Chapter Two: Indonesia
| Country program estimate Australia–Indonesia Partnership for Reconstruction and Development (AIPRD) Estimated other ODA Estimated total ODA |
$125.0 million $132.1 million $44.6 million $301.8 million |
Indonesia development indicators
Source: GNI per capita: World Development Indicators, World Bank, 2003; other indicators: Human Development Report, UNDP, 2004.
Despite the devastating impact of the December 2004 Indian Ocean disaster — which, according to World Bank estimates, will cause national GDP growth to fall by 0.1 to 0.4 per cent during 2005 — Indonesia’s national economic prospects remain relatively stable. During 2004 there was evidence of growing confidence in the Indonesian economy, and progress in key areas of economic reform. The economy grew by approximately five per cent, and inflation remained largely under control at around six per cent. Although investment as a percentage of GDP fell to 17.8 per cent at the end of 2003, there were signs of improved investment growth of 11.3 per cent over the first three quarters of 2004, compared to just 1.9 per cent during 2003. Successful democratic parliamentary and presidential elections were held in 2004, important steps towards the consolidation of Indonesia’s democratic transition. The Yudhoyono Government has prepared a National Medium-Term Development Plan which seeks to build on these developments through three objectives: creating a peaceful and secure Indonesia; creating a fair and democratic Indonesia; and improving public welfare.
However, significant challenges remain. According to the World Bank, even though poverty levels in Indonesia are declining (the percentage of people below the international poverty line of US$1 a day fell to 7.2 per cent in 2003), growth has been unequally distributed, and major inroads into poverty still need to be made, particularly in rural areas. The poor still lack access to health and education services, and unemployment in the formal economy remains a major concern, with the open unemployment rate reaching 9.3 per cent in 2004. Investment in human capital and infrastructure from domestic, foreign, government and private sources continues to be inadequate. Conflict still affects several areas of the country and, despite effective action by the Indonesian police, the threat of terrorism remains.
Indonesia’s education outcomes are poor by regional standards. Many teachers lack formal qualifications, educational resources are scarce, education in life skills and vocational subjects is very limited, drop-out rates are high, and there is uncertainty about the roles of national and local governments in the resourcing and regulation of education. Assistance to education is critical for poverty reduction and lays the foundation for economic growth by providing Indonesians with the skills to participate in the workforce.
In recent years the overall health situation of Indonesians has improved. Infant mortality has declined, life expectancy has increased, and a higher number of people now have better access to safe drinking water and sanitation. However, Indonesia’s maternal mortality is still significantly above the levels of neighbouring ASEAN countries and basic health interventions do not always reach the poor. A relatively small number of health conditions cause a large part of the burden of disease in Indonesia, particularly among the poor, and contribute to high levels of avoidable death. These include communicable diseases such as HIV/AIDS, malaria, tuberculosis and childhood infections, as well as nutritional deficiencies and, increasingly, tobacco-related illness.
Corruption continues to be a serious problem, which the Indonesian Government is addressing with the preparation of a national anti-corruption strategy. The newly established Commission for the Eradication of Corruption and Anti–Corruption Court are central to the government’s approach in this area. Legal sector reform is on the government agenda and includes a significant court reform program. However, much work is required to promote efficiency, transparency, predictability and equity in the justice sector.
The destruction caused by the December 2004 Indian Ocean disaster was greatest in Indonesia, with over 120,000 dead, 300,000 missing and 500,000 internally displaced persons. Australia responded quickly with a $33 million emergency relief package, of which $13 million was directed to key agencies (UNICEF, IOM, WHO, WFP), $8 million to Australian, international and in-country NGOs, and the remainder delivered through activities by AusAID, Emergency Management Australia, the Australian Defence Force, and other Australian government agencies. In addition, Australia contributed $12 million to NGO activities across all tsunami-affected countries including Indonesia. The assistance included Australian civilian medical teams, disaster management expertise, and immediate air freight of over 1,000 tonnes of food, water and medical supplies. The relief effort focused on improving health and water and sanitation (with most assistance going to Banda Aceh) and also included small-scale support for the north-west coast including the outlying islands of Nias, Batu, Banyak and Simeulue. Australia played a leadership role in the international community by helping the Government of Indonesia, UN and NGOs coordinate the ongoing response. On 28 March 2005 another earthquake affected islands off the coast of Sumatra. Australia committed $1 million in immediate assistance, along with support from the Australian Defence Force.
Building coherence
While Indonesia welcomed the massive outpouring of international assistance following the disaster, the response also presented Indonesian authorities with serious logistical and coordination challenges. Donors have recognised these challenges and worked together under an Indonesian Government framework for recovery and reconstruction. It is anticipated that the coordinated and cooperative approaches developed for post-tsunami assistance will influence the broader donor‑government dynamic in Indonesia, and provide an impetus for progressing donor coordination and harmonisation more generally.
Australia’s aid to Indonesia will be delivered within this new framework of international coordination and harmonisation. Planning is already underway for activities under the Australia–Indonesia Partnership for Reconstruction and Development (AIPRD). The AIPRD will complement existing approaches, which Australia will expand on in 2005–06 to achieve greater coherence and reinforce impact across the program. Through its activities in Nusa Tenggara and in the Indonesian basic education sector, the aid program will build synergies across Australian aid activities, and develop partnerships with other organisations and donors. In maternal and child health, HIV/AIDS and education, Australia will strategically invest in local and international initiatives, and facilitate other donors’ investment in Australian-supported programs.