ACTIVE WITH INDONESIA INDONESIA: a key partner for the OECD
Indonesia continues to be a strategic partner for the OECD, and it is important that we retain and intensify our engagement as the country’s role in the global economy increases. Indonesia was the eighth largest economy in the world in 2016, with a GDP of around USD 3.0 trillion at PPP, and it is expected to be the fourth largest economy by 2050, with a projected GDP of USD 10.5 trillion at PPP. As the largest country in Southeast Asia, one of the world’s fastest growing regions, Indonesia plays an increasingly important role in global trade. It is also one of the world’s largest democracies, with the impressive task of governing a population that is culturally, religiously and linguistically diverse across a vast territory. Its experience of reaching consensus in the face of this diversity can yield important insights for the international community.
Since it became a Key Partner of our Organisation in 2007, Indonesia has actively contributed to addressing common policy challenges and has enriched policy debates at the OECD. Through this collaboration, we are also learning a lot from the great cultural richness and policy-making complexity of large developing countries. Today, Indonesia takes part in six bodies, 12 legal instruments and a wide array of OECD reviews and databases. It was the first Key Partner to sign a Framework of Co-operation Agreement in 2012, and a Privileges and Immunities Agreement in 2013. Such engagement with Indonesia has helped to drive our work in Southeast Asia. The launch of the Southeast Asia Regional Programme in 2014, together with the creation of a Jakarta representative office in 2015, are testament to this.
Over the past two years, Indonesia has pursued an ambitious reform agenda. It has taken important steps to boost public revenue, invest in infrastructure, enhance sub-national government and reduce poverty and inequality. It has managed to maintain solid macroeconomic fundamentals, increase investment and establish free primary education. Going forward, progress in these areas will remain high on the development agenda. Connectivity continues to be a major development constraint, and policymakers will need to find ways to crowd more private finance into infrastructure investment. Measures to decrease malnutrition among school-age children will be important to reduce poverty and inequality. Human resource development, particularly more and better vocational education and training, will be key to engaging in higher-value added activities, including via FDI. Most economic development strategies will depend on the government’s success at boosting public finances, and these in turn will hinge on the success of current efforts to increase tax revenue and integrity within the public administration. The OECD stands ready to support Indonesia in these endeavours and in achieving economic growth that is both inclusive and sustainable.
This “Active with Indonesia” brochure highlights how the OECD and Indonesia have worked together to advance the country’s reform agenda, and how Indonesia’s participation in OECD activities has enriched our work and helped us find solutions to global challenges. We look forward to deepening this collaboration and continuing to work with Indonesia as it advances better policies for better lives. ÁNGEL GURRÍA, OECD Secretary-General CONTENTS Contents
THE OECD AND INDONESIA 2 EMPLOYMENT AND SOCIAL DEVELOPMENT 40 History of OECD-Indonesia co-operation 4 Achieving universal health coverage 41 The OECD-Indonesia Joint Work Programme 7 Promoting gender equality 42 The Southeast Asia Regional Programme 8 Fostering skills through education and training 44 The OECD Jakarta Office 11 Tackling inequality 46
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH 14 INDUSTRY AND INNOVATION 47 Maintaining economic growth and resilience 15 Building a knowledge economy 48 Supporting SME development 17 Harnessing digital technologies 49 Supporting green growth initiatives 18 Enhancing chemical safety 50 Promoting regional development and urbanisation 19 Biotechnology 50 Increasing agricultural productivity and food security 20 Boosting tourism 51 Promoting development co-operation and the 2030 Agenda 22 Better data for better policies 24 ENVIRONMENT AND ENERGY 52 Towards a cleaner and healthier environment 53 SMOOTH FUNCTIONING OF MARKETS 25 Combating climate change 54 Enhancing investment’s contribution to Biodiversity conservation and sustainable use 56 sustainable development 26 Strengthening global partnerships on clean energy Promoting trade and upgrading in global value chains 27 and energy efficiency 57 Promoting sound competition 29 Developing a robust financial system 30 ANNEXES 60 Strengthening connectivity, capital investment Overview of the OECD 60 and public-private partnerships 31 OECD legal instruments 62 Developing high-quality financial education 32 OECD bodies 63 Dialogue and data 63 PUBLIC AND CORPORATE GOVERNANCE 33 Implementing regulatory reform 34 Disseminating open government 35 Fighting transnational corruption 36 Towards a culture of integrity in Indonesia 37 Improving tax transparency and compliance 38 Raising the bar on corporate governance 39
CONTENTS . 1 THE OECD AND INDONESIA
2 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA HOW WE WORK TOGETHER
THE OECD AND INDONESIA . 3 THE OECD AND INDONESIA An ever-growing partnership
