Indonesia: Partnering with a Middle Income Client 10/16/08 Indonesia: Partnering with a Middle Income Client Mark Hagerstrom March 2, 2011 Knowledge Series – Emerging Indonesia MC2-850 1

CONTEXT of CPS FY09-12 Indonesia’s re-emergence as middle-income country; graduating (again) from IDA Need for second generation reforms to avoid middle income trap Vibrant democracy but weak institutions for policy development and implementation Increased confidence in regional and global matters; geopolitical importance

Partnership Support Government’s own development strategies, policy objectives and priority programs; strengthening and using country systems and procedures to the extent possible; yet continuing to put a strong emphasis on fiduciary controls, accountability and technical excellence; making effective use of existing capacities and harmonizing support; and supporting efforts to strengthen the consolidation and alignment of resources.

The Means Support Government’s own development strategies, policy objectives and priority programs; Flexible use of instruments, focusing on relationships and engagements Lending increased to $2 billion annually Programmatic and innovative approaches and knowledge services

Institutions Accountability - incentives and processes to promote accountability for increased government effectiveness, including: social accountability transparency and public access to information grievances processes results based M&E performance incentives and fiduciary controls to promote cost-effectiveness and identify misuse of funds.

Institutions Capacity : legal and regulatory frameworks operational, technical and administrative policies, procedures and standards organizational structures, including roles and responsibilities management, information and evaluation systems planning and budgeting capacity research and analytical capacity, including to support policy formulation knowledge and information sharing, including on international best practice.

Areas of Engagement Central gov’t institutions and systems (CC) Subnational institutions and systems (CC) Private Sector Development Infrastructure Community Development and Social Protection Education Environmental Sustainability and Disaster Mitigation

Dropped costs Preparation time Portfolio Performance Results? Dropped costs Preparation time Portfolio Performance