Indonesia

Indonesia faced major challenges in meeting the demand for infrastructure investment during the late 1990s. Infrastructure investment fell from above 7 percent of gross... Show More + Domestic Product (GDP) in 1995 and 1996 to around 3 percent in 2000 as the Government focused on fiscal consolidation and cutting public debt following the 1997/1998 Asian financial crisis. Poor levels of infrastructure development are also holding back Indonesia's growth potential and poverty reduction progress. The symptoms of more than a decade of low infrastructure investment include increasing congestion in urban areas, high levels of inter-island cargo transport costs, and limited access to improved sanitation. Improving infrastructure is also the main focus of the master plan for acceleration and expansion of Indonesia's economic development 2011-2025, which was launched in May 2011. There have also been some supportive legislative developments such as the creation of the risk management unit in the Ministry of finance and the enactment of Presidential regulation, which sets out the criteria that apply to Public Private Partnership (PPP) projects requiring government financial support. The government has recognized the challenges of the road sector and has set an ambitious target in the medium term development plan. The road sector has also received increasing budget allocations, accounting for example more than 60 percent of total public expenditure on transport in 2008. At the same time, the government has also initiated reforms of the fiscal and legislative framework to further improve road sector performance and management, as well as to attract greater private sector participation. The government has also set up various institutions and financing facilities to support PPP transactions, to assist with high-level coordination of PPP issues and a Risk Management Unit (RMU) in the Ministry of finance to assess projects that require financial support from the government. Show Less -

Indonesia is an oil producing country and is the only East Asian member of the Organization of Petroleum Exporting Countries (OPEC). Over the years, this endowment of... Show More + oil resources has been steadily exploited with substantial rents flowing to the government from production and exports of crude oil. The country is also one of the world's largest exporters of another petroleum resource, liquefied natural gas. The introduction of a new oil and gas law in 2001 (the law) provides the policy and legal basis for moving away from the present ineffective and fiscally inefficient fuel pricing and subsidy regime, towards the goal of an independent, reliable, transparent, competitive, efficient, and environmentally friendly petroleum sector that encourages the growth of the national potential and role and at the same time does not exclude the Government of Indonesia (GoI) fully meeting its social responsibility towards certain community groups. Implementation towards achieving the goals set out in the Law has been slow and hesitant. The Indonesian treasury is still saddled with a rather inefficient and ineffective fuel pricing and subsidies regime. This present report identifies a way forward for Indonesia to meet the requirements of the Law. That way forward will progressively eliminate the waste inherent in the present system, signal correct market behaviors to consumers, achieve large fiscal savings and help the economy grow while the any negative impact on the poor and vulnerable are cushioned. Chapter one tracks the recent history to the present situation in terms of petroleum fuels utilization, supply, pricing and subsidies, and identifies some of the key impacts of the prevailing policies. Chapter two identifies the target petroleum fuel market regime based on the goals established in the law, evaluates where the present policy falls short, and proposes measures that will help Indonesia achieve the outcomes that are consistent with the law. Chapter three proposes a step-wise transition that will be required to transform the present regime and at the same time opening the oil products market to the beneficial forces of competition and restructuring Pertamina's downstream operations. Show Less -

Indonesia is one of the largest commodity exporters in the world, and given its mineral potential and expected commodity price trends, it could and should expand its... Show More + leading position. Commodities accounted for one fourth of Indonesia's Gross Domestic Product (GDP) and more than one fifth of total government revenue in 2007. The potential for further commodity growth is considerable. Indonesia is the largest producer of palm oil in the world (export earnings totaled almost US$9 billion in 2007 and employment 3.8 million full-time jobs) and the sector has good growth prospects. It is also one of the countries with the largest mining potential in view of its second-largest copper reserves and third-largest coal and nickel reserves in the world. This report consists of seven chapters. The first six chapters present an examination and an analysis of the factors driving increased commodity prices, price forecasts, economic impact of commodity price increases, effective price stabilization policies, and insights from Indonesia's past growth experience. The final chapter draws on the findings of the previous chapters and suggests a development strategy for Indonesia in the context of high commodity prices. This section summarizes the contents of the chapters and their main findings. Show Less -

The province of Papua of the Republic of Indonesia was provided special autonomy under law 21-2001 in recognition of the fact that 'the management and use of the natural... Show More + wealth of Tanah Papua has not yet been optimally utilized to enhance the living standard of the natives, causing a deep gap between the Papua province and the other regions, and violations of the basic rights of the Papuan people.' The goal of special autonomy was to help Papua and Papuans catch up to the rest of Indonesia in terms of living standards and opportunities. Yet, now almost a decade later, and after the split into two provinces: Papua and West Papua, progress toward this goal has been slow. In recognition of this, the Indonesian central government issued presidential instruction 5-2007 on the acceleration of development of Papua and West Papua instructing all relevant technical ministries to devote special attention to the two provinces and to coordinate their programs with the governors of both provinces. Transport is a key piece of the development puzzle and is a high priority for all levels of government in Papua and West Papua. Yet, despite this, and large amounts of investment channeled toward the sector, the people of Papua and West Papua are not receiving substantially better transportation services than they were before special autonomy. This report aims to set out a set of priorities that transport development must follow in Papua and West Papua if investments are to be productive and remain useful for their entire design life. Show Less -