The OECD’s engagement with Indonesia has deepened Milestones in OECD-Indonesia collaboration include the significantly since 2007, when the country became one of the country’s decision to become a member of the OECD organisation’s five Key Partners. It was the first Key Partner Development Centre in 2009 and to join the OECD’s to sign both a Framework of Co-operation Agreement (2012) Multilateral Convention to Implement Tax Treaty Related and a Privileges and Immunity Agreement (2013) with the Measures to Prevent Base Erosion and Profit Shifting Organisation, and Indonesian ministers have regularly (BEPS) in 2017. Both signal Indonesia’s willingness to attended and substantively contributed to the OECD’s align more closely with OECD countries and to engage Ministerial Council Meetings since 2012. The establishment with them in a spirit of mutual learning. In this vein, of the OECD’s first Southeast Asian office in Jakarta in March Indonesia also adheres to 12 OECD legal instruments 2015 marked a further intensification of this relationship, and participates in nine OECD bodies as an Associate or with the office supporting the Organisation’s engagement Participant. The country is also integrated into a number with Indonesia and Southeast Asia, as well as a number of of flagship OECD publications as well as statistical regional organisations. databases. HIGHLIGHTS
2007 2009 2010 2012 2013 2014 Indonesia becomes Indonesia becomes OECD launches its first Indonesia becomes Indonesia becomes The OECD launches one of five Key the 34th member of the full Economic Survey the first Key Partner the first Key Partner to its Southeast Asia Partners of the OECD OECD’s Development of Indonesia to sign a Framework sign a Privileges and Regional Programme, through its Enhanced Centre and concludes of Co-operation Immunities Agreement with Indonesia as its Engagement a “statement of co- Agreement with the with the OECD Co-Chair Programme operation” with the OECD OECD’s Investment Committee
4 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA THE OECD AND INDONESIA An ever-growing partnership
L The President of Indonesia, H.E. Mr Joko Widodo, and OECD Secretary-General, Angel Gurría during a visit to launch the 2017-18 OECD-Indonesia Joint Work Programme and the OECD Economic Survey of 2015 2016 2017 2017 2018 Indonesia in Jakarta, 2016. Minister of President of Indonesia Renewal of the Indonesia signs Minister of National Finance Bambang Joko Widodo and Framework of the OECD MLI on Development Brodjonegoro and the OECD Secretary Cooperation BEPS along with 71 Planning Bambang OECD Secretary General launch Agreement for a countries at the 2017 Brodjonegoro attends General Angel Gurria the second OECD- period of 5 years by OECD Ministerial the OECD MCM in inaugurate an OECD Indonesia JWP for Minister of Finance Council Meeting 2018 office in Jakarta 2017-2018, and the Sri Mulyani Indrawati (MCM) in Paris 2016 OECD Economic and OECD Secretary Survey of Indonesia General Angel Gurria
THE OECD AND INDONESIA . 5 6 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA The OECD-Indonesia Joint Work Programme: A path for more structured co-operation
OECD engagement with Indonesia is based on a Framework l ENVIRONMENT: The Green Growth Policy Review of Indonesia of Co-operation Agreement that was first signed in 2012 was initiated, which seeks to assess the extent to which and renewed in 2017 by the OECD Secretary General Angel Indonesia is mainstreaming environmental considerations Gurría and Minister of Finance of Indonesia, Sri Mulyani into its economic policy. A GGPR workshop was held in Jakarta Indrawati. It is structured around a Joint Work Programme in November 2017, which included a special session on the (JWP), which traditionally ran for two years but will run for OECD report Investing in Climate, Investing in Growth. three years starting from 2019. The JWP is developed in close consultation with key policy stakeholders in Indonesia as l SME POLICIES: An SME and Entrepreneurship Policy Review well as substantive OECD directorates, and is based on the of Indonesia was developed in 2018 and launched at the 2018 country’s strategic policy priorities. IMF/World Bank meeting in Bali, Indonesia. Indonesia also contributed actively to the development of the ASEAN SME The OECD-Indonesia Joint Work Plan seeks to assist Indonesia Policy Index 2018, which serves as a benchmarking tool to in meeting its development goals based on OECD standards and monitor and map SME policies across ASEAN Member States. best practices. The first Joint Programme of Work for 2015-16 A large number of stakeholders from a variety of government delivered notable results, particularly in the areas of managing ministries and agencies in Indonesia attended workshops to food insecurity risk and producer subsidies, supporting the OJK develop and launch these two reviews. while it drafted new regulations to manage the systemic risk of financial conglomerates, and public sector integrity, with l TAXATION: Indonesia signed the Multilateral Convention the OECD supporting the development of the country’s revised to Implement Tax Treaty Related Measures to Prevent Base National Anti-Corruption Strategy, through its Integrity Review. Erosion and Profit (BEPS) in June 2017. The government has also been working to upgrade Indonesia’s status from The most recent JWP, covering the period 2017-18, focused on “partially compliant” to “largely compliant” under the OECD business climate reform and dynamic growth, social policy and Global Forum on Transparency and Exchange of Information inclusive growth, good governance, and green growth. It also for Tax Purposes. serves to assist Indonesia in implementing its commitments under the 2030 Agenda for Sustainable Development. Notable l FISHERIES: Indonesia’s fishery and aquaculture policies in outputs under this JWP include: Indonesia were reviewed in the 2017 edition of Building Food Security and Managing Risk in Southeast Asia. Discussions are l EMPLOYMENT AND SOCIAL PROTECTION: A Social Protection ongoing to complete follow-up work in this area. System Review of Indonesia is ongoing, with a Workshop on Expanding Social Protection held in Jakarta in September The next JWP, to cover the period 2019-21, will focus on 2017. macroeconomic management and infrastructure development, business climate reform, inclusive growth, sustainable development and resilience, and good governance.
