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Development partnership in Indonesia

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Economic recovery in Indonesia

Australia is providing trusted expert policy advice on the design of economic stimulus measures and recovery strategies through our economic governance and World Bank partnerships, and government-to-government partnerships including through the Australian Treasury. We are similarly working with Indonesia to manage the challenges posed by the pandemic to its growth-enabling infrastructure agenda, including helping to mobilise additional financing through international financial institutions and the private sector.

We are focused on supporting an inclusive and resilient economic recovery and will work with Indonesia to address key constraints to growth, to build human capital for productivity, and to increase the economic participation of women, people with disabilities and marginalised groups.

Our new Indonesia – Australia Comprehensive Economic Partnership Agreement is supporting our shared economic recovery through increased bilateral trade and investment, and the IA-CEPA Economic Cooperation Program will provide technical advice and other assistance to enable Indonesia to fully realise the mutual benefits of the partnership.

Australia-Indonesia Partnership fop Economic Development (PROSPERA)

$145 million, 2018- 2023

Australia's economic governance program aims to foster more effective Indonesian economic institutions and policies that contribute to strong, sustainable and inclusive economic growth. PROSPERA commenced on 1 March 2018, and builds on over 20 years of Australian investment in Indonesia's economic governance that began in the aftermath of the Asian Financial Crisis of the late 1990s. It brings together two previous programs: the Government Partnerships Fund (GPF) and the Australia Indonesia Partnership for Economic Governance (AIPEG). PROSPERA activities are delivered by Australian Government agencies and contracted advisers working with around 30 Indonesian counterpart agencies.

PROSPERA is supporting key ministries with economic policy responses to COVID-19. These include, advising on immediate stimulus and confidence-building measures for financial stability and investment; helping to identify new sources of budget finance; assisting with budget reprioritisation to fund vital economic and health expenditure; and charting a course to economic recovery by assisting with policy for business, job creation, trade and investment that is inclusive and considerate of the needs of women and vulnerable groups.

Additional information on the program can be found on the PROSPERA website.

Related documents

Name of document Year published Type
Australia Indonesia Economic Cooperation Partnership (AIECO): Investment Design 2017 Design
Program Kemitraan Indonesia Australia untuk Perekonomian (PROSPERA) Knowledge, Performance and Learning Framework 2018 Monitoring and Evaluation Framework

Related links

PROSPERA Automation Report [PDF]

Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA) Economic Cooperation Program (ECP)

$40 million, 2020 – 2025

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) entered into force on 5 July 2020. It includes a new Economic Cooperation Program (ECP), which aims to maximise the mutual benefits of IA-CEPA, support two-way trade and investment, improve market access, and promote inclusive economic growth in Indonesia. In particular, the ECP will support IA-CEPA implementation in the Agrifood, Advanced Manufacturing and Services (including skills) sectors.

The ECP will play an important role in post-COVID economic recovery in both Indonesia and Australia. With a predominant emphasis on industry engagement, the ECP will position both countries well to increase trade and business linkages as growth returns after COVID.

Related links

Economic Cooperation Program (ECP) — Investment Design

Indonesia Australia Infrastructure Partnership (KIAT)

$146.2 million, 2017-2021

KIAT commenced implementation in May 2017 and replaces the Indonesia Infrastructure Initiative (IndII) facility. Through KIAT we support the development of high-quality infrastructure projects in water and sanitation, and transport; promote regulatory reforms to address impediments to infrastructure investment; and build the capacity of government bodies responsible for infrastructure delivery. In doing so we support sustainable and inclusive economic growth through improved access to infrastructure.

KIAT is working with various partners to strengthen dialogue between government and civil society to ensure that women and other vulnerable groups are consulted in the planning, design, implementation, and evaluation of infrastructure projects.

KIAT also provides implementation support for the Palembang City Sanitation Project (PCSP), Water and Sanitation Grants Program (Watsan Hibah), Australia Indonesia Grants for Sanitation (sAIIG) and the Provincial Road Improvement and Maintenance Program (PRIM).

As a flexible facility, KIAT is playing a key role in Indonesia’s response to COVID-19. KIAT is working on improving the reliability and safety of water provided by local water utilities, together with associated public health messaging, as well as supporting safe public transport for essential workers. KIAT activities are generating employment opportunities in the infrastructure sector for unskilled and low-skilled Indonesians during the recovery phase, including for women and people with disabilities.

More information on KIAT program can be found on the KIAT website.

