Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
INDONESIA
FY 1997 FY 1998 FY 1999 Actual Estimate Request Development Assistance.............. $37,700,000 $36,319,000 $29,669,000 Child Survival and Disease.......... $5,800, 000 $7,481,000 $8,700,000
IntroductionU.S. interests in Indonesia are defined by its trade and investment potential, its progressive influence on certain regional issues, the difficult political transition likely in a post-Soeharto era, and its global importance for the environment and population growth.
Indonesia is the world's fourth most populous country, with 202 million persons. Prior to the current "Asian contagion," three decades of increasingly pro-market policies led Indonesia's gross domestic product (GDP) to grow at an annual rate of 7% for the last 25 years, making Indonesia a key U.S. trade partner and an important contributor to global economic growth. Indonesia's responsible leadership and deft handling of many complex regional and global issues within the United Nations (UN), the Non-Aligned Movement, the Islamic Conference, the World Trade Organization, the Asia Pacific Economic Corporation and the Association of South East Asian Nations, gives the country increasing political prominence.
Notwithstanding these gains, problems remain. Despite a surface adherence to democratic principles, the Indonesian political system is strongly authoritarian with an inadequate and capricious legal system. Serious human rights abuses occur, especially in East Timor, Irian Jaya and Aceh. President Soeharto, at age 76, is likely to be elected to a 7th term in March 1998. Indonesia lacks any plan for an orderly, democratic transition of power. Although the Government of Indonesia (GOI) has made great strides in protecting health and providing reliable family planning for its citizens, Indonesia remains a critical country in U.S. efforts to stabilize world population by 2020, given the large number of young people entering their childbearing years. Indonesia is the world's most important depository of terrestrial and marine biodiversity. Without more responsible utilization and conservation of Indonesia's rich natural resources, Indonesia may further degrade its still abundant but fragile environment. Indonesia is akey global climate change (GCC) country for USAID.
The Development Challenge
Indonesia, like much of Asia, is faced with a severe financial crisis. While regional factors have come into play, a weak banking system, domestic inefficiencies, lack of transparency in decision-making and poor regulatory enforcement are at the core of the problem. Simultaneously, the prolonged El Niño-related drought and forest fires have reduced tourism and agricultural production, affected health and livelihood, and burned up to 2 million hectares of Indonesia's forests. The number of Indonesian's living in poverty will likely increase by at least 15% (total 30 million persons) during the next year, as unemployment may reach unprecedented levels. Given required GOI budget stringency, recent gains in quality of life are unlikely to be maintained. Indonesia's ambitious International Monetary Fund (IMF)-supported economic reform program, announced mid-January, is expected to accelerate financial sector restructuring and tackle many key distortions. Yet economic indicators have worsened as regional financial turbulence continues.
USAID's program is strategically positioned to address many key development issues facing Indonesia. To help Indonesia implement its reform program while addressing free market issues of international trade and domestic competition, USAID is structuring technical assistance and a grants program that partners Indonesian and U.S. institutions to collaborate on market-oriented analysis and policy options. Economic policy-based technical assistance has proven very effective. For example, with the help of
USAID advisors' analysis on potential options for commodity tariff reductions, the GOI went forward with a tariff reduction list that reduced the unweighted import tariff rate by two percent to 11.8%.
A mature democratic political culture that honors human rights and rule of law, and can withstand economic and political turmoil such as Indonesia now faces, requires the development of civil society institutions to serve as watchdogs of government actions and engage government in protecting the rights of citizens. USAID supports the strengthening of key institutions of civil society that foster these concepts. Despite deteriorating economic conditions, the GOI has not cracked down on civil society advocacy activity; in fact, these institutions are playing an important role in venting citizen concerns. In the past year, civil society institutions assisted by USAID engaged the GOI to shape or change policy development and implementation over 45 times. The new Environmental Management Law includes provisions mandating NGO participation in government environmental reviews and allows for class action suits. NGOs supported by USAID lobbied successfully for such measures.