J Minister of Finance of Indonesia Sri Mulyani Indrawati and OECD Secretary General Angel Gurría at the 2017 OECD MCM in Paris, France.
THE OECD AND INDONESIA . 7 The OECD Southeast Asia Regional Programme: Connecting the OECD with Southeast Asia
The OECD has strengthened its engagement with Southeast Asia in recent years as a strategic priority. In May 2014 at GENDER the OECD Ministerial Council Meeting, OECD Secretary INNOVATION General Ángel Gurria and Japanese Prime Minister TRADE Shinzō Abe launched the Organisation’s Southeast Asia COMPETITION GOOD Regional Programme, along with Ministers and high-level TAX REGULATORY representatives from the region. PRACTICE 6 Regional Policy The Programme aims to build on over two decades of work with Southeast Asia to develop a more strategic Networks (RPNs) engagement with the region, based on a whole-of- CONNECTIVITY SMEs 4 Initiatives government approach. It supports different countries and Regional AND PPPs with their domestic reform priorities, and assists regional integration efforts. Specifically, it works to support Economic implementation of the ASEAN Economic Community Outlook Blueprint 2025. EDUCATION INVESTMENT Based on the principles of knowledge exchange and mutual AND SKILLS learning, the Programme is comprised of six Regional Policy Networks (RPNs) that build on the work of substantive OECD ECONOMIC directorates as well as partner regional bodies. These RPNs are OUTLOOK focused on policy areas identified to be of strategic importance for the region, namely: i) taxation; ii) good regulatory practice; iii) investment policy and promotion; iv) education and skills development; v) small and medium-sized enterprises (SMEs); over the coming year. The activities and impact of the RPNs are vi) public-private partnerships (PPPs) to support connectivity reported to the Programme’s Steering Group on an annual basis. for infrastructure development. In addition, the Programme has This Steering Group provides overall strategic guidance for the identified four policy areas to be integrated horizontally through Programme, with the objective of deepening OECD collaboration its work with the region, namely: i) trade; ii) innovation, iii) gender with the region. It has two co-chairs, one from Southeast Asia and iv) competition. Finally, the OECD Development Centre and one from an OECD country. In 2018 Thailand and Korea produces an Economic Outlook for Southeast Asia, China and India took over chairmanship of the Programme. for the Programme each year, which monitors medium-term macroeconomic trends in the region, as well as the state-of-play of In addition to targeted engagement with specific Southeast its regional integration efforts. Asian countries, the Programme provides support to both the ASEAN Secretariat and the annual ASEAN chairmanships. In Each RPN is comprised of policy experts from Southeast Asian 2017, the Programme supported the Philippines’ chairmanship and OECD countries, who jointly decide on its work programme via the development of official deliverables such as the
8 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA
Launch of the OECD Southeast Asia Regional Programme at the OECD Forum 2014 in Paris, France.
Strengthening Women’s Entrepreneurship in ASEAN report, as well as official statements such as the Leaders’ Declaration on Innovation. In close collaboration with the ASEAN Coordinating Committee on Micro, Small and Medium Enterprises (ACCMSME), the OECD and ERIA also developed the ASEAN SME Policy Index 2018 report, which can be used as a benchmarking tool to map and measure SME development policies across ASEAN Member States, as well as implementation of the ASEAN Strategic Action Plan for SME SCAN TO READ Development 2016-2025. Both of these reviews were funded THE REPORT by the Government of Canada. www.oecd.org/globalrelations/seaprogramme.htm
THE OECD AND INDONESIA . 9 10 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA The OECD Jakarta Office
The OECD Jakarta Office supports enhanced engagement with The office was inaugurated in March 2015, during the OECD Indonesia and Southeast Asia, to foster mutual learning and Southeast Asia Regional Forum held in Jakarta, Indonesia. It was the exchange of good practices between policy makers in the opened by the then-Minister of Finance of Indonesia Bambang region and the OECD. It supports the implementation of the Brodjonegoro and OECD Secretary General Ángel Gurría. OECD-Indonesia Joint Work Programme, helps to implement the Southeast Asia Regional Programme, and works to The inauguration marked a milestone in the OECD’s co- strengthen collaboration between the OECD and regional operation with Indonesia, which was the first co-chair of the organisations such as ASEAN, ADB, APEC, AMRO, ERIA and Organisation’s Southeast Asia Regional Programme, along with UNESCAP. Japan. The Jakarta Office, hosted in the Embassy of New Zealand, is the OECD’s first office in Southeast Asia. It supports the The decision to establish the OECD Jakarta Office was taken in implementation of the ongoing OECD-Indonesia JWP via regular September 2013, based on an agreement concluded between the meetings with relevant stakeholders, and monitors its progress. OECD Secretary General Jose Ángel Gurría and the then-Minister It also supports the organisation of high-level official visits by of Finance of Indonesia Muhamad Chatib Basri at the G20 Indonesian policy makers to OECD headquarters in Paris, France, Leaders’ Summit in St. Petersburg, Russia. as well as official visits of OECD delegations to Indonesia.
