INDONESIA

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Development Assistance	$43,704,694	$61,550,000 1	$57,850,000
Child Survival and Disease	$ 9,130,000	$17,150,000	$17,150,000
Economic Support Funds	---	---	$ 5,000,000
P.L. 480 Title II	$46,833,000	$11,563,000	---
1Includes $10 M in recoveries

Introduction

Indonesia is grappling with a complex crisis of mutually reinforcing political, economic and social dimensions. Its success in resolving the crisis carries significant implications for U.S. interests. With more than 200 million people, Indonesia is both the fourth largest country in the world and has its largest Muslim population. With the first free elections in 33 years scheduled for June 1999, Indonesia has a chance to become the world’s third largest democracy. Its enormous natural resource base and human capital have made it a major emerging market for U.S. trade and investment. Its position astride strategic sea lanes gives it geopolitical importance and has been a major force in Indonesia’s economic growth. As a central member of the Association of Southeast Asian Nations, Indonesia has been an important contributor to regional stability. Its dramatic economic implosion and concurrent political and social instability have been at the heart of Asia’s financial crisis and growing concerns about regional stability.

Development Challenge

Indonesia’s crisis is creating widespread unemployment, impoverishing millions and causing extensive human misery. At the same time, it is providing remarkable new opportunities to encourage key economic and political reforms necessary for Indonesia’s future sustainable growth and peaceful transition to a more open, less corrupt, and increasingly participatory society.

After 33 years of virtually uninterrupted 7% annual growth, Indonesia’s GDP slumped nearly 13% in 1998. The commercial financial sector is paralyzed, and banks have virtually ceased operations. In Jakarta, one out of every three workers is out of work, and unemployment nationwide has reached 20%. The rupiah, after initially losing 85% of its value, has settled uneasily at a level one-third of a year ago. Inflation in 1998 approached 70%. Per capita income dropped from $1,200 to $400 (at prevailing exchange rates). An estimated 40 million people fall below the absolute poverty line.

The economic and political situation has had dramatic social impact. On average, 15,000 workers in the formal sector continue to lose their jobs each day. Malnutrition, anemia, and the number of women turning to commercial sex work are on the rise. Health and family planning services, suffering from the inability of government and private suppliers to finance key imported commodities, have been unable to respond. Unable to afford school fees, parents have enrolled fewer children in 1998 than 1997. Commercial distribution systems have been disrupted, and food prices inflated. Anger at inflated prices, in turn, has fueled additional unrest, such as looting and burning of rice warehouses and the breakdown of law and order.

Growing poverty has increased pressure on natural resources. Indonesia is one of the world’s most biologically diverse nations. It holds much of the world’s primary forests and enormous mineral and coastal resources. The development of these resources will have major biodiversity and global warming implications.

Resolving the current crisis depends on no one solution. Most observers agree that a major first step will be political: the holding of free and fair elections and establishment of a new government with unquestioned legitimacy and commitment to reform. The government has scheduled elections on June 7 with a parliamentary session to begin in August. A new president will be elected in November.

FY 2000 Program

The United States and its partners responded quickly this past year to the financial crisis to begin to slow Indonesia's downward spiral, mitigate its human impact and stimulate recovery. The United States provided emergency food and health supplies and increased its support for economic reform and nongovernmental organizations (NGOs).

USAID has stepped up efforts to strengthen the democratic transition currently underway. Assistance in FY 1999 and FY 2000 will improve conditions required for free, fair and substantive elections. USAID will support an independent media to monitor and inform the democratic process. It will double aid to NGOs working on voter education, monitoring, media, and human rights. Assistance will support a transparent, participatory, inclusive and informed public dialogue on Indonesian laws, regulations and procedures governing the democratic process.

Through close coordination with the major multilateral donors and other U.S. agencies, USAID will help spur recovery of Indonesian economic and financial systems. Assistance will support financial and corporate sector restructuring and governance, reform public sector policy and governance, and strengthen non-governmental sector participation in the economic reform process.

USAID will invest in the health of women and children by protecting access to essential primary health care services, supporting monitoring systems to improve efficiency of resource allocation and encouraging better health information. To improve food security for those most in need, USAID will support better food management and policies, and increase food accessibility. USAID will coordinate with other donors and the Government of Indonesia (GOI) to ensure food donations reach pockets of greatest need. USAID will work with the GOI and other donors to increase employment in targeted urban areas through the creation of temporary jobs that build, maintain, and rehabilitate basic infrastructure and community facilities.