Protection of Indonesia's rich environment is threatened both by growing urban pollution and by extensive exploitation of natural resources for economic gain. (The out-of-control forest fires were largely started intentionally to clear land for agriculture.) USAID's natural resource management program engages central and local governments, indigenous NGOs, businesses and communities to agree jointly on policies and practices that maintain livelihoods while conserving resources. This year improved practices were implemented on at least 600,000 hectares of fragile lands through USAID efforts, and 28 agreements for local land use management by communities and local governments guaranteed greater protection of forest resources. USAID is assisting forest concessionaires to practice low impact logging to conserve valuable hardwood and reduce risk of fires. One concessionaire who experienced a 30% cost savings through the improved practices decided to apply these techniques to all holdings. Through assistance in urban environmental management, USAID works with local governments and the private sector to identify methods to finance urban environmental infrastructure and renewable energy. Such mechanisms helped Indonesia provide access to water for 2 million urban residents last year. In Indonesia's current economic downturn, this program offers help in providing sustainable access to financing for such improvements.
Despite impressive progress in improving health and reducing fertility, Indonesia's ability to provide high-quality, sustainable health and family planning services is challenged by the difficulty of maintaining quality care for a growing population. The challenge is now greater as economic difficulties increase health needs, yet limit available resources. USAID contributions to policy advice, education-communications programs and service delivery improvements by government and private sector providers helped increase national contraceptive prevalence by 2%, to 61.7%, this past year. Fifteen percent more pregnant women delivered babies with professional services in USAID-assisted areas. Expanded private sector services enabled government resources to be targetted by need.
Other Donors
International donors pledged over $5 billion in 1997 or about 75% of the GOI's development budget. The U.S. is Indonesia's 2nd largest bilateral partner after Japan and the 6th largest donor overall. The other four large donors are multilateral banks: the World Bank, Asian Development Bank, the Islamic Development Bank and the European Investment Bank. However, the U.S. provides only 1.4% of Indonesia's development resources. USAID has worked closely with the World Bank on many projects and leveraged Asian Development Bank assistance in urban environment and privatization.
FY 1999 Program
Approximately 24% of Development Assistance funding planned for FY 1999 is for health/family planning, about 34% for environmental management, 21% for economic growth promotion and 21% for democracy and governance.
ACTIVITY DATA SHEET
PROGRAM: Indonesia
TITLE AND NUMBER: Sustained Liberalization of International Trade and Domestic Competition for the Mutual Benefit of Indonesia and the United States; 497-SO01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $5,500,000 (DA)
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: To strengthen open markets and greater domestic economic competition by fostering continued economic policy reform.
USAID's Role and Achievements to Date: USAID is a major supplier of technical support and advice to the GOI. Many of our contributions to the formation and execution of macro-policies aided Indonesia's strong economic growth of the last 25 years. Obviously, with Indonesia in the midst of a severe economic downturn, this work is not done. USAID's work continues to produce results. Weighted average import tariffs declined below 12%; new laws supported by U.S. technical assistance were promulgated regarding intellectual property and commodities futures; and progress was made in identifying and quantifying financial and other constraints to the development and expansion of small and micro-businesses in the country.
The sum of exports and imports between Indonesia and the U.S. increased by 14%, nearly double that anticipated by USAID. In 1996, the flow of U.S. investment increased 23%, again nearly twice the USAID target. USAID advisors analyzed and recommended a list of commodity tariffs to be reduced in the July 1997 deregulation package. The GOI agreed to a commodity-by-commodity reduction plan which Indonesia would need in order to meet its APEC targets. There are now over 58,000 users with access to a complete set of commercial laws and regulations made available by USAID on CD-Rom. Increasingly, both private firms and the GOI have used the now-transparent regulations to defend their positions in court. The current economic crisis only reinforces the importance of USAID's focus on liberalized trade and domestic economic competition.
Description: This program supports improvements in two key areas of the economy: the international trade regime and domestic economic competition. Rapid economic progress clearly masked a number of key problems, particularly at the microeconomic level -- weak bank supervision and resultant increases in bad debt; lack of transparency and lack of a strong legal framework in which the economy could operate; and a multitude of barriers to efficient operation of the domestic economy -- which have now been exposed by the financial crisis sweeping Asia. These weaknesses, combined with concerns over the process of political transition led to an over 200% depreciation of the Indonesian rupiah in less than 12 months, an increase in inflation to above ten percent annually, the loss of millions of jobs, and the prospect of widespread corporate failure, diminished economic output and social unrest in the coming year.