“The OECD Jakarta Office serves as a platform for intensified OECD work with Southeast Asia to foster closer collaboration with counterparts across the region. It facilitates OECD work with Southeast Asian countries, focusing on Indonesia in particular as a Key Partner, and strengthens partnerships with organisations such as ASEAN.” Massimo Geloso Grosso, Head of the OECD Jakarta Office
I 25 March 2015: Indonesian Finance Minister Bambang Brodjonegoro (left) and OECD Secretary-General Ángel Gurría inaugurate the OECD’s new Jakarta Office.
THE OECD AND INDONESIA . 11 The OECD and Indonesia
“Indonesia welcomes the OECD’s commitment to be our strategic partner in achieving social and economic development goals. The strategic co-operation and mutually beneficial partnership between the OECD and Indonesia for the last several years has been one of the important international engagements that Indonesia has been participating in. Parallel with Indonesia’s development stage, we do hope that OECD-Indonesia working collaboration in our selected common priority areas is also strengthened to achieve sustainable and inclusive growth.” Sri Mulyani Indrawati, Minister of Finance of the Republic of Indonesia
“Indonesia continues to be a key cooperation partner country for the OECD. We are about to complete the second Joint Work Programme with the OECD covering 2017-18, and to embark on the third such programme, this time for a period of three years. The new Joint Work Programme is structured along five areas of priority, of which one is on “Sustainable Development and Resilience”. In the past few months before I was asked to contribute to this brochure, Indonesia has experienced a series of major natural disasters. Sustainability of Indonesia’s development and its resilience seem all the more important, and I hope that future cooperation between the OECD and Indonesia will constribute to enhancing the country’s resilience. As Chair of the External Relations Committee of the OECD, I am committed to further deepen OECD’s engagement with Indonesia. We are grateful to Indonesia’s support to the OECD Jakarta Office which is now in its fourth year of operation, and continues to function as an effective bridge between the OECD and Indonesia. The Jakarta Office is also increasingly active in deepening the relationship between the OECD and ASEAN, a core element of another important activity of the OECD in the region, the Southeast Asia Regional Programme.” Ivita Burmistre, Ambassador, Permanent Representative of Latvia to the OECD, Chair of the External Relations Committee
“Engagement with the OECD has enabled Indonesian policy makers to participate in an exchange of views and good practices to help better inform policy design and implementation. It has also enabled Indonesia to tap into OECD expertise which can be used as a reference point in national policy debates. The benefits of this collaboration have been felt by many policy makers in Indonesia, and this is demonstrated by the fact that an increasing number of Indonesian officials are attending OECD meetings and that proposals for cooperation projects are rising. As Indonesia’s weight in the region and the world continues to grow, I believe that our collaboration with the OECD will continue to strengthen and evolve.” Dr Hotmangaradja Pandjaitan, Ambassador of Indonesia to France
12 . ACTIVE WITH INDONESIA THE OECD AND INDONESIA
“The relationship between the OECD and Indonesia has further developed during the past two years through the renewal of the Framework of Co-operation Agreement signed during the 2017 Meeting of the OECD Council at Ministerial level, the implementation of the second Joint Work Programme, and OECD’s further engagement with Indonesia through the Jakarta Office, already in its fourth year of activity. As Leader of the OECD Informal Reflection Group on Indonesia, I look forward to contributing to further strengthening the excellent cooperation between Indonesia and the OECD and its Member Countries, by increasing opportunities for dialogue between my peer OECD Ambassadors and Indonesia.” Carsten Staur, Ambassador, Permanent Representative of Denmark to the OECD, Leader of the Informal Reflection Group on Indonesia
