Indonesia Seventh Development Policy Loan

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The Seventh Development Policy Loan Program (DPL 7) to Indonesia for US$600 million is being presented to the Board as the beginning of a new, third series of annual single-tranche DPLs seventh to ninth. The first four DPLs, from 2004 to 2007, constituted a program anchored to the FY04-FY08 Country Assistance Strategy (CAS). Subsequently, during 2008 to 2009, DPLs fifth to sixth were the second series of core program support to the Government of Indonesia (GoI), anchored under the FY09-FY12 Country Partnership Strategy. DPL seventh was previously envisaged to be the last in this second series. However, with the new Government in place, there is a renewed opportunity to better align the DPL program with the new Government's development strategies and priorities. Therefore, DPL seventh now represents the first of a new, third series of annual single-tranche loans (DPLs seventh to ninth), although still anchored under the FY09-FY12 Country Partnership Strategy. Overall, the DPLs seventh-ninth policy actions evolve around the following DPL reform pillars: (a) improving the investment climate through issuance of a revised investment negative list, simplifying investment licensing procedures, establishing a national single window, development of a national logistics blueprint, strengthening the tax administration organization and business processes, as well as modernizing human resource management within the Ministry of Finance (MoF) Director General (DG) tax; (b) strengthening public financial management through improving the results orientation in the budget process, linking budget formulation to an integrated financial management information system (SPAN), development of a new monitoring and evaluation (M&E) system, streamlining budget execution and management of budget authority, strengthening the management of state assets, improving public procurement systems, as well as strengthening government accounting and audit functions; and (c) enhancing poverty alleviation and service delivery efforts through strengthening governance and institutional accountability over the Government's poverty alleviation programs, improving the methodologies for poverty measurements and targeting of the poor, and improving poverty reduction programs at the household and community level, i.e. Jamkesmas and the National Program for Community Empowerment (PNPM Mandiri).