The threats previously identified and which this program is designed to mitigate, remain real, and are in fact exacerbated by the crisis: 1) the potential for a rise in protectionist sentiment which could undermine the efficiency and competitiveness of the economy and also threaten future export and investment opportunities for the U.S. and other countries; and 2) continued barriers to domestic economic competition that limit the broadening of participation in the benefits of economic growth.
This program encompasses technical assistance to a number of the key GOI agencies dealing with the economy: the most important being the Ministry of Industry and Trade, the Coordinating Ministry of Economics and Finance, and the National Planning Agency. Technical support to these and other key GOI entities will continue under a new contract to be issued in late FY 98. A new activity known as the Partnership for Economic Growth will support linkages and alliances between private economic
research and development organizations in the U.S. and Indonesia which can provide additional intellectual capital to assist in the ongoing reform process. It will also support a collateral objective to create a strengthened dialogue between the GOI and the private sector on economic reform issues. Strong private sector participation is seen as one avenue through which U.S. support to the economic development process in Indonesia can be sustained once USAID assistance ends. USAID will use these programs as needed to assist the GOI with other aspects of the current crisis, including financial sector reforms, in collaboration with the World Bank and the Asian Development Bank.
Host Country and Other Donors: Host country involvement covers many GOI ministries and agencies and local and international NGOs. USAID has long been a preeminent donor in economic policy analysis. Estimated Host Country Contribution for this activity is $6.4 million. Other major donors in the economic growth field are the World Bank and the Asian Development Bank. Both these institutions have increased their level of technical support to Indonesia to assist in implementing the current IMF-led economic reform programs. USAID collaborates closely with these and other bilateral donors in the development of its economic growth programs for Indonesia.
Beneficiaries: Partners in the economic policy reform field have included a wide range of public institutions. The range of partners is now being expanded to include private institutions which wish to affect the process of economic reform. The customer base for such reforms is country-wide, encompassing not only members of the public bureaucracy, but also private employers and employees and a wide range of customers for both domestic and foreign goods and services. The thrust of the continuous process of reform to which USAID is contributing is to assure that benefits of increased economic efficiency are as widely shared as possible. By use of survey and interview techniques, the opinions and views of customers and partners have contributed substantially to the design of USAID's economic growth activities.
Principal Contractors, Grantees, or Agencies: Several institutional contractors will complete their work in FY 1998. New technical assistance contracts, to be awarded in FY 98, will continue to supply needed support in the fields of international trade and domestic competition. The U.S./Indonesian Partnership for Economic Growth activity will require a new institutional contractor to assist in management of the program. USAID expects to make a series of grants to support U.S./Indonesian institutional linkages under the new partnership concept.
Major Results Indicators: Baseline Target Lower weighted average import tariff rate 15% (1995)See footnote 1 11% (1999) Adoption of major new economic enactments which strengthen openness, transparency and competition 2 (1995)See footnote 2 10 (1999)
ACTIVITY DATA SHEET
PROGRAM: Indonesia
TITLE AND NUMBER: Sustained Improvements in Health and Reduced Fertility, 497-S002
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 99: $8,700,000 (CSD)
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000
Purpose: To improve health by reducing the fertility rate, reducing the transmission of HIV/AIDS and other sexually transmitted infections (STIs), improving the quality of maternal health services and improving the financial basis for sustained health improvements.
USAID Role and Achievements to Date: USAID's unique contribution in health and population is its ability to provide high quality, short- and long-term technical assistance in a number of key program areas: (1) policy development, (2) institutional development, and (3) operations research. No other donor in Indonesia provides health and population technical assistance on a sustained basis. Most recent performance targets have been met or exceeded. The percentage of married women of child bearing age now using modern contraception is estimated to be 62%, or approximately 25 million women, according to the National Family Planning Coordinating Board. Total fertility declined from 3.1 in the early 90's to an estimated 2.7 children per woman in 1995; it will be measured again in 1998 through a National Demographic and Health Survey. An estimated 42% of current family planning users received family planning services from private sector sources, reducing the burden on the GOI for providing such services. A national STI/HIV/AIDS strategy, launched in 1995, is being implemented through GOI and donor alliances; national health resources allocated to HIV/AIDS increased by 350% from $2.5 million in 1994 to $8.9 million in 1997. The GOI considers the USAID supported managed health care trial in Klaten, Central Java as an important pilot project and has made several important policy reforms including increasing health center tariffs.