“Over the past two years Indonesia has made notable efforts to tackle poverty, reform the business environment, boost public finances and facilitate investment in infrastructure. The OECD has supported these efforts through its 2017-18 OECD-Indonesia Joint Work Programme, which echoed the administration’s priorities. Over the course of this programme, we have worked together to enhance tax policies, which reached a milestone in 2017 when Indonesia joined the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. We have supported green growth, via the Green Growth Policy Review of Indonesia, and we have worked to create a better business environment, particularly for small and medium-sized enterprises. Through the OECD’s Economic Survey of Indonesia, we have looked at how to raise government revenues in a growth and equity-friendly manner, and how tourism can contribute to sustainable regional development. This work has brought Indonesia closer to the OECD, supporting our 2011 Vision Statement to become a more effective and inclusive global policy network. We look forward to intensifying these efforts under the 2019-21 OECD-Indonesia Joint Work Programme, as we work with the Government of Indonesia to advance its reform agenda and promote better lives for its people.” Andreas Schaal, Director of OECD Global Relations and OECD G20 Sous-Sherpa
THE OECD AND INDONESIA . 13 SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH 14 . ACTIVE WITH INDONESIA SUSTAINABLE GROWTH
Maintaining economic growth and resilience
Indonesia has experienced rapid growth since the end of the the importance of shifting the job mix to high-quality and Asian Financial Crisis in 1998. Up until 2014, GDP growth high productivity positions in the formal sector to capture the averaged over 5% per annum, contributing to a significant benefits of the demographic dividend. It also considers how reduction in poverty. However, recently slowing growth rates to raise revenues to fund infrastructure and social spending indicate that many underlying policy challenges still need that will promote growth and well-being. The potential of to be tackled to ensure sustainable and inclusive growth. tourism to diversify the economy and drive sustainable regional The OECD has been working alongside Indonesia to help development is also highlighted. formulate policies to meet the country’s targeted economic goals. The OECD Economic Outlook, released twice a year, analyses recent developments in the global economy and provides The OECD Economic Surveys, published biennially for each OECD economic projections for 47 economies, including Indonesia. Member and Key Partner economy, analyse major economic The May 2018 edition underlines the ongoing expansion and challenges and propose country-specific reform options drawing the pick-up in infrastructure investment that will boost future on international good practices. The sixth Economic Survey of growth. The Economic Outlook emphasises that continuing to Indonesia was released in Jakarta in October 2018. It focuses on reduce structural and administrative bottlenecks remains how to promote inclusive and sustainable growth, highlighting crucial to strengthen growth.
L Meeting with Indonesia’s Ministry of Tourism to collect inputs for the 2018 Economic Survey of Indonesia.
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH . 15 Maintaining economic growth and resilience
Going for Growth provides a comparative overview across The Economic Outlook for Southeast Asia, China and economies of structural policy developments and reform India,produced jointly with several regional organisations, priorities to boost growth and ensure that the gains are shared discusses regional economic trends, provides regional and by all. The 2018 edition, released in February, highlights the country growth forecasts and discusses structural policy gains Indonesia could reap from further education reform, challenges. The 2016 edition draws on contributions from the improving the regulatory environment for infrastructure, United Nations Economic and Social Commission for Asia reforms to employment regulations to address labour and the Pacific (UNESCAP) and the Asian Development Bank informality and easing barriers to entrepreneurship and Institute and focuses on “Enhancing Regional Ties,” an issue investment. of high relevance to Indonesia. The report also contains a country chapter analysing key structural policy challenges to Since 2012, the OECD has also jointly organised the Asian Indonesia’s development, prepared in co-operation with the Regional Roundtable with the ASEAN+3 Macroeconomic Ministry of Finance. The 2017 edition will provide key insights Research Office (AMRO), the Asian Development Bank (ADB), and recommendations on addressing the region’s energy the Asian Development Bank Institute (ADBI) and the Economic challenge and sustainability for inclusive growth. Research Institute for ASEAN and East Asia (ERIA). This annual event brings together policy professionals to discuss near-term www.oecd.org/eco macroeconomic policies and medium-term structural policies in www.oecd.org/dev/asiapacific Emerging Asian economies.
SCAN TO READ THE REPORTS
16 . ACTIVE WITH INDONESIA SUSTAINABLE GROWTH
Supporting SME development
SMEs play an important role for economic growth and social inclusion in Indonesia. Based on data from the Ministry of Co-operatives and SMEs, Indonesian SMEs account for nearly 97% of domestic employment and for 56% of total business investment.
