Australia Indonesia Partnership for Reconstruction and Development

New: Indonesia update: Year in review 2006

On 5 January 2005 the Prime Minister announced the establishment of a $1 billion, five-year, Australia Indonesia Partnership for Reconstruction and Development (AIPRD).

The objective of the AIPRD is to support Indonesia's reconstruction and development efforts, both in and beyond tsunami-affected areas.

This will be done through sustained cooperation focused on the Indonesian Government's programs of reform, with an emphasis on economic and social development.

The package consists of $500 million in grants and $500 million in concessional loans.

The AIPRD is additional to Australia's ongoing Development Cooperation Program and Defence Cooperation Program.

The initiative will bring the provision of aid to Indonesia to a total of almost $2.0 billion over five years.

While there is a clear focus on areas devastated by the tsunami, all areas of Indonesia will be eligible for assistance under the partnership.

Governance

The AIPRD is governed by a Joint Commission, overseen by the Prime Minister of Australia and the President of Indonesia.

The Commission also comprises Australia's Minister for Foreign Affairs and Treasurer; and Indonesia's Minister for Foreign Affairs, Minister for Finance, and State Minister for National Development Planning and Chair of the National Planning Board.

Implementation

The partnership will be implemented according to agreed guiding principles which emphasise the joint nature of the AIPRD, the need to properly take account of Indonesia's needs and development efforts, the assistance that Australia is able to provide, and the importance of coordinating activities with international development partners.

Under the AIPRD, $500 million will be provided through a grant assistance program, to be managed in accordance with the existing General Agreement on Development Cooperation between Australia and Indonesia, and $500 million will be provided through a highly concessional loan program.

AIPRD activities will be jointly managed and implemented by the Australian and Indonesian governments under both the loan and grant components, and will be developed so that they complement Australia's assistance under the existing Indonesia bilateral program.

Australian, Indonesian and New Zealand companies will all be eligible to tender for projects.

Grant funding priorities

Early priorities for grant funding include:

restoring health, education, and local government services in Aceh - $50 million
urgent rehabilitation assistance to other areas of Indonesia - $5 million
capacity building of Indonesia's own systems for managing and responding to natural disasters - $10 million
development of a Government Partnerships Fund to support exchange of skills, knowledge and expertise between Australian government agencies and their Indonesian counterparts - $50 million.

Under the AIPRD, Australia will also offer 600 scholarships, thereby doubling the number of scholarships currently funded for Indonesia.

Further areas for assistance will be developed, subject to agreement by the Australian and Indonesian governments.

Loan program

The loan program will provide funding at zero interest for up to 40 years with no repayment of principal for 10 years. The Joint Commission will consider and endorse proposals for loans under a AIPRD Loan Framework, consistent with the broad strategic directions for the partnership. It is anticipated that the loan component will be used largely for infrastructure development.

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