Report and Recommendation of the President to the Board of Directors

Project Number: 54117-001 September 2020

Proposed Policy-Based Loan Republic of Indonesia: Disaster Resilience Improvement Program

Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Access to Information Policy after excluding information that is subject to exceptions to disclosure set forth in the policy.

CURRENCY EQUIVALENTS (as of 1 September 2020)

Currency unit – Rupiah (Rp)Rp1.00 = $0.00006

$1.00 = Rp14,596

ABBREVIATIONS ADB – Asian Development BankASEAN BAPPENAS

BNPB

CARES CDF

– –

–

– –

Association of Southeast Asian Nations Badan Perencanaan Pembangunan Nasional (National Development Planning Agency)Badan Nasional Penanggulangan Bencana (National Board for Disaster Management) COVID-19 Active Response and Expenditure Support contingent disaster financing

COVID-19 DFAT DRFI GDP MOF MOH MOWECP MPWH OP PPPF RPJMN

TA UNICEF USAID WHO

– – – – – – – – – – –

– – – –

coronavirus disease Department of Foreign Affairs and Trade Disaster Risk Financing and Insurance gross domestic product Ministry of Finance Ministry of Health Ministry of Women's Empowerment and Child Protection Ministry of Public Works and Housing operational priority post-program partnership framework Rencana Pembangunan Jangka Menengah Nasional (National Medium-Term Development Plan) technical assistance United Nations Children’s Fund United States Agency for International Development World Health Organization

NOTE In this report, “$” refers to United States dollars.

Vice-President Ahmed M. Saeed, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Directors Jose Antonio R. Tan III, Public Management, Financial Sector, and

Trade Division (SEPF), SERD Winfried Wicklein, Indonesia Resident Mission (IRM), SERD

Team leaders Benita Ainabe, Financial Sector Specialist (Capital Markets), SEPF, SERD Amr Qari, Principal Infrastructure Specialist, IRM, SERD

Team members Meenakshi Ajmera, Principal Safeguards Specialist, Office of the Director General (SEOD), SERD Charlotte Benson, Principal Disaster Risk Management Specialist, Climate Change and Disaster Risk Management Division (SDCD), Sustainable Development and Climate Change Department (SDCC)

Aekapol Chongvilaivan, Economist (Public Finance), SEPF, SERD Haidy Ear-Dupuy, Senior Social Development Specialist (Core Labor Standards), Safeguards Division (SDSS), SDCC David Elzinga, Senior Energy Specialist, Energy Sector Group, Office of the Cluster Head (SDSC), SDCC Coral Fernandez Illescas, Principal Water Resources Specialist, Water Sector Group, SDSC, SDCC Anna Fink, Economist (Regional Cooperation), Regional Cooperation and Integration Thematic Group, Office of the Cluster Head (SDTC), SDCC Madhumita Gupta, Principal Social Development Specialist (Safeguards), SDSS, SDCC Michiko Katagami, Principal Natural Resources and Agriculture Specialist, Rural Development and Food Security (Agriculture) Thematic Group, SDTC, SDCC Keiko Koiso, Senior Procurement Specialist; Procurement Division 2, Procurement, Portfolio, and Financial Management Department Susan Lim, Senior Transport Specialist, Transport and Communications Division, SERD Marie Jessamine Mitra, Project Analyst, SEPF, SERD Antoine Morel, Principal Environment Specialist, SEOD, SERD Takako Morita, Senior Counsel, Office of the General Counsel Christopher Morris, Principal Social Development Specialist, NGO & Civil Society Center Kaukab Naqvi, Senior Economist, Economic Analysis and Operational Support Division, Economic Research and Regional Cooperation Department Go Nagata, Public Management Specialist (Taxation), Governance Thematic Group, SDTC, SDCC Keiko Nowacka, Senior Social Development Specialist (Gender and Development), Gender Equity Thematic Group, SDTC, SDCC Hyun Chol Park, Senior Financial Control Specialist, Loan and Grant Disbursement Section, Controller’s Department Eric Quincieu, Senior Water Resources Specialist, Environment, Natural Resources, and Agriculture Division, SERD Francesco Ricciardi, Environment Specialist, SDSS, SDCC Karen May Sanchez, Senior Project Assistant, SEPF, SERD Azusa Sato, Social Sector Specialist, Human and Social Development Division, SERD Virinder Sharma, Senior Urban Development Specialist, Urban Sector Group, SDSC, SDCC Deeny Simanjuntak, Senior Project Officer, IRM, SERD Le Trang, Associate Financial Management Officer, Viet Nam Resident Mission, SERD Robert Valkovic, Principal Transport Specialist, Transport Sector Group, SDSC, SDCC Michiel Van der Auwera, Senior Financial Sector Specialist (Social Security), Social Development Thematic Group, SDTC, SDCC Joris G.P. van Etten, Senior Urban Development Specialist, Urban Development and Water Division, SERD

Alexandra Vogl, Senior Planning and Policy Specialist, Strategy, Policy, and Business Process Division, Strategy, Policy, and Partnerships Department

Peer reviewer Steven Goldfinch, Disaster Risk Management Specialist, SDCD, SDCC

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

PROGRAM AT A GLANCE

I. THE PROPOSAL 1

II. PROGRAM AND RATIONALE 1

A. Background and Development Constraints 1B. Policy Reform and ADB’s Value Addition 5C. Impacts of the Reform 9D. Development Financing Needs and Budget Support 9E. Implementation Arrangements 10

