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Indonesia
Please note: All linked documents are in PDF format
| Objective |
SO Number |
FY 2004 |
FY 2005 |
FY 2006 |
| Democracy Reform | 497-007 |
22,105 |
|
|
| Health, Population and Nutrition | 497-008 |
24,800 |
|
|
| Crisis Mitigation | 497-009 |
7,000 |
|
|
| Strengthening Local Government | 497-010 |
14,215 |
|
|
| Promoting Economic Growth | 497-011 |
12,395 |
|
|
| Natural Resource Management | 497-012 |
13,481 |
|
|
| Energy Sector Reform | 497-013 |
12,000 |
|
|
| Education | 497-018 |
10,000 |
26,500 |
32,011 |
| Basic Human Services | 497-019 |
|
40,948 |
39,051 |
| Democratic and Decentralized Governance | 497-020 |
|
35,000 |
45,849 |
| Economic Growth | 497-021 |
|
19,480 |
20,300 |
| Healthy Ecosystems | 497-022 |
|
7,500 |
8,753 |
|
Total (in thousands of dollars) |
115,996 |
129,428 |
145,964 |
Excludes P.L. 480. See Program Annex.
|
The Development Challenge: On December 26, 2004, an earthquake with a magnitude of 9.0 on the Richter Scale triggered massive tsunamis in the Indian Ocean. The impact on Indonesia's island of Sumatra was catastrophic with over 120,000 dead, 113,000 missing, and 400,000 displaced (estimates at the time of this publication). The former U.S. Secretary of State Powell described this as the worst disaster he has ever seen. Besides the new challenges created by the tsunami, significant social, political, and economic barriers continue to impede Indonesia's progress toward becoming a moderate, stable, and productive nation. More than half of Indonesia's population subsists on less than two dollars per day. Governing institutions remain weak and corruption is endemic. Approximately half of Indonesian children who start primary school do not complete junior secondary school, and drop-out rates are increasing. Poor health and environmental conditions contribute to millions of illnesses every year reducing incomes and productivity. Regional conflicts and terrorism continue to destabilize the country's fledgling democracy. While important strides have been made toward creating an open and democratic society since 1998 and the fall of Suharto, Indonesia still has tough social, political and economic development challenges to address that are critical for a prosperous future.
In 2004, Indonesians voted in a new President, Vice President, and national and local legislators in internationally recognized free and fair elections. The success of the elections cannot be overstated. By holding the largest and most complex single-day elections in history, the most populous Muslim nation demonstrated to the world the compatibility of democracy and Islam. The vote was also a clear mandate for political, social, and economic reform. The country chose reform-oriented Susilo Bambang Yudhoyono (SBY) as their first directly elected president. The new Government of Indonesia's (GOI) political will to implement essential reforms is high, but it has yet to be tested. SBY has set ambitious goals to fight corruption and terrorism, and to increase investment and employment. However, specific reform policies have yet to be implemented, and the President has warned the nation to abandon high expectations of quick fixes to rampant corruption, sectarian and separatist conflict, widespread unemployment, and the threat of terrorism. The tsunami presents an opportunity to address these endemic problems.
Indonesia's economic growth lags behind other countries in the region, and the current 4% to 5% gross domestic product (GDP) growth is insufficient to absorb new entrants to the labor force or reduce numbers of unemployed and underemployed. While key macroeconomic reforms have resulted in lower interest rates and a stronger Rupiah, poor business and investment climates continue to impede growth. Weak governing institutions, inadequate rule of law, and pervasive corruption are the principle obstacles facing the new government. According to a study co-sponsored by the World Bank and IFC in 2004, it takes 151 days to register a business in Indonesia. Corruption in business and government continues to rob Indonesia of its business development and investment potential.
Indonesia's poor are not receiving adequate human services necessary for productive and healthy lives. Public funding for education is estimated between 1% and 2% of GDP, the lowest in the region. An estimated 77 million people, particularly rural and low-income urban populations, lack access to safe and affordable drinking water. Diarrhea, which often results from water-born diseases, causes over 100,000 deaths per year. Indonesia has one of the highest maternal mortality ratios in Southeast Asia. Rapidly developing sub-epidemics in HIV/AIDS are occurring. While it is true that tremendous progress has been made over the last 40 years toward improving the education and health of Indonesians, much more remains to be done. From the early 1970s to 1998, Indonesia achieved almost universal enrollment in primary school. Fertility rates have more than halved since 1971 (6.0 to 2.1) and life expectancy is now 68 years. However, the inadequate provision of essential health and human services in recent years threatens these positive trends.
