20 Oct Get to Know Indonesian AID, the International Aid Fund for the Success of SDG No. 17
Establishment of Indonesian AID
Indonesian Agency for International Development (Indonesian AID) or Lembaga Dana Kerjasama Pembangunan Internasional Indonesia (LDKPI) was inaugurated by the former Vice President of the Republic of Indonesia, Jusuf Kalla on October 18, 2019. For the first time in history, Indonesia has an institution that manages and distributes state funds for the provision of international assistance.
Indonesian AID is intended to channel technical (capacity development), physical, and humanitarian cooperation for other developing countries that need Indonesian government assistance, in accordance with the 2030 Sustainable Development Goals target.
Indonesian AID was legally formed under the Minister of Finance Regulation Number 143 of 2019 concerning the Organization and Work Procedure of the International Development Cooperation Fund (LDKPI). LDKPI is an institution in charge of managing international development cooperation funds in accordance with Government Regulation Number 57 of 2019 concerning Procedures for Granting Grants to Foreign Governments or Foreign Institutions.
This is equivalent to the United States USAID, Japan’s JICA, and Australia’s AUSAID is fronted by four Indonesian ministries; Ministry of Foreign Affairs, Ministry of Finance, Ministry of National Development Planning (Bappenas), and Ministry of State Secretariat.
Not a New Thing
The Indonesian government has long distributed international assistance to a number of developing countries in need, in line with the principles of South-South Cooperation before Indonesian AID released. Previously, the Indonesian government had long distributed international assistance to a number of developing countries in need, in line with the principles of South-South Cooperation.
Prior to Indonesian AID, aid distribution was carried out in a segmented and independent manner based on the ministry that provided it. For example, the Ministry of Agriculture wants to provide technical assistance for empowering agricultural capacity in X country. So, the mechanism and funding sources are independently carried out by the relevant agencies.
However, that method of distributing aid abroad is difficult to monitor, so it has the potential to be less aligned with foreign policy, said Director General of Information and Public Diplomacy of the Indonesian Ministry of Foreign Affairs, Cecep Herawan. The establishment of LDKPI is to unite efforts to distribute aid abroad in a one-stop and centralized system. Another reason for the formation of Indonesian AID was to cut red tape disbursement of international aid funds.
In the framework of international humanitarian assistance, the budget is in the reserve budget at the Ministry of Finance. But the disbursement process is long and tiered. There needs to be a proposal from the relevant ministries to the president, the disposition of the president, the allocation at the Ministry of Finance, the process is long.
For example, a natural disaster in X country occurred today, then, the Indonesian political decision came to help. However, in the previous system model, the realization process will be hampered, disbursement from the Ministry of Finance’s reserve budget may not be until next year after the next RAPBN budgeting. In fact, the disaster was last year.
With the new system in Indonesian AID, it will be easier. The source of the budget is no longer from the Ministry of Finance’s reserve budget, but is taken directly from the LDKPI endowment fund. Delivery will also be faster.
Endowment Fund of Indonesian AID
An endowment fund is an investment fund established by a foundation that makes consistent withdrawals of invested capital. Capital in endowments is generally used for specific needs or to advance operations processes, which are funded entirely by deductible donations to donors.
Endowments are usually structured so that the principal amount invested remains intact, while the investment income is available for immediate funding for efficient use.
In the case of Indonesian AID, the endowment fund is the budget allocated by the four managing ministries; Indonesian Ministry of Foreign Affairs, Ministry of Finance of the Republic of Indonesia, Ministry of National Development Planning (Bappenas), and Ministry of State Secretary.
Finance Minister, Sri Mulyani Indrawati said the aid funds in Indonesian AID were regulated in the below the line budget post or financing model, so that their use didn’t have to be exhausted. The budget value that has been issued by the Government for Indonesian AID is IDR 3 trillion, with details of IDR 1 trillion for the first year in 2018 and IDR 2 trillion in 2019.
An official from the Indonesian Ministry of Foreign Affairs targets that by the time Indonesian AID is fully operational in 2021′, the agency will have an endowment fund of Rp 10 trillion, which is sourced from donations or investments. Meanwhile, regarding the initial endowment fund mentioned by Minister Sri Mulyani, the Indonesian Ministry of Foreign Affairs official said that the sources had been collected by the Indonesian government since 1998.
Regarding the mechanism of checks and balances and transparency of financial flows, Cecep explained that everything will coordinate with the DPR-RI as the certifier of the state budget and the Indonesian Supreme Audit Agency. LDKPI will also have an internal financial examiner or Audit Unit.
The Indonesian government has and will distribute a number of international assistance to a number of countries using the endowment fund.
“There are already seven countries; five in the Pacific and two in Southeast Asia that have received LDKPI grants in 2019,” said Cecep Herawan.
The seven countries include; Tuvalu, Nauru, Solomon Islands, Fiji and Kiribati in the Pacific, and Myanmar and the Philippines in Southeast Asia.
Indonesian AID has also provided assistance in the form of capacity building techniques.
To Palestine and Serbia, assistance has been given to focus on capacity building. There are some also to other countries. In total, there are 1,041 technical assistance programs targeting more than 13,000 capacity building participants, explained Cecep.
Cecep also realizes that LDKPI can’t work alone, given that Indonesia’s status as a developing economy is not yet on par with other large economies with similar institutions; such as USAID USA, JICA Japan, or AUSAID Australia. Indonesia is still included in the list of countries receiving aid from AUSAID and was included in the list of 20 countries receiving USAID’s largest aid in 2012.
Therefore, Indonesian AID will cooperate with these institutions, including UNDP (United Nations Agency for Capacity Development Program) in distributing aid using a triangular mechanism.
Furthermore, he said, “But in the end, Indonesia will not become a developing economy country. Our projection in 2030 is to become the fifth largest economy in the world. So, Indonesia has a moral obligation from now on, to form an international aid agency to help the country. develop differently.”