III. DUE DILIGENCE 10

IV. ASSURANCES AND CONDITIONS 12

V. RECOMMENDATION 12

APPENDIXES

1. Design and Monitoring Framework 13

2. List of Linked Documents 16

3. Development Policy Letter 17

4. Policy Matrix 21

Project Classification Information Status: Complete

PROGRAM AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 23062020132741576934 Generated Date: 15-Sep-2020 14:20:19 PM

1. Basic Data Project Number: 54117-001Project Name Disaster Resilience Improvement

ProgramDepartment/Division SERD/SEPF

Country Indonesia Executing Agency Ministry of Finance Directorate General of Budget Financing and Risk Management

Borrower IndonesiaCountry Economic Indicators https://www.adb.org/Documents/LinkedD

ocs/?id=54117-001-CEIPortfolio at a Glance https://www.adb.org/Documents/LinkedD

ocs/?id=54117-001-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Public sector management Decentralization 100.00

Public administration 100.00

Finance Insurance and contractual savings 150.00

Health Disease control of communicable disease 150.00

Total 500.00

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalities

Accelerating progress in gender equality

Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainabilityStrengthening governance and institutional capacity

Fostering regional cooperation and integration

GHG reductions (tons per annum) 0Climate Change impact on the Project

Low

ADB Financing

Adaptation ($ million) 45.57

Mitigation ($ million) 0.00

Cofinancing

Adaptation ($ million) 0.00

Mitigation ($ million) 0.00

Sustainable Development Goals Gender Equity and MainstreamingSDG 1.5, 1.a, 1.bSDG 3.3SDG 5.cSDG 6.aSDG 8.10SDG 9.1SDG 11.aSDG 13.aSDG 15.9SDG 16.6, 16.7SDG 17.17

Effective gender mainstreaming (EGM)

Poverty TargetingGeneral Intervention on Poverty

4. Risk Categorization: Complex .

5. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: C.

6. Financing

Modality and Sources Amount ($ million)

ADB 500.00 Sovereign Stand-Alone Policy-Based Lending (Regular Loan): Ordinary capital resources

500.00

Cofinancing 0.00 None 0.00

Counterpart 0.00 None 0.00

Total 500.00

Currency of ADB Financing: US Dollar

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed policy-based loan to the Republic of Indonesia for the Disaster Resilience Improvement Program. 2. The program is an integral part of Asian Development Bank’s (ADB) support to the government’s efforts to enhance environmental sustainability; disaster and climate resilience; and human capital development, including health and gender equality. The program is aligned with Indonesia’s National Medium-Term Development Plan (RPJMN), 2020–2024. 1 It supports reforms in disaster risk management and health services and will help manage the fiscal risks arising from future disasters triggered by natural hazards and pandemics. The program reflects the prioritization of addressing climate change and disaster risk mitigation in the forthcoming country partnership strategy for Indonesia, 2020–2024.2 The program supports ADB’s Strategy 2030 operational priorities on addressing remaining poverty and reducing inequalities (operational priority 1); accelerating progress in gender equality (operational priority 2); tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability (operational priority 3); strengthening governance and institutional capacity (operational priority 6); and fostering regional cooperation and integration (operational priority 7).

II. PROGRAM AND RATIONALE A. Background and Development Constraints 3. Disaster risk. From 1999 to 2018, 264 disaster events were reported in Indonesia, with 792,106 people affected per year on average and 186,758 lives lost. 3 From 2000 to 2016, average annual losses of $1.5 billion were recorded.4 Climate-related extreme events such as landslides, floods, and droughts have increased in frequency and magnitude, and much of the infrastructure is inadequate to cope with such events. In the past two years alone (since 2018), Indonesia has experienced a succession of deadly disasters: (i) in August 2018, a 7.0-magnitude earthquake hit Lombok in West Nusa Tenggara; (ii) in September 2018, a 7.4-magnitude earthquake triggered a near-field tsunami, landslides, and major liquefaction in Central Sulawesi; (iii) in December 2018, another tsunami caused by a volcanic eruption struck Sunda Strait; and (iv) in November 2019, a magnitude 7.1 earthquake hit near the Maluku Islands and North Sulawesi. Previous disasters in Indonesia have shown women and girls to be at a greater disadvantage due to the limited involvement of women in disaster monitoring and rapid response, and religious and cultural norms that do not encourage their readiness for natural hazards.5 Climate change is set to increase the frequency and severity of extreme climate events in the future. Rapid demographic and economic growth in hazard-prone areas, including coastal cities, are also expected to increase exposure to natural hazards, contributing to continuing high levels of disaster risk.

1 National Development Planning Agency (BAPPENAS). 2019. Rencana Pembangunan Jangka Menengah Nasional,

2020–2024. Jakarta. 2 ADB. 2020. Country Partnership Strategy: Indonesia, 2020–2024. Manila. (forthcoming). 3 Centre for Research on the Epidemiology of Disasters. Emergency Events Database. OFDA/CRED International

Disaster Database. 4 Government of Indonesia, Ministry of Finance, Fiscal Policy Agency. 2018. Strategi Pembiayaan dan Asuransi Risiko

Bencana. Jakarta. 5 E. Anantasari and S. Davies. 2019. Gender-Sensitive Disaster Risk Reduction in Indonesia; Lower Hutt, New

Zealand: GNS Science International. For example, there are constraints that prevent women and girls from learning to swim, such as impractical clothing for rapid movement, particularly when wet.

