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1、The World Bank Group in IndonesiaInvesting in Institutions for Inclusive,Sustainable and Competitive IndonesiaShubham ChaudhuriWorld Bank,IndonesiaJakarta,June 4,20081OutlineIndonesia 2008:Doing Well,But Could Do Even BetterIndonesia 2012 and Beyond:The Development AgendaWorld Bank Country Partnersh
2、ip Strategy:Investing in Institutions for Inclusive,Sustainable and Competitive Indonesia2Indonesia 2008:Doing Well,But Can Do Better3Indonesia:Doing Well-An Emerging Dynamic Middle Income CountryMajor Political transformation over the last 10 years-Democratization-Big Bang Decentralization-Historic
3、 Aceh peace agreement(2005)is largely sustaining-Commitment to good governance-Growing sense of confidenceMacroeconomic policies and related reforms have been conducted well-Growth and macroeconomic performance have been increasingly strong-Prudent Fiscal Management-The financial sector is on a much
4、 stronger footing and Indonesia is now accessing alternative sources of finance-Investment is still low but rising fast4Robust GrowthIn 2005,per-capita real GDP for the first time exceeded the high that had been reached in 1997,before the peak of the crisisand,in 2007,growth accelerated to a ten-yea
5、r high of 6.3%,despite a slowing global economy5Prudent Macroeconomic Management Lower budget deficits,a much lower debt-to-GDP ratio,and manageable inflation(though rising recently)6.but Slower Progress on Other Dimensions.7Stability And Growth Are Delivering Less Poverty ReductionThe poverty rate
6、has been declining,but many are near poor and remain sensitive to shocks(including recent increase in soy price,palm oil,rice)Poverty Head CountIncome Distribution8Delivering Fewer Jobs as the Demography Shifts the Labor Force RapidlyUnemployment fell slightly in 2007,but remains high with increasin
7、g high school and university graduates coming into the labor forceUnemploymentChanges in Labor Force(,000)2002-042004-06Youth(15-24)HS&7519211,4772,5292,2293,451 HS966-1,0359Education Remains A ChallengeAccess:While Indonesia has achieved nearly universal primary education at 93.5%,junior secondary
8、net enrollment is still low at only 65.2%and for the poorest quintile it is at only 50%Quality:The 2003 PISA math exam results indicate that Indonesia scores low and lags behind in student learning2530354045505560Hong Kong,ChinaJapanKoreaPolandSpainRussian FederationPortugalGreeceThailandMexicoIndon
9、esiaBrazilReading 2000Reading 2003Math 2000Math 20032003 PISA Math Results Junior Secondary Net EnrollmentSource:Various years of Susenas00.10.20.30.40.50.60.70.80.91998199920002001200220032004Enrollment Rate1(Poor)234510Transitions To Secondary&Tertiary Education Are Lagging.11Under-performing On S
10、ome Critical Health Outcomes12Environmental Degradation and Unsustainable Depletion Of Resourcestwo-thirds of Indonesians live in rural areastwo-thirds of Indonesians live in rural areas and are directly or indirectly dependent on common land,coastal,and environmental resources that are being rapidl
11、y depletedbeing rapidly depleted the other thirdother third is affected by environmental conditions in urban areasin urban areas,from water water and air pollutionair pollution,congestion and noisecongestion and noisedeforestation ratesdeforestation rates in Indonesia are amongst the highest in the
12、world and Indonesia is arguably the third largest source of greenhouse gas emissionsthird largest source of greenhouse gas emissions,behind only the U.S.and Chinahealth and other costshealth and other costs attributable to water pollutionwater pollution and limited access to safe watersafe water and
13、 sanitationsanitation have been estimated to be roughly 2 percent of 2 percent of GDPGDP annuallyannual costsannual costs of air pollutionair pollution to the Indonesia economy have been calculated at around$400 million$400 million per year13.and There Are Emerging Risks.14turmoil in global financia
14、l markets is raising the costs of meeting Indonesias financing needs,despite its strong fundamentalsRisks from Turmoil in Global Financial Market.15Risks from Continued Increases In Fuel&Food Prices16Indonesia 2012 and Beyond:The Development Agenda17Indonesia 2012 and Beyond:The Development AgendaGo
15、vernments development agenda is articulated in the medium-term strategy(RPJM)for 2004-2009,which specifies three broad and multi-faceted goals:1.A safe and peaceful Indonesia;2.A just and democratic Indonesia;3.A prosperous IndonesiaThe process of drafting the 2010-2014 RPJM has begun and early indi
16、cations show that the unfinished agenda of the current plan will frame the broad priorities of the next oneHowever,the upcoming 2009 presidential and legislative elections necessarily make any statements about the next governments development agenda somewhat speculative18Indonesia 2012 and Beyond:Th
