This Country Program Evaluation (CPE) assesses the World Bank Group's support to Indonesia between FY13 and FY23. The evaluation investigates the relevance, effectiveness, and coherence of Bank Group support in four areas that are critical for the country to achieve its development vision of reaching high-income status by 2045. These areas include: (i) more efficient public finances; (ii) stronger human capital; (iii) financial sector strengthening; and (iv) resilient urbanization.
The evaluation used a theory-based approach and a mixed methods design to triangulate findings from multiple evidence sources, including portfolio review and analysis, analysis of diagnostics and administrative data, 300 semi-structured interviews, and geospatial analysis. Based on the analysis, the report identifies lessons to inform future Bank Group engagement in Indonesia and other countries with similar development contexts.
Introduction
The evaluation finds that the Bank Group's support has been relevant and partially effective. The Bank applied a strategic mix of lending, analytics, and technical assistance to achieve extensive capacity and institution building. It advanced the country's reform agenda, which included reducing energy subsidies, stabilizing the economy, expanding social protection, improving financial inclusion, and rebuilding after disasters, among other goals. The Bank, however, faced challenges in supporting additional deeper tax and domestic revenue mobilization reforms, education improvements, financial sector efficiency, and local government capacity development. See more in Chapter 1.
World Bank Group's Engagement in Indonesia
Bank Group strategies adapted to government priorities during the evaluation period and helped Indonesia thrive despite multiple crises and institutional capacity challenges. The Bank used multiple lending instruments, particularly Program-for-Results, to tackle multisectoral issues. In addition, the Bank Group strategically used trust fund–supported advisory services and analytics to support operations and sustain engagement at times of limited lending. See more in Chapter 2.
World Bank Support for More Efficient Public Finances
The Bank supported the government in strengthening fiscal controls and modernizing budget execution through systems such as the Sistem Perbendaharaan dan Anggaran Negara and the Treasury Single Account, improving transparency, accountability, and fiscal discipline. However, efforts to mobilize domestic revenue stalled due to political sensitivities around tax reform and challenges with large, complex procurement processes. See more in Chapter 3.
World Bank Support for Stronger Human Capital
Bank support in health, nutrition, and social protection was impactful—stunting declined, health insurance coverage reached 98 percent of the population, and the conditional cash transfer program expanded from 6 million to 10 million families. The Bank appropriately sequenced its support in health and social protection, from diagnostics to advisory services and analytics (ASA) to lending. The diagnostics identified key constraints, with findings showing that 43 percent of ASA informed national strategies, and more than 50 percent of ASA directly led to lending operations. In education, however, Bank support—both in terms of analytics and lending—declined over the evaluation period. See more in Chapter 4.
World Bank Group Support to Strengthen the Financial Sector
Bank Group support was well aligned with Indonesia's financial sector priorities - strengthening financial stability and inclusion and establishing foundations for capital market and sustainable finance development. However, despite important foundational reforms, progress in financial deepening and efficiency was, limited by the dominant role of state-owned enterprises (SOEs), particularly in banking competition and capital market diversification. See more in Chapter 5.
World Bank Support for Resilient Urbanization
Urban resilience lending increased by 60 percent over the evaluation period, aided by Swiss-supported trust funds and catalyzed by the 2018 earthquake and tsunami. World Bank Group lending and advisory work was relevant to national policies on water, transport, solid waste management, slum upgrading, and disaster risk management. There was some success in enhancing local government capacity, especially in the water sector. A performance-based platform drove capacity gains in local governments and water utilities, while broader urban planning and subnational infrastructure projects lagged due to weak subnational capacity. See more in Chapter 6.
Conclusion and Lessons
The World Bank Group's effective engagement was enabled by strong partnerships, adaptive strategies, technical assistance, and trust fund–supported analytics. However, the Bank Group was less successful in advancing reforms when confronted with political, institutional, or market barriers. Continued reforms are needed to realize Indonesia's vision of becoming a high-income nation by 2045.
Based on the CPE's evidence and analysis, IEG offers three lessons to inform future Bank Group engagement in Indonesia. These lessons are also relevant to other countries in similar development contexts.