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4. The government’s disaster risk management reform agenda. Indonesia requires substantial financing to manage its disaster risks, and strengthening financial preparedness for disasters will facilitate more timely early recovery and reconstruction efforts. This, in turn, will allow the government to develop recovery plans with greater certainty and reduce the indirect social and economic consequences of direct physical damage and losses, and loss of life. In October 2018, the government launched its Disaster Risk Financing and Insurance (DRFI) Strategy (see figure).6 This strategy comprises short- and medium-term implementation priorities to provide sustainable and efficient DRFI mechanisms for timely, well-targeted, and transparent assistance following disasters. The five key targets of the DRFI Strategy are as follows: (i) combining financing instruments; (ii) retaining or absorbing risk through the national and subnational budgets for high-frequency and low-severity disaster events; (iii) using contingent financing instruments to complement the national budget to address medium-risk and medium-frequency disaster events; (iv) developing a pooling fund to facilitate the accrual of unspent fiscal budget allocations for disaster response in years of lower loss; and (v) using risk transfer instruments such as insurance for low-frequency and high-severity disaster events. The national and subnational governments make annual budget allocations for post-disaster response and disaster risk management more broadly.7 However, in practice, most disaster response funding is provided by the national government and included in the annual national budget. National government funding for disaster response is channeled through on-call funds for emergency response, allocated by the National Board for Disaster Management (BNPB).

5. Public health management and the COVID-19 pandemic. Indonesia has significantly improved its public health indicators since the 1980s. Life expectancy at birth rose from 58.0 years in 1980 to 71.3 years in 2017 and is expected to reach 72.4 by 2035.8 The prevalence of tuberculosis declined from 263 per 100,000 people in 2015 to 202 per 100,000 people in 2018.9 Indonesia’s polio-free status was maintained for 13 years before the disease returned in 2019

6 Government of Indonesia, Ministry of Finance (MOF). 2018. Minister of Finance Explained the Disaster Financing

Strategy Plan to AM2018Bali Delegates. News release. 18 October. 7 In line with Law 24/2007 on disaster management and Law 23/2014 on provincial government. 8 World Bank. World Development Indicators (accessed 2 April 2020). 9 Government of Indonesia, Ministry of Health (MOH). 2018. Indonesia Health Profile 2017. Jakarta.

Risk Layering of Indonesia’s Disaster Risk Financing and Insurance Strategy

Household

Insurance

Ris

k

Tra

nsfe

r

Pooling Fund

Public Asset

Insurance

Ris

k

Rete

nti

on

Fre

qu

en

cy

High

Low

Lo

ss

Low

High

Residual Risk (International Assistance)

Catastrophe Insurance

Contingent Credit

Budget Allocation and Reallocation

Source: Government of Indonesia, Ministry of Finance.

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because of the low vaccination coverage in the Papua region.10 However, the coronavirus disease (COVID-19) pandemic presents a new health challenge for Indonesia. As of 20 August 2020, Indonesia had 147,211 positive cases and 6,418 deaths; the Special Capital Region of Jakarta was the hardest hit region with 30,465 cases and 1,014 deaths, followed by East Java with 28,551 cases and 2,055 deaths.11 These figures may not reflect the complete picture because of the low number of tests administered. The World Health Organization (WHO) recommended that the Ministry of Health (MOH) support sentinel surveillance of severe acute respiratory infections and influenza-like illnesses as part of the surveillance strategy to increase the likelihood of detecting COVID-19.12 6. COVID-19 has put a significant strain on the Indonesian economy. Prior to the COVID-19 pandemic, gross domestic product (GDP) growth was robust, averaging 5% during 2013–2019. Fiscal deficits were low, below the legally stipulated ceiling of 3% of GDP, and Indonesia’s external and public debt was moderate and sustainable.13 Inflation had been at the lower end of Bank Indonesia’s target range, and international reserves remained ample to cover imports and debt repayment. However, public health measures to mitigate the spread of COVID-19 have seriously disrupted economic activity, leading to a projected economic contraction of 1% in 2020, the lowest GDP growth rate in 21 years, down from an original growth estimate of 5.2%.14 The ongoing crisis has also had a significant impact on livelihoods, especially within the most vulnerable communities. The government estimates that up to 5.2 million Indonesians could lose their jobs due to the COVID-19-induced economic slowdown. Close to 10 million people are at risk of falling below the national poverty line, with poverty incidence expected to increase from 9.4% in March 2019 to 11.9%–12.8% in 2020.15 7. The government’s response to COVID-19. On 28 January 2020, the government through the head of the BNPB issued a disaster emergency decree until 28 February 2020 and allocated national funds to fight the COVID-19 pandemic. This was further extended until 29 May 2020. In March 2020, the government announced a $32.4 billion package for urgently needed health, social assistance, and economic support measures.16 On 31 March 2020, the President issued a decree to declare COVID-19 as a public health emergency and issued a separate regulation on large-scale social distancing which was enforced across 4 provinces and 24 districts. On 13 April 2020, the President also declared COVID-19 a non-natural national disaster.17 On 20 April 2020, the MOH approved the national response plan for COVID-19. Subsequently, the government has further increased the stimulus package. With the substantial COVID-19 response package, the government has temporarily relaxed the 3% fiscal deficit ceiling requirement (para. 15), and in June 2020 raised its 2020 budget deficit estimate to 6.34% of GDP, from the previous estimate of 5.07% of GDP in March 2020.18 On 20 July 2020, the government issued Presidential Regulation No. 82/2020 to establish the Committee for the

10 John Hopkins Center for Health Security, Outbreak Observatory. 2019. Indonesia Confirms First Polio Case since

2006. 21 February. 11 Government of Indonesia. Task force for the acceleration of COVID-19 mitigation. 12 WHO. Situation Report 8. 14 May 2020. 13 International Monetary Fund Assessment Letter (accessible from the list of linked documents in Appendix 2). 14 ADB. 2020. Asian Development Outlook Supplement: June 2020—Lockdown, Loosening, and Asia’s Growth

Prospects. Manila. 15 Reuters. 2020. Indonesia warns on COVID-19 poverty setback as regional elections postponed. 6 May; M. I.