17、e Development Agenda(contd)ACCELERATING ACCELERATING growth by making Indonesia more COMPETITIVECOMPETITIVEBuilding a more INCLUSIVE INCLUSIVE Indonesia by making growth more BROAD-BASED,improving service delivery,and enhancing voiceBROAD-BASED,improving service delivery,and enhancing voiceWorking t
18、owards a GREENER GREENER Indonesia by making growth more SUSTAINABLE through better management of natural resources SUSTAINABLE through better management of natural resources and the environmentand the environmentMaking Indonesia more RESILIENT by better planning for and RESILIENT by better planning
19、 for and management of risksmanagement of risks19Accelerating growth:The PotentialIndonesia has the potential to achieve the rates of growth it achieved Indonesia has the potential to achieve the rates of growth it achieved prior to the crisisprior to the crisis.by making the most of Indonesias reso
20、urce resource endowmentsendowments while developing globally globally competitive clusterscompetitive clusters elsewhereby relieving infrastructure infrastructure bottlenecksbottlenecks and remedying weaknesses&inconsistencies,and reducing uncertainty in the uncertainty in the regulatory and policy
21、regulatory and policy environment20Making growth Inclusive:The challengesRaising the returns to the main asset of the poorlaborby revitalizing agriculture and the rural economy and facilitating the transfer of labor from low-productivity activities in agriculture to higher value-added activities els
22、ewherePoor quality and limited access remain areas of concern for basic education,healthcare,water and sanitation servicesImproving the allocation and efficiency of expenditures is the main challenge21Raising the returns to the main asset of the poortheir laborPer-worker productivity in Indonesia is
23、 low,regardless of sector and not Per-worker productivity in Indonesia is low,regardless of sector and not increasing very rapidlyincreasing very rapidly22Facilitating the transfer of workers out of low-productivity agriculturewhile the movement of workers out of agriculture,the lowest while the mov
24、ement of workers out of agriculture,the lowest productivity sector,has stalled in Indonesia since the crisisproductivity sector,has stalled in Indonesia since the crisis23Making Growth Inclusive:Providing Quality Education For AllRemarkable progress in primary and secondary enrollment rates;but chal
25、lenged in improving quality and increasing accessimproving quality and increasing access across the country:Uneven spatial distribution and quality of teachers(through remedial spatial distribution and quality of teachers(through remedial efforts in place)efforts in place)Positive outcome from tPosi
26、tive outcome from the BOS BOS system of direct transfers to schoolsRecently introduced CCTCCT program is aiming to improve education access for the poorOverall progress is hindered,however,by the unfinished unfinished decentralization agenda,decentralization agenda,which has left responsibility and
27、responsibility and accountabilityaccountability for many education areas vaguevague24Making Growth Inclusive:Restructuring the Health SystemTransformation to a more sophisticated health system in the medium term needed The immediate challenge is to improve qualityimprove quality,increase access for
28、the poor and reduce spatial disparities Accountability Accountability of health care workers is hindered by civil service and civil service and decentralization regulationsdecentralization regulations,which limit the authority local governments to manage their staffInefficiencies and poor quality in
29、 the health sectorInefficiencies and poor quality in the health sector have resulted in low utilization low utilization ratesrates of both public and private facilities,and high rates of self-treatmenthigh rates of self-treatment,and is a major source of inequityinequity in healthcare accessPublic h
30、ealth spending for secondary caresecondary care tends to be regressive,although tregressive,although the AskeskinAskeskin program of subsidized healthcare for the poor is attempting to change this25Financing Is Not The Only or Even The Main ChallengeImproving the allocation and efficiency of expendi
31、tures and providing adequate services in the context of decentralized Indonesia is26Ensuring Growth Is Sustainable:The ChallengesWorking towards a GREENER GREENER Indonesia by making growth more SUSTAINABLE SUSTAINABLE through better management of natural management of natural resources,and the envi
32、ronmentresources,and the environmentManaging Indonesias forestry and marine resources forestry and marine resources sustainablysustainably while providing adequate livelihoods while providing adequate livelihoodsMeeting Indonesias energy needs without sacrificing energy needs without sacrificing its