In 2018 the OECD launched the SME and Entrepreneurship Policy Review of Indonesia. The study is part of a peer-reviewed series, developed by the OECD Working Party on SMEs and Entrepreneurship. These studies aim to improve the design, implementation and effectiveness of national SME and entrepreneurship policies. The policy review of Indonesia finds that there are a large number of public programmes for SME development in Indonesia, but that these could be streamlined, with more being done to support innovative companies. The development and implementation of an SME strategy would be instrumental to improve the overall coherence of national policy measures, objectives and measurable targets.
www.oecd.org/cfe
SCAN TO READ THE REPORT
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH . 17 Supporting green growth initiatives
As the most populous country and the largest economy in environmental trends in ASEAN countries, and provides recom Southeast Asia, Indonesia faces the complex challenge of mendations on mainstreaming green growth into national improving living conditions for its growing population while development planning. It also advises on sustainable management addressing environmental pressures that, if left unchecked, of natural resources and tackling urbanisation challenges. could deter growth and development. Implementing green growth policies can help governments reconcile In 2019, the OECD will launch the Green Growth Policy Review environmental protection with economic development. of Indonesia, which will highlight good practices and provide recommendations on how Indonesia can transition to a The OECD’s Green Growth Strategy is built upon four reports green and low-carbon economy. Indonesia’s green growth – Towards Green Growth, Towards Green Growth: Monitoring policies were also analysed in the OECD 2015 Economic Survey: Progress, Tools for Delivering on Green Growth, and Putting Green Indonesia, with a focus on Indonesia’s fossil fuel subsidy Growth at the Heart of Development. These reports provide reforms. Recommendations on fossil fuel subsidy reforms as targeted advice to Member and Partner economies as they well as broader use of environmentally related taxes will also be design and implement economic, environmental, investment part of the upcoming OECD 2018 Economic Survey: Indonesia. and innovation policies. When tailoring green growth strategies to developing countries, the OECD assesses the links between The OECD’s ongoing Urban Green Growth in Dynamic Asia green growth and poverty reduction, and identifies the changes project takes Bandung, Indonesia, as one of the five case study needed in sectors such as agriculture and infrastructure to cities to examine short- and long-term policy options towards a support sustainable development. The 2013 report, Putting Green sustainable green growth development. The Bandung report was Growth at the Heart of Development suggests that green growth published in October 2016. is the only way to sustain development over the long-term. www.oecd.org/greengrowth Indonesia is included in the report Towards Green Growth in www.oecd.org/greengrowth/asia.htm Southeast Asia, which discusses major economic, social and www.oecd.org/greencities
J An OECD fact-finding mission to Bandung, SCAN TO READ THE Indonesia, in 2018 to REPORT collect data for the 2019 Green Growth Policy Review of Indonesia.
18 . ACTIVE WITH INDONESIA SUSTAINABLE GROWTH
Promoting regional development and urbanisation
Southeast Asian cities, including those in Indonesia, are enhance effective collaboration between levels of government, undergoing rapid and continuous urbanisation accompanied critical to efficient policy making, effective investment and by fast economic growth. At the same time, they face service delivery. a number of challenges, including increasing energy consumption and greenhouse gas emissions, consequences The Recommendation on Effective Public Investment Across of global warming and localised environmental disasters. Levels of Government and its implementation toolkit help They also have wide disparities in income and lack of access to Promoting regional development and urbanisation assess the education and job opportunities among urban populations. strengths and weaknesses of a country’s public investment capacity across levels of government and set priorities for The OECD recognises the contribution of cities to economic improvement. progress, well-being and environmental sustainability. The productivity and prosperity of cities and their metropolitan www.oecd.org/regional region trickle down to less developed areas contributing to their www.oecd.org/greencities advancement and productive growth. Furthermore, it must be www.oecd.org/effective-public-investment-toolkit realised that cities, being hubs of productivity and innovation, are not only successful due to their size but also due to the structure of the urban system and the policies that enable such growth. In October 2016, the OECD also released a study on Green Growth in Bandung and held a dedicated workshop at the Ministry of Environment and Foresty in Jakarta in September 2017. Importantly, the study noted some of the difficulties that rapid growth can bring to a city, recognising the importance of sustainable development and urbanisation.
The OECD’s Territorial Reviews at the national and metropolitan levels (urban and rural) aim to provide a diagnosis of economic, social and environmental performance of an area, assess and recommend policies to enhance competitiveness, social inclusion and environmental sustainability. At the same time, the OECD Urban Policy Reviews examine urban policies at the national level and help to address key multilevel governance challenges to urban development. Similarly, the National Rural Policy Reviews explore rural conditions and territorial policies SCAN TO READ offering opportunities for rural areas to thrive. The changing THE REPORTS inter-governmental dynamics have become increasingly complex, and Multi-level Governance Reviews help diagnose challenges in this field and promote recommendations to
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH . 19 Increasing agricultural productivity and food security
Indonesia is the world’s fourth most populous country and The report is a unique source of up-to-date estimates of fifth largest producer in agriculture. Promoting sustainable support to agriculture and an analysis of agricultural policy private investment in agriculture in Indonesia is crucial to developments in OECD Member countries and in eight emerging enhancing agricultural growth, maximising the benefits of a economies (Brazil, China, Indonesia, Kazakhstan, Russia, South strong agricultural sector and increasing food security. Africa, Ukraine and Viet Nam).
