EU-Indonesia development cooperation

EU-Indonesia development cooperation

The European Union (EU) is one of the largest aid donors in
the world, providing US$7.1 billion or 10.5 percent of all aid
disbursed by the Organization for Economic Cooperation and
Development (OECD) countries in 1995. If this is aggregated with
aid disbursed by individual EU member states, then European
development expenditure amounts to almost 60 percent of all OECD
aid. Of this total, EU aid commitments to Asia accounted for 9.5
percent of EU aid committed in 1995.

Over the period from 1990 to 1995, euro (EUR) 128 million of
development aid from the European Commission (EC) has been
committed to Indonesia. The EC's present development program
consists of nine major projects with a total budget of EUR 168
million. A further EUR 15 million worth of projects are in the
pipeline focusing specifically on assistance to Indonesia's
recovery from an economic and monetary crisis. Funding is also
being provided for a series of humanitarian aid projects, again
targeted at mitigating some of the negative effects of the crisis
and for the activities of local and European non-governmental
organizations.

Two points must be stressed about EC development aid to
Indonesia. Fist, all EC funds are donated as grants for projects
which have been negotiated and agreed with the national
authorities. None of the EC funds add to Indonesia's public
sector debt burden. Second, all EC development cooperation is
implemented in full partnership with the relevant line agencies.
To emphasize the importance of this partnership: all EC projects
are managed by teams that include both European and Indonesian
technical experts.

Before the deterioration of Indonesia's financial and economic
situation in 1997, EC development aid was directed primarily
toward water and irrigation and sustainable forest management
sectors. The aims of the program were to assist Indonesia's
efforts to maintain food security and to assure the sustainable
utilization of Indonesia's rich and important forest resources.

From the middle of 1997, the focus of the program shifted with
an increasing number of new humanitarian aid projects approved --
the total amount approved to date is in excess of EUR 5 million
-- and with new projects being developed to support the social
safety net program. In addition, a new project to provide radar
remote sensing data on the condition and expected harvest size of
Indonesia's rice crop has been approved and is currently being
implemented in collaboration with Board for Study and
Implementation of Technology.

The EC is also active in addressing the consequences of the
economic crisis from a regional perspective. One outcome of the
second Asia-Europe Meeting (ASEM), which took place in London in
April 1998, was the establishment of the ASEM Trust Fund. This
fund, managed by the World Bank, is designed to provide Indonesia
and seven other Asian countries with technical expertise to
assist with financial sector restructuring and with other
measures to deal with the social problems caused by the crisis.
The EC has committed EUR 15 million to this fund, making it the
largest single contributor.

However, the largest proportion of EC funds committed to
Indonesia remains for projects in the forest sector. The EC is
deeply concerned about the social, economic and environmental
consequences of the depletion of the world's forest resources.
The government's willingness to use the crisis as a window of
opportunity to study and implement fundamental structural reforms
within this vital sector is one of the few positive outcomes to
emerge from the present situation.