Gorbiano. 2020. Up to 9 million people to fall into poverty, unemployment as COVID-19 hits: Sri Mulyani. The Jakarta Post. 14 April.

16 The government’s stimulus package was later increased to $45.7 billion (para. 15). 17 Sector Assessment (Summary): Health (COVID-19 related) (accessible from the list of linked documents in

Appendix 2). 18 Compared with Malaysia (4.7% of GDP) and Singapore (15.4% of GDP).

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Handling of COVID-19 and National Economic Recovery which consists of the: (i) Policy Committee, chaired by the Coordinating Minister for Economic Affairs with the Minister of State-Owned Enterprises as the executive chair; (ii) Task Force for the Acceleration of the Handling of COVID-19 (para. 13); and (iii) Task Force for the National Economic Recovery and Transformation, chaired by the First Vice Minister of State-Owned Enterprises. As the executive chair of the Policy Committee, the Minister of State-Owned Enterprises oversees the coordination and implementation of strategic policies of the Task Force for the Acceleration of the Handling of COVID-19 and the Task Force for the National Economic Recovery and Transformation. 8. Climate risk and its impact on health. Climate change causes hydrological and meteorological disasters that increase public health risks from climate-sensitive diseases. Such diseases may cause certain segments of the population to be more vulnerable to epidemics and pandemics. Responding to the impact of disasters and epidemics requires addressing underlying vulnerabilities such as poverty, limited social safety nets, weak health systems, and structural gender inequalities. Resilient healthcare systems adapt and respond effectively to pandemics and diseases caused by climate change, such as respiratory ailments.19 9. Development constraints. While the magnitude of natural hazards and pandemics is outside the control of any government, their impact is dependent on the exposure and vulnerability of a country’s economy and people. In Indonesia, first of all, low prioritization of climate resilience, disaster risk management, and health and social protection measures in national development plans restrict climate and disaster resilience and limit the provision of healthcare facilities, information technology, and financial, policy, and human resources to respond to pandemics and disasters. Further, women and other marginalized groups are rarely in positions of power in households and communities to influence and contribute to disaster response and recovery decisions. These constraints result in delays in early recovery and rehabilitation and exacerbate the economic and social impacts of physical losses following disasters and pandemics. They also cause a strain on health services by limiting testing, case management, and reporting capacity, which cause onward transmission of disease. Second, inadequate climate- and disaster-resilient planning, intra-agency and interagency coordination, construction of priority innovative public infrastructure, and information systems delay the achievement of the Sustainable Development Goals. Third, limited financing capacity and sovereign debt management for disaster risk and pandemic preparedness and response, as evidenced by the limited use of risk transfer (insurance) and capital market instruments, lead to reallocation of core development spending or the requirement of supplementary budgets, which delay achievement of development targets.20 10. Lessons learned. The program reflects several lessons learned from ADB’s experience in providing post-disaster support to Indonesia (para. 18) and contingent disaster financing (CDF) to ADB’s developing member countries in the Pacific. First, contingent financing is most effective as part of a broader disaster risk financing framework, complementing other risk retention and risk transfer instruments. 21 Second, policy reforms should focus on enhancing long-term resilience to natural hazards and pandemics to reduce their social, health, and economic impact. Third, technical assistance (TA) should be provided in a timely manner and with strong coordination among development partners to help the government achieve ambitious reform

19 P. Bhandari and A. S. Roy. 2020. The response to COVID-19 should also be a response to the climate crisis. ADB

Asian Development Blog. 16 April. 20 National budget allocations for the Indonesia’s disaster contingency fund averaged IDR3.1 trillion ($300 million)

annually during 2005–2017, while disaster losses averaged IDR22.84 billion ($1.5 billion) annually during 2000–2016.

21 Other risk retention measures may include annual contingency budgeting and budget reallocations, and risk transfer instruments may include insurance, reinsurance, and insurance-linked securities.

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targets. Fourth, coordination and capacity constraints that are likely to delay fiscal transfers during an emergency should be addressed. Fifth, policy-based lending should focus on sectors where investment loans are provided and ADB has experience, to ensure that policy constraints are addressed by relevant policy reforms.22 Sixth, a framework for monitoring program performance is important for effective program implementation and loan renewal. Seventh, policy-based disaster risk management programs allow ADB and other development partners to engage in strategic policy dialogue with the government, and to ensure that financial dimensions of disaster risk are incorporated in the disaster risk management system and that the costs and benefits of the proposed solutions are assessed appropriately. B. Policy Reform and ADB’s Value Addition

