Indonesia continues to post significant economic growth. The country’s gross national income per capita has steadily risen from $2,200 in the year 2000 to $3,563 in 2012.
In terms of macroeconomic stability, Indonesia has managed to fulfill many of its fiscal targets, including a significant drop in Debt-to-GDP ratio from 61 percent in 2003 to 24 percent in 2012.
Indonesia has formulated a long-term development plan which spans from 2005 to 2025. It is segmented into 5-year medium-term plans, each with different development priorities. The current medium-term development plan covering 2009-2014 is the second phase and focuses on:
• promoting quality of human resources
• development of science and technology
• strengthening economic competitiveness.
However, considerable challenges remain.
Out of a population of 234 million, more than 32 million Indonesians currently live below the poverty line and approximately half of all households remain clustered around the national poverty line set at 200,262 rupiahs per month ($22).
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 2009 shows that Indonesia still suffers 307 deaths for every 100,000 live births, while the MDG aims to reduce this to 105 deaths by 2015. Maternal mortality remains high, and may be an MDG target that will not be met.
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 still positive, may also be impeded regulatory uncertainties, shortcomings in infrastructure provision, and adjustments in minimum wages.
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 emerging status as a middle-income country.
To remain relevant and responsive to the needs of Indonesia, the Bank Group will continue to call on a broad range of instruments and knowledge services to respond to the challenges of each of the areas in which we engage.
At the end of 2012, the World Bank Group approved the new Country Partnership Strategy for Indonesia. This strategy, developed in consultation with various stakeholders, is governing the World Bank Group’s program from fiscal years 2013 to 2015. The new strategy is aligned with the country's Master Plan for "Acceleration and Expansion of Indonesia's Economic Development 2011-2025" and will focus on four main areas of engagement:
• Pro-Growth: by providing support to increase connectivity and logistics performance, improve the regulatory environment for competition and innovation, maintain financial sector stability and enhancing access to credit,boost the quantity and efficiency of infrastructure investment, and improve the quality of public spending and financial management at the national and local levels.
• Pro-Jobs: by improving the overall governance and management of the education system, through improving the quality and performance of teachers, enhancing human resource capacity in Research &Development, and facilitating the institutional transformation required to implementation reform of social insurance.
• Pro-Poor: by providing support to the national targeting system in order to better reach poor and vulnerable households, to enhance the design and performance of the Government's community development programs, to the promotion of agricultural revitalization, and to the improvement of health and nutrition outcomes, particularly of the poor, by supporting improved access to quality health care, including maternal and child health services and enhanced HIV/AIDS surveillance, as well as to increased access to safe water and sanitation.
• Pro-Green: byhelping to enable the implementation of Indonesia's REDD+ Strategy, the protection of coral and marine resources, and the scaling up disaster and climate risk reduction and adaptation measures. Support would be provided through knowledge services and mainly grant financing, along with IFC investments.
In addition to the four main engagement areas, the World Bank Group will also engage in two cross-cutting issues, that is, gender, as well as governance and anti-corruption.
World Bank’s lending portfolio in Indonesia consisted of 70 active projects as of April 2013, with a total commitment of worth $7.612 billion, and made for community empowerment, government administration, infrastructure, energy, and rural development.
Engagement of the World Bank Group
International Finance Corporation (IFC), a member of the World Bank Group, made investments of close to $300 million in eight projects and spent almost $7 million on advisory projects in Indonesia during fiscal year 2012 (July 2011 – June 2012), expanding access to financial services for millions of Indonesians, developing vital infrastructure, improving corporate practices, and fighting climate change. Our work has achieved tremendous results. In Indonesia, we have 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. This increased their yearly income by more than 9 million dollars in total – that’s 800 dollars for each farm each year. IFC has an outstanding portfolio of about $1.2 billion of investments of which about $900 million are IFC’s own account
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 currently supports PNPM Mandiri, Indonesia’s lauded community-driven development program, increasingly the model for similar CDD programs in nations around the world. 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 2,892 villages throughout eight provinces, with over 3.6 million beneficiaries, half of whom are women. Some of the program’s results include helping over 365,000 children receive immunizations, addressing malnutrition in some 185,000 children, and ensuring some 770,000 pregnant women receive iron supplements.
In the field of education, the World Bank-financed Early Childhood Education and Development (ECED) Project, launched in 2007, improves access to services for over 3,000 low-income villages. Some 6,000 ECED centers have been established in 50 districts across Indonesia, with more than half a million children aged 0 to 6 attending these centers.
Eight years since a devastating tsunami struck Aceh and Nias, the Multi Donor Fund supporting the reconstruction process ended in December 2012. The fund pooled a total of $655 million in grants from 15 donors. MDF’s achievements showcase partnerships and Indonesian resilience at its best: the reconstruction or rehabilitation of some 20,000 houses, over 3,000 km of village roads, nearly 10,000 local infrastructure projects, over 1,200 public buildings, and five national and international ports. It is a true testimony to the determination of the Indonesian people to rebuild, supported by a united global community. The MDF has also brought valuable lessons for Indonesia and the world about how to respond to disasters — and how to reduce disaster risks in the future.
The experience in Aceh was replicated in Java when a series of natural disasters occurred in 2006. The Java Reconstruction Fund was then established and pooled $95 million. Upon its closure in December 2012, the JRF had helped build more than 15,000 houses, and completed close to 4,000 local infrastructure projects. The program also assisted over 15,000 micro and small enterprises to develop their businesses in order to improve their earnings.
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.