33、 environmentenvironmentMaking Indonesias rapidly growing towns and cities livable rapidly growing towns and cities livable27Building Resiliency:The challengesMaking Indonesia more RESILIENT RESILIENT by better planning planning for and management management of risks risksPreparing for climate change
34、 climate changeStrengthening institutions Strengthening institutions and capacity for planning for managing for managing disasters disasters Designing social protection schemes Designing social protection schemes that buffer the population from the adverse impacts of shocksEnhancing the capacity of
35、and coordination mechanisms among financial sector regulatory financial sector regulatory and supervision institutions to deal with systemic shocks systemic shocks from either external or internal sources 28Why It Will Take Time And CommitmentBecause of the dramatically changed circumstances Indones
36、ia finds itself in,and its own ongoing and as yet incomplete transition,there is no one single policy,there is no one single policy that could quickly help Indonesia to complete its transition to modern economythat could quickly help Indonesia to complete its transition to modern economyDemocratizat
37、ion and decentralization Democratization and decentralization have fundamentally changed decision-decision-making processes and accountability structures making processes and accountability structures within government and the broader public sphereThe tasks The tasks facing the government have thems
38、elves become more difficult,more difficult,in part because of Indonesias own past successes The Middle Income TransitionThe Middle Income TransitionThe changed global economic environment global economic environment implies a different,though equally important,role for the state,role for the state t
39、han in the past These changes reveal weaknesses weaknesses in the processes and capacity for formulating formulating and implementing policy and implementing policy and have made the process of implementing reforms implementing reforms a more challenging challenging and time-consuming task29Strength
40、ening Public Institutions And ProcessesRestructuring and strengthening the core processes,human resources and institutions for formulating and implementing policyReform of public sector systems procurement,financial management and budget execution,project design,audit,M&E Clarify institutional respo
41、nsibility for civil service reform,improve incentives and governance and revise the legal framework Making the most out of decentralizationImprove the framework(and its implementation)for the division of responsibilities between national and local governmentsImprove local government capacity and acc
42、ountabilitySustaining the focus on GovernanceBuild on the new institutions created(KPK,Judicial and Police Commissions,etc.)that have begun to deliver tangible resultsRaise the focus on the deeper structural reforms needed in the Judicial and Legal systemReplicate existing success stories at the loc
43、al and national level(MoF,LG reformers,etc)30The World Bank:Investing in Institutions for an Inclusive,Sustainable and Competitive Indonesia31Changing Role of International Development Partners in a Middle Income Country(MIC)New partnership model required:with Indonesias exit from IDA and the post-C
44、GI environment as a MIC We are moving to adjust our paradigm:From Aid Agency to Development BankFrom WB projects to GOI programsFrom trying to solve Indonesias problems to helping Indonesia find and implement the solutionsFrom managing transactions to managing relationships32Strengthening and Using
45、Country SystemsWorld Bank financing represent a small portion of Government budget focus on leveraging impact through strengthening institutions:Public institutions grow by delivering services and policies effectively and thus gaining trust of the citizens The World Bank works in support of institut
46、ions that have effective leadership and are able to improve performanceWBs aim is not to fill in Indonesias development challenges,rather to support Indonesian institutions that would fill this challenge%of total official foreign borrowing to budget 1995-200833The World Bank new Country Partnership
47、Strategy:Investing in Institutions for an Inclusive,Sustainable,and Competitive Indonesia:Aim:The World Bank helps accelerate transition to modern governance through investing in Indonesian institutions help create replicable success stories at national government,local government,and public sector
48、levelsApproach:1.Building supply of better governance-Investing in country systems(supply side)2.Stimulating demand for better governance building on CDD approaches34Indonesia CPS:Direction for Future ProgramWBG SupportGovernment ProgramsDevelopment OutcomesInstitutional Lens35OutlineIndonesia 2008:Doing Well,But Could Do Even BetterIndonesia 2012 and Beyond:The Development AgendaWorld Bank Country Partnership Strategy:Investing in Institutions for Inclusive,Sustainable and Competitive Indonesia36Thank You!37