11. The program design and reform discussions reflect insights on disaster preparedness that ADB has gained from its post-disaster reconstruction and disaster and climate risk reduction lending and TA operations (including on disaster insurance) in Indonesia. The proposed program will complement the COVID-19 Active Response and Expenditure Support (CARES) Program for Indonesia by strengthening the disaster resilience of Indonesian institutions and communities, and the government’s response to pandemics through three reform areas: (i) policy and institutional arrangements for disaster risk management and health-related emergencies, including social protection; (ii) resilience of physical assets to disaster and climate risks; and (iii) disaster risk and pandemic response financing. The CARES Program supported the government’s COVID-19 fiscal response plan announced on 31 March 2020.23 The proposed program supports medium-term pandemic response reforms beyond the immediate COVID-19 response measures supported by the CARES Program. 24 The proposed program responds directly to the COVID-19 pandemic with support for urgent response measures required by the government to prepare for a worsened COVID-19 situation and control of the health-related impacts of the pandemic (para. 13).25 All prior actions were accomplished. 12. Reform area 1: Policy and institutional arrangements for disaster risk management. In 2019, the government strengthened institutional policies and action plans and adopted its RPJMN, 2020–2024, which incorporates climate resilience, disaster risk management, and gender goals, indicators, and targets (footnote 1).26 Climate budget tagging will strengthen public financial management, allowing the government to (i) plan, identify, prioritize, and report

22 Independent Evaluation Department. 2018. Policy-Based Lending 2008–2017: Performance, Results, and Issues of

Design. Manila: ADB. The proposed program includes reforms in flood risk management, an area where ADB is currently financing projects. It also supports the management of fiscal transfers and administration of public assets at the subnational government level, which will facilitate the establishment of a disaster risk insurance pool, a target area for future ADB investment lending.

23 ADB. 2020. Report and Recommendation of the President to the Board of Directors: Proposed Countercyclical Support Facility Loans to the Republic of Indonesia for the COVID-19 Active Response and Expenditure Support Program. Manila.

24 A comparison between health reforms supported in the Contingent Disaster Financing (CDF) loan, Disaster Resilience Improvement Program and the Countercyclical Support Facility Loans, COVID-19 Active Response and Expenditure Support Program (accessible from the list of linked documents in Appendix 2).

25 ADB. 2020. ADB’s Comprehensive Response to the COVID-19 Pandemic: Policy Paper. Manila. 26 The RPJMN’s 2024 targets at the national level include the following: (i) improved delivery time of disaster early

warning systems to the public from 5 minutes to 3 minutes; (ii) increased investment in disaster risk management in the state budget, from 0.04% to 1.36% of the state budget; and (iii) a decrease of 1.25% of GDP in climate and disaster damage and loss. The RPJMN’s appendixes include gender and climate commitments, including (i) institutional strengthening to promote the protection of women's rights in emergency situations and special conditions; (ii) services to empower women in emergency situations and special conditions; (iii) guidelines to enhance the resilience of women to disasters; and (iv) communication, information, and education materials to enhance the resilience of women to disasters disseminated through various media.

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climate-related expenditures; and (ii) identify funding gaps and under-resourced priorities in the RPJMN. Climate budget tagging is also a key element in mobilizing financing through green bonds. Following a government regulation mandating climate budget tagging at the subnational level, a group of four provinces and districts started climate budget tagging projects. The government, led by the Ministry of Finance (MOF), has embarked on a plan, with the help of ADB and other development partners, to ensure that more subnational budgets are climate-tagged in the medium term. 13. Policy and institutional arrangements for health-related emergencies, including social protection. The government institutionalized action plans that provide financial and human resources to respond to COVID-19 and future pandemics. First, to promote effective coordination of the government’s response and its efforts to prevent and mitigate the COVID-19 pandemic at the national and subnational levels, the government established the Task Force for the Acceleration of the Handling of COVID-19. The task force is led by the head of the BNPB. It includes key stakeholder agencies such as the MOH, the Indonesian National Police, the Indonesian National Army, the Ministry of State-Owned Enterprises, the Ministry of Human Development and Culture, the Ministry of Public Works and Housing (MPWH), regional governments, and the Ministry of Women's Empowerment and Child Protection (MOWECP).27 Second, led by the MOH, the government strengthened pandemic and epidemic reporting capacity across government agencies by issuing guidelines for a single reporting system, which integrates disaggregated data from hospitals, provinces, and the MOH Center for Data and Information. Better reporting will improve case management and data transparency and elicit appropriate levels of government intervention and public response. To standardize testing protocols and processes, the government issued guidelines for testing and treatment of COVID-19, future pandemics, and disease outbreaks. To strengthen social protection measures that support women in the workplace during the COVID-19 pandemic, the MOWECP issued Regulation No. 1 of 2020, which outlines procedures for the protection of female workers. The MOWECP also allocated $19.5 million for referral services to women victims of violence and to children in need of special protection, and strengthened its provision of essential services to women, children, the elderly, and migrant workers during the COVID-19 pandemic. Finally, the MOH adopted decree nos. 214 and 216, and circular no. 234 of 2020 to establish a national laboratory network and increase the number of laboratories to improve the country’s testing capacity for COVID-19 and future pandemics as a prerequisite to normalizing the economy. 14. Reform area 2: Resilience of physical assets to disaster and climate risks. Ensuring the resilience of infrastructure and coordinating disaster response across key ministries (while considering the gendered impacts of disaster and climate change) are imperative to reduce the cost of replacing or restoring public infrastructure. To promote protection of vulnerable groups following disasters and effective coordination within the MPWH and across government agencies involved in disaster response, the MPWH revised its disaster committee Decree No. 1176/KPTS/M/2019. This revised decree assigned key personnel and task forces to critical disaster response roles (such as the chief of the disaster committee and the disaster task force secretary) and provided resource coordination for highways and provinces. In addition, to account for and enhance disaster and climate resilience of water resource infrastructure, following the ADB-supported development of a national asset management inventory and upgrading of the

27 Presidential Decree No. 7 of 2020 was issued on 13 March 2020 and revised on 20 March 2020 (Presidential Decree

No. 9 of 2020). On 20 July 2020, Presidential Regulation No. 82/2020 was issued, replacing Presidential Decrees No. 7 and No. 9 of 2020.