Description: USAID will continue to help the GOI to improve the quality of family planning and reproductive health services, and will assist the GOI to expand private sector delivery of goods and services. Grants to key local NGOs are critical ingredients for Indonesia's implementation of appropriate family planning and STI/HIV/AIDS prevention strategies. Technical assistance is helping the GOI's Ministry of Health conduct economic analyses to assess how the managed health care program can be strengthened in order to support expansion. Activities in the population and health sector focus on building sustainable institutions in order to: (1) increase the use, quality, and sustainability of family planning and reproductive health services and (2) increase the use and quality of sexually transmitted infection STI/HIV/AIDS prevention programs. Midwives -- the primary health care providers to Indonesian women and children -- will be trained to provide high quality family planning and reproductive health services. A national clinical training network for family planning and reproductive health will be expanded. The private sector will play a larger role as supplier and financier of family planning, reproductive health and other health services. The development of coherent and appropriate HIV/AIDS policies will help increase public knowledge of prevention practices and encourage a more effective allocation of public funds to combat STI/HIV/AIDS.
Achievement of our objectives depends to a large extent on political commitment, which traditionally has been strong in the health and population sector. However, the deterioriating economic situation may affect the GOI's ability to provide budget allocations for activities financed with local funds and especially for contraceptives purchased with foreign currency. A significantly reduced GOI budget would affect achievement of several objectives, particularly those related to long-term contraceptive use, clinical training, and mass media information and communication campaigns. The new GOI budget demonstrates continued strong commitment for the provision of social services, which will be needed even more as incomes decline.
Host Country and Other Donors: The State Ministry of Population and the Ministry of Health are collaborating with USAID to pursue objectives by formulating new national policies and by coordinating and implementing activities. Local provincial government offices and NGOs are cooperating in carrying out USAID-funded programs: an STI/HIV/AIDS prevention program, improved maternal health service delivery activities, and family planning activities in hard-to-reach areas. The estimated host country contribution for these activities is $12,900,000. The World Bank is also launching an integrated health program which will emphasize improved maternal health and family welfare. USAID, which has always been the lead donor and advisor in family planning, is a major leader of the donor committee coordinating STI/HIV/AIDS. A collaborative effort is underway between USAID and the Japanese government to launch a survey on the effects of Vitamin A in reducing maternal mortality.
Beneficiaries: Beneficiaries include over 40 million women of reproductive age, including expectant mothers, lower-income populations who require improved health care, and persons who practice high-risk sexual behavior. Improvements in the quality of health and family planning services will provide better service to end-users and will make the service more customer-oriented.
Principal Contractors, Grantees, or Agencies: Contractors and grantees, such as Pathfinder International, John Snow International, The Population Council, Futures Group International, Johns Hopkins University, Centers for Disease Control and Family Health International, will continue their activities in family planning, reproductive health, STI/HIV/AIDS prevention and health sector financing.
Major Results Indicators:
Baseline Target for FY99
Total fertility rate 2.86 (1994)See footnote 3 2.62
Sexually transmitted infections prevalence rate
among high-risk populations in demonstration areas
(male and female) 33% (1996)See footnote 4 20%
Proportion of births attended by trained health
personnel in demonstration areas 35.4% (1996)See footnote 5 72%
ACTIVITY DATA SHEET
PROGRAM: Indonesia
TITLE AND NUMBER: Decentralized and Strengthened Natural Resources Management, 497-SO03
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $9,000,000 (DA)
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2005
Purpose: Indonesia has the most diverse natural resource base of any USAID recipient. The purpose of USAID's Decentralized and Strengthened Natural Resources Management program is to give the tools of natural resources management (NRM) to local and provincial government, the private sector and non-governmental organizations (NGOs). Further, USAID seeks to build partnerships among these players so they can collaborate in natural resource policy implementation, planning, and management. With the widest range of biodiversity and the world's richest marine resources, Indonesia also has the longest list of endangered species. Its tropical forests (second only to the Amazon) are disappearing at a rate of a million hectares per year (and double that of last year because of the El Niño aggravated fires), at a heavy cost not only to biodiveristy conservation. Its coastlines are being polluted. Its parks and protected areas are insufficiently financed and staffed to adequately protect them. One GOI response to these problems has been transfer greater authority for natural resource management to local governments.
