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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 P

2、artnership 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 yearsDemocratization Big Bang Decentraliz

3、ation Historic Aceh peace agreement (2005) is largely sustainingCommitment to good governanceGrowing sense of confidenceMacroeconomic policies and related reforms have been conducted wellGrowth and macroeconomic performance have been increasingly strongPrudent Fiscal Management The financial sector

4、is on a much stronger footing and Indonesia is now accessing alternative sources of financeInvestment 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 accelerat

5、ed to a ten-year 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 Reducti

6、onThe poverty rate 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 rem

7、ains high with increasing 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 educati

8、on at 93.5%, junior secondary 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 Federation

9、PortugalGreeceThailandMexicoIndonesiaBrazilReading 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 Educatio

10、n Are Lagging.11Under-performing On Some Critical Health Outcomes12Environmental Degradation and Unsustainable Depletion Of Resourcestwo-thirds of Indonesians live in rural areas and are directly or indirectly dependent on common land, coastal, and environmental resources that are being rapidly depl

11、eted the other third is affected by environmental conditions in urban areas, from water and air pollution, congestion and noisedeforestation rates in Indonesia are amongst the highest in the world and Indonesia is arguably the third largest source of greenhouse gas emissions, behind only the U.S. an

12、d Chinahealth and other costs attributable to water pollution and limited access to safe water and sanitation have been estimated to be roughly 2 percent of GDP annuallyannual costs of air pollution to the Indonesia economy have been calculated at around $400 million per year13.and There Are Emergin

13、g Risks.14turmoil in global financial 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

14、2012 and Beyond: The Development AgendaGovernments development agenda is articulated in the medium-term strategy (RPJM) for 2004-2009, which specifies three broad and multi-faceted goals: A safe and peaceful Indonesia; A just and democratic Indonesia; A prosperous IndonesiaThe process of drafting th

15、e 2010-2014 RPJM has begun and early indications 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

16、 speculative18Indonesia 2012 and Beyond: The Development Agenda (contd)ACCELERATING growth by making Indonesia more COMPETITIVEBuilding a more INCLUSIVE Indonesia by making growth more BROAD-BASED, improving service delivery, and enhancing voiceWorking towards a GREENER Indonesia by making growth mo

17、re SUSTAINABLE through better management of natural resources and the environmentMaking Indonesia more RESILIENT by better planning for and management of risks19Accelerating growth: The PotentialIndonesia has the potential to achieve the rates of growth it achieved prior to the crisis.by making the

18、most of Indonesias resource endowments while developing globally competitive clusters elsewhereby relieving infrastructure bottlenecks and remedying weaknesses & inconsistencies, and reducing uncertainty in the regulatory and policy environment20Making growth Inclusive: The challengesRaising the ret

19、urns 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 elsewherePoor quality and limited access remain areas of concern for basic education, healt

20、hcare, 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 low, regardless of sector and not increasing very rapidly22Facilitating the transfer

21、of workers out of low-productivity agriculturewhile the movement of workers out of agriculture, the lowest productivity sector, has stalled in Indonesia since the crisis23Making Growth Inclusive:Providing Quality Education For AllRemarkable progress in primary and secondary enrollment rates; but cha

22、llenged in improving quality and increasing access across the country:Uneven spatial distribution and quality of teachers (through remedial efforts in place)Positive outcome from the BOS system of direct transfers to schoolsRecently introduced CCT program is aiming to improve education access for th

23、e poorOverall progress is hindered, however, by the unfinished decentralization agenda, which has left responsibility and accountability for many education areas vague24Making Growth Inclusive:Restructuring the Health SystemTransformation to a more sophisticated health system in the medium term need

24、ed The immediate challenge is to improve quality, increase access for the poor and reduce spatial disparities Accountability of health care workers is hindered by civil service and decentralization regulations, which limit the authority local governments to manage their staffInefficiencies and poor

25、quality in the health sector have resulted in low utilization rates of both public and private facilities, and high rates of self-treatment, and is a major source of inequity in healthcare accessPublic health spending for secondary care tends to be regressive, although the Askeskin program of subsid

26、ized healthcare for the poor is attempting to change this25Financing Is Not The Only or Even The Main ChallengeImproving the allocation and efficiency of expenditures and providing adequate services in the context of decentralized Indonesia is26Ensuring Growth Is Sustainable: The ChallengesWorking t

27、owards a GREENER Indonesia by making growth more SUSTAINABLE through better management of natural resources, and the environmentManaging Indonesias forestry and marine resources sustainably while providing adequate livelihoodsMeeting Indonesias energy needs without sacrificing its environmentMaking

28、Indonesias rapidly growing towns and cities livable27Building Resiliency: The challengesMaking Indonesia more RESILIENT by better planning for and management of risksPreparing for climate changeStrengthening institutions and capacity for planning for managing disasters Designing social protection sc

29、hemes that buffer the population from the adverse impacts of shocksEnhancing the capacity of and coordination mechanisms among financial sector regulatory and supervision institutions to deal with systemic shocks from either external or internal sources 28Why It Will Take Time And CommitmentBecause

30、of the dramatically changed circumstances Indonesia finds itself in, and its own ongoing and as yet incomplete transition, there is no one single policy that could quickly help Indonesia to complete its transition to modern economyDemocratization and decentralization have fundamentally changed decis

31、ion-making processes and accountability structures within government and the broader public sphereThe tasks facing the government have themselves become more difficult, in part because of Indonesias own past successes The Middle Income TransitionThe changed global economic environment implies a diff

32、erent, though equally important, role for the state than in the past These changes reveal weaknesses in the processes and capacity for formulating and implementing policy and have made the process of implementing reforms a more challenging and time-consuming task29Strengthening Public Institutions A

33、nd 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 responsibility for civil se

34、rvice 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 accountabilitySustaini

35、ng 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 local and national

36、 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-CGI enviro

37、nment 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 Country SystemsWorld Bank financing represent a small portion of Government budget focus on leveraging impact through strengthening institutions:Public institutions grow by delive