Overview of Australia’s aid program to Indonesia

How we are helping

2014/15 Bilateral Outcome
$551.9 million

2015/16 Bilateral Budget Estimate
$323.0 million

2015/16 Total Australian ODA Estimate
$375.7 million

The Australian Government will provide an estimated $375.7 million in total ODA to Indonesia in 2015-16, including an estimated $323 million in bilateral funding managed by DFAT.

Australia and Indonesia’s broad partnership encompasses political, security, trade, economic and development cooperation. It is underpinned by substantial people-to-people and institutional links. Around 13,700 Indonesian students were enrolled in Australian educational institutions in 2014, the eighth-largest international student group. Indonesia is currently our 12th-largest trading partner. Its location, geography and demography give Indonesia an important geopolitical and strategic role in the region. Sustainable and inclusive economic growth in Indonesia benefits Australia and contributes to regional growth and stability.

Despite progress over the past decade, economic growth in Indonesia is slowing and inequality is rising. While it is a middle-income economy, structural bottlenecks to growth and social inclusion remain. Slowing growth will make it challenging for Indonesia to graduate from middle income status by 2025 and to tackle poverty and increasing inequality. Productivity has lagged behind other economies because of the infrastructure deficit, skills deficits, corruption and the exclusion of women from economic participation. Improving the efficiency and competitiveness of Indonesia’s labour and product markets and improving the investment environment more broadly are also critical priorities for a more resilient economy.

Indonesia’s National Medium-Term Development Plan 2015-19 (RPJMN) is part of the country’s National Long-Term Plan 2005-2025 and sets out the Government’s vision and priorities for the country. The nine priority areas include good governance, improved productivity and competitiveness, human resource quality and self-sufficiency. It has a focus on Eastern Indonesia to help address regional disparities in development, whilst maintaining growth momentum in other parts of the country. Australia’s Aid Investment Plan 2015/16-2018/19 will align to the greatest extent possible with RPJMN priorities.

Australia is committed to supporting Indonesia’s development. Reflecting our transition from a donor-recipient model to an economic partnership of equals, we will support Indonesia’s efforts to distribute the benefits of growth to a larger number of its people. We will work together with Indonesia to provide the foundation for higher economic growth, private sector investment and increased levels of trade. Assistance will focus on areas such as financial sector supervision, budgeting, and macroeconomic management. In human development, our programs will catalyse change and build capacity to provide better quality health and education outcomes at the community level, including in the poorer Eastern regions. We will promote an inclusive society through better service provision, social assistance, poverty reduction policy advice and support for the rule of law. Gender equality will be a priority concern for the program, with an emphasis on women’s economic empowerment and a gender focus across investments.

Our development cooperation program in Indonesia is structured around the following three objectives, as outlined in the Aid Investment Plan

Objective 1: Effective economic institutions and infrastructure

Improving economic institutions and infrastructure is essential to Indonesia’s ongoing development. Australia is supporting Indonesia to boost inclusive growth and productive jobs through its public policy and regulatory settings. By supporting areas such as financial sector stability, revenue mobilization, improved government spending and tax collection we will contribute to better economic productivity.

Bottlenecks in infrastructure constrain growth. Our support will help address disincentives to infrastructure investment, including through technical assistance and policy advice on regulatory provisions, planning and evaluation. Better infrastructure will require a multifaceted approach including more efficient and timely use of government resources, better project selection and preparation, and productive partnerships between the public and private sector.

Investments for effective economic institutions and infrastructure

Objective 2: Human development for a productive and healthy society

Indonesia needs to drive the development of human capital to create the conditions for higher growth. We will support Indonesia’s efforts to address the acute problems - such as maternal mortality, child stunting, and poor literacy and numeracy - that limit the productivity of its workforce.

Our Australia Awards Scholarships deliver considerable educational dividends for Indonesia’s future leaders as well as valuable people-to-people linkages. Areas of study will continue to focus on a broad range of fields relevant to economic, strategic and development outcomes. We will promote participation from Eastern Indonesia including East Nusa Tenggara, West Nusa Tenggara, Papua and West Papua.

Investments for human development for a productive and healthy society

Objective 3: An inclusive society through effective governance

We will work with Indonesia to ensure that the poor and marginalized in society benefit from economic growth. We will help develop better quality economic and social protection policies based on research and analysis. We will continue to pursue programs for women’s economic and political empowerment, which help women gain jobs and other sources of financial security. Marginalised groups will benefit from improved disability access and support; new assistance for strengthening the rule of law; and support for better local service provision.

Investments for an inclusive society through effective governance

Our results

In 2015, 866 Australia Awards scholarships were provided to Indonesian citizens.
In 2014-15, 25,078 additional births in Eastern Indonesia were attended by a skilled birth attendant. There has been a 31 per cent increase in the number of births delivered in a facility from 2009 to 2014, and over the same period the number of maternal deaths decreased by 40 per cent.
21,943 poor women and men accessed new agricultural technologies and resources in 2014.
In 2014, 464,034 people had improved access to clean water or sanitation.
Our women’s empowerment program supported the development of 950 local women’s groups across Indonesia, which will help their 17,409 female members to participate in policy-influencing activities in areas such as increasing women’s access to jobs and strengthening women’s leadership to reduce violence against women.

Our changing program

Our aid program in Indonesia reflects the priorities of the Indonesian and Australian governments. Following the release of the 2015-16 aid budget we have consolidated our activities to focus on three main areas – economic growth, human development, and stability and inclusion. This rebalancing reflects the successful development trajectory of Indonesia and the progression from a traditional aid donor-recipient relationship to a broader economic partnership.

Reorienting our program to Indonesia’s priorities will extend its reach and effectiveness, and will result in substantial changes in some sectors. We will stop building infrastructure using grant funding and will instead focus on working with Indonesia to get better results from its own substantial infrastructure spending. We will increase the quality and implementation of economic policy by tightening our economic governance programs. Our rural enterprise work will focus more closely on private sector development, including through partnerships with Indonesian banks and Australian companies.

We will also reframe our support for education and health, reduce stand-alone sector programs and focus more on common challenges to improving health and education systems. We will, however, continue to target maternal and child health, stunting, and children’s literacy and numeracy, along with emerging infectious diseases.

We will continue our successful work on women’s political and economic empowerment and social protection, with a shift towards labour migration and mobility. We will design a new program to support the rule of law and counter violent extremism. We will close our disaster preparedness and management program, but retain scientific research and response cooperation in this area.