USAID will strengthen environmental management to protect areas under increased stress from the financial crisis while continuing to respond to environmental issues of global importance. It will assist indigenous NGOs and local governments to strengthen environmental management and restructure essential energy and water services in urban areas.

Other Donors

The donor community in Indonesia can be broken into two distinct groups: (1) those with programs of nearly $1 billion and more yearly; and (2) those with annual programs and budgets of around $250 million and less. Multilateral organizations – the International Monetary Fund (IMF), World Bank, Asia Development Bank and Islamic Bank – and the Japanese bilateral program constitute the big donors. USAID is the largest contributor in the group of smaller donors, which also includes the European Union, the bilateral programs of Australia, Germany, Britain, France, Italy, the Netherlands, Canada, New Zealand and South Korea, and private U.S., German and Dutch foundations.

USAID’s influence within the donor community is substantial. Since the United States Government holds the largest capital and voting positions in the IMF and the World Bank, and significant sway at the Asian Development Bank, these institutions listen to U.S. interests and seek to collaborate with USAID whenever possible. As the largest of the smaller donors, USAID maintains a leadership role within this group and frequently represents it when dealing with the multilateral institutions. There is close and mutually beneficial coordination with the large Japanese assistance programs. USAID’s overall influence is further reinforced by the knowledge and relative continuity of its staff, strong influence with the GOI, and long history in Indonesia.

INDONESIA

FY 2000 PROGRAM SUMMARY (in thousands of dollars)

USAID Mission Director, Desaix Myers

USAID Strategic & Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Developmnt	Humanitarian Assistance	TOTALS
S.O. 6 Health of the Most Vulnerable Women & Children Protected - DA -CSD	-- --	9,500 16,950	-- --	-- --	-- --	-- --	9,500 16,950
S.O. 7 Improved Food Security for the Most Vulnerable Groups - DA - CSD	3,800 ---	--- 200	--- ---	--- ---	--- ---	--- ---	3,800 200
S.O. 8 Strengthened Environmental Management - DA	---	---	8,500	---	---	---	8,500
S.O. 9 Recovery of Economic & Financial Systems - DA	13,050	---	---	---	---	---	13,050
S.O. 10 Democratic Transition Strengthened - DA -ESF	--- ---	--- ---	--- ---	14,500 5,000	---	---	14,500 5,000
S.O. 11 Increased Employment For Targeted Communities - DA	---	---	8,500	---	---	---	8,500
Totals - DA - CSD - ESF	16,850 --- ---	9,500 17,150 ---	17,000 --- ---	14,500 --- 5,000	--- --- ---	--- --- ---	57,850 17,150 5,000

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ACTIVITY DATA SHEET

PROGRAM: INDONESIA
TITLE AND NUMBER:Health of the Most Vulnerable Women and Children Protected, 497-SO06
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES:FY 2000: $9,500,000 DA; $16,950,000 CSD
INITIAL OBLIGATION:FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: This objective is to protect the health of women and children by ensuring households have access to essential primary health care services, establishing needed monitoring systems, and providing information on appropriate health behavior.

Indonesia faces both a health crisis and a health care crisis. Years of progress in building a strong health care system and improving health status are threatened. An estimated 80 million persons now live below the poverty line and cannot meet basic needs, including nutritious diet, transportation to health facilities, and payment of fees for health care, medicines, and contraceptives. Many Indonesians no longer have the purchasing power for care from private providers and must increasingly rely on country or government provided maternal health (i.e., safe pregnancy and delivery); prevention of neonatal mortality; nutrition and prevention of micronutrient deficiencies; family planning; HIV/AIDS and sexually transmitted infections (STIs) control and prevention; and child health services.

At the same time, the GOI budget for the health sector has decreased by as much as 15-20%, reducing the resources necessary to maintain the health care system and its ability to meet increased demand. In sum, there is a widening gap between the decreased household resources available to purchase health care and the system-wide resources required to address the increasing health needs of the population.

Key Results: Three key intermediate results are identified as necessary to achieve this objective: 1) effective crisis monitoring and disease and nutritional surveillance established to allow the GOI and donors to make efficient program resource allocations; 2) essential health services preserved; and 3) appropriate health behavior services provided families under financial stress.

Performance and Prospects: This objective was established in FY 1998 and, consequently, performance from the past year is not available. The Mission expects that by 2001, family planning utilization, maternal health, and the nutritional status of mothers and children will return to pre-crisis levels and continue to improve thereafter. This timeline assumes that the GOI follows through with commitments to implement targeted health programs and the worst of the economic crisis has already occurred.

