Government of Canada

Foreign Affairs, Trade and Development Canada

www.international.gc.ca

Indonesia

Table of Contents

International development projects in Indonesia

International development projects in Indonesia

CIDA disbursements in Indonesia: 2011-2012

Total: $38.66 million
A boy wearing a bucket in San Rego, South Sulawesi. © ACDI-CIDA

Overview

Indonesia is a lower middle-income country with a wealth of natural resources. With a population of 232.5 million, Indonesia contains the largest Muslim population in the world. Indonesia has wide inequalities, deep poverty, and significant regional disparities. It is highly vulnerable to economic crises and natural disasters.

Indonesia ranks 121 out of 187 on the United Nations Development Programme's 2012 human development index, and data show that 18.1 percent of the population lived on less than US$1.25/day in 2007-2010.

In the early 1990s, the rapid growth of the country's industrial sector contributed to high economic returns. However, the country was affected severely by the 1997 Asian financial crisis and had only recently regained its previous economic levels. While the current global recession does pose threats to recent gains, Indonesia is weathering the crisis relatively well so far with a 4.5 percent growth in 2009.

Indonesia's growth and stability have been bolstered by substantial political, economic, and institutional reforms. The 2009 legislative and presidential elections were free and fair. Human rights are improving but certain concerns remain. National indicators show that the country is on track to meet many development goals. Still, regional disparities among provinces and districts remain a key development challenge for Indonesia. Living in a highly decentralized country, Indonesians are dependent on how well their local government delivers services and on the extent to which local economic growth is promoted.

The economy in Indonesia is largely dependent on natural resources, accounting for more than 50 percent of jobs. Sustainable management of natural resources is another key development challenge, given that the majority of the poor live in rural areas and depend on natural resources for their incomes.

In addition to the rural-urban divide, disparities also exist between women and men in Indonesia. Even though women are beginning to enjoy greater equality with men, they are still largely excluded from the decision-making processes within society. Their access to services and economic opportunities also remains restricted.

Thematic Focus

In 2009, as part of Canada's new aid effectiveness agenda, Indonesia was selected as a country of focus for international development. Canada's program in Indonesia is aligned with the Government of Indonesia's priorities. It supports sustainable economic growth to help the country reduce its vulnerability to poverty. Canada concentrates on Sulawesi, Indonesia's third most populous island and a driving force for change in the poorest region of Eastern Indonesia.

The Government of Indonesia has outlined a number of development priorities in their five-year medium term development plan (in Indonesian) and other important policy documents. These priorities include:

  • Strengthening the government's ability to provide services
  • Improving the quality of human resources
  • Enhancing the capacity of science and technology development and strengthening economic competitiveness
  • Continuing reforms related to economic growth in the regions
  • Improving management of natural resources
  • Successfully implementing decentralization

Economic growth

The goals and objectives of Canada's strategy for Indonesia are to support sustainable economic growth by:

  • Working with national and local partners to strengthen local and regional economic planning and programming
  • Promoting improved management of renewable resources in support of local and regional economic development

Local and regional economic planning and programming in key economic sectors such as infrastructure, industry, and agriculture is the responsibility of local governments. Better performance by these governments will have a real impact on sustainable economic growth.

With increasing pressure on marginally productive and fragile natural resources, improved and sustainable management of these resources can support sustainable economic growth and directly contribute to raising incomes for the poor.

Equality between women and men, environmental sustainability, and good governance will be integrated into all of Canada's programs in Indonesia. Continuous dialogue and consultation among development partners (government, non-government, and donors) will guide investment choices.

Key anticipated results
  • Provided training and technical assistance to local government officials to ensure efficient use of public funds so as to enhance economic growth
  • Improved business development programs for local entrepreneurs—for example, one-stop service shops run by local governments—and widely market the programs
  • Provided training and technical assistance to ensure local plans and budgets integrate the needs of women and the poor
  • Adopted multistakeholder and microenterprise approaches to manage high-value tree crops and aquaculture
  • Implemented new ways to manage forest and water resources to benefit the population of Sulawesi

Progress on Aid Effectiveness

Through the Jakarta Commitment: Aid for Development Effectiveness-Indonesia's Road Map to 2014, Indonesia is addressing commitments to the Paris Declaration on Aid Effectiveness (PDF, 317 KB, 23 pages).

The main elements of the Jakarta Commitment are:

  • Strengthening local ownership
  • Building more effective and inclusive partnerships
  • Delivering and accounting for results

Canada, along with a number of international donors, is working with the Indonesian government to help implement the 2009 Jakarta Commitment.

Achievements 2011-2012

Economic growth

  • Helped create 2,628 new jobs—a 230 percent increase since 2009-in the seaweed, cashew nut and coconut industries
  • Helped train staff in nine business development organizations, enabling them to serve 5,511 clients from small and medium-sized businesses
  • Helped 12 microfinance institutions expand their loan portfolios by 19 percent over the previous year, supporting 175,000 microenterprise loans worth nearly $29 million, 89 percent of which were to women
  • Initiated green farm practices that benefit 1 million farmers in production of organic fertilizers and coconut-shell charcoal briquettes, bee-keeping, seaweed farming and tree nurseries
  • Supported 193 villages to identify 2,375 environmental and sustainable livelihood initiatives in coffee and cocoa estate agroforestry, fish pond management and non-timber forest product development
  • Assisted 80 villages to develop 10 watershed action plans to improve water quality and create more ecologically-sustainable livelihoods
  • Supported training for 26,000 people in participatory planning for improved sanitation and water, and introduction of new techniques for livestock, crop, soil and pest management
  • Rehabilitated 1000 hectares of mangroves, while a moratorium against mangrove clearance will protect a further 12,700 hectares
  • Secured land titles for landless farmers for thousands of hectares for sustainable fishponds, animal husbandry, home industries, the use of bio fuels, composting, and the production of organic food

Achievements 2010-2011

Economic growth

  • Helped create 1,669 new jobs—a 90 percent increase compared to the previous year—by providing technical expertise to small and medium-sized businesses, business service providers, and microfinance institutions
  • Assisted microfinance institutions in expanding their loan portfolios by 18 percent-50 percent to women—compared to the previous year
  • Increased the knowledge of 158 (out of 200) legislators of the process for reviewing plans and budgets
  • Helped train 304 government officials in planning and budgeting to increase their responsiveness to local needs, including the needs of women
  • Helped establish a system to monitor and evaluate local government program and service delivery
  • Increased the number of registered taxpayers from 4 million to 16 million between 2009 and 2010 by supporting administrative tax reforms
  • Helped establish more than 300 decentralized customer-service-focused taxpayer offices
  • Helped more than 26,500 villagers participate in local government decisions that had an impact on their income
  • Helped to protect a large mangrove forest from being converted into shrimp ponds, resulting in the protection of fish and marine wildlife, two sources of income for local communities

Achievements 2009-2010

Economic growth

  • Support decentralization to local levels of government, resulting in harmonized regulations related to administrative and program delivery activities, as well as the dissemination of a model accounting policy to 480 local governments and the implementation of a system to monitor and evaluate local government performance in program and service delivery
  • Supported Indonesian tax administrative reforms that increased the number of registered taxpayers from four million to 16 million and established more than 300 decentralized customer service-focused taxpayer offices
  • Helped more than 26,500 villagers participate in decisions that have an impact on their income, through the Environmental Governance and Sustainable Livelihoods Project
  • Helped to protect a large mangrove forest from being converted into shrimp ponds, resulting in the protection of fish and marine wildlife, two sources of income for local communities

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