In October 2012, the OECD released its Review of Agricultural In June 2015, the OECD released its report Managing Food Policies in Indonesia. The Review assessed agricultural Insecurity Risk: Analytical Framework an Application to Indonesia, performance over the last two decades, evaluated Indonesian which provides an analytical base of evidence to enhance agricultural policy reforms and provided recommendations discussions on food security and identify best policy responses to address future challenges. It paved the way for Indonesia that can better mitigate risks of food insecurity. The project is part to be regularly included between 2013 and 2016 in the annual of a broader work on food security, including other important flagship report,Agricultural Policy Monitoring and Evaluation. aspects such as trade issues and the enabling environment.
Producer support estimate (PSE), % of gross farm receipts, 2000 – 2016
35
30
25
20
15
10
5
0
-5
-10 Indonesia OECD – total -15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: OECD (2018), Agricultural Support. doi.org/10.1787/6ea85c58-en
20 . ACTIVE WITH INDONESIA SUSTAINABLE GROWTH
The OECD, together with ASEAN, organised the OECD-ASEAN Regional Conference on Policies for Food Security in Bogor in November 2014. The conference was an opportunity to exchange policy experiences between OECD Member countries, Southeast Asian economies and international organisations in the region, with a special focus on food security. This conference formed the basis of broader regional engagement with ASEAN, launched in August 2015 under the project Building Food Security and Managing Risks: A Focus on Southeast Asia, of which Indonesia is a participant. This project explores in-depth issues relating to food security with ASEAN and explores policy options for improving long-term food security in the region. It also provides a platform for the sharing of policy experiences from across the OECD and ASEAN and includes a focus on fisheries management, drawing on lessons from Indonesia. www.oecd.org/agriculture www.oecd.org/site/rpca
SCAN TO READ THE REPORTS
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH . 21 Promoting development co-operation and the 2030 Agenda
The OECD is promoting development co-operation and other NO ZERO GOOD HEALTH relevant policies to contribute to the implementation of POVERTY HUNGER AND WELL-BEING the 2030 Agenda for Sustainable Development, including sustained, inclusive and sustainable economic growth, poverty eradication, improvement of living standards in developing countries and to a future in which no country QUALITY GENDER CLEAN WATER AFFORDABLE AND will depend on aid. One of the core elements of the OECD’s EDUCATION EQUALITY AND SANITATION CLEAN ENERGY strategy is to strengthen policy dialogue and knowledge sharing to enhance continuous learning with major emerging economies, including OECD Key Partner Indonesia.
DECENT WORK AND INDUSTRY, INNOVATION REDUCED SUSTAINABLE CITIES The Development Centre occupies a unique place within ECONOMIC GROWTH AND INFRASTRUCTURE INEQUALITIES AND COMMUNITIES the OECD, where countries can share their experience of economic and social development policies. It co-operates closely with other parts of the OECD, particularly those working on development issues. Membership to the Development Centre is RESPONSIBLE CLIMATE LIFE LIFE open to both OECD and non-OECD members, and as of August CONSUMPTION ACTION BELOW WATER ON LAND AND PRODUCTION 2018, the OECD Development Centre comprises 52 member countries: 25 emerging and developing economies and 27 OECD member countries. Indonesia has been a member of the Development Centre’s Governing Board since 2009 and is PEACE, JUSTICE PARTNERSHIPS involved in setting the programme of work and budget and in AND STRONG FOR THE GOALS financing the Centre. INSTITUTIONS
The Development Cooperation Directorate (DCD) is actively working with Indonesia through technical co-operation and policy dialogue on development co-operation and finance for A major contribution to the sector are the OECD DAC Blended development. The DCD Director met in May 2018 with the Finance Principles for Unlocking Commercial Finance for Minister of National Planning Development (BAPPENAS) of the Sustainable Development Goals, which Indonesia is Indonesia to discuss collaboration on capacity building and encouraged to incorporate. DCD and Indonesia are intensifying knowledge sharing. In August 2018, DCD contributed to the collaboration on managing development co-operation and technical seminar held in Bali on Achieving the 2030 Agenda tracking development co-operation flows. The new statistical through South-South and Triangular Cooperation: Enhancing measurement framework, TOSSD, plays a crucial role in this. Data Collection, Analysis and Monitoring & Evaluation. DCD Indonesia has shown an interest in triangular co-operation and is also organising with the Indonesian government an event has participated in the international meeting on “Making Best on Blended Finance at the second Tri Hita Karana Sustainable Use of the Value Added of Triangular Co-operation”, organised Development Forum in October 2018 in Bali. by the OECD and Portugal in April 2018 in Lisbon.