USAID Role and Achievements to Date: USAID has two advantages over other donors that enable it to support strategic, complex programs at a level sufficient to influence decisions about strategy and priorities: (1) the ability to collaborate directly with NGOs, difficult or impossible for most donors; and (2) top-level technical expertise. This allowed USAID to respond quickly when the large scale forest fires broke out in late 1997. In cooperation with the U.S. Forest Service, USAID provided state-of-the-art wildfire fighting remote sensing maps to assist U.S.G. C-130 water bombing missions, and provided follow-on support regarding the best ways to interpret and use maps. The maps were loaded onto a U.S.-based web site to ensure maximum access by a wide range of user groups engaged in fire suppression activities.
Other achievements this year include the completion of Phase I of the US-Japan Biodiversity Conservation Project Common Agenda activity which funded, among other things, a biodiversity priority setting exercise in Irian Jaya which demonstrated that this eastern island is a megadiversity spot rivaling that of the Amazon basin. USAID contributed to the development of Indonesia's National Maritime Strategy ensuring inclusion of coastline considerations. Finally, a new Environment Law was passed which allows greater authority to the provincial level environmental impact agencies and specific mechanisms for citizen participation.
Description: USAID will continue to work with the GOI, NGOs, community groups and private sector partners to promote strengthened and decentralized NRM. This will be done by providing these partners with NRM tools including: (1) "best practices" which serve to maintain or improve the condition of Indonesia's natural resources while at the same time preserving livelihood of the local communities who utilize the resources, (2) information and training, (3) enabling policies, and (4) methods for ensuring sustainable financing. The field site demonstrations, located primarily in the biologically rich eastern islands of Indonesia, will be linked to national level analysis, and information from lessons learned will be disseminated in key ministries to improve the formulation of national policy options in the NRM sector. Further, USAID will continue to provide medium and longer term response to the fall fires by (1) conducting analyses on causes and consequences of the fires to provide policy and mitigation options for the GOI in preparing an effective response to future wild fires, and (2) expanding efforts to assist forest concessionaires in adopting reduced impact harvesting practices which help to reduce the debris that feeds forest fires. The impact of this program will be measured by total area of USAID-assisted sites where NRM best practices are being demonstrated plus the total area where USAID demonstrated best practices are being replicated by others. Intermediate results under each sector
(forest resources, protected areas resources, and coastal resources management) will be measured by: (1) the extent to which GOI and NGO are strengthened in order to better undertake NRM, (2) the number of advances along a policy and enabling condition index, (3) the number of publications, articles and audiovisual materials documenting NRM lessons learned that are distributed to Indonesian audiences, and (4) the number of individuals, trained in USAID-assisted workshops who are participating effectively in NRM.
Host Country and Other Donors: The GOI's Ministries of Environment, Forestry, Home Affairs, and the National Planning Agency are key host country partners. Other donors are replicating the community-based NRM approach which USAID introduced, including the World Bank, the Asian Development Bank and Australian AID. Multilateral banks, bilateral donors, and international research centers (e.g. International Center for Agroforestry and Center for International Forestry) work with USAID to support Indonesia's forestry and marine conservation. The Government of Japan and the United Nations' Global Environmental Fund also work with USAID on biodiversity conservation and climate change efforts. USAID provides leadership to the donor community in the formulation of forestry policy with the support of Canada, Finland, and Japan. Selected private sector entities and NGOs will also pool resources to pursue this activity. The estimated total host country contribution to this activity is $19,333,000 and other donors provide an estimated $50 million (mainly loan financing from the World Bank and Japan).