Related documents

Name of document Year published Type
Indonesia Australia Infrastructure Partnership (KIAT) facility design document 2017 Design

Related links

Multilateral Development Bank Infrastructure Assistance Program

$56.4 million, 2013-2021

Through the Multilateral Development Bank Infrastructure Program, we work with the World Bank and the Asian Development Bank to help the Indonesian Government strengthen the enabling environment for infrastructure investment, including its associated policies and institutional capacity. Activities include infrastructure project preparation, feasibility studies, engineering designs and environmental impact assessments.

With COVID-19 limiting Indonesian Government resources available for infrastructure projects, these activities will help to attract finance from lending institutions and the private sector, and in turn create jobs.

Related documents

Name of document Year published Type
Multilateral Development Bank Infrastructure Assistance Program (MDB-IAP) Independent evaluation and management response 2018 Independent evaluation and management response

Related links

Australia-World Bank Indonesia Partnership (ABIP)

$25 million, 2020-2025

Australia-World Bank-Indonesia Partnership (ABIP) is a new partnership model that provides a platform for all Australian-funded World Bank activities in Indonesia. It aims to support the Government of Indonesia’s efforts to increase inclusive economic growth. It works across the following three priority themes, with a cross-cutting theme of gender equality:

    • accelerating human capital development, focused on education quality and better nutrition outcomes, as well as activities to promote more and better jobs and a strengthened social protection system
    • improving economic governance and mobility, focused on economic governance including evidence-based policy making, better government spending and improved revenue collection
    • building more and better infrastructure, focused on connectivity, energy, local infrastructure and infrastructure finance.

In the context of the current COVID-19 situation in Indonesia, the partnership is helping to address medium-term recovery efforts across priority themes. ABIP will tackle constraints to Indonesia’s development, in line with the National Medium Term Development Plan (2020-2024), coordinating with DFAT’s bilateral investments. ABIP’s core modalities are analytical and policy advisory work, knowledge exchange, support to lending operations, and capacity building and institutional strengthening.

Palembang City Sewerage Project (PCSP)

$45 million, 2017-2024

The Palembang City Sanitation Project is upgrading the sanitation system in Palembang City, South Sumatra Province, Indonesia. It is co-financed by the Australian and the Indonesian governments. The project is piloting a more effective model for financing, building and managing municipal infrastructure in Indonesia's three levels of government, in order to increase local government ownership and to contribute to more enduring and better maintained infrastructure.

The project will build a wastewater treatment plant in Palembang City with capacity for up to 21,700 household connections. Upon completion, the project is expected to provide 12,000 property connections (connecting houses/businesses to the sewerage network) benefiting 100,000 people and provide desludging of septic tanks for an additional 50,000 households (250,000 people).

The project will contribute to Palembang City’s economy during Indonesia’s recovery from COVID-19. More than 1,400 people will be employed during construction, including jobs targeted at women and people with disabilities. Small and medium enterprises will also benefit through a range of direct contracts as part of construction, which commenced in July 2020, under COVID-19 safe conditions.

This project is a component of the Asian Development Bank's Metropolitan Sanitation Management Investment Project (MSMIP), with the total project value of USD168.83 million. Other cities supported by MSMIP are Makassar, Jambi and Pekanbaru.

Additional information regarding the MSMIP and PCSP can be found on the Asian Development Bank and KIAT websites.

Infographic: PCSP partnership - healthy people increase productivity

Infographic showing what the project will do, the benefits, and how the project partnership works. Link to full description below.

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Related documents

Name of document Year published Type
PCSP design document 2017 Design document

Related links

Water and Sanitation Hibah Phase 2 and the Performance Based Grants for Water Utilities

$93.6 million, 2012-2022

Through the Water and Sanitation Grants Program, we aim to increase water and sewerage connections across Indonesia by working with local governments to boost investment in water and sanitation infrastructure. The program uses an innovative approach where local governments are reimbursed up to 45 per cent of the connection costs following verification that each new connection has functioned for at least three months.

The program Water Hibah has partnered with 144 local governments to provide water supply connections to over 317,000 houses benefitting approximately 1.4 million people. The program has successfully demonstrated a model which the government of Indonesia has rolled out nationally with $369 million of its own funds after Water Hibah concluded in 2016.

To support water utilities manage their expanding water networks, Australia is also funding Performance-based Grants for Water Utilities (PBG). In response to COVID-19, the PBG is supporting water utilities implement new chlorination regulations and community hygiene behaviour-change activities, essential for preventing the spread of COVID-19. Support for improved governance, financial management and operational efficiency will underpin the viability of water utilities and longer-term recovery from the economic impact of COVID-19.

