Growth and equity is a priority theme of the minister of Development Cooperation Bert Koenders.  Enhancing economic growth is important and one of the most efficient ways to reduce poverty. However growth alone is not enough; it is important that everybody benefits from this growth and thus it must be divided (more) equally.

Working on a better investment-climate

In Indonesia the relation between economic growth and poverty reduction is fairly strong. Therefore The Netherlands has chosen to support projects to improve the investment-climate in order to enhance a sustainable growth and reduce poverty. A better investment-climate ideally increases the attractiveness for both domestic and foreign companies to invest. SMEs too are burdened by a web of unnecessary administrative rules, even though their growth can create a lot of employment.

In this context The Netherlands has also chosen to improve public finance management, to improve budget preparation, execution and accountability. Better PFM will result in freeing up additional funds for the poor and a more just tax collection system in augmented fiscal space and a better investment-climate.

The Netherlands has the following programs running to contribute to the above targets:

• Multi-donor Trustfund at the Worldbank (WB) to support Trade Promotion and the Investment climate. The program assists among others with bureaucratic reform in the ministry of Trade, helps with capacity building, organises an analysis of bottlenecks in the logistics sector (important for export: how do you get your products as efficient as possible to a port and out of the country), supports the PEPI secretariat and works on access to credit and deepening financial markets in Indonesia.
• Multi-donor Trustfund Public Finance Management. This European Commission and Dutch supported trustfund is also executed by the WB. The Netherlands feels this cooperation with the WB is highly efficient, as the WB has a lot of expertise, is able to attract experienced consultants and the program complements GoI investments in for better budgeting (SPAN) and integrated information systems for tax collecting offices. Indonesia is exerting a prudent fiscal policy and this program is assisting in improving, together with the input of other donors, the budget planning, budget executing and accountability. It is the type of project which should help Indonesia to stand on its feet. The impact of improved PFM is therefore potentially considerable and has already helped the government to finance projects such as PNPM and the Bantuan Langsung Tunai (BLT) themselves.
• PNPM poverty analyses and studies. This program assists the government executing critical analyses on the effects of government policy on poverty. It is an important part of the Growth and Equity agenda. The program helps monitoring the poverty situation and does research on the effectiveness of poverty reducing programs.
• Through the Dutch-Indonesian Chamber of Commerce INA, work is done several Kota and kabupatens to improve the local investment climate and corporate social responsibility is being promoted by introducing GRI sustainability reporting.
• Through the Union-co financing program (VMP) and the Employers program (DECP) respectively trade unions and employers-organizations are being supported (Kadin and Apindo).
• Under the Growth and Equity program, cooperatives and famers associations are being supported in the dairy sector (together with PT Frisian Flag) and vegetable farming (in particular bell and hot peppers, in cooperation with LNV (an agricultural organization), Wageningen University Research and IVEGRI – a Lembang based vegetable research institute).