Effective economic institutions and infrastructure in Indonesia

Overview

Our economic governance investments support Indonesia to boost inclusive growth and to achieve mutual benefit from international trade and investment. We provide technical assistance, including through government-to-government partnerships, which focus on Indonesia’s priority economic reforms in areas such as financial sector supervision, budgeting, trade and competition, tax policy and administration and macroeconomic management. We are also working with Indonesia to tackle the underlying disincentives to investment in infrastructure, providing input on regulations and project planning, along with targeted technical assistance to make sure that Indonesia gets good results from its own spend on infrastructure development.

As nearly two thirds of Indonesia’s poor live in rural areas, our aid program continues to focus on development of the agricultural sector. We are encouraging inclusive economic growth by attempting to influence how agricultural markets work for the poor, improving food security, raising agricultural productivity, and helping to boost farmer’s incomes and employment by addressing constraints such as access to loans.

Australia-Indonesia Partnership for Economic Development (PROSPERA)

$145 million, 2018- 2023 (with option to extend for 3 years)

Australia's economic governance program (PROSPERA) aims to foster more effective Indonesian economic institutions and policies that contribute to strong, sustainable and inclusive economic growth. PROSPERA commenced on 1 March 2018, and builds on over 20 years of Australian investment in Indonesia's economic governance that began in the aftermath of the Asian Financial Crisis of the late 1990s. It brings together two previous programs: the Government Partnerships Fund (GPF) and the Australia Indonesia Partnership for Economic Governance (AIPEG). PROSPERA activities are delivered by Australian Government agencies and contracted advisers working with around 30 Indonesian counterpart agencies.

Additional information on the partnership can be found on the PROSPERA website.

Related documents*

Name of document Year published Type
Australia Indonesia Economic Cooperation Partnership (AIECO): Investment Design 2017 Design

Indonesia Australia Infrastructure Partnership (KIAT)

$146.2 million, 2017-2021

Through KIAT we support development of high quality infrastructure projects in water and sanitation, and transport; a reduction in regulatory constraints that impede infrastructure investment, and building capacity of government bodies responsible for infrastructure delivery. In doing so we support sustainable and inclusive economic growth through improved access to infrastructure. KIAT is working with various partners to strengthen dialogue between government and civil society to ensure that women and other vulnerable groups are consulted in the planning, design, implementation and evaluation of infrastructure projects.

KIAT commenced implementation in May 2017 and replaces the Indonesia Infrastructure Initiative (IndII) facility that ended in June 2017.

KIAT also provides implementation support for the Palembang City Sanitation Project (PCSP), Water and Sanitation Grants Program (Watsan Hibah), Australia Indonesia Grants for Sanitation (sAIIG) and the Provincial Road Improvement and Maintenance Program (PRIM) (see below for further details).

Related documents*

Name of document Year published Type
Indonesia Australia Infrastructure Partnership (KIAT) facility design document 2017 Design

Related links

Water and Sanitation Hibah Phase 2

$93.6 million, 2012-2020

Through the Water and Sanitation Grants Program we aim to increase water and sewerage connections across Indonesia by working with local governments to boost investment in water and sanitation infrastructure. We use an innovative approach where local governments are reimbursed up to 45 per cent of the connection costs following verification that each new connection has functioned for at least three months.

The program has partnered with 124 local governments to provide water supply connections to over 317,000 houses benefitting approximately 1.4 million people. The program has successfully demonstrated a model which the government of Indonesia has rolled out nationally with AUD 369 million of its own funds.  

The Sanitation Hibah aims to increase the number of sewerage connections in up to eight cities. The program has delivered over 8,000 new sanitation connections benefiting 36,000 people and is expected to support construction of an additional 8,000 sanitation connections.

Additional information can be found on the Government of Indonesia website

Infographic: How The Water Hibah Works

Infographic. See alternative text below.

View larger image [PNG 335 KB]

View text version of infographic

Related documents*

Name of document Year published Type
Indonesia Water and Sanitation Initiative - Phase 1 Concept Note 2009 Concept note
Indonesia Development Cooperation Report 2010 Report
Indonesia Urban Household Water Supply and Sanitation Program - Direct Funding Agreement 2010 Agreement
Indonesia Urban Household Water Supply and Sanitation Program - Agreement with USAID 2011 Agreement
Indonesia Water and Sanitation Initiative - Phase 2 Concept Note 2011 Concept note
Indonesia Water and Sanitation Initiative - Independent Evaluation and Final Report 2011 Independent evaluation
Indonesia Water and Sanitation Initiative - Independent Evaluation and Final Report: Management Response 2012 Evaluation management response
Indonesia Water and Sanitation Hibah: Independent review 2017 Review

Water and Sanitation for Low Income Communities Project (PAMSIMAS) 2 & 3

$70 million, 2013-2022

PAMSIMAS is the Indonesian Government's national program to deliver water, sanitation and improved hygiene to rural and peri-urban areas. Through PAMSIMAS we work with communities to plan, finance, manage and maintain their water supply and sanitation systems and improve hygiene behaviour. As of December 2018, our joint efforts with the Indonesian Government had enabled about 14.1 million people to access improved water facilities (such as piped water into houses and public taps), and more than 13.6 million people to access improved sanitation facilities (such as flush toilets or improved pit latrines). PAMSIMAS is delivered by the Indonesian Ministry of Public Works and Housing, and is co-financed by Australia and the World Bank.

In the newest phase of the program the Indonesian Government aims to achieve universal access to water and sanitation in rural areas, covering a total of 28,731 villages in 403 districts and 33 provinces.

Related documents*

Name of document Year published Type
Design Summary and Implementation Document - Water and Sanitation Initiative - Indonesia 2009 Design
Third Water Supply and Sanitation for Low income Communities Project Mid-Term Review Aid Memoir 2010 Review
PAMSIMAS Anti-Corruption Action Plan 2012 Plan
Third Water and Sanitation for Low Income Communities Project and the Water Supply and Sanitation Policy Formulation And Action Planning Facility - Independent Review 2013 Independent evaluation
Third Water and Sanitation for Low Income Communities Project and the Water Supply and Sanitation Policy Formulation and Action Planning Facility - Independent Review: Management Response 2013 Evaluation management response

Related links

World Bank PAMSIMAS-2 Documents

Leaving no one behind: the pioneering work on disability inclusion in Indonesia's rural water sector

Palembang City Sanitation Project (PCSP)

$45 million, 2017-2022

The Palembang City Sanitation Project is building a wastewater treatment plant in Palembang City, South Sumatra Province, Indonesia. It is being co-financed by the Australian Government and the Government of Indonesia (Central, Provincial and Local Government funds). The investment is demonstrating a more effective model for Indonesia's three levels of government to finance, build and manage municipal infrastructure. It will increase ownership by local government and contribute to more enduring and better maintained infrastructure.

This project is one component of the Asian Development Bank's Metropolitan Sanitation Management Investment Project (MSMIP), with the total project value of USD168.83 million. The other cities supported by MSMIP are: Makassar, Jambi and Pekanbaru.

The Palembang project has three components: (i) a wastewater treatment plant; (ii) a wastewater transmission line fed by a wastewater pumping station; and (iii) a wastewater collection system. Upon completion, the project is expected to provide 12,000 property connections (connecting houses/businesses to the sewerage network) and provide desludging of septic tanks for an additional 50,000 households (250,000 people).

In partnership with central, provincial and local-level governments, we are co-financing a wastewater treatment plant in Palembang City, South Sumatra. The project is expected to connect 12,000 new households to the sewerage network, benefitting up to 100,000 residents in Palembang.

Additional information regarding the MSMIP and PCSP can be found on the Asian Development Bank website.

Infographic: PCSP partnership - healthy people increase productivity

Infographic showing what the project will do, the benefits, and how the project partnership works. Link to full description below.

View larger image [JPG]

View text version of infographic

Related documents*

Name of document Year published Type
PCSP design document 2017 Design document

The Australia Indonesia Infrastructure Grant for Municipal Sanitation (sAIIG)

$40 million, 2012-2020

The Australia Indonesia Infrastructure Grant for Municipal Sanitation supports approximately 49 local governments to implement sanitation infrastructure, including simplified sewerage treatment systems, connections to existing sewerage networks, and solid waste transfer stations. sAIIG has been designed to stimulate local government investment in sanitation infrastructure and to provide incentives for governance reforms that will improve the delivery of sanitation services. To date, the program has supported over 46,000 new sanitation connections and aims to provide an additional 23,000 house connections by 2020.

Infographic Summary of the Australia – Indonesia Infrastructure Grants for Sanitation (sAIIG) Phase II

Infographic showing what the project will do, the benefits, and how the project partnership works. Link to full description below. Infographic showing what the project will do, the benefits, and how the project partnership works. Link to full description below.

View larger image [PDF 3.42 MB]

View text version of infographic

Related documents*

Name of document Year published Type
sAIIG design document 2011 Design
sAIIG concept note 2011 Concept note

Multilateral Development Bank Infrastructure Assistance Program

$55.5 million, 2013-2019

Through the Multilateral Development Bank Infrastructure Assistance Program we work with the World Bank, the Asian Development Bank and the Indonesian Government to support a range of activities, including project preparation support and implementation, feasibility studies, engineering designs and environmental impact assessments. Through the program we have also supported the development of a Public Private Partnerships Centre in the Indonesian Ministry of Finance.

Related documents*

Name of document Year published Type
Multilateral Development Bank Infrastructure Assistance Program (MDB-IAP) Independent evaluation and management response 2018 Independent evaluation and management response

Related links

World Bank Indonesia Infrastructure Support Trust Fund Documents

ADB Sustainable Infrastructure Assistance Package Documents

Provincial Road Improvement and Maintenance (PRIM)

$38 million, 2014-2021

The Provincial Road Improvement and Maintenance Pilot Program is an output-based grant program through which we provide incentives for local governments to implement road maintenance and rehabilitation works. It aims to improve the way local governments plan, budget and implement their investments in road maintenance on a sustainable basis. Through PRIM we are working to broaden the use of the hibah (grant) mechanism that was successfully piloted in the water and sanitation sector.

Related documents*

Name of document Year published Type
PRIM program design document 2014 Design

Australia Indonesia Partnership for Promoting Rural Incomes through Support for Markets in Agriculture (PRISMA-2)

$95 million, 2019-2023

PRISMA-2 is the second phase of Australia Indonesia Partnership for Rural Economic Development Program (AIP-Rural). PRISMA-2 commenced operations on 1 January 2019. Building on the achievements of AIP-Rural, the aim is to increase the incomes of an additional 700,000 smallholder farming households by a minimum of 30% using a Market Systems Development (MSD) approach. Of the additional 700,000 smallholder farming households targeted through PRISMA-2, at least 60% of these beneficiaries will consist of people living below USD2.50 per-day at PPP (Purchasing Power Parity). By combining the results from Phase 1 - AIP-Rural (targeted 300,000 smallholder farming households), by the end of Phase 2 the program should see a cumulative one million smallholder farming households with an increased income.

The PRISMA-2 program operates in six provinces, namely East Java, East Nusa Tenggara (NTT), West Nusa Tenggara (NTB), Papua, West Papua and Central Java, as a new province. PRISMA-2 will move from the four-project model under AIP-Rural to a single, integrated program, and it will strengthen the focus on policy influence by equipping decision makers with evidence and the development of strategic partnerships with key policy and agri-business influencers.

Related documents*

Name of document Year published Type
PRISMA2 Design Document 2017 Design

Related links

Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector

$50 million (with an additional $10 million in non-Official Development Assistance funding from the Department of Agriculture), 2013-2024

Through the Indonesia-Australia Partnership on Food Security in the Red Meat and Cattle Sector we aim to strengthen long-term economic relations between Indonesia and Australia. This partnership focuses on developing economic opportunities along the cattle and beef sector supply chain in order to support Indonesia's food security and to promote closer ties in the beef and cattle sector between the two countries. The Partnership comprises senior government officials and industry representatives from Indonesia and Australia, and provides advice on areas for development in the sector. Through the partnership we are exchanging skills in beef processing, cattle production and husbandry, and agricultural policy. In 2016, we launched the Indonesia Australia Commercial Cattle Breeding Program.

Related documents*

Name of document Year published Type
Indonesia-Australia Partnership on Food Security - Communique 2014 Communique
Indonesia Cattle Breeding Program Investment Design 2015 Design

Related links

Indonesia Australia Red Meat & Cattle Partnership

Indonesia Australia Commercial Cattle Breeding Program

Indonesia-Australia Partnership for Environmental Governance

$10 million, 2015-2020

The 2015 forest and land fires in Indonesia caused an economic loss of approximately USD16 billion (approximately AUD20 billion) and discharged over one billion tons of CO2 into the atmosphere. Forest and land fires are an annual crisis in Indonesia and a significant contributor to global greenhouse gas emissions. To support Indonesia's efforts to prevent the recurrence of fires and to reduce emissions, we initiated an environmental governance program as part of Australia's Indo-Pacific Land Action Package in 2017. The Indonesia Australia Partnership for Environmental Governance Program consists of four activities being implemented over a four-year period (2017-2020). This responds to Indonesia's renewed interest and involvement in addressing forest fires and climate change.

Through technical experts from Government of Australia and multilateral agencies, we partner with the Indonesia Government of Indonesia to promote sustainable land management practices, and strengthen governance and law enforcement.

Related documents*

Name of document Year published Type
Indonesia Australia Partnership in Environmental Governance brief 2018 Brief

* The Department of Foreign Affairs and Trade (DFAT) is committed to high standards of transparency and accountability in the management of the Australian aid program through publishing information on our website, including policies, plans, results, evaluations and research. Our practice is to publish documents after the partner government and any other partners directly involved in the delivery of the initiative have been consulted. Not all material published on this site is created by the Australian aid program and therefore not all documents reflect our views. In limited circumstances some information may be withheld for reasons including privacy and commercial sensitivity.



Last Updated: 3 April 2019