Progress towards establishing effective crisis monitoring and disease/nutritional surveillance is promising. Protection of the most vulnerable groups requires the GOI to identify the effects of household and government expenditures on nutritional intake, disease outbreaks, and use of the health care system. This will allow targeting of resources toward the most affected. Strengthening the capacity of the GOI at all levels to monitor health, nutrition and disease will be important for the recovery period and beyond. USAID-funded activities will allow the GOI and NGOs to play an active role in collection, analysis and dissemination of data required for crisis monitoring and surveillance. Policy-makers and program managers will use these data to determine resource allocations and program implementation.

It is too soon to assess progress in ensuring that key primary health care services continue to be available to those most adversely affected by the crisis. Although decision-making is benefiting from improved monitoring and surveillance systems, initial data received are grim. Fewer poor women are using trained providers for prenatal care and delivery of their babies resulting in increased complications and risk of mortality. Declining use of basic child health services is leading to increased child morbidity and mortality. A decline in the use of contraceptives is leading to increased pregnancies, higher birthrates and increased reliance on abortion. As the quantity and quality of food available to poor families decrease, so does families' nutritional status, resulting in micronutrient deficiencies. Sexually transmitted infections are reportedly rising with increased prostitution and reduced condom use, and shortages of diagnostics impedes the ability of the health system to diagnose and treat those infected.

In response, USAID-funded activities are: providing micronutrient supplementation and fortification (particularly vitamin A and iron) in target areas; implementing child feeding programs in collaboration with other donors; providing emergency supplies, contraceptives, training, and operational support for midwives; providing family planning services and related information to targeted districts; and supporting U.S. private voluntary organizations (PVOs) and indigenous NGOs and private sector entities for primary health care programs at the community level and prevention and education on risk factors associated with STIs and HIV/AIDS.

Lower incomes and unemployment are associated with increased susceptibility to infectious diseases and high risk behavior. The unavailability of soap and disinfectants in the home, smoking, untreated water supplies, and prostitution are contributors to illness and are likely to increase during an economic crisis. Campaigns and advocacy to provide families with health related information are essential to prevent lower demand for family planning and basic health services. USAID-funded activities will allow health workers, policy makers and the media to mobilize for the promotion of health messages. Knowledge about appropriate nutrition and cost effective options will increase. Over the long run, as the crisis subsides, families will also have comprehensive information about service availability in the private sector.

Possible Adjustments to Plans: Program emphasis has shifted to maternal/child health and nutrition. Both GOI and USAID monitoring efforts will determine if additional adjustments are necessary.

Other Donor Programs: The Asia Development Bank (ADB) is providing basic health education materials, medical supplies in eight provinces, block grants to cover medical operational costs and high-risk mothers requiring hospital services. Australia is providing $2.6 million in essential drugs, medical supplies and equipment. Canada will donate $3 million in oral contraceptives. The European Union will procure $17 million in contraceptives. Finland has approved a loan for $29 million for Norplant implants. Japan will assist the GOI in maintaining essential blood bank and transfusion services in Sulawesi and provided a donation of $16 million for medicine and disposable medical supplies. The United Nations Population Fund will donate $3 million for contraceptives. The United Nations Children's Fund has initiated child feeding, salt iodization, household food security and nutrition surveillance programs.

Principal Contractors, Grantees or Agencies: Ministry of Health; Ministry of Population; Midwives Association; Indonesian Planned Parenthood; Helen Keller International; Population Council; The Futures Group; Family Health International; Johns Hopkins; Pathfinder; and PRIME.

Selected Performance Measures:

	Baseline (1998)	Target (2000)	Target (2001)
Health and Nutritional crisis surveillance Surveys underway and GOI crisis centers Established: number of centers reporting	Program Initiated	3+	27
Contraceptive prevalence rate maintained	55%	55%	60%

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ACTIVITY DATA SHEET

PROGRAM: INDONESIA
TITLE AND NUMBER:Improved Food Security for the Most Vulnerable Groups, 497-SO07
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $3,800,000 DA; $200,000 CSD
INITIAL OBLIGATION:FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: The purpose of this objective is to ensure that affordable basic food items are provided to Indonesians most in need.

In 1997 and early 1998, El Nino weather patterns resulted in the worst drought in Indonesia’s recorded history, creating severe shortfalls in food availability and rising prices. USAID responded with 85,000 tons of commodities for nearly one million beneficiaries through food-for-work and vulnerable group feeding programs located primarily in the eastern islands. Indonesia’s food crisis has increasingly become primarily one of access, not supply. Inflation, growing poverty, and disruption of the normal food distribution and marketing systems have reduced people’s ability to access food.

