Programme description

Title: Local and Regional Economic Development (RED)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Indonesia
Lead executing agency: National Planning Board "Badan Perencanaan dan Pembangunan Nasional" (BAPPENAS)
Overall term: 2008 to 2013

Context

As an emerging economy and member of the G20, Indonesia plays an important role in the Southeast Asian region. Since the turn of the millennium, the country has been achieving greater macroeconomic stability and considerable economic growth. However, regional disparities, especially between the dynamic provinces in Java and remote parts of the country, continue to hamper broad-based, pro-poor growth. Only a few public and private stakeholders are in a position to implement successful economic promotion measures. The frequently poor coordination between national and regional state institutions makes effective planning, budgeting, and implementation of strategic interventions difficult. The unfavourable investment climate and lack of business services undermine the competitiveness of small and medium-sized enterprises. This exacerbates the shortage of employment and limited income opportunities for a growing population.

Objective

The business climate, sector programmes, and planning and implementing processes for local and regional economic development (LRED) have all improved at national and regional levels.

Approach

On behalf of the German Federal BMZ, GIZ is supporting the Indonesian National Planning and Development Agency, BAPPENAS. The two partners are working together to establish favourable conditions for sustainable economic promotion. The focus is on developing and encouraging institutional and individual capacities, as well as effective support structures. National and regional actors are acquiring the potential to devise and implement consistent strategies for economic development. This is improving the competitiveness of the regions involved, which in turn will create growth and employment opportunities that ultimately to help reduce poverty.

The programme operates at national and regional levels in a broad dialogue that includes civil society and the private sector.

• At the national level, it is helping the Indonesian Government to establish a conducive business climate and to implement its sector policies. This should stimulate LRED initiatives around the country.
• Targeting their respective local needs, the programme is supporting Central Java, West Kalimantan and West Nusa Tenggara as they develop specific economic sectors and improve of the regional economic climate.

The programme provides advice, facilitation and training measures to assist its partners.

Results achieved so far

The National LRED Strategy, which was developed with the support of the programme, was integrated into the Mid-Term Development Plan 2010-2014 and is currently being implemented through a wide range of LRED-related government programmes. Considerable additional leverage can be expected from the coordination body TKPED as well as the LRED facilitation mechanism currently being developed.

To achieve structural sustainability, the programme is involved in several different partnerships. So far, largely on their own initiative, the partners in two provinces have conducted regular surveys of the investment climate. In Central Java, for instance, 2,000 private enterprises from 35 districts are asked to judge their business development, the local investment climate and the government's efforts to promote business. The results of this benchmarking are published in the media and the 'best performers' are rewarded at a public ceremony, as a way of encouraging competition between the districts. Detailed profiles recording the strengths and weaknesses of the districts are used to guide efforts to overcome the existing hurdles.

At the end of 2010, after six years of successful collaboration, the programme phased out its support in the district of Solo Raya. Due to the strong emphasis it places on sustainability, many of the local partners are now in a position to develop and drive forward their own LRED initiatives. Examples include the joint LRED Strategy for Solo Raya 2010-2014, and the development of tourism in the 'Mice' sector (meetings, incentives, conferences, events). The number of tourists visiting Solo Raya rose by around 10% in both 2010 and 2011, and the average duration of visitors' stays lengthened from one and a half to two days.

As a former pilot region, Solo will remain an important partner for other regions in the future.