Many local governments are still not providing accountable governance and services to their constituencies. The political decentralization process occurred rapidly and transferred substantial responsibilities to cities and districts. Local governments are now controlled by freely-elected councils that can hold local administrators accountable for performance. Communities and non-governmental organizations have greater opportunities to participate in government decision-making. However, most local governments are still struggling to plan, budget and manage their new responsibilities in a transparent, efficient, and effective manner.
Indonesia has lost an estimated 75% of its original natural forest and the accelerated rate of loss threatens the country's remaining natural heritage. Habitat loss is the primary threat to the country's terrestrial biological diversity. People who depend on the forest for income also have their livelihoods at stake.
The GOI commitment to tackling terrorism and regional conflicts is strong, but the September 2004 terrorist bombing of the Australian Embassy and continued violence in Aceh in 2004 demonstrated that sustainable solutions to these issues remain elusive. The current ceasefire in post-tsunami Aceh, however, offers hope for future conflict resolution.
The outcome of Indonesia's democratic transition has profound implications for U.S. strategic interests in fighting terrorism; preserving regional stability in Asia; strengthening democratic principles, the rule of law, and respect for human rights; and expanding access for U.S. exports and investment in the fourth largest country in the world. Indonesia's importance also stems from its substantial natural resources, rich biodiversity, and strategic location across key shipping lanes linking Europe, the Middle East, and Asia.
The USAID Program: USAID immediately responded to the tsunami disaster with relief assistance. Additional relief and reconstruction activities will be developed to respond to the needs in Aceh. USAID's new five-year program in Indonesia addresses the same development priorities President Yudhoyono described in his inaugural speech: economic growth and job creation; clean and good governance; and improving the education and health sectors. By implementing activities under President Bush's education initiative, the United States will become the largest grant donor in this sector. USAID's program in Indonesia already has one of the largest and most active public-private alliances in the world and will increase the number of active alliances in the coming years. With new activities that increase access and skills to information and communication technologies, USAID/Indonesia has become one of only three Missions in the world participating in the Presidential Digital Freedom Initiative. In the next two years, USAID will use innovative Development Credit Authority approaches to improve the Indonesian water sector. With the majority of assistance being provided at the local level, USAID will work with Indonesians to reduce extremism and intolerance in favor of democracy, respect for diversity, and resolution of differences through non-violent means. The program data sheets provided in this document cover five development objectives in Indonesia for which USAID is requesting FY 2005 and FY 2006 funds.
The Millennium Challenge Corporation has identified Indonesia as an eligible country for the Millennium Challenge Account. USAID will play an active role in helping Indonesia qualify for these new funds.
Other Program Elements: USAID's democracy and education activities are closely integrated with State Department's public diplomacy efforts. The U.S. Department of State's East Asia Bureau and the Pacific Women's Rights Initiative funds anti-trafficking programs in Indonesia. The Farmer-to-Farmer program provides volunteer technical assistance to promote horticulture production and marketing. USAID has funded a one-year cybercrime activity, which will continue with Department of Justice funding.
Other Donors: Outside of tsunami relief, there are four major bilateral donors to Indonesia (rank order by resource level): Japan (infrastructure, counter-terrorism, safe water supply, energy and biodiversity), the United States, Australia (education, governance, health, emergency assistance, environment), the Netherlands (community development, water management, education, human rights). Germany, the United Kingdom, Canada and New Zealand have smaller development programs. Major multilateral donors are World Bank (poverty reduction), United Nations Development Programme (democratic governance, poverty reduction, crisis prevention, energy and environment, HIV/AIDS), Asian Development Bank (poverty reduction), International Monetary Fund (macroeconomic stability), and the European Union (governance, natural resource management, economic growth). International pledges for tsunami relief are in process at this time.
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