The availability and affordability of rice, cooking oil, sugar and other basic foodstuffs are central to stability in Indonesia. The May 1998 riots were spurred in part by the rise in food prices. Street demonstrations to lower food prices have continued since May.

Estimates of the number of households at risk run as high as 17 million. The relatively small resources of the donor community can have important but limited impact. There is a broad consensus within the donor community that a meaningful response to the current food crisis must include successful GOI interventions to stabilize open market prices and target special assistance to those households most in need. The GOI must manage these interventions.

Key Results: Two intermediate results are key to achieving this objective: 1) strengthening GOI food policy and management practices and 2) improving food accessibility.

Performance and Prospects: This objective was established in FY 1998 and activities contributing to its achievement have just begun. USAID is working with the GOI and the donor community to strengthen GOI food policies and management systems. A USAID-funded food policy and operations assessment identified technical assistance required to strengthen the GOI’s food policies and management. This assistance will entail policy dialogue with key Indonesian policy makers, research on critical policy issues, and experiments to test policies in the field.

Progress towards improving food accessibility is promising. The GOI and donor community have taken steps to target direct food assistance to those most in need. The donor community, including the U.S. Government, has donated large quantities of food aid. Through its Special Rice Market Operations, the GOI has targeted 7.5 million families to receive heavily subsidized rice. Progress to date has been good; approximately 6.5 million families now receive about 65,000 tons of rice per month. USAID, in association with the World Bank and other donors, will study ways to strengthen this program and other mechanisms to target assistance to those most in need.

As a result of the drought and the beginning of the economic crisis, USAID provided $50 million in Title II emergency food assistance in FY 1998 to support food-for-work, direct distribution, and vulnerable group feeding programs. These programs are implemented by the World Food Program, CARE, Catholic Relief Services (CRS) and other U.S. NGOs. To date, approximately 55,000 tons of food commodities have arrived in Indonesia.

USAID will continue to target food assistance to the most needy. Title II food assistance in FY 1999 is expected to approach $11.5 million. There will be a greater focus on food assistance to urban areas, particularly in Java, which have been severely affected by the economic crisis. FY 2000 food levels will depend on assessments of needs to be conducted during FY 1999.

Possible Adjustments to Plans: Plans may be adjusted based on a number of factors. Among these are possible events in relation to upcoming elections, the structure of the post-election GOI and the possibilities of implementing effective change in food policies and management systems. The level of FY 1999 PL-480 Title II assistance, and the capacity of cooperating U.S. NGOs to implement new and possibly larger food assistance programs, may also necessitate activity adjustments.

Other Donor Programs: The World Bank structural adjustment loans affect rural development in Indonesia. Reforms to GOI food and agricultural policy are mandated under these loans. The World Food Program will re-focus their Emergency Operation Plan for Indonesia to address the food impact of the economic crisis. Other donors, principally Canada, Australia and Japan have indicated a willingness to continue food assistance.

Principal Contractors, Grantees or Agencies: World Food Program; CARE; CRS; Church World Service; Adventist Development and Relief Agency; World Vision International; and Mercy Corps.

Selected Performance Measures:

	Baseline	Target (2000)	Target (2001)
Minimum body mass index in adult women and mothers in program areas	N/A	15%	15%

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ACTIVITY DATA SHEET

PROGRAM: INDONESIA
TITLE AND NUMBER: Strengthened Environmental Management, 497-SO08
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $8,500,000 DA
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: This objective is to strengthen management of the environment in areas most affected by the crisis, to promote longer-term biodiversity conservation, and to limit global climate change.

The financial crisis provides unexpected opportunities for fundamental reforms to move the management of natural resources and urban environmental infrastructure onto a more sustainable footing. The GOI is considering major policy and structural reforms, such as creating more decentralized and accountable forest management system and privatization, in the energy sector.

At the same time, Indonesia’s economic crisis and political transition has brought increased stress on the environment through exploitation of marginalized land and coastlines for subsistence food and the rapid exploitation of resources for quick profit. Government budgetary resources for national parks, protected areas and urban environmental infrastructure have also been drastically reduced.

Key Results: Decentralizing and strengthening sustainable natural resource management and improving urban environmental management.

Performance and Prospects: With assistance from USAID and other donors, the Mission expects this objective to be achieved by 2001, assuming the GOI follows through with reforms that delegate authority to the local level, the absence of natural disasters, and improved economic conditions. While USAID’s focus is on this three-year objective, it is also addressing longer-term objectives such as biodiversity conservation and global climate change.

