New World Bank Financing to Boost Indonesia's Power, Education and Local Governance Sectors

June 8, 2010

Washington DC, June 8, 2010 – The World Bank’s Board of Executive Directors today approved new loans designed to help scale-up two successful Indonesian government programs in the power and education sectors, as well as a for a new project designed to help improve local government accountability on the use of Specific Purpose Grants (DAK) from the central government.

In the power sector, an Additional Finance loan of US$30 million was approved to support efforts by PLN, the national power company, to strengthen its management capabilities by continuing to deploy an Enterprise Resource Planning (ERP) system.  The ERP is an integrated information technology (IT) system that helps better manage PLN’s human resource, materials, and financial management systems.   The approved project will build upon an already successful deployment of the ERP system to PLN’s business units in the islands of Java and Bali, to its operations in Sumatra and Sulawesi. 

“The use of ERP systems in Java and Bali has significantly strengthened our management capabilities by providing timely and accurate financial information that enable us to make better informed decisions,” said Setio Anggoro Dewo, Director of Finance of PLN. Whereas Joachim von Amsberg, Indonesia Country Director of the World Bank said,The ERP systemsin Java-Bali has standardized PLN’s business processes, made them more transparent and improved its internal controls. As a result, there is evidence of greater accountability and governance within the company,”

In the education sector, Additional Financing of US$500 million has been approved to help scale up BOS-KITA (School Operational Assistance – Knowledge Improvement for Transparency and Accountability), which is designed to strengthen school-based management and community participation and, as a result, to further improve the quality of education spending in Indonesia. BOS-KITA builds on the success of BOS – the Government’s program to improve access to quality education for all children aged 7 to 15. This new loan brings the World Bank’s total BOS-KITA financing to US$1.1 billion.

Finally, a new loan worth US$ 220 million was approved for the Local Government and Decentralization project, aimed at increasing the accountability of local governments in their use of Specific Purpose Grants (DAK). DAK grants come from the national budget (APBN) and are generally used to support regions that lack the fiscal capacity to provide physical infrastructure for basic public service delivery. In 2010, total DAK allocation amounts to Rp. 21,13 billion or 2.0 percent of APBN.  The project will reimburse existing DAK grants for infrastructure (roads, water, sanitation, and irrigation) based on reported and verified physical outputs delivered by participating local governments. The State Finance and Development Supervisory Board (Badan Pengawasan Keuangan dan Pembangunan, BPKP) are tasked with verifying these outputs. Up to 81 local governments are eligible to take part in this project.

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