The Sanitation Hibah aims to increase the number of sewerage connections in up to eight cities. The program has delivered over 8,000 new sanitation connections benefiting 36,000 people and is expected to support construction of an additional 8,000 sanitation connections by 2021.

Infographic: How The Water Hibah Works

Infographic. See alternative text below.

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View text version of infographic

Related documents*

Name of document Year published Type
Indonesia Water and Sanitation Initiative - Phase 1 Concept Note 2009 Concept note
Indonesia Development Cooperation Report 2010 Report
Indonesia Urban Household Water Supply and Sanitation Program - Direct Funding Agreement 2010 Agreement
Indonesia Urban Household Water Supply and Sanitation Program - Agreement with USAID 2011 Agreement
Indonesia Water and Sanitation Initiative - Phase 2 Concept Note 2011 Concept note
Indonesia Water and Sanitation Initiative - Independent Evaluation and Final Report 2011 Independent evaluation
Indonesia Water and Sanitation Initiative - Independent Evaluation and Final Report: Management Response 2012 Evaluation management response
Indonesia Water and Sanitation Hibah: Independent review 2017 Review

Asian Development Bank Sustainable Infrastructure Assistance Program II (SIAP 2)

$40 million, 2019-2024

Australia has partnered with the Asian Development Bank (ADB) to deliver high quality infrastructure technical advice and loan preparation since 2013 through the Sustainable Infrastructure Assistance Program (SIAP) trust fund.

SIAP2 supports effective identification, preparation, implementation, and financing of infrastructure projects. The program: (i) assists in the preparation of sovereign and non-sovereign infrastructure projects leveraging ADB infrastructure related project financing and co-financing; (ii) provides enhanced project implementation support; and (iii) provides knowledge support for infrastructure planning and financing and effective program management.

Priority sectors are energy, transport, urban services and water resources. Priority themes are innovation and new technologies, private sector development, innovative infrastructure financing, sound public sector management, climate resilience, gender equity and partnerships.

SIAP2 is also contributing to the implementation of ADB’s broader support to the Government of Indonesia’s COVID-19 response and recovery efforts. This includes technical assistance for contingent financing for disasters including from future waves of the pandemic as well as support for a low carbon and resilient COVID-19 economic recovery.

Related links

ADB Sustainable Infrastructure Assistance Program Documents

Provincial Road Improvement and Maintenance Pilot Program (PRIM)

$38 million, 2014-2021

The Provincial Road Improvement and Maintenance Pilot Program is an output-based grant program through which we provide incentives for local governments to implement road maintenance and rehabilitation works. It aims to improve the way local governments plan, budget and implement their investments in road maintenance on a sustainable basis. Through PRIM we are working to broaden the use of the hibah (grant) mechanism that was successfully piloted in the water and sanitation sector.

The project has been successfully piloted in West Lombok District, Province of West Nusa Tenggara and an ongoing PRIM project is currently being implemented in Probolinggo district, East Java Province, which commenced in 2019.

A key feature of PRIM involves working with various partners from central and local government and civil society to improve inclusiveness and sustainability of the project.

As of 2019, PRIM has maintained 6,099 km of roads of which 896 km were improved in 2019.

PRIM’s routine road maintenance work will support the Indonesia’s rapid economic recovery post-COVID-19 through better connectivity and employment opportunities not only for low-skilled and unskilled workers but also for women and people with disability.

Related documents

Name of document Year published Type
PRIM program design document 2014 Design

Related links

Australia Awards

*$166 million, 2014-2022

Australia Awards Scholarships are an important part of Australia's relationship with Indonesia. Many Indonesian alumni of Australian institutions have gone on to hold positions of influence, have made significant contributions to Indonesia's development and have helped build strong people-to-people links between Indonesia and Australia.

Australia Awards is the largest and longest-running international scholarship program in Indonesia. Two hundred and fifty postgraduate Australia Awards scholarships were offered to Indonesians for study in Australia in intake 2020, preceded by pre-departure English language training in Indonesia. In addition, around 300 short-term awards were offered to future Indonesian leaders in intake 2020 to develop new skills and increase their networks through tailored short courses at Australian tertiary institutions.