Prospects for achieving improved and decentralized management of natural resources are promising. Civil society has experienced a remarkable flowering in the last half-year. USAID’s support to NGO partners in institutional strengthening, community organizing, policy analysis, advocacy, land and coastal use planning and mapping are expected to pay large dividends in the reform process. Progress has already been made in mapping and recognizing and protecting traditional land and sea use claims from corporate encroachment. USAID’s work in fostering national NGO networks will also continue to play an important role in shaping the political agenda and electoral debate across the archipelago. Already, these networks have been successful in defining, for the first time, a vision for community-based forest management in Indonesia.

Growing economic desperation has prompted an increase in rural conflicts throughout Indonesia as families confront each other and corporations in asserting resource-use rights. A traditional social safety net for many households is constituted by access to marginal land and coastal zones. This was a primary cause of the forest fires in Indonesia last year as "retaliatory" burning was used to punish perceived violators of land confiscation.

In response, USAID is carrying out bioregional planning activities in six of Indonesia’s resource rich provinces. In one province, this work has already resulted in the declaration of two new protected areas, realignment of a planned road away from a biologically significant area, and local recognition by the Minister of Forests and Estates of a type of community forest land use managed by traditional law. Given the 95% budget cut of the GOI Parks and Protected Areas Department, USAID is assisting the GOI to create private sector partnerships to fund conservation efforts in parks. USAID is completing a study to ascertain the feasibility of initiating debt for nature swaps. It is also helping to develop and monitor IMF-sanctioned forest sector reforms and developing alternative income sources in forest and coastal areas hardest hit by the economic crisis.

Prospects for improving the management of urban environmental infrastructure are much more troublesome. Almost one-third of the country's 300+ municipal water enterprises are in danger of shutting off water due to the high cost of chemicals and electricity and the inability to raise tariffs. The national electricity authority (PLN) is technically bankrupt with outstanding obligations to buy power at unacceptably high prices from independent joint venture producers. PLN's inability to fulfill numerous contracts has been met with disputes and lawsuits.

In response, USAID technical assistance is making possible emergency auditing of the operations of the most hard-hit water enterprises and recommending both the conditions for central government assistance and self-help efficiency measures to improve cash flow without outside resources. In the energy sector, USAID-funded assistance will help the GOI reform the power sector, improve its efficiency, and attract private investment.

Possible Adjustments to Plans: USAID will continue to monitor the impact of the crisis on natural resources and adjust activities as needed.

Other Donor Programs: Other donors such as the World Bank, the ADB and AusAID are replicating the community-based approach which USAID introduced. Multilateral banks, bilateral donors, and international research centers work with USAID to support Indonesia's forestry conservation. The Government of Japan and the United Nations Global Environmental Fund work with USAID on biodiversity conservation and climate change efforts. Canada, Finland, and Japan work with USAID in the formulation of forestry policy. World Bank and ADB continue to provide assistance for capital investment in water enterprises in specific areas. Denmark is providing technical assistance to a number of small water enterprises in West Java. Assistance for reforming Indonesia's energy sector and particularly PLN is provided mainly by the World Bank and ADB.

Principal Contractors, Grantees or Agencies: Ministry of Forestry; Ministry of Planning; Ministry of Home Affairs; provincial and district governments units; NGOs; local universities; World Wildlife Fund; Nature Conservancy; Conservation International; Biodiversity Support Program; University of Rhode Island; Chemonics Inc.; Indonesian Association of Sanitary and Environmental Engineers; Hagler/Bailly Inc.; Carana Inc.; Bechtel; Advance Engineering International; Winrock International; U.S. Department of Energy; U.S. Energy Association; and the Institute for International Education.

Selected Performance Measures:

	Baseline (1997)	Target (2000)	Target (2001)
Area of program example and replication of best natural resource practices	618,000 ha	1,332,000 ha	2,500,000 ha
Number of site management plans implemented	31	50	125

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ACTIVITY DATA SHEET

PROGRAM: INDONESIA
TITLE AND NUMBER: Recovery of Economic and Financial Systems, 497-SO09
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $13,050,000 DA
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: This objective is to bring about economic and financial system recovery through sound macroeconomic policy, bank restructuring, bank supervision, bank re-capitalization and a framework for private sector workouts and corporate restructuring.

