Overview

  • The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups -- has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s. The country’s GDP per capita has steadily risen, from $857 in the year 2000 to $3,603 in 2016. 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.  An emerging middle-income country, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate to more than half since 1999, to 10.9% in 2016.

    Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional) each with different development priorities. The current medium-term development plan – the third phase of the long-term plan – runs from 2015 to 2020. It focuses on, among others, infrastructure development and social assistance programs related to education and health-care.  Such shifts in public spending has been enabled by the 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.

    A continued slump in demand for commodities, which stimulated Indonesia’s economic boom in the past decade, has led to moderating GDP growth. Trade has slowed, as has expansion of fixed investment, and domestic consumption – long the main driver of growth – is also less buoyant. These developments have led to a slower pace of poverty reduction.

    Out of a population of 252 million, more than 28 million Indonesians still live below the poverty line. Approximately 40% of the entire population remain vulnerable of falling into poverty, as their income hover marginally above the national poverty line.

    The slower pace of job creation is another challenge to efforts at reducing poverty, largely affecting the 1.7 million youth who enter the workforce each year. . Employment growth is now slower than population growth.

    While there are greater efforts at improving basic public services, the quality of health clinics and schools is uneven by middle income standards, contributing to alarming indicators, particularly in health.

    For example, the maternal mortality rate in Indonesia is 126 maternal deaths per 100,000 live births – higher than the Millennium Development Goal of 102 maternal deaths per 100,000 live births. 1 in 3 children under the age of 5 suffer from stunting, or shorter height, which reflects impaired brain development that will affect the children’s future opportunities. If not reversed, the gap between rich and poor, already increasing in recent years, may widen. At 0.40, Indonesia’s GINI coefficient – a measure of inequality - is higher than in neighboring countries.

    To strengthen the country’s investment climate and economic growth, the government continues to announce policy reforms intended to cut red-tape. Investors welcome the policy reforms, which include opening sectors for investment and reducing high logistics costs.

    Last Updated: Sep 19, 2017

  • The partnership between Indonesia and the World Bank Group has evolved over six decades to become one of the Bank Group’s 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 responsive to the needs of Indonesia, the Bank Group continues to call on a broad range of instruments and knowledge services.

    In December 2015, after broad consultations with government, civil society, and the private sector, the Board approved the 2016-2020 Country Partnership Framework (CPF) for Indonesia, aligned with the priorities of Indonesia’s medium-term development plan, the RPJMN.

    The CPF is expected to deliver over the next four years one of the largest country programs of the World Bank Group.  If fully implemented, IBRD lending and the IFC (International Finance Corporation) would deliver $10 billion in equity, loans, guarantees, and mobilization. Four of the engagement areas of the CPF are focused on strengthening Indonesia’s infrastructure sector, including energy, an area of engagement where IBRD and IFC are working seamlessly.

     

    Engagement of the IFC

    International Finance Corporation (IFC) blends investment and advisory services to foster sustainable economic growth in Indonesia’s private sector.

    Since 1968, IFC’s investments, including funds mobilized in Indonesia, stands at $7.7 billion.

    IFC aims to help Indonesia’s private sector attract investments, create jobs, and boost sustainable economic growth with the highest overall exposure in the financial markets, chemicals and power sectors.

    IFC’s Advisory Services portfolio comprises 18 advisory projects and $34.7 million in funds under management.

    Last Updated: Sep 19, 2017

  • Recognizing the importance of helping those in need to help themselves, the World Bank supports the government’s Family Hope Program, which strives to end the cycle of poverty among Indonesia’s poorest.  Family development sessions and learning materials jointly developed with World Bank assistance are included in the program, to help mothers have a better understanding of health and nutrition, good parenting practices, child protection and financial management. The program is currently assisting 3.5 million families improve the education and health outcomes of their children, and the government plans to expand the program to reach 10 million families in 2020.

    The World Bank’s flagship programs address urgent needs facing Indonesia.  The Generasi program provides incentivized block grants to communities to address three lagging Millennium Development Goals: maternal health, child health, and universal education. Generasi is currently active in 5,488 villages throughout 11 provinces, reaching nearly 5 million people. Some of the program’s results include helping hundreds of thousands of children receive immunizations, addressing malnutrition, and ensuring that nearly 1 million pregnant women receive iron supplements.