Beneficiaries: Direct beneficiaries are (1) the one-third of Indonesia's population (i.e, 65 million people) who are dependent upon forest resources and the approximately 16 million people employed in fishing activities whose livelihood is directly dependent on the health of coastal and marine ecosystems; (2) Indonesia's network of environmental NGOs which will be strengthened to ensure sustainability of their conservation efforts beyond the life of USAID financing; (3) universities that provide professional assistance and training for NRM; and (4) owners of natural resource enterprises that will become more sustainable and productive. Indirect beneficiaries include: (1) the future generations of Indonesian citizens who will use natural resources that otherwise may have been depleted and (2) the global climate which will benefit from protection of forests which help to reduce global warming.
Principal Contractors, Grantees, or Agencies: The activity will be implemented through a variety of complementary instruments: (1) a partnership of key GOI ministries, local NGOs, Indonesian universities, and local governments with U.S. environmental NGOs (World Wildlife Fund, the Nature Conservancy, World Resources Institute, Conservation International); (2) the ongoing Biodiversity Support Program, (3) a cooperative agreement with the University of Rhode Island; and (4) technical assistance from a U.S. consulting firm through the USAID Center for Environment.
Major SO Results Indicator: Baseline Target (numbers in thousands) Total area (hectares) of (a) USAID assisted sites 250 ha 1,030 ha where best practices are being demonstrated or (1994/95) (1998/99) implemented; plus (b) total area where best practices are being replicated by others.
ACTIVITY DATA SHEET
PROGRAM: Indonesia
TITLE AND NUMBER: Strengthened Urban Environmental Management, 497-SO04
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $9,000,000 (DA)
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2003
Purpose: To strengthen the management of Indonesia's urban environment by increasing access to water and increasing the environmentally sound production and use of energy.
USAID's Role and Achievements to Date:
To meet the challenge of rapid urbanization, Indonesia must address three constraints. The constraints are: (1) the limited ability of local government to access public and private sector capital to finance urban environmental infrastructure projects designed and managed at the local level; (2) insufficient community participation in the design and management of such projects; and (3) insufficient incentives to the Indonesian private sector for investments in clean sources of energy and its more efficient use. Indonesia's current economic crisis highlights these constraints, which must be overcome to reinstate a climate conducive to economic growth.
To assist Indonesia to meet this long-term urbanization challenge, aspects of the IMF-sponsored reform package, and improvements in intergovernmental relations, USAID will continue to blend technical assistance and grants to foster: (1) the adoption of new policies and practices to facilitate decentralized, and increasingly private sector, financing of urban environmental infrastructure; (2) greater participation by community residents in decisions regarding urban environmental infrastructure; and (3) wider adoption by government and industry of policies and procedures to promote cost-effective use of clean, renewable energy. Decentralized financing of infrastructure will result in better investment decisions by local utilities and will reduce the dependence of local governments on grants and other revenue transfers from the central government, thereby aiding the GOI to meet IMF public expenditure targets as well as other IMF structural adjustment objectives. More community participation in infrastructure decisions will ensure projects have local commitment and can pay for themselves. The promotion of renewable energy production and energy efficiency will help reduce the level of greenhouse gases emitted in power generation and reduce, over the long-term, energy production cost. Progress since last year includes (1) additional 1.7 million urban residents with access to piped water; (2) continued increases in the provision of other urban environmental services; (3) substantial increases in all essential components of financial resource flows for urban environmental services: loans, grants, and investments by the private sector; and (4) a two percent increase in the amount of megawatts of installed generating capacity that use renewable energy resources, representing $150 million of investment in renewable energy. Global climate change activities will be undertaken primarily with assistance from USAID's Global Bureau.
Description: USAID remains a leader among foreign donors in advising the GOI on the reform of its policies and procedures dealing with urban environmental finance and management. USAID expects, however, that the current economic crisis in Indonesia will mean that several anticipated results in the areas of water service privatization, increases in locally-generated municipal revenues, and increases in installed energy capacity from renewable energy may not be achieved. The technical assistance USAID provides to the GOI will be maintained because it focuses on policies and practices that need to be changed to achieve many of the IMF called-for structural adjustments. Our emphasis on private sector financing for infrastructure through instruments such as revenue bonds will be deferred until the banking system stabilizes. We expect to focus in the coming year on improved utilization of public investment for urban infrastructure, local government efforts to increase own-source revenues and privatization activities of low capital intensity that promote immediate infrastructure system efficiencies. Similarly, while the restructuring of the national power utility accelerates, it is not clear what emphasis renewable energy will receive. USAID will closely monitor events in these fields. We
are well situated to support the efforts of both the GOI and the private sector in resolving the current crisis.