In 1997, Indonesia was enjoying its thirtieth year of virtually uninterrupted economic growth and substantial progress in reducing poverty. The GOI’s budget was balanced, the exchange rate relatively stable, and annual inflation well under 10%. Indonesia’s macroeconomic fundamentals were considered sound. Beneath the surface, however, the institutional framework was deeply flawed. Bank supervision was weak and existing banking laws were not enforced. Standards of corporate accountability were poor. Many laws regulating finance and commerce were antiquated or weakly enforced. These factors, combined with irregularities and questionable practices during the rule of President Soeharto, distorted the domestic economy and encouraged inefficient and corrupt business practices. This contributed to the system’s inability to adapt effectively to the shock of Asia’s economic crisis. This year the value of the rupiah has fallen by as much as 80%, the economy has contracted severely, and the banking system has virtually collapsed.

Key Results: Four key intermediate results have been identified as necessary to achieve this objective: 1) restructuring the financial sector and improving governance; 2) restructuring the corporate sector and improving governance; 3) reforming public sector policy and governance; and 4) strengthening the nongovernmental sector participation in economic reform.

Performance and Prospects: With assistance from USAID and other donors, the Mission expects that by 2001, economic and financial systems will have recovered sufficiently to allow Indonesia to begin a growth rate that will bring its GDP to 1997 levels by 2005. Targets include increasing Indonesian trade with the United States by 5% annually by FY 2000 and a similar rate of increase in bank lending to small and micro enterprises. This timeline assumes free, fair and credible parliamentary elections are held as scheduled and no additional external economic shocks occur.

Achievement of this objective will be challenging. The economic problems facing the economy are extraordinary, the technical capacity of key government institutions is limited, and the policy process is in considerable disarray. Within the Habibie administration, there appear to be sharply divergent views on appropriate reform programs. Many are suspicious of capitalism, sympathetic toward state interventions and narrowly nationalistic. No clear center of gravity has emerged for identifying key policy issues, assessing options, building consensus on agreed programs, and effectively overseeing implementation.

In close coordination with the U.S. Treasury and major multilaterals (the IMF, the World Bank, and the ADB), USAID is providing technical assistance to the Indonesian Bank Restructuring Agency (IBRA) and Bank Indonesia to strengthen the bank supervision system and eliminate the kinds of abuses that contribute to the current crisis and improve macroeconomic policy.

USAID is providing technical assistance to the Indonesia Debt Restructuring Agency (INDRA), a vehicle for supporting debt workouts by private sector companies, and the Jakarta Initiative, which promotes alternative dispute resolution mechanisms to foster private debt workouts. Assistance targets legal and regulatory reforms to address asset ownership, transfer rights, and new procedures governing bankruptcy proceedings to support corporate workouts.

USAID is supporting NGOs in their roles as watchdogs and sources of technical analysis in order to foster continued economic reform. This assistance will establish linkages between Indonesian NGOs with American counterparts to strengthen their capacity to analyze critical issues, improve the quality of the public dialogue on economic issues, and prompt critical changes in monetary policy, exchange rate regimes and fiscal policy and other key areas needed to support corporate and financial restructuring such as bankruptcy, secured transactions, competition policy and arbitration,

Possible Adjustments to Plans: USAID’s key role and strength in the economic reform process is to provide assistance that the GOI can use to formulate and implement policies that are transparent and build a robust economy. Adjustments will be made according to GOI needs and changes in the economy.

Other Donor Programs: Most important are the reform efforts led by the IMF $43 billion restructuring package. The ADB is implementing the Financial Governance Reforms Sector Development Program to help provide an adequate institutional and regulatory framework to manage the country’s financial sector. The World Bank, a key participant in the IMF-led rescue package for Indonesia, will provide $4.5 billion in loans to Indonesia by the year 2000. Much of this assistance will go to support macroeconomic stability, financial sector reform and trade policy initiatives.

Selected Performance Measures:

	Baseline (1999)	Target (2000)	Target (2001)
Increased value of Indonesia-U.S. non-oil trade (over prior year)	N/A*	5%	5%
Increased bank lending to small and micro firms (over prior year)	N/A*	5%	5%
* Benchmark will be determined in FY 1999.

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ACTIVITY DATA SHEET

PROGRAM:INDONESIA
TITLE AND NUMBER: Democratic Transition Strengthened, 497-SO10
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY2000: $14,500,000 DA; $5,000,000 ESF.
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: The purpose of this objective is to strengthen key democratic institutions to bolster Indonesia’s democratic transition.

Parliamentary and presidential elections are planned for June 1999 and November 1999, respectively. The GOI has publicly stated the elections will be free, fair and transparent to civil society and international organization observation. Preparations for the election are underway, including discussion before the parliament on three electoral laws: election, political party, and a revised law on parliament and consultative assembly. As preparations and funding for the elections proceed, additional assistance from international donors will be required to conduct elections based on international standards.

