Indonesia and ADB team up for development partnership

25 Oct 16

The Asian Development Bank has approved a country partnership strategy with Indonesia for the 2016-19 period to promote infrastructure investment and sustainable economic growth.

Sona Shrestha, the bank’s deputy country director at its Indonesia resident mission, said: “Indonesia has made tremendous social, economic, and political progress since its independence seven decades ago.

“ADB’s new partnership with Indonesia will help build on that progress by working toward inclusive and environmentally sustainable growth through improved infrastructure services, better public sector governance and management, and enhanced education and skills.”

The partnership will see increased infrastructure investments including in the national electricity grid, geothermal power and natural gas.

Rural areas are to benefit from investment in irrigation, water supply and high-value crops.

Education will also be a focus for investment, a field in which the bank said quality remained an issue though Indonesia had achieved impressive gains.

Meanwhile, the Organisation for Economic Co-operation and Development’s (OECD) 2016 Economic Survey of Indonesia has concluded that Indonesia faces problems despite the country having enjoyedan extraordinary transformation over the past two decades, benefiting from strong growth that has lifted millions out of poverty and allowed important progress in areas such as health and education”.

Low levels of public spending and tax revenue were undermining the quality of social services and exacerbating infrastructure gaps, because the tax base was narrow and compliance poor.

Indonesia is among the world’s most populous countries but of its 260 million citizens, only 27 million were registered taxpayers in 2014, and only 900,000 paid what they owed.

The OECD was also critical of the efficiency of public spending where the level of resources devoted to energy subsidies that it considers inefficient “remains very high” – at some 7% of all public spending. 

It also questioned the standard of Indonesia’s governance compared with other major emerging economies, and said that corruption remained the main impediment to doing business in Indonesia.

More resources should be devoted to the Corruption Eradication Commission, it said, in particular to work with regional governments, which as a result of a decentralisation policy now account for around half of the country’s public spending.

The report was accompanied by the OECD’s separate 2016 Open Government Review of Indonesia, which said the quality and quantity of data and information accessible to the public throughout the budget cycle needed to improve.

OECD secretary-general Angel Gurría said: “More and more Indonesians are enjoying higher standards of living thanks to Indonesia’s remarkable economic and social progress. Many challenges remain, but the government is moving in the right direction by reducing obstacles to doing business, improving the investment environment, and cutting subsidies.”

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