Host Country and Other Donors: The GOI's Ministries of Planning, Home Affairs, Finance, and Mines and Energy play key roles in the success of this activity. Private investors, the semi-public power sector, and local community groups also will contribute their resources and time to this activity. The ADB and World Bank's urban sector loans, and equity financing through multilateral organizations such as the IFC support USAID-backed policy initiatives to privatize electric power services and to establish self-financing schemes for urban infrastructure expansion. USAID has consistently been the lead technical advisor in the urban environment sector, with the ADB and World Bank typically providing the greatest funding once USAID-sponsored pilots have proven successful.
Beneficiaries: Forty million Indonesians have water piped into their houses, but 53% of urban residents lack access to piped water. USAID's urban environmental activity will promote the extension of water utility networks to serve an additional two and one-half million beneficiaries. Beneficiaries also include all electricity consumers whose power is unreliable and inefficiently produced.
Principal Contractors, Grantees, or Agencies: Research Triangle Institute will continue its work as a long-term technical assistance contractor in the areas of municipal finance, capital market development, and private sector sector funding of public utilities. A new element in the mix of advisory services in FY 1999 will be the inclusion participation in decision-making about management of urban services.
Major Results Indicators: Baseline Target
Percent of total urban population served by 40% (1994/95)See footnote 6 47% (1998/1999) local water treatment and piped distribution
Metric tons of CO2, methane, SO2, and 0 (1996/97) 2 million (1998/99)
particulate matter reduced or avoided nationally
ACTIVITY DATA SHEET
PROGRAM: INDONESIA
TITLE AND NUMBER: Increased Effectiveness of Selected Institutions Which Promote Democracy, 497-SO05
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $6,169,000 (DA)
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2000
Purpose: To enhance respect for the principles of the rule of law and internationally accepted human rights, to encourage the development of a politically active civil society, and to foster more transparent and accountable governance.
USAID's Role and Achievements to Date: USAID assistance helps both the Government of Indonesia (GOI) and Indonesian civil society introduce and execute reforms which are responsive to the democratic changes Indonesians themselves desire. Indonesia's pace of democratization continues to lag behind its previously rapid, but now stalled economic progress. Demands are growing for greater political participation, for greater adherence to Indonesian law and international human rights standards and for a more open government. Because of the deep economic crisis, Indonesians are also clamoring for increased equality of economic opportunity and equity in development. Special problems exist in the troubled East Timor, Irian Jaya and Aceh regions of Indonesia. Indonesian civil society is relatively weak and disorganized relative to government, military, and state institutions. However, non-governmental organizations (NGOs) are increasingly active in expressing their diverse interests and recently, the GOI has responded more to NGO arguments and positions contributing to NGO legitimacy within the society, validating their political role. The GOI permits some, albeit limited, independent political activity. The Soeharto government controlled political expression during 1997 parliamentary elections and all indications are that Soeharto will be elected President for a 7th term in March 1998. The threat of the GOI and/or the military imposing severe restrictions on NGOs' activities and independence is exacerbated by the continued economic crisis.
Among donors assisting Indonesia, USAID enjoys a unique role in helping to establish and strengthen democratic principles; USAID is the largest financial supporter to and the most active donor in this controversial sector. Recent progress attributable to the actions of USAID-sponsored activities in the NGO sector include: (1) withdrawal of permits for companies which did not provide insurance for immigrant workers; (2) the end of forced contributions to finance the South East Asian games and use of military personnel to assist in collection of television taxes; (3) establishment of a nuclear power monitoring body; (4) class action procedures approved in the new Environmental Management law; (5) alternative dispute mechanisms formally authorized for certain environmental and commercial cases; (6) an unprecedented NGO/military seminar to discuss the role and nature of civil society; and (7) a cessation of distribution of subsidized fertilizer in coffee growing areas certified organic.