    The World Bank is also supporting the government’s program, PAMSIMAS, to provide clean water and sanitation services,. Active across 32 provinces, PAMSIMAS is a collaboration between local governments and communities, and widely considered to be the most cost-effective option for scaling up water and sanitation services. Over the next few years, PAMSIMAS will expand to serve 26,000 villages in around 403 districts.

    Today, Indonesia is comprised of more than 500 autonomous local governments that have the potential to accelerate growth in the districts. The Local Government Decentralized Project works with local governments in ensuring that the transfers allocated by the central government for infrastructure investments are well spent, with improvements in transparency and accountability. Strong government buy-in has followed, and the output-verification approach is now being scaled up to 30 provinces nationwide, with an expected 450 districts participating by 2018.

    With increasing growth of the country’s urban population, the Bank is helping address the lack of local infrastructure in urban slums using a community-driven approach. The PNPM Urban program has helped over 30 million people build or rehabilitate infrastructure in their communities, including roads and water supply facilities. The program also boosts incomes by providing micro-credit services and training in financial management. PNPM Urban is part of PNPM Mandiri, the government’s largest community-driven development program which was active in 6,000 sub-districts and 70,000 villages across the country.

     

     

    IFC Results

    Impact in Manufacturing: IFC supported the construction of an ammonia plant in Central Sulawesi province. With an annual capacity of 700,000 metric tons upon completion, the development of the new plant is in line with the Indonesian government’s focus on increasing value-added manufacturing of industrial products which utilize the country’s abundant natural resources. The plant is expected to create more than 1,600 direct and indirect jobs around the Banggai Regency, located in Central Sulawesi.

    Supporting Infrastructure: IFC is supporting PT Indonesia Infrastructure Finance (IIF) to provide long-term finance for Indonesia’s infrastructure projects. IIF has invested in highways, seaports, airports, telecommunications, hydro and gas-fired power plants, and renewable energy. 

    Addressing Climate Change: IFC developed EDGE (Excellence in Design for Greater Efficiencies) as a green building-certification system that proves the business case for building green in emerging markets. In Indonesia, IFC is partnering with the Green Building Council Indonesia (GBCI) to launch the EDGE-certification program which is being implemented by a leading property developer at several of its residential and commercial development projects.

    Over the next seven years, IFC and GBCI aim to award EDGE certification to 20 percent of all new construction projects, around 80,000 housing units. This level of penetration will help cut 1.2 million metric tons of greenhouse-gas emissions per year, avoid 500 megawatt-hours of energy use, and save almost $200 million per year by 2021.

    Expanding micro, small, medium enterpirse: IFC has provided lending for PT Bank Tabungan Pensiunan Nasional Tbk (BTPN) to help the mid-size bank increase lending to low-income families, micro and small businesses, and women entrepreneurs. The loan from IFC will expand access to finance in Indonesia, including an estimated two million women entrepreneurs. 

    Last Updated: Sep 19, 2017



LENDING

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

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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In Depth

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Urban Development

World’s most rapidly urbanizing region should create more opportunities and reduce inequality.

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Reducing childhood stunting

New evidence on the need for a multi-sectoral approach to reducing childhood stunting.

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Project Map

Take a closer look at where our projects are located in Indonesia

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Indonesia Economy Updates

Indonesia’s economy remains positive and future potential is even greater, but ongoing challenges and risks remain.

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Results Profiles

Take a look at what results the World Bank projects have achieved in Indonesia.

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Open Data

The World Bank provides free and open access to a comprehensive set of data about development in countries around the globe, including ...

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INDO-DAPOER

The Indonesia Database for Policy and Economic Research has sub-national data for almost 200 development indicators.

Additional Resources

Country Office Contacts

Jakarta, (+62-21) 5299-3000
Indonesia Stock Exchange Building, Tower 2, 12th Floor. Jl. Jenderal Sudirman Kav 52-53, Jakarta 12190
wbindonesia@worldbank.org
Washington, +1-202-473-4709
1818 H Street, N.W, Washington, DC 20433
eastasiapacific@worldbank.org