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information system platform for irrigation infrastructure,28 the MPWH signed a memorandum of understanding with ADB, completed key milestones for similar projects for river and water supply infrastructure, and established 136 community-based disaster management organizations in Banten and Maluku provinces (with women holding approximately 20% of managerial positions). 15. Reform area 3: Disaster risk and pandemic response financing. Building resilience through insured infrastructure, improved healthcare, and targeted social spending—complemented by the use of financial mechanisms—ensures effective disaster and pandemic preparedness and response. In 2019, the government, supported by the World Bank, established a state-owned asset indemnity insurance pilot project to insure the MOF’s buildings against disasters. Following this, the government expanded the scope of the public asset insurance program to include the participation of two additional government agencies: the National Public Procurement Agency and the National Government Internal Auditor. For its COVID-19 response, the government announced a $45.7 billion emergency stimulus package focusing on health, social protection, and economic assistance to businesses and local government programs. To support this, the government adjusted its fiscal rules by relaxing the state budget deficit policy to allow the fiscal deficit to exceed 3% of GDP for 3 fiscal years.29 16. Post-program partnership framework for disaster risk management. To ensure the continuity of reforms and to strengthen policy and institutional arrangements, the program incorporates a post-program partnership framework (PPPF). Under the PPPF, the climate tagging of subnational government budgets, gender and climate tagging of national government agency budgets, and disaster risk reduction tagging of national government expenditures will be strengthened. The MPWH will improve flood risk management and investment by preparing gender-responsive risk management plans for at least six river basins. The government will finalize the legal process to adopt standards for seismic loading (Indonesian national standard no. 1726) and reinforced concrete structural design (Indonesian national standard no. 2847), and revise its technical standards for earthquake resilience of irrigation infrastructure. The government will also strengthen disaster resilience of national highways and bridges and develop a gender-responsive emergency road response plan. The PPPF will strengthen the fiscal resilience of subnational governments to disasters to eventually provide sustainable and efficient disaster risk financing mechanisms for timely, well-targeted, and transparent post-disaster recovery and reconstruction. This will include the management of financing sources for disaster relief and recovery (including fiscal transfers), which will improve the quality of subnational government asset registers and country disaster risk data. ADB has secured $1 million in funding for TA, provided by Australia’s Department of Foreign Affairs and Trade (DFAT), to support the PPPF.30 17. Post-program partnership framework for pandemic response. The government will implement its testing capacity policy with gender-responsive monitoring and surveillance measures, preparation of a draft national roadmap on COVID-19 vaccine development, and human resource capacity building of healthcare workers to strengthen the national laboratory network. The testing capacity policy will enhance the government’s capacity for timely and transparent data sharing with the Association of Southeast Asian Nations (ASEAN) neighbors. The government will develop national guidelines to promote the safety and security of men and

28 ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Results-Based Loans

to the Republic of Indonesia for the Integrated Participatory Development and Management of Irrigation Program. Manila.

29 The fiscal year of the Government of Indonesia is the same as the calendar year (from 1 January to 31 December). 30 ADB. 2019. Technical Assistance to the Republic of Indonesia for the Sustainable Infrastructure Assistance Program

Phase II—Subproject 1: Innovative Infrastructure Financing, Infrastructure Planning, and Program Management Support. Manila.

8

women housed in quarantine facilities and emergency shelters during pandemics and climate-related disasters. 18. ADB’s experience and value addition in disaster risk management. ADB has extended significant disaster-related support to Indonesia dating back to the 2004 Indian Ocean tsunami.31 A key lesson learned from that project is that effective post-disaster infrastructure reconstruction requires careful assessment, planning, and preparation if the needs and priorities of reconstruction are to be properly addressed. The program fulfills the dual objectives of supporting fundamental disaster risk reduction reforms and providing quick-disbursing financing for disaster preparedness and response (recovery and reconstruction). ADB has supported the government’s efforts to strengthen disaster risk management capabilities, including in the area of flood risk management.32 ADB partnered with the European Space Agency and other knowledge and technology providers to introduce web-based asset management information systems for water resources infrastructure, light detection, and ranging to improve survey and planning processes for operation and maintenance of assets, and nature-based solutions for water resources management. ADB provided TA to help the National Development Planning Agency (BAPPENAS) and other line agencies to strengthen resilience in urban development. Following the 2018 disasters in Lombok and Central Sulawesi (para. 3), ADB immediately responded by approving a $500 million loan to finance immediate and short-term needs such as livelihood assistance and temporary schools. 33 Subsequently, in 2019 ADB approved the Emergency Assistance for Rehabilitation and Reconstruction loans of $297.75 million and TA to support rehabilitation and reconstruction of water resources, water supply, and education infrastructure; and ports and an airport in Central Sulawesi using build-back-better principles.34 19. ADB’s value addition in response to COVID-19 and social assistance. ADB works closely with the BNPB, the MOH, WHO, and the United Nations Children’s Fund (UNICEF) on the delivery of critical medical equipment and supplies through a $3 million grant under the Asia Pacific Disaster Response Fund. 35 ADB is supporting social protection in Indonesia by strengthening the capacity of social protection and employment program facilitators, and advising on maintaining supplies of basic food and personal protective equipment. On 23 April 2020, ADB approved the $1.5 billion CARES Program, cofinanced with $750 million from the Asian Infrastructure Investment Bank, €250 million from German development cooperation through KfW, and ¥50 billion from the Japan International Cooperation Agency (footnote 23). ADB’s $5 million regional technical assistance for policy advice for COVID-19 economic recovery in Southeast Asia is providing financing, policy dialogue and knowledge solutions to the government, including hosting events with ASEAN government officials and experts, which address the immediate health and economic impacts and the economic recovery phase. 36 ADB is closely engaging with the MOF’s Fiscal Policy Agency to jointly analyze and monitor the socioeconomic impacts of COVID-19, and will provide a bespoke coordination and monitoring framework to support effective implementation of the CARES Program for Indonesia.

