Indonesia: Competitiveness, Industrial Modernization, and Trade Acceleration Program (CITA) - Subprogram 2

approved

This proposed Program will provide a policy-based loan under the COVID-19 Crisis Recovery Facility of the Bank and will be co-financed with the Asian Development Bank (ADB). The pandemic has driven up unemployment and poverty levels in Indonesia. The adverse impact of reduced working hours, lockouts and unemployment caused a reversal of the structural transformation of the economy. The risk of a prolonged recovery from the COVID-19 pandemic could further stall economic development. While domestic consumption has been the main driver of economic growth, it is likely to remain dampened due to the income loss experienced by households. In the post-pandemic context for Indonesia to meet its target of becoming a high-income country by 2045, critical reforms are needed to address productivity, creation of quality jobs, and income growth. The proposed Program is anchored on GoI's structural reforms, combining reforms in the investment, trade, and MSMEs (micro, small, and medium-sized enterprises) sectors. The proposed Program will support the following three reform areas: (i) Reform 1 (creating an enabling environment for investments) - this reform area aims to improve the business climate; (ii) Reform 2 (easing barriers to trade) - this reform area will reduce impediments to trading, both domestic and cross-border; and (iii) Reform 3 (growing and upscaling enterprises) - this reform area will help firms increase their productivity and upscale operations.