The importance of forests in mitigating climate change, balanced with the need for participation of forest-dependent communities in developing forest conservation initiatives,... Show More + is without question. Of relatively recent interest is determining how governments at all levels, the private sector, non-government organizations and local communities can work together to ensure equitable distribution of benefits from initiatives targeted at reducing emissions from deforestation and forest degradation (REDD). Many countries have expressed their preference for forestry offsets, which are seen as an effective mechanism to channel carbon finance funding to developing countries capable of protecting their forests. To successfully accomplish this, challenges and questions remain, not least of which are: accurately measuring forest carbon emissions savings; the types of forests that can/should be included; ensuring REDD forests can remain standing for the long-term; effectively preventing illegal logging and losses due to fire; and the avoidance of leakage, i.e. the cessation of logging in one area leading to deforestation in another. In Asia, Indonesia has become the epicenter for REDD trial programs because of its existing, large tracts of forest undergoing rapid deforestation. With nearly 100 million ha of state forests, Indonesia contains the world's third largest area of tropical forests (after Brazil and Congo) and is, consequently, one of the world's largest greenhouse gas emitters, making Indonesia a key player in forest-related carbon projects. Show Less -

The first phase of the strategic assessment for spatial planning in Papua province, Indonesia, was carried out during the last quarter of 2007 and the first quarter... Show More + of 2008. The strategic assessment has followed an analytical and participatory approach for mainstreaming environmental and social issues into the decision-making and implementation process in Papua. However this assessment is only the first stage of the decision-making process. The assessment of spatial data for Papua reveals that the majority of Papua and West Papua are still covered with intact forests and that, to date, deforestation rates have been minimal over the last decade. The forestry sector is extremely important but also a source of dissension. Central government would prefer to see large-scale logging and the conversion of forests to oil palm plantations; the provincial government has committed itself to the development of community-based logging. Papua is a paradox in its under-development. On the one hand the province has extensive natural resources reserves and significant public expenditure budgets, and even before special autonomy and decentralization, Papua was the second richest province in fiscal terms. At the same time, there is intense competition by a range of stakeholders competing for control over the province's rich natural resources, and in particular its mineral resources. Within this context, central government efforts to maintain control over the management of the province's resources have been hotly contested, and regional autonomy and Papua's special autonomy law have encouraged both local governments and local people to assert control over natural resources and the extraction of these resources. Show Less -

This economic update highlights the following in its overview: growth in Aceh's non-oil and gas economy slowed in the first half of 2008 as the reconstruction effort... Show More + neared an end; the agricultural sector grew by 4.5 percent in the first six months of 2008, slightly higher than in the first six months of 2007; despite low growth, private consumption seems relatively unaffected; and inflation is declining. For the first time since the tsunami, inflation in Aceh is lower than the national level. This paper includes sections on: overview; gross domestic product; employment; trade; banking sector; inflation; and economic outlook 2008. Show Less -

Indonesia stands at the threshold of a new era and at an important juncture of its history. After the historic economic, political and social upheavals at the end of... Show More + the 1990s, Indonesia has started to regain its footing. The country has largely recovered from the economic and financial crisis that threw millions of its citizens back into poverty in 1998 and saw it regress to a low-income status. Recently, it has once again crossed the threshold, making it one of the world's emergent middle-income countries. Likewise, poverty rates that increased by over one-third during the crisis fell back to pre-crisis levels in 2005, despite rising somewhat in 2006 largely driven by hefty rice price increases in late 2005 and early 2006. Meanwhile, politically and socially Indonesia has seen some major transformations: it is now a country with a vibrant emergent democracy, a newly decentralized government, and far greater social openness and public debate. The purpose of this report is to identify the nature and key constraints to poverty reduction in today's Indonesia and to provide concrete recommendations on how Indonesia can move forward to achieve its poverty reduction objectives. It aims to contribute to the policy debate and decision-making process in Indonesia by putting forth: (i) new and more comprehensive analysis of empirical poverty diagnostics; and (ii) suggestions on concrete policies and programs for a strategic action-plan to achieve Indonesia's stated poverty-reduction objectives. This report lays out how Indonesia can better align policies and programs to achieve the key poverty indicators in which Indonesia is lagging and that are identified by planning documents such as the National Strategy for Poverty Reduction (SNPK) and Medium-Term Development Plan (RPJM). Show Less -

The scope of this paper is limited to how donors and governments can stimulate owners to realize the potential of water utilities in serving the urban poor. As survey... Show More + data indicates that reliable water utility service is a key aspect of serving the poor, this paper focuses on how Indonesian water utilities (PDAMs) can increase access to the poor. It also touches on tariff reform because the reluctance of PDAMs to connect the poor at an artificially low tariff creates a hindrance to overall reform. However, this discussion does not offer a comprehensive analysis or solutions to PDAM or tariff reforms, topics that have already been covered by several excellent studies. This study draws heavily on recent Indonesian survey data, while offering insights and first-hand accounts from those who have successfully managed water utilities in serving Indonesia's poor. Several water utility Diruts (Direktur Utama or a utility's Managing Director) have been able to serve the people by turning around weak utilities and guiding them to profitability. Their solutions on PDAM management appear in the annexes and apply mainly to PDAM reform, which is needed for sustainable service to the poor. This paper is more concerned with what can be done in the short term to move toward a system based on more reformed utilities that are led by motivated owners serving the poor. In general, while rural settlements are built up and maintained around water sources such as shallow wells, the quick spread of urban pollution due to crowding quickly eliminates clean water sources in those areas. Therefore, it is generally cheaper to find water in settled rural areas than in cities. Furthermore, the significant difference in Indonesia between the sometimes artificially low price of piped water and the high price people are willing to pay for it often results in serious social inequalities, including economic rents, illegal connections, water strongmen, water smuggling from social tariff to commercial tariff areas, and water theft. Show Less -