31 ADB. 2005. Earthquake and Tsunami Emergency Support Project and Contribution to Multidonor Trust Fund. Manila 32 Sector Assessment (Summary): Public Sector Management (Disaster Risk Management) (accessible from the list of

linked documents in Appendix 2). 33 ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic

of Indonesia for Emergency Assistance for Recovery and Rehabilitation from Recent Disasters. Manila. 34 ADB. 2019. Report and Recommendation of the President to the Board of Directors: Proposed Loans to the Republic

of Indonesia for Emergency Assistance for Rehabilitation and Reconstruction. Manila. 35 ADB. 2020. Grant Agreement (Asia Pacific Disaster Response Fund) for Grant 0686-INO: COVID-19 Emergency

Response. Manila. 36 ADB. 2020. Technical Assistance for Policy Advice for COVID-19 Economic Recovery in Southeast Asia. Manila.

9

20. Development partner coordination for disaster risk management. While preparing this program, ADB closely coordinated with the following development partners: Agence Française de Développement, the Asian Infrastructure Investment Bank, DFAT, the Japan International Cooperation Agency, the United Nations Development Programme, the United States Agency for International Development (USAID), the World Bank, and the World Food Programme. ADB’s lending and TA operations with disaster risk resilience components are coordinated with DFAT, the Japan International Cooperation Agency, and the World Bank. The World Bank has been particularly active in supporting financial management of disaster response, beginning with support for the development of the country’s national DRFI Strategy (footnote 6 and figure). Indonesia is a member country of the Southeast Asia Disaster Risk Insurance Facility, a platform established in December 2018 by ASEAN+3 and the World Bank, to provide ASEAN countries with financial solutions and technical advice to increase their financial resilience to climate and disaster risks. ADB is a technical working group member of the Southeast Asia Disaster Risk Insurance Facility. 21. Development partner coordination for COVID-19 response. Health- and pandemic-related reforms and support for the PPPF targets were discussed with the following development partners: the Center for Disease Control and Prevention, DFAT, the European Union (through the European External Action Service), the Government of Canada, UNICEF, USAID, the World Bank, and the World Food Programme. ADB is closely coordinating its COVID-19 response support with development partners, including the International Monetary Fund and the World Bank on macroeconomic monitoring and surveillance. The WHO is the lead partner on public health policy response, supported by DFAT, UNICEF, USAID, and the World Bank. C. Impact of the Reform 22. In line with the RPJMN, 2020–2024 (footnote 1), the program has the following impact: disaster and climate resilience enhanced, and health services improved, including advancement toward universal health coverage. The impact of the program is demonstrated through the performance indicators in the design and monitoring framework.37 The program will have the following outcome: disaster resilience and pandemic response of institutions and communities strengthened, and financial preparedness for disasters and pandemics improved. The program impact assessment concludes that the reforms achieved under the program are expected to mitigate $562.5 million–$1,069.3 million of damage and losses from natural hazards at present value, accrued during 2020–2025.38 Meanwhile, the COVID-19 pandemic is estimated to cause economic losses of $60.1 billion, or 5.8% of GDP.39 The benefits result from the government’s rapid access to resources that would enable it to initiate timely disaster and pandemic response, thereby mitigating the indirect economic and social impact of disasters and pandemics. D. Development Financing Needs and Budget Support 23. The government has requested a loan of $500 million from ADB’s ordinary capital resources to help finance the program. The loan will have a 15-year term, including a grace period of 3 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; and such other terms and conditions set forth in the draft loan agreement. The government has chosen option 1 of the CDF policy where, upon loan

37 The design and monitoring framework is in Appendix 1. 38 The reduction in losses does not explicitly capture the economic benefits of reforms in the context of COVID-19.

Although GDP might have included these impacts at the macro level, they are not being captured through the program. As such, the range of expected benefits is conservative in nature.

