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Indonesia
The Development Challenge: Six years into a comprehensive political and economic transition, Indonesia has made significant progress in consolidating democratic reforms and processes. It has successfully converted one of the world's most centralized countries to one of the most decentralized, and has placed the country's economy back on a growth path. It is beginning to tackle terrorism.
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Serious challenges remain that could derail what is still a fragile situation. The education system is in crisis. Indonesia continues to struggle with deeply entrenched legacies of authoritarian rule. Indonesia is the only major ASEAN country yet to fully recover from the 1997-1998 Asian financial crisis. Decentralization shifted responsibility for the delivery of essential human services to more than 400 local governments most of which are ill-prepared to address the challenges of planning, budgeting, and managing these services in an effective, transparent and accountable manner. More than 40 million people live in poverty with limited access to adequate health services, food, clean water and effective sanitation. An estimated 77 million people (one-third of the population) lack access to clean water. Hundreds of thousands of Indonesians continue to suffer from ethnic and religious conflict and natural disasters.
As the world's largest Muslim-majority country, Indonesia is too important to fail. 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. A thriving Indonesian democracy could serve as an example and inspiration to other Muslim nations with a long experience of autocratic rule.
The USAID Program: USAID's 2000-2004 assistance program to Indonesia was designed to support a transition from 1998-era crisis response initiatives to strategic interventions that establish the foundation for economic, social and political reforms. This has largely been accomplished. The next step is to provide assistance to Indonesia that will make it a more moderate, stable and productive country. USAID is embarking on a new strategic direction that will address these needs.
FY 2004 and FY 2005 funds will be used to fund ongoing and new activities that will accomplish the following:
- Strengthen decentralized local governance by consolidating the decentralization processes and Indonesia's democratic reform agenda, improving the rule of law, and elections assistance, and promote pluralism;
- Improve the delivery of basic human services by targeting integrated watershed management, municipal water supplies, sanitation, food security, family planning, child survival, maternal health and HIV/AIDS and other infectious diseases;
- Increase economic growth and job creation through assistance that will liberalize trade and investment, improve economic policies, and reform economic governance; and
- Improve the quality of education in public and private schools.
With FY 2004 funding, USAID will be the lead donor supporting transparent, inclusive and peaceful legislative and, first-ever, direct presidential elections in Indonesia.
The education program, which will be initiated and implemented with FY 2004 and FY 2005 funds, is a new one based on President Bush's announcement of an Indonesian education initiative. Program activities will prepare the children of Indonesia to be more productive members of the world economy. USAID's program will also prepare them to be effective participants in their own democratic society, while reducing extremism and intolerance in favor of democracy, respect for diversity, and resolution of societal and political differences through non-violent means. In addition, USAID/Indonesia will continue to expand the development of public-private partnerships, including major new efforts in the Digital Freedom Initiative, use of Development Credit Authority approaches in the water sector, and a significant engagement with private sector partners in our new education program.
Other Program Elements: USAID's Office of Foreign Disaster Assistance's emergency and disaster relief activities complement USAID/Indonesia's P.L. 480 food assistance and programs related to internally displaced persons. As appropriate, USAID's democracy activities are closely integrated with State Department public diplomacy efforts. USAID will fund technical assistance and training to strengthen national and local economic institutions in partnership with other U.S. agencies including the Department of State, Department of Justice and U.S. Federal Trade Commission. USAID is implementing activities in Indonesia through global and regional programs in health, economic growth and environment. Programs previously implemented through the U.S.-Asia Environmental Partnership are being integrated into Mission programs. The State Department's East Asia and Pacific Women's Rights Initiative continues to fund anti-trafficking programs in Indonesia.
Other Donors: The United States is the second largest bilateral donor to Indonesia and the largest donor of grant assistance. Other major bilateral donors include Japan, the Netherlands, Australia, Germany, the United Kingdom, and Canada. Through flexible and responsive programming, USAID plays a leadership role among donors, most notably in elections assistance, civil society development, and decentralization. USAID works closely with the major multilateral donors including the World Bank, the Asian Development Bank, the International Monetary Fund, the European Union, and the United Nations agencies. The World Bank-chaired Consultative Group on Indonesia coordinates donor assistance to Indonesia. The United Nations-led Partnership for Governance Reform also coordinates donor interventions on civil society, corporate governance, anticorruption, decentralization, justice sector reform, and poverty reduction.
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