Key Results: Five key intermediate results have been identified as necessary to achieve this objective: 1) essential elements for free, fair, and substantive elections in place; 2) independent media monitoring and informing the democratic process; 3) effective NGOs advocating democratic reform; 4) reformed institutions of governance; and 5) legal reforms fundamental to the democratic process.

Performance and Prospects: With assistance from the international donor community, USAID anticipates that the democratic transition will be strengthened with real political reform underway by 2001. A democratically elected government with an agenda and public consensus will be in place. During this period, USAID will implement activities that strengthen civil society organizations, build their institutional capacity, and support their legal standing and roles in advocating for constructive reforms. USAID will focus on reforms necessary for a robust democracy, including an active media, free expression, human rights, economic and commercial law, and an independent judiciary. In the post-election period, USAID will focus on strengthening political engagement on reform issues, access of constituents to political leaders and, broader participation of the public in the political decisions.

This timeline assumes, most importantly, free and fair elections are held in June 1999 and are not overcome by communal violence and conflict. It also assumes the newly elected government will have a clear mandate for major political and economic reforms.

USAID assistance alone cannot ensure free and fair elections. Nevertheless, the elections are so critical to Indonesia’s political transition and economic recovery, and the opportunities for U.S. assistance to increase the likelihood of free and fair elections so great, USAID has made it the priority focus of this objective.

USAID-funded activities will strengthen: NGOs, think tanks, and the media engaged in advocating reform and in monitoring political and economic reform processes; political parties and NGOs engaged in the formulation of issues and policy agendas; an independent election commission involved in overseeing actual election administration; a network of national, regional and local NGOs and civic organizations capable of undertaking independent election monitoring; and an independent body of national and international observers to help establish the legitimacy of the election.

Prospects for an independent media monitoring and informing the democratic process are promising. Although suppressed in the past (through multiple license requirements and threats of closure), in the past year, the media has become a conduit of information exchange, analysis and debate, and a check on the abuses of government and nongovernment actors. Media development will be critical to advancing democracy in Indonesia, before, during and after the elections.

A USAID initiative will enhance the capacity of the mass media to do independent news reporting and analysis and to provide public service programming. Activities include: help in drafting of new laws that protect the freedom and independence of the media, including licensing, and anti-trust measures; appropriate guidelines for media regulation and political party access to the media in election campaigning; support for public service programming and print and broadcast journalist training, particularly in news production; development of professional organizations to advocate on behalf of the media; and programs to strengthen standards of accountability and professionalism within the sector.

USAID is strengthening NGO institutional and technical capacity to address political reforms in human rights, free speech, and religious tolerance and reconciliation. It is also providing civic and voter education and is using indigenous NGOs to implement these activities.

Possible Adjustments to Plans: Monitoring activities are underway to track carefully a dynamic political environment. USAID will adjust assistance activities according to changing conditions and circumstances in order to encourage a transparent, participatory, inclusive and informed public dialogue on the laws, regulations and procedures governing political life.

Other Donor Programs: USAID is coordinating election assistance activities through the UNDP. It is in regular contact with approximately 15 other donor assistance programs in support of the election and political transition programming. Working groups on key program issues with other donors and civil society are conducted with AusAID, European Union, Great Britain, Canada, and other donors providing assistance for election management, monitoring, voter education and media support.

Principal Contractors, Grantees or Agencies: Approximately 200 Indonesian civil society organizations; the National Democratic Institute for International Affairs; the International Republican Institute; the International Foundation for Election Systems; Participating Agencies Collaborating Together; Management Systems International; and United States Information Service (USIS).

Selected Performance Measures: BaselineTarget

Established an independent election monitoring system Involving the major elements of civil society (NGOs, Media and university students) that covers two-thirds of eligible voters.	No (1998)	Yes (1999-2003)
Policy changes affecting consumer rights, human rights, women, children, labor and environment continue.	Yes (1998)	Yes (2000 & 2003)

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ACTIVITY DATA SHEET

PROGRAM: INDONESIA
TITLE AND NUMBER: Increased Employment for Targeted Communities, 497-SO11
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $8,500,000 DA
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2001

Summary: The purpose of this objective is to increase employment by helping local governments coordinate and streamline labor-intensive projects for building, maintaining, and rehabilitating basic infrastructure and community facilities in urban areas with the highest absolute numbers of unemployed.

