundreds of thousands of children receive immunizations, addressing malnutrition, and ensuring nearly 1 million pregnant women receive iron supplements.

In the field of education, the World Bank supported the government to implement its teacher reform plans. Under the Bermutu project launched since 2007, over 1.7 million teachers acquired the mandated 4-year college degree as required by the Teacher Law passed in 2005. The project supported further development for teachers through training, research, and establishment of professional working groups at the local level.

The Bank tackles Indonesia’s considerable challenges in disaster risk management by leveraging existing engagements and financing instruments, as well as its access to international best practices. One successful approach actively involves communities in prevention and reconstruction efforts; the use of a free software by communities that produces realistic natural-hazard impact scenarios for better planning, preparedness, and response activities. Also, the success of community-based settlement rehabilitation, or Rekompak, prompted the government to adopt its template for nationwide community housing. Communities are also involved in the Safe School program, whereby the rehabilitation of schools damaged by disasters uses special allocation funds, capital investment and disaster preparedness schemes. 

Through the Geothermal Clean Energy Investment Project, Indonesia will scale up power generation using its vast geothermal resources - the largest in the world.  The goal is to increase capacity to 4,000 Megawatts of geothermal power, which is equivalent to a 40 percent increase of global geothermal power generation.

 


LENDING

Indonesia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments