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Indonesia: Staff Report for the 2010 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund
Published Date:
September 2010
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ANNEX I: INDONESIA—FUND RELATIONS

(As of June 30, 2010)

I. Membership Status: Joined February 21, 1967; Article VIII

II. General Resources Account

SDR MillionsPercent of Quota
Quota2,079.30100.00
Fund holdings of currency1,933.8093.00
Reserve position in Fund145.507.00

III. SDR Department

SDR MillionsPercent of

Allocation
Net cumulative allocation1,980.44100.00
Holdings1,762.4088.99

IV. Outstanding Purchases and Loans None

V. Financial Arrangements

TypeApproval DateExpiration

Date
Amount

Approved

(SDR millions)
Amount

Drawn

(SDR millions)
EFF2/04/200012/31/20033,638.003,638.00
EFF8/25/19982/04/20005,383.103,797.70
Stand-by11/05/19978/25/19988,338.243,669.12

VI. Projected Payments to Fund: (expectations basis)

(SDR millions; based on existing use of resources and present holdings of SDRs):

Forthcoming
20102011201220132014
Principal

Charges/Interest
0.290.600.610.600.60
Total0.290.600.610.600.60

VII. Exchange Arrangement

The rupiah has floated since August 14, 1997. The market exchange rate was Rp 9,053 per U.S. dollar on June 30, 2010. Indonesia has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange system free of restrictions on payments and transfers for current international transactions.

VIII. Article IV Consultation

The last Article IV consultation report (IMF Country Report No. 09/230) was discussed by the Executive Board on July 13, 2009.

Annex II: Indonesia—Relations with the World bank Group1

(As of June 9, 2010)

Indonesia Country Partnership Strategy

The World Bank Group’s (WBG) Country Partnership Strategy (CPS) for Indonesia for FY 2009-12, which marked Indonesia’s emergence as a strong middle income country, was approved by the WBG Board in September 2008. The CPS focuses on improving Indonesia’s institutions, both at the central and sub-national level, through five core areas of engagement: private sector development, infrastructure, community development, education, environmental sustainability, and disaster mitigation. A full Progress Report on the CPS will be undertaken in FY 11.

The CPS implementation is marked by strong dialogue and solid partnership with the Indonesia’s core economic ministries and several line ministries and agencies, including education, public works, people’s welfare, anti-corruption commission (KPK), supreme and state audit agencies (BPK and BPKP), and regional/local governments. Partnerships with the key bilateral and multilaterals, including EC, Japan, Australia, Netherlands, ADB, UNDP and IMF remain robust.

World Bank Engagement: Selected Highlights

Improving the Climate for High Quality Investment and Growth. The WBG, with the support of trust funds, is involved in several key areas to promote the private sector. The WBG works closely with the government to develop investment policies that are conducive to private sector business including regulatory reform and business licensing. In addition to improving the investment climate, the WBG is also involved in creating a better trade environment—both domestically and internationally. On the domestic side, work on logistics has become a top priority for improving Indonesia’s connectivity and competitiveness. On the international side, the WBG team is working on implementation of the National Single Window, analysis of non-tariff barriers, and port and customs bottlenecks. On the finance side, the WBG is also involved in improving access to financial services, infrastructure financing, and developing non-bank financial institutions.

In response to the global financial crisis, the Government of Indonesia (GOI) took precautionary and preemptive actions to address financial and fiscal concerns including approaching the WBG and other development partners for contingent financing support. The WBG assisted the Government to mobilize from bilateral, multilateral and other sources US$5.5 billion, of which US$ billion was a WBG-supported Development Policy Loan with a Deferred Drawdown Option (DPL-DDO), enabling Indonesia to successfully weather the crisis and emerge as one of the more robust economies in the region.

Strengthening the Governance Agenda. The WBG is supporting the strengthening of Indonesia’s country systems. The fight against corruption is central to the Government’s program and relevant institutions continue to be strengthened. The CPS seeks to move away from a WBG focused approach of “ring-fencing projects” to one designed to strengthen and build upon Indonesia’s own systems, policies and procedures. This approach focuses on policy formulation, policy and program implementation, financial management, procurement, budget implementation, audit, social and environmental safeguards, monitoring and evaluation, and supports Indonesia’s priority budget programs to enhance the quality of overall public spending. In addition, funding in several projects (e.g., PNPM, BOS and DAK) puts more focus on utilizing and strengthening existing government programs, with better monitoring and oversight of results. To strengthen governance, work is also expanding in improving the effectiveness of the government via bureaucratic reform—first at the Ministry of Finance, and more recently with the Ministry of Trade.

Deepening Indonesia’s Decentralization. The decentralization and empowerment of local governments has been one of Indonesia’s most remarkable achievements in the past 10 years. As a result, Indonesia’s almost 500 sub-national governments now manage close to 40 percent of all public spending. Many of elected heads of provinces and districts/cities are implementing innovative reforms, although challenges are considerable. Needs, opportunities and the WBG’s capacity to respond to the demand vary greatly across the archipelago. Over the CPS period, the WBG will seek to engage with a limited number of sub-national governments that demonstrate a clear commitment to reforms. One means is through our subnational public expenditure reviews, tailored to the needs of local governments. Another project will increase the accountability of local governments in their use of Specific Purpose Grants (DAK). DAK grants come from the national budget (APBN) and are generally used to support regions that lack the fiscal capacity to provide physical infrastructure for basic public service delivery. Lastly, the WBG-administered Decentralization Support Facility brings together a number of development partners with a broad mandate to engage Indonesian institutions essential to the local accountability framework.

Enhancing Poverty Reduction and Service Delivery. The GOI aims to lower the poverty rate from 14.1 percent in 2009 to 8-10 percent by 2014 by strengthening economic growth and job creation, as well as continuing its poverty reduction strategy. To this end, the WBG is providing technical assistance to the government in coordinating and integrating poverty reduction programs. Analytical and advisory services are supporting the reform of household-based assistance programs, the establishment of cross-cutting targeting and M&E systems, and the strengthening of local capacities for poverty analysis. Key reforms in these areas are included among the triggers for a series of development program loans that also support reforms in investment climate, public financial management, public service delivery and infrastructure. In addition, WBG is supporting the implementation and consolidation of community-based programs through the National Community Empowerment Program (PNPM Mandiri) Support Facility. The WBG also supports the development of local water utilities to improve delivery of water and sanitation services. On health, there has been recent work on maternal health, HIV, and health insurance. On education, the WBG is involved in improving the quality of teacher management, early childhood development, youth skills and competitiveness.

Supporting Indonesia on Environmental Sustainability and Climate Change. Indonesia emits significant levels of greenhouse gases, mainly from deforestation and land use change. The GOI recognizes this issue and is developing an initiative on Reduced Emissions from Deforestation and Degradation (REDD) supported by the WBG. The GOI is pursuing an innovative and potentially path-breaking engagement with the WBG on geothermal energy. The WBG is also deepening the relationships established with the National Planning Agency (Bappenas) and the local governments of Aceh, Nias and Jogjakarta in supporting selected elements of the Government’s actions to strengthen natural disaster resiliency. In addition to investment operations, the WBG is supporting the GOI with background studies and other analytical work and technical assistance provided to the Government agencies at the central and local levels. The WBG has also supported GOI’s initiatives through the recent climate change development policy loan.

Support for Sustainable Recovery in Disaster Areas. Reconstruction efforts after the tsunami in Aceh and the series of earthquakes devastating Nias, Central Java, and Jogyakarta, have become a key element of the WBG’s response program, anchored around two substantial multi-donor trust funds. The Multi-Donor Fund (MDF) for Aceh and Nias brings together some 15 partners and is providing nearly US$700 million in resources, while Java Reconstruction Fund (JRF), supported by six partners, brings in over US$90 million. Post-disaster reconstruction and recovery are progressing well. In the wake of the recent West Sumatra earthquake, the WBG took a leading role in the damage and loss assessment and has an on-going program to train other institutions to conduct such assessments in the future.

Bank Operations in FY 10 and FY 11

Lending. As of April 30, 2010, there are 46 active IBRD/IDA investment projects and project-type grants in the Indonesia Portfolio, including a DPL with a Deferred Draw Down Option (DDO). For FY 10, the World Bank expects to deliver 8 projects and 2 additional financing operations, worth $3.2 billion. These include three development policy loans (DPL, Infrastructure DPL, Climate Change DPL), and lending in rural and urban community programs (PNPM), local government (DAK), urban water, health education quality, and power transmission.

In FY 11-12, there is a strong pipeline of about $1.0 billion a year each for DPLs, country programs and projects, including significant infrastructure investments. In addition to the development policies series, other deliveries planned for FY 11 are projects to strengthen statistical capacity of the Government, electric transmission, an infrastructure guarantee fund, and road preservation.

Analytical and Advisory Services. In addition to the lending program, the WBG is delivering to the Government of Indonesia policy notes and just-in-time advice, technical assistance, as well as reports including Papua Infrastructure Strategy, Labor Report, Health workforce, Agriculture Research and Development PER, Access to Finance for Migrant Workers.

In the year ahead, the WBG expects to deliver continuing analytical and advisory support, including policy notes for the new Government and reports including on Social Protection, Public Spending, Urbanization and Maternal Health.

Trust Funds. Trust funds (TF) and grant financing are an integral part of the WBG program. The Indonesian TF portfolio is around US$1 billion at present.

Annex III: Indonesia—Relations with the Asian Development Bank1

(As of June 9, 2010)

Asian Development Bank (ADB) cumulative loans to Indonesia reached $25.7 billion as of end-December 2009. In 2009, the ADB approved a total of $2,184 million or 16.5 percent of the total loans approved by the institution for the year. More than 90 percent of the loans approved in 2009 were provided through four policy-based operations. Two loans supported the Government’s efforts to mitigate the effects of the global economic crisis. The remaining two continued to support the Government’s medium-term term reform agenda in capital market development, investment climate, public financial management, and poverty alleviation.

ADB is preparing a Country Partnership Strategy with the Government of Indonesia to cover the period 2011-2015. The strategy will be aligned with the Government’s medium-term development plan (RPJM) for 2010-2014. It will support the government’s objectives to achieve higher levels of sustainable growth and to foster social development. It is anticipated that assistance will be provided in the core areas—transport, energy, financial sector, natural resource management, water supply and sanitation, and education—identified in ADB’s Long-Term Strategic Framework. Support for good governance, gender equality, environmental sustainability and regional cooperation will be encouraged in all sectors where relevant. Special emphasis will be provided to assist the Government to implement its Climate Change action plan.

Between 1967 and 2009, ADB provided 504 Technical Assistance grants to Indonesia amounting to $282.9 million. The TA grants were financed from ADB’s Technical Assistance Special Fund, the Japan Special Fund, and other sources. Measured by cumulative TA approvals, Indonesia is the second largest recipient of TA support from the ADB.

Table 1.Sovereign and Nonsovereign Loan Approvals and Disbursements to Indonesia(In millions of U.S. dollars)
200420052006200720082009
Loan approvals225.01,145.69784.81,187.11,0852,184.2
Loan disbursement593.51,014.991,025.881,136.3949.6739.3
Sources: Asian Development Bank, Annual Report (various editions), and ADB staff. Prepared by ADB staff.
Sources: Asian Development Bank, Annual Report (various editions), and ADB staff. Prepared by ADB staff.
Table 2.Cumulative Lending to Indonesia(As of December 31, 2009)
SectorLoans

(No.)
Amount

($ million)
Percent 1/
Agriculture and Natural Resources994,047.0015.74
Education322,222.358.64
Energy313,781.0514. 71
Finance203,526.1013. 72
Health and Social Protection131,068.304.16
Industry and Trade12645.702.51
Public Sector Management164,167.2216.21
Multisector161,586.226.17
Transport and ICT332,713.8610.56
Water Supply and Other Municipal311,949.747.58
Infrastructure and Services

Total
30325,707.54100.00
Sources: Asian Development Bank, Indonesia Fact Sheet 2010; and ADB staff.

Total may not add up because of rounding.

Sources: Asian Development Bank, Indonesia Fact Sheet 2010; and ADB staff.

Total may not add up because of rounding.

Annex IV: Indonesia—Statistical Issues

As of June 22, 2010

Indonesia: Table of Common Indicators Required for Surveillance(As of June 30, 2010)
Memorandum Items:
Date of

Latest

Observation
Date

Received
Frequency

of

Data 6
Frequency

of

Reporting 6
Frequency

of

Publication 6
Data Quality -Methodological soundness 7Data Quality -Accuracy anc Reliability 8
Exchange rates6/30/106/30/10DDW/M
International reserve assets and reserve liabilities of the monetary authorities 16/30/107/23/10DMM>
Reserve/base money6/107/28/10DDW/MO, LO, O, OLO, O, O, LO, O
Broad money5/107/28/10MMM
Central bank balance sheet4/106/21/10MMM
Consolidated balance sheet of the banking system5/20/106/8/10MMM
Interest rates 26/30/106/30/10DDW/M
Consumer price index6/107/10MMM
Revenue, expenditure, balance and composition of financing 3-central government20106/21/10MMMid-yearLNO, LNO, LO, LNOLNO, LO, LO, LO, LNO
Stocks of central government and central government-guaranteed debt3/106/10MQA
External current account balance3/105/24/10QQQLO, LO, LO, LOLO, O, LO, O, O
Exports and imports of goods and services3/107/13/10MMM
GDP/GNP3/107/13/10QQQLO, LO, O, LOLO, LO, LO, LO, LNO
Gross external debt 43/106/21/10QQA
International investment position 520085/24/10AAA

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis-a-vis non residents.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); NA: Not Available.

Reflects the assessment provided in the data ROSC published on July 20, 2005 (based on the findings of the mission that took place during March 28-April 11, 2005), for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing

Including currency and maturity composition.

Includes external gross financial assets and liability positions vis-a-vis non residents.

Daily (D); Weekly (W); Monthly (M); Quarterly (Q); Annually (A); NA: Not Available.

Reflects the assessment provided in the data ROSC published on July 20, 2005 (based on the findings of the mission that took place during March 28-April 11, 2005), for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

1Prepared by the World Bank staff. For questions relating to this annex, contact Shubham Chaudhuri at (+62 21) 5299 3076 or schaudhuri@worldbank.org.
1Prepared by ADB staff.

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