Not only do Australia Awards Scholarships provide Indonesians with a world-class qualification, the overall experience that recipients gain while in Australia fosters greater people-to-people links and enhances Australian-Indonesian relations. In addition, leading Australia Award Scholarship recipients from Indonesia (and PNG) may be eligible to receive an Allison Sudradjat Prize, awarded to outstanding scholars and current or emerging leaders, or a Hadi Soesastro Prize, awarded to PhD recipients from Indonesia who are undertaking high-level research at an Australian university.

Engagement with alumni (including those who self-fund their study) upon their return to Indonesia continues to be a high priority for the program. The aim is to foster a stronger alumni network in Indonesia and a network of advocates for Australia, particularly for the quality of an Australian education.

* the figure only covers activities undertaken in Indonesia and does not include tuition fees and other costs occurred in Australia.

Related links

Australia Indonesia Youth Exchange Program (AIYEP)

$1.1 million, 2013 – 2020

The Australia Indonesia Youth Exchange Program (AIYEP), links Australian and Indonesian youth (21-25 years old) through social, professional and cultural exchange. The program aims to provide opportunities for young people from Indonesia and Australia to gain a better understanding of the culture, development and way of life of each other's country.

In Australia, Indonesia AIYEP participants develop their leadership skills and gain valuable work and intercultural experiences. In Indonesia, the Australian participants develop their leadership skills and contribute to community development projects.

Building Relationships through Inter-cultural Dialogue and Growing Engagement (BRIDGE)

$4.5 million, 2019 – 2022

The Building Relationships through Inter-cultural Dialogue and Growing Engagement (BRIDGE) program aims to build people-people links between Indonesians and Australian teachers, students and school communities by selecting Australian and Indonesian teachers to participate in an international program that focuses on improving the teaching practices and cross-cultural understanding between participants. The program has been operational in Indonesia and implemented since 2008 by the Asia Education Foundation of the University of Melbourne. Three main activities include:

  • selection & pairing of participant schools and teachers
  • in-Australia Program & establishment of school partnerships, and
  • ongoing communication and support.

The program focuses on maintaining existing school partnerships and establishing new sustainable ones.

In response to COVID-19, the BRIDGE team has successfully maintained communication and education capacity building activities with Australian and Indonesian educators through newly established virtual programs. The Program continues to provide support to increase educator capacity, partnership collaboration, communication and sustainability across Australia and Indonesia.

Environmental Governance

$10 million, 2017-2024

The 2015 forest and land fires in Indonesia caused an economic loss of approximately USD16 billion (approximately $20 billion) and discharged over one billion tons of CO2 into the atmosphere. Forest and land fires are an annual crisis in Indonesia and a significant contributor to global greenhouse gas emissions. To support Indonesia's efforts to prevent the recurrence of fires and to reduce emissions, we initiated an environmental governance program as part of Australia's Indo-Pacific Land Action Package in 2017. The Indonesia Australia Partnership for Environmental Governance Program consists of four activities that respond to Indonesia's interest in addressing forest fires and climate change.

The COVID-19 pandemic presents Indonesia with an opportunity to implement a recovery pathway that will accelerate transition to a more sustainable, inclusive, and resilient economy. Through technical experts from Government of Australia and multilateral agencies, we are supporting Indonesia’s adoption and implementation of a green and low carbon recovery through promotion of sustainable land management practices, and strengthening governance and environmental law enforcement.

Related documents

Name of document Year published Type
Indonesia Australia Partnership in Environmental Governance brief 2020 Background brief

Investing in Women

$102 million (multi-country), 2016 – 2023

Investing in Women is a multi-country program with an innovative, long-term approach to improving women's economic participation as employees and as entrepreneurs, and influencing the private and public sector environment to promote women's economic empowerment in Southeast Asia. The program operates in Indonesia, Philippines, Vietnam and Myanmar, and works directly in collaboration with corporations and business leaders, impact investors, entrepreneurs and advocates, in driving change for inclusive economic growth in the region. It works with businesses to shift workplace cultures, practices and policy barriers to workplace gender equality; partnering with impact investors to expand opportunities for women in small and medium enterprises; and through influencing gender norms to support women’s economic empowerment.

Investing in Women has moved quickly to respond to the COVID-19 crisis. The program has been working closely with its partners to understand the impact of the pandemic on their organisations and operating environments, and responding to the economic impacts on women, including through the provision of emergency relief to support women’s small and medium enterprises to respond to economic pressures resulting from the pandemic.

To find more about Investing in Women’s operation in Indonesia, please visit: https://investinginwomen.asia/indonesia

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