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Indonesia
>> Regional Overview >> Indonesia Overview
Previous Years' Activities
2002, 2001, 2000, 1999, 1998, 1997
Last updated: 25
THE DEVELOPMENT CHALLENGE: The United States has a strong national security interest in Indonesia and the two nations share a long history of friendship and mutual support. As the world's fourth most populous state, and largest Muslim country, Indonesia can play a fundamentally important role in efforts to combat terrorism and maintain political stability in Southeast Asia. Its 220 million people are a major market for U.S. goods. Indonesia's importance also stems from its enormous natural resources, rich biodiversity, and strategic location across key shipping lanes linking Europe, the Middle East, and Asia.
Nearly 60% of the population lives below the poverty line of $2 a day. Indonesia faces remarkable challenges as it takes on three major tasks: economic reform, a transition to democracy after 30 years of military authoritarian rule, and a massive decentralization of power to nearly 400 local governments. The task has not been easy, and the country continues to suffer through a period of political and economic uncertainty. The budget is in crisis, the economy fragile, and new political leadership has only begun to provide some sense of stability to what has been a turbulent ride since the fall of Suharto in May 1998.
The turbulence is reflected in the numbers. More than 1.3 million Indonesians have been displaced by ethnic, religious, and separatist violence. Economic growth dropped from 4.8% to 3.5% in 2001, inflation has grown to 12%, and the budget deficit is close to four percent of GDP. Indonesia's policy makers continue to be slow in seizing opportunities to implement necessary economic structural reforms such as bank and corporate restructuring, privatization, and fiscal reform. Rising unemployment has pushed many people below the poverty line, increasing the appeal of radical and extremist elements. Corruption, exacerbated by a weak justice sector, permeates all levels of society, politics, and the economy, seriously undermining reform efforts. Declining government resources for the health system imperils many Indonesians, and HIV/AIDS is spreading at an alarming rate among high-risk populations.
At the same time, the country and its people have demonstrated remarkable resilience. Decentralization has moved forward-two million government officials and 20,000 government offices have been transferred from central to local control. In August 2001, the presidency transferred peacefully and constitutionally from Abdurrahman Wahid to Megawati Sukarnoputri, ending a long period of political and economic turmoil that had stymied reform efforts, tainted relations with the IMF, and discouraged foreign investment. The parliament has begun to play an increasingly active role, considering more than 100 pieces of legislation including laws on bank secrecy and money laundering. Civil society is flourishing and an independent media has grown exponentially. The reduction of massive energy subsidies is easing pressure on the national budget.
The events of September 11th and subsequent actions to combat terrorism have had special implications for U.S. policy interests in Indonesia. Indonesia's response to the global war on terrorism has been mixed. Small but vocal militant groups were outspoken in their initial reaction to the war in Afghanistan; moderate voices, and the government itself, have increasingly gained footing and are working to restore the image of Indonesia as a country tolerant of diversity and committed to cooperating in dealing with terrorism.
THE USAID PROGRAM: USAID will devote $74,272,000 DA and $50,000,000 ESF to its FY 2002 program and requests $71,472,000 DA and $60,000,000 ESF for FY 2003. The USAID program in Indonesia supports all four Agency Pillars: Economic Growth, Agriculture and Trade; Global Health; Democracy, Conflict and Humanitarian Assistance; and the Global Development Alliance (GDA). It focuses on 1) accelerating Indonesia's democratic transition, through civil society development, strengthening democratic institutions, and conflict prevention and mitigation; 2) promoting economic recovery and growth; 3) facilitating Indonesia's decentralization process, concentrating on local service delivery and budget planning in sectors such as natural-resource management and health; 4) reducing the threat of conflict and crisis in Indonesia related to ethnic and religious violence, internally displaced persons, and natural disasters; and 5) addressing health-sector priorities such as child survival, family planning, and HIV/AIDS.
By concentrating activities in certain geographic areas, the programs maximize impact, capitalize on synergies, and make the most of limited resources. Innovative private sector partnerships, including a national health campaign, resource city exchanges between U.S. and Indonesian local governments, and development partnerships with private companies, leverage USAID resources and support the GDA. While Food for Peace activities offer immediate relief to the poor, economic growth work on food policy is helping the Government rationalize pricing to make food staples more affordable and available. Linkages with regional universities provide a forum for local dialogues on a host of topics, from revenue sharing, to public television, to performance-based budgeting.
The events of September 11th led to USAID's reassessment of programs and priorities. While reaffirming that USAID programs mitigate the underlying causes of terrorism, such as the frustration and disenfranchisement generated by rising poverty in Indonesia, the review also led to new initiatives. A program supporting moderate mass-based Islamic organizations was expanded to promote better cooperation on inter-religious issues, increase public understanding and appreciation of democracy and religious tolerance, bolster civic education efforts in faith-based and secular schools, and strengthen the ability of Muslim women's organizations to promote messages of peace among less educated groups. This expansion will help ensure that moderate, peaceful voices are represented in Indonesia's ongoing dialogue on religion. Pending legislation on money laundering and anti-terrorism took on new relevance, and USAID stepped up its technical assistance to help the government pass and implement strong laws. Upcoming activities will continue and expand efforts that focus on youth, basic education, public diplomacy, and conflict resolution.
ONGOING PROGRAMS FOR WHICH NO FY 2002 OR FY 2003 FUNDING IS REQUESTED: None.
OTHER PROGRAM ELEMENTS: USAID is carrying out activities in Indonesia through global and regional programs in health (polio and tuberculosis), economic growth (Asian Economic Recovery Assistance program) and environment (U.S.-Asia Environmental Partnership and East Asia and Pacific Environment Initiative). The State Department's East Asia and Pacific Women's Rights Initiative has provided funding for antitrafficking programs in Indonesia. The bilateral program is complemented by activities funded by USAID's Office of Foreign Disaster Assistance (OFDA) and Office of Transition Initiatives (OTI). OFDA emergency and disaster relief activities enhance USAID's Title II food assistance and programs related to internally displaced persons. OTI activities are aligned with programs supporting Indonesia's democratic transition in conflict areas such as Aceh, the Malukus, and Papua.
OTHER DONORS: The United States is the second largest bilateral donor in Indonesia behind Japan. Other major bilateral donors include the Netherlands, Australia, Germany, the United Kingdom, and Canada. Through flexible and responsive programming, USAID plays a leadership role among donors, most notably in civil society development, decentralization, natural resources management, and health and humanitarian assistance. USAID works closely with the major multilateral donors: the World Bank, the Asian Development Bank (ADB), the International Monetary Fund (IMF), the European Union, and the United Nations agencies. The World Bank-chaired Consultative Group on Indonesia (CGI) coordinates donor assistance to Indonesia. The United Nations-led Partnership for Governance also coordinates donor interventions on civil society, corporate governance, anticorruption, decentralization, justice sector reform, and poverty reduction.
Program Data Sheets
- 497-007 Democratic Reforms Sustained and Deepened
- 497-008 Health of Women and Children Improved
- 497-009 Impact of Conflicts and Crises Reduced
- 497-010 Decentralized and Participatory Local Government
- 497-011 Foundation Set for Rapid, Sustainable, and Equitable Economic Growth
- 497-012 Strengthened and Decentralized Natural Resources Management
- 497-013 Energy Sector Governance Strengthened
Country Background Information Resources
CIA Factbook
Library of CongressNational Geographic Country Maps
State Dept. Country Information
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Last Updated on: May 29, 2002 |