Description: USAID will continue to implement a strategy to promote democratic ideals largely through grants to indigenous NGOs focussing on advocacy, human rights, the political economy and rule of law, while always seeking new avenues to work with the GOI. USAID activities promote three results: (1) increased NGO advocacy for democratic participation; (2) greater respect for the rule of law; and (3) enhanced capacity, reliability, and responsiveness of selected NGOs. Through greater participation, Indonesians will channel their views more effectively to political decision-makers. A heightened respect for due process will encourage a more inclusive, consistent and reliable process as citizens demand that civil, criminal and commercial procedures and rulings be more transparent and less arbitrary. As NGOs become technically, administratively and financially sound, they become more capable and respected in representing public sentiments in an independent, balanced, and non-partisan manner. USAID will continue to program resources in the three politically sensitive geographic areas of Indonesia.
Host Country and Other Donors: USAID is by far the leading donor in Indonesia's democracy sector. Local NGOs dealing with citizens' rights, freedom of the press, legal aid, labor relations, land disputes and consumer protection are USAID's primary development partners. International donors and foundations look to the U.S. and USAID for leadership and direction in this sensitive program area. Following USAID's lead, a growing number of bilateral donors have introduced small programs in the democracy and governance sector. The estimated host country contribution for this activity is $3,600,000 derived almost completely from NGOs.
Beneficiaries: Indonesian women, men and children who benefit from the wide range of NGO programs in the areas of legal, consumer, and environmental advocacy, labor rights, land tenure, and freedom of the press are the ultimate beneficiaries of USAID funded activities. Immediate clients, recipients, consumers, executive boards and employees of local NGOs are direct beneficiaries. Intangible benefits of a more participatory form of public policy formulation have a salutary effect throughout Indonesian society.
Principal Contractors, Grantees, or Agencies: USAID continues to pursue this activity primarily through selected Indonesian and U.S. NGOs, such as the Indonesian Legal Aid Society, the National Cooperative Business Association, the American Center for International Labor Solidarity, the Asia Foundation, the Indonesian Consumers Foundation, Institute for the Development of Economics and Finance, and the Indonesian Environmental Law Center, which focus on democratic participation, advocacy and rule of law activities. When appropriate, U.S. advocacy, political and economic, and research institutions are also engaged. A two-year contract with Management Systems International adds analytical depth and broader outreach to USAID's democracy-building activities in Indonesia.
Major Results Indicators:
Baseline Target
Number of times that grantee
NGOs have a measurable impact on the
formulation and implementation of government policy 20 (1994) See footnote 7 45 (1998/99)
INDONESIA
FY 1999 PROGRAM SUMMARY
($000)
USAID Strategies and Special
ObjectivesEconomic
Growth &
Agriculture
Population &
Health
Environment
DemocracyHuman
Capacity
Development
Humanitarian
Assistance
TOTALSS.O 1. Sustained liberalization of international trade and domestic competition for the mutual benefit of Indonesia and the U.S.
- D.A.
5,500
5,500
S.O. 2, Sustained improvements in health and reduced fertility
- CSD
8,700
8,700
S.O. 3. Decentralized and strengthened natural resource management
- D.A.
9,000
9,000
S.O. 4. Strengthened urban environmental management
-D.A.
9,000
9,000
S.O.5, Increased effectiveness of selected institutions which promote democracy
-D.A.
6,169
6,169
Totals
- D.A.
- C.S.D.
5,500
0
0
8,700
18,000
0
6,169
0
0
0
0
0
29,669
8,700
USAID Mission Director: Vivikka Moldrem Source: IBRD data on calculation of average tariff rates
Footnote: 1
Footnote: 2 Source: Government of Indonesia Gazette for text of new laws and enactments
Footnote: 3 Source: Indonesian Demographic and Health Survey 1994.
Footnote: 4 Survey data developed in late 1996 is being used for this indicator.
Footnote: 5 Source: GOI/MOH and Project Survey Data.
Footnote: 6 Source: Ministry of Public Works and Ministry of Home Affairs
Footnote: 7 Source: NGO reports, independent monitoring
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