The financial crisis has caused unemployment in Indonesia to soar. A recent Central Bureau of Statistics survey showed that 13.9 million are unemployed, a three-fold rise since 1996. Informal estimates indicate as many as 20 million persons are out of work. Unemployment is concentrated in West Java (3.6 million), Jakarta (1.3 million), East Java (1.7 million), Central Java (1.6 million), and North Sumatra (1 million). Crisis-generated under-employment is even more serious. The hardest hit sectors are construction, real estate, finance, manufacturing, and hotels and tourism -- sectors predominantly situated in urban areas.

Instruments to initiate a broad employment generation program already exist in the government's 11 widely different labor-intensive programs which are scheduled to disburse more than six trillion rupiah this year. However, thousands of small projects worth millions of person-days of work are stalled in the approval/implementation system due to the need for better targeting, the emergency overload of local government apparatus, and a sudden policy change replacing local governments with inexperienced community organizations as the main engine of small village infrastructure project planning.

Key Results: Three key intermediate results have been identified as necessary to achieve this objective: 1) establishing employment generation programs quickly; 2) leveraging resources for employment generation; and 3) improving the targeting of employment generation programs at both local and central levels.

Performance and Prospects: USAID expects this objective to be accomplished as the number of person-days created by employment generation programs in the targeted areas increase by 50% in 1999 over the 1998 level and by 25% each year thereafter until the year 2001. This timeline assumes that the GOI follows through with its social safety net programs.

As a part of the USAID-funded CLEAN Urban project, an employment generation Secretariat at BAPPENAS (Indonesia's national planning agency) was established in October 1998, and assistance to selected high unemployment cities in East Java for enhancement of local government employment programming efficiency began in January 1999. Successes in East Java are expected to be extended to assist local governments in high unemployment areas surrounding Jakarta later in the year.

USAID is well placed to assist in streamlining the flow of employment generation projects through local governments because of its long-standing work in fiscal decentralization which has strengthened both the funding link between central and local governments and the planning capability for infrastructure at the local level. The USAID-assisted employment generation Secretariat in BAPPENAS will ensure employment generation activities reach communities which need it most through assistance for monitoring and analytical capabilities. USAID will give particular attention to improving gender analysis at the Secretariat level because traditional labor-intensive public works programs in Indonesia usually have excluded the participation of women.

Specific types of assistance include: strengthening local governments through establishment of systems, standards, and procedures for coordinating and fulfilling the requirements of diverse employment generation programs; outreach to local community organizations; establishing procedures for transparency and openness in procurement of inputs; streamlining coordination with community based organizations or universities to identify and design community infrastructure such as footpaths, public latrines/wash areas, drains, and solid waste collection points using unemployed workers; and supporting BAPPENAS data collection and analysis capabilities, better program approaches, and monitoring techniques to ensure greater participation of women in employment generation programs.

Possible Adjustments to Plans: Initial experimental assistance to streamline employment generation activity is expected to be successful and replicated in other geographical areas. If purchasing power returns quickly through increased employment, USAID assistance may be used to consolidate gains through continuing assistance for decentralization and closer coordination between the local governments and communities for routine development activities. Employment generation Secretariat activities would have to be phased out. A new local government law, to be promulgated in 1999, is expected to strengthen the role of local government, and decentralization/employment generation activities will need to be adjusted to accommodate the changes.

Other Donor Programs: Social safety net programs, including employment generation programs, are the largest single item in the new GOI budget. The largest project for employment generation activities, PK-3, or third generation padat karya (labor intensive works) is funded from the rupiah budget, which has been supported by the Consultative Group for Indonesia funds. The largest employment generation donor organizations are the World Bank and the ADB. Because employment generation planning and implementation channels are full, several planned large projects, such as the World Bank's $200 million Urban Poverty Program, have been delayed. Japan is an emerging key donor to employment generation activities with large loans for projects in the Ministry of Public Works and the Ministry of Manpower.

Principal Contractors, Grantees, or Agencies: The principal contractor for delivery of CLEAN Urban assistance is Research Triangle Institute (RTI). Since January 1998, RTI in association with CARE have been implementing the CLEAN Urban project, which supports decentralization initiatives at both the central and local levels to strengthen the capability of local governments to find alternative funding for community-generated urban infrastructure projects.

Selected Performance Measures:

	Baseline	Target (2000)	Target (2003)
Increase in the number of person-days of employment In target areas	N/A *	50%	88%
Increase in the number of local NGOs (including university faculties) implementing employment generation activities in the target areas	N/A*	20%	44%
* Baseline to be established later in the year.

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