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Source: Asia Development Bank

Article | 14 October 2020

Winfried Wicklein, ADB’s Country Director for Indonesia

The Asian Development Bank, or ADB, is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. A multilateral, not-for-profit development bank, ADB assists its developing member countries by providing loans, technical assistance, grants, and equity investments to promote social and economic development. Established in 1966, ADB is owned by 68 members—49 from the region.

Indonesia is one of ADB’s founding members and its sixth largest shareholder. Despite remarkable development progress, Indonesia faces substantial challenges in fostering inclusive and sustainable development. Now with COVID-19 severely affecting Indonesia, ADB estimates that poverty could increase significantly unless adequate support measures can be effectively be implemented.

To find out how ADB has been responding to the COVID-19 crisis in Indonesia, MVB’s Chairman Alistair Speirs talked to ADB’s Country Director for Indonesia Winfried Wicklein who has been based in Jakarta since 2017.

1. ADB and other international agencies such as UNICEF formed partnerships to fight COVID-19. How effective was this and did any of the assistance come to Indonesia?

From the onset of the outbreak, ADB has supported Indonesia’s response to the pandemic, often partnering with other agencies.

For example, we worked closely with UNICEF to help the Ministry of Health procure medical equipment to protect frontline workers.

Indonesia was one of the first countries to access ADB’s counter-cyclical finance facility, providing critical budget support to the Government to help address the pandemic’s fiscal, health, and social impacts. In addition to ADB’s financial support, the facility mobilized significant finance for Indonesia from other bilateral and multilateral sources.

In social protection, we have partnered with other aid agencies to help the government rapidly expand social assistance programs and disburse emergency cash and food assistance.

2. ADB has very clearly stated sustainability goals in support of the SDG’s. Please tell us about how that affects your evaluation of which projects and sectors to finance. Do you reject proposals because they are not sustainable?

ADB’s country partnership strategy for Indonesia is closely linked to the SDGs. Essentially, all of our projects support the SDGs. We provide targeted knowledge solutions and mobilize financing for the SDGs. We also helped the government prepare its SDG roadmap.

COVID-19 has highlighted the need and urgency to focus on the SDGs. In fact, the SDGs have never been more relevant and important. Post-pandemic recovery efforts must focus on the SDGs.

3. Can you give us some specific examples of projects which are directly related to increasing sustainability in Indonesia? In energy, water, waste or agriculture perhaps?

ADB is strongly promoting renewable energy in Indonesia. As a matter of fact, we have been involved in the financing of 25% of installed solar capacity, 50% wind and 25% of geothermal power in the country. Recently, we committed $300 million to support the expansion of geothermal power plants in West and Central Java.

In rural development and food security, we are financing the development of irrigation systems. We supported initiatives to help river-based communities in Banten and Maluku better manage and mitigate flood risks in several river basins.

In addition, we are assisting local governments in improving sanitation in urban areas such as Makassar, Yogyakarta, and Medan. In South Tangerang, we are helping the government with the structuring and tendering of a waste-to-energy project to the private sector.

ADB is also providing innovative financing solutions to mobilize private and public investments in support of the SDGs. For example, ADB is supporting a green finance facility as part of the Government’s “SDG Indonesia One” initiative. The facility is designed to help reduce the private sector’s risk in investing in green projects and provide innovative financing solutions to catalyze green investments.

4. Indonesia has declared its commitment to achieving some pretty high carbon reduction targets, deforestation targets, renewable energy targets etc. How is ADB assisting Indonesia in attaining them?

Addressing climate risk and promoting environmental sustainability are priorities in ADB’s work in Indonesia.

We embed climate change mitigation and adaptation measures in all ADB-financed infrastructure investments. ADB also helps mobilize domestic and international climate finance and establish market-based carbon mechanisms.

COVID-19 has highlighted the potentially devastating impact of climate change-related disasters. It has also been a wake-up call to switch to a greener, sustainable future. In order to “build back greener,” environmental sustainability should be a key consideration of the COVID-19 recovery strategy.

As mentioned earlier, we are helping Indonesia realize its geothermal potential, as well as the large-scale use of its considerable solar photovoltaic and wind resources. That is in support of Indonesia’s goal that 23% of the country’s energy supply will come from renewable sources by 2025.

We are working with a wide range of stakeholders to improve ocean health by catalyzing  financing and exploring innovative approaches such as coral reef insurance. We also support waste management and low-emission transport schemes, as well as Indonesia’s National Plastic Action Partnership.

COVID-19 has highlighted the potentially devastating impact of climate change-related disasters. It has also been a wake-up call to switch to a greener, sustainable future. In order to “build back greener,” environmental sustainability should be a key consideration of the COVID-19 recovery strategy.

5. There were questions before the onset of COVID-19 as to whether Indonesia could attain these ambitious targets. What do you think the chances are now? Reduced? Increased?

COVID-19 has severely worsened the global economic outlook, and Indonesia is no exception. Governments around the world are facing the dual challenge of flattening the pandemic curve while addressing the economic shock.

There is increasing evidence that low-carbon and resilient development – for example, investments in clean physical infrastructure, energy efficiency, natural capital, and rural resilience building – can boost economic growth during the recovery from the COVID-19 pandemic. We believe there is an opportunity for Indonesia to simultaneously support economic recovery while working toward meeting its ambitious targets in climate change and environmental sustainability.  ADB will support Indonesia in seizing such opportunities through knowledge and innovative financing solutions.

6. Indonesia has been trying to balance the reopening of the economy against the threat of health. How is it doing?

COVID-19 has had a significant impact on the Indonesian economy and the livelihoods of many Indonesians, especially the most vulnerable segments of society, namely the poor, the near-poor, the informal workers, and women and girls. Unfortunately, it is quite likely that the pandemic will undo years of remarkable progress Indonesia had made in reducing poverty in the past couple of decades.

The government’s macroeconomic and fiscal response, including support for expanded social assistance and businesses, has been timely and relatively effective. It will be critical to bring the pandemic under control to stimulate economic activity, investment, and job growth. ADB is supporting the government’s monitoring of the economic recovery program, as well as knowledge support in epidemiological modelling and policy recommendations for COVID-19 responses. 

7. What do you think Indonesia’s objectives should be at this point? Ibu Sri Mulyani thinks this is an opportunity for reform. Can Indonesia grasp this opportunity or is the economy just too badly affected? Or is the structure just not ready?

No doubt, COVID-19 should be used as an opportunity to address Indonesia’s outstanding reform agenda. If anything, COVID-19 has accentuated some of the underlying impediments to Indonesia’s longer-term growth potential. Economic recovery measures should be designed with the transformation of the economy in mind.  

I see three areas that, if addressed with determination, will help Indonesia emerge from the crisis stronger:

First, investing in its people, including health, education, social protection, is critical to the foundation of a modern and resilient economy.

Second, prioritizing structural reforms, investment climate, domestic resource mobilization, and quality infrastructure will lead to more investment and jobs.

Third, addressing climate and disaster risk and promoting environmental sustainability will help ensure the sustainability of Indonesia’s development.

Focusing development efforts on these areas will help Indonesia emerge stronger from COVID-19, toward a future that is more inclusive, resilient and sustainable.

This is republished from Leaders e-Magazine. Read the article on pages 20-23.

MIL OSI Global Banks