Indonesia Gets IDR 11.6 Trillion Disbursement From The World Bank, What For?

JAKARTA - The World Bank's Board of Executive Directors approved funding of $ 800 million or around IDR 11.6 trillion to support investment and trade policy reforms and help accelerate Indonesia's economic recovery and transformation.

World Bank Director for Indonesia and Timor-Leste, Satu Kahkonen, said the assistance would support the Government of Indonesia's plans for reforms to attract investment and increase the competitiveness of the economy.

"These reforms have the potential to support the economic transformation to shift from the commodity sector to sectors with higher added value. This will provide a much-needed impetus for post-pandemic economic recovery", he said as quoted by Antara, Wednesday, June 16.

He explained that the financing for development policy operation (DPO) support is structured to increase investment by opening up more sectors for private investment.

The focus of this support is specifically on foreign direct investment, adding highly skilled professionals in the labor market, and encouraging private investment in renewable energy.

This financing is also structured to support trade policy reforms aimed at promoting competitiveness and economic recovery as well as increasing access and affordability of prices for basic food commodities and raw materials as well as facilitating access to manufacturing inputs.

"The increase in investment that is expected to be triggered by these reforms will also require careful environmental management. The World Bank will work closely with other development partners to support the government in strengthening environmental management efforts in all sectors," said Kahkonen.

Overall, the DPO aims to support major reforms in Indonesia's trade and investment fields, in line with the longstanding cooperative relationship between the World Bank Group (WBG) and the Government of Indonesia.

This activity is fully aligned with the country partnership framework (CPF), recently adopted by the WBG, which identifies strengthening economic competitiveness and resilience as an important way to reduce poverty and improve welfare.

Currently, major barriers to investment and trade have limited Indonesia's ability to attract export-oriented foreign direct investment, reduced Indonesia's integration into global value chains, and increased domestic food prices.

These challenges have also slowed growth in the manufacturing and non-commodities sectors so that most of the jobs created in recent decades have been in the low-productivity commodity and service sectors, which generally earn below middle-class wages.

Meanwhile, due to the pandemic, Indonesia experienced its first recession in two decades. This condition exacerbates the challenges facing the economy to expand into more sophisticated sectors to create jobs with better wages and higher productivity.