22 . ACTIVE WITH INDONESIA SUSTAINABLE GROWTH
The Global Partnership for Effective Development Co-operation practitioners while collectively looking into the challenges provides a platform for stakeholders to share experiences linked to project implementation, effectiveness, impact and and improve collaboration at a country level. Indonesia co- sustainable results. In Asia, netFWD counts on the support of chaired the Global Partnership from 2012 to 2014 and actively the Asian Venture Philanthropy Network (AVPN), which brings participates in GPEDC meetings. together the most innovative foundations in the region. It includes venture philanthropy associations from Indonesia such The OECD is also increasingly partnering with foundations as Japfa Foundation Indonesia or UnLtd Indonesia. Through and NGOs to enrich policy dialogues and activities that may their collaboration, netFWD and AVPN can share experiences further the realisation of international development goals. The of philanthropic actors between regions and thus contribute to Global Network of Foundations Working for Development building knowledge and expertise in the field of philanthropy. (netFWD) is a group of foundations committed to optimising the impact of philanthropy for development by sharing www.oecd.org/dev/ experiences, influencing policy and developing guidelines and www.oecd.org/dac innovative partnerships. The Network allows foundations www.oecd.org/site/netfwd to engage with stakeholders ranging from policymakers to effectivecooperation.org
SUSTAINABLE, BALANCED AND INCLUSIVE GROWTH . 23 Better data for better policies
The inclusion of Indonesian data in the OECD’s statistical edition was published in 2017, and includes a special feature on databases has encouraged the country to move closer developments in ICT. to international standards and provide comprehensive statistical indicators for comparison. The OECD, in co-operation with the Asian Development Bank, launched the new publication, South-East Asian Government Indonesian data was included in the OECD’s How’s Life 2015 at a Glance in 2018, building on the experience of the success publication, and the Organisation is currently working closely of a similar publication for the Latin American and Caribbean with Statistics Indonesia to include its data in the Income region in 2014. Reflecting OECD survey instruments and Distribution database, a vital tool for policy work on poverty recommendations, the publication gathers new comparative and income inequality. Indonesian data has also been included data on key aspects of public governance in the region to in the OECD Factbook since 2009, such as national accounts inform public sector reforms. It includes data on public and a range of short-term economic statistics. These statistics finances and economics, employment and budgeting practices, provide a comparative overview of recent international economic as well as on other areas such as open government, digital development and are used in the OECD compilation of Indonesia’s government and human resources management. It covers all Composite Leading Indicators. OECD’s Green Growth Indicators ten ASEAN countries, as well as a number of OECD countries for cover OECD and G20 countries, and are intended to help countries comparative purposes assess and compare their progress on greening the economy. www.oecd.org/sdd The annual report Revenue Statistics in Asian Countries, www.oecd.org/statistics first published in May 2014, covers seven Asian countries www.oecd.org/dev/asia-pacific – Indonesia, Malaysia, the Philippines, Singapore, Japan, www.oecd.org/govataglance.htm Kazakhstan and Korea – and contains comparative data and www.oecd.org/greengrowth/green-growth-indicators policy recommendations on the overall tax burden as measured by tax-to-GDP ratios, the tax mix and the share of tax revenues attributed to the different levels of government. The fourth
SCAN TO READ THE REPORTS
24 . ACTIVE WITH INDONESIA SMOOTH FUNCTIONING OF MARKETS SMOOTH FUNCTIONING OF MARKETS . 25 Enhancing investment’s contribution to sustainable development
International investment is contributing to the rapid A second Review, which began in the second half of 2018, integration of Asian economies under the impetus of the will look at how to sustain and diversify FDI inflows and ASEAN Economic Community and has been a driver of maximise their development impact. It will focus on promoting Indonesia’s recent economic dynamism. Inflows of foreign and facilitating investment for sustainable development, direct investment (FDI) into Indonesia have reached record encouraging responsible business conduct, fostering linkages, levels over the past four years. and removing impediments to outward investment from Indonesia. The study will also include an assessment of the The OECD promotes investment policy reform and international investment climate in one of the provinces. investment co-operation to enhance growth and sustainable development. It has been actively undertaking Investment Policy Investment Policy Reviews use the Policy Framework for Reviews (IPRs) throughout Southeast Asia in collaboration with Investment (PFI), a comprehensive tool for investment climate the ASEAN Secretariat. Indonesia undertook an Investment reform covering twelve policy areas. The PFI was updated in Policy Review in 2010, led by the Co-ordinating Ministry for 2014-15 with the help of a global task force which held its first Economic Affairs and involving a multi-agency task force. It meeting in Bali in March 2014. showed that the bold reforms of the Indonesian investment policy framework have revived investor confidence and helped www.oecd.org/investment to drive record FDI inflows. The Review also highlighted www.oecd.org/investment/seasia.htm remaining reform challenges.
FDI restrictiveness by sector in Indonesia
Primary
Secondary
Tertiary Total FDI Inde Fisheries Mining uarrying Media