Australian aid in Indonesia

Introduction

A major example of the way Australian regional aid programs and other aid links operate is shown in Australia's government and non-government involvement with its largest neighbour, Indonesia. Australia's aim is to reduce poverty and achieve sustainable development is seen as serving Australia's national interest. The following case study discusses this example and the role taken in bilateral projects managed by the Australian Agency for International Development (AusAID) and by non-government organisations (NGOs) such as Australian Red Cross and World Vision. A look at AusAID's channelling of funds from the United Nations (UN), International Financial Institutions (IFIs) and International Non-Government Organisations (INGOs), and Civil Society Organisations (CSOs) and other community groups will provide examples of approaches to regional aid delivery.

Reasons for Australian-Indonesian Aid

Australia and Indonesia have been development partners for many years and today's total estimated level of government and non-government assistance to Indonesia has increased to $270.3 million. Earlier aid efforts, such as the Australia-Indonesia Development Cooperation Program (AIDCP), began in the 1950s and continue to assist Indonesia with recovery from the financial crisis of the late 1990s and with security issues. A strengthening world economy has helped lift economic growth in Indonesia, however more than half of its 220 million people live on less than US$2 per day. Investment in human capital and infrastructure remains inadequate. Further, conflict still occurs in the fringes of the country, particularly with the newly independent East Timor and in the northern province of Aceh. Other problems include an unemployment rate of 9.3 percent as well as lack of access to health and education services and recent malnutrition outbreaks. Bearing these facts in mind, aid organisations such as AusAID have identified the key to assisting Indonesia to reduce its poverty is this: improvement of its production and investment climate. The impact of natural disasters such as 2004's tsunami strike at north-western Sumatra are also addressed by bilateral agreements like the Australia-Indonesia Partnership for Reconstruction and Development (AIPRD) (2005), and by government plans to assist its economic management, democratic transition and enhanced public welfare. Such efforts reflect an enlightened self-interest whereby improved Indonesian living standards and stability promises the expansion of trade and investment opportunities between the two countries.

Australia-Indonesia Partnership for Reconstruction and Development

Australia's total aid to Indonesia over the next five years will reach roughly $2 billion in the form of the AIPRD and of the Commonwealth Government's initial tsunami relief. The AIPRD aims to support Indonesia's reconstruction and development efforts in afflicted areas and through cooperative efforts with the Indonesian government at economic and social reform, as well as promoting security and stability. It consists of a joint forum for foreign and economic ministers from the two countries, with eligibility for AIPRD activities given only to Australian, Indonesian and New Zealand firms. AIPRD funds of $175 million have been allocated to such projects as the Aceh Rehabilitation Programme for health, education and government services in Aceh. They have also been allocated to assist economic, financial and public sector management through a government partnerships fund, and to emergency preparedness for disasters. Scholarships enabling Indonesian postgraduate students to study in Australia are included in the fund.

Proposed aid outcomes

Some argue that investment in human capital and infrastructure from domestic, foreign, government and private sources may be insufficient to support higher rates of growth in Indonesia. Assistance is aimed not just at economic growth, however. Government aid recognises there is no real solution to poverty without an understanding and promotion of human rights, with aid given to democratic reform and to the accessibility and quality of basic social services. In 2004-2005, Australia assisted Indonesia's debt management agency, state-owned bank monitoring units and taxpayers office, as well as the Supreme Court, Human Rights Commission and Anti-Corruption Commission.