39 Program Impact Assessment (accessible from the list of linked documents in Appendix 2).

10

effectiveness, the committed CDF amount will be available for disbursement immediately after a disaster occurs.40 The government will pay a one-time front-end fee of 0.25% of the committed loan amount, which may be financed out of the loan proceeds. If the undisbursed loan amount is renewed for an additional 3-year loan availability period (up to four times), the borrower will pay each time a fee of 0.25% of the renewal amount (up to the undisbursed loan balance), which may also be financed out of the loan proceeds. The loan size is based on Indonesia’s financing needs and development spending in conjunction with the reforms. The shocks arising from the COVID-19 pandemic severely impact the government’s fiscal position and give rise to urgent and large near-term financing needs. The government’s projected gross financing requirement for 2020 is estimated at $106 billion. E. Implementation Arrangements 24. Institutional arrangements. The MOF will be the program’s executing agency and will oversee and coordinate the timely implementation of the program. The implementing agencies will be BAPPENAS, BNPB, the Ministry of Environment and Forestry, the MOF, the MOH, the Ministry of Home Affairs, the MPWH, and the MOWECP. The program will be completed in December 2023. Renewal is subject to reconfirmation of the adequacy of the macroeconomic environment, Indonesia’s continued progress toward the PPPF, and an updated PPPF with mutually agreed objectives for the subsequent availability period. The renewal may also be affected by changes in country classification during the program period. 25. Disbursement triggers and approach. Disbursement triggers will not be applied retroactively. For natural disasters, withdrawal requests will be deferred until the President of Indonesia or the governor of an affected province has declared a state of emergency pursuant to Law No. 24/2007, Article 51. For health-related emergencies, withdrawal requests will be deferred until the President of Indonesia has declared a public health state of emergency under Law No. 6/2018, Article 10, or the minister of health has (i) declared an epidemic pursuant to Ministry of Health Regulation No. 1501/2010, Article 11, or (ii) taken an equivalent measure including issuing of a decree pursuant to Ministry of Health Regulation No. 9/2020 imposing a large-scale social distancing in a province. The government may withdraw the loan proceeds partially or entirely, depending on its assessment of the severity of the disaster or health-related emergency and resulting need. Only a single withdrawal may be requested per disaster or health emergency event, and the request must be received by ADB within 90 days of the declaration of a state of emergency, declaration of an epidemic or issuance of a ministerial decree imposing a large-scale social distancing in a province. Any unutilized funds at the conclusion of the loan availability period can be disbursed to the Republic of Indonesia under the deferred disbursement option, subject to ADB reconfirming Indonesia’s continuation of policy actions and the PPPF through submission of a progress report. Funds will be spent through national budget processes for eligible items. Proceeds of the policy-based loan will be withdrawn in accordance with ADB’s Loan Disbursement Handbook (2017, as amended from time to time). ADB will periodically monitor the continuing implementation of the policy actions and PPPF during the availability period.

III. DUE DILIGENCE 26. Safeguards. In compliance with ADB’s Safeguard Policy Statement (2009), the program is classified category C for environment, involuntary resettlement, and indigenous peoples. The program is not expected to have any environmental or social safeguards impacts within the meaning of the Safeguard Policy Statement.

40 ADB. 2019. Contingent Disaster Financing under Policy-Based Lending in Response to Natural Hazards. Manila.

11

27. Gender. The program is categorized effective gender mainstreaming. Women in Indonesia are disproportionally vulnerable to the impact of climate change and disasters with regard to mortality, morbidity, and economic shocks. This is because they have less access to key survival and recovery resources, such as food, shelter, transport, and cash or disposable income. While women in Indonesia are generally conscious of how climate change and disasters can affect them and their families, they are rarely in a position to influence decisions concerning measures required to mitigate the impacts of disasters, and services or support required to return to normalcy.41 The vulnerability of the population is intensified by socioeconomic disparities, including gender inequality, which determines the ability of women and girls to survive and recover in times of crisis. 28. The government has acknowledged the importance of addressing the needs of women during times of crisis as evident through: (i) the RPJMN’s inclusion of gender commitments; (ii) the establishment of the Task Force for the Acceleration of the Handling of COVID-19, which includes the participation of the MOWECP; (iii) the allocation of budget to provide referral services to female survivors of violence and to children in need of special protection, and the issuance of guidelines to reduce the vulnerability of women, children, the elderly, and migrant workers during the COVID-19 pandemic; (iv) the issuance of Regulation No. 1/2020, which outlines procedures for the protection of female workers during the COVID-19 pandemic and beyond; and (v) the more than doubling of the size of the government’s social assistance program (since March 2020) to $13.4 billion, which includes $2.9 billion for the Kartu Sembako food assistance program (96% of whose beneficiaries are women and 16% of whom are female heads of household), and $2.5 billion for the Family Hope Program (90% of whose beneficiaries are women). The government will develop gender-responsive river basin flood management plans and promote the robust participation of women in managerial roles in community-based disaster management organizations. Finally, the government will ensure the safety and security of women, girls, and other vulnerable groups through national gender-responsive and socially inclusive quarantine facility management guidelines during public health outbreaks, and similarly for disasters. 29. Governance. The program will support the integration of disaster risk reduction, climate change action, 42 and pandemic response into national and local planning, development processes, and poverty reduction strategies. It will help to strengthen governance at the national and local government levels to provide quality, reliable, sustainable, and resilient infrastructure to support economic development and human well-being, with a focus on affordable and equitable access for all. Overall, the government has strengthened its public financial management. In 2017, Indonesia scored either A or B (both considered above the basic alignment with international good practice) on 17 out of 31 indicators in the World Bank’s public expenditure and financial accountability assessment report. 43 Government regulations issued in 2017 strengthened the legal and regulatory frameworks for public financial management, mandating coordination between BAPPENAS and the MOF in planning, budgeting, and subsequent regulations. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and the MOF. 30. Poverty and social. The program supports sound policy frameworks at the national and local government levels, based on pro-poor and gender-sensitive development strategies, to support poverty eradication. The government’s policies support mobilization of resources from a

41 E. Anantasari and S. Davies. 2019. Gender-Sensitive Disaster Risk Reduction in Indonesia. Lower Hutt. 42 Climate Change Assessment (accessible from the list of linked documents in Appendix 2). 43 World Bank. 2018. Indonesia: Public Expenditure and Financial Accountability (PEFA) Assessment Report 2017.

Washington, DC

12

variety of sources to provide adequate and predictable means of financing disaster insurance of public assets that benefit the poor and vulnerable. With an efficient delivery mechanism of the social protection system in place, post-disaster humanitarian assistance can be better targeted and channeled faster. 31. Major risks and mitigating measures are summarized in the table and described in detail in the risk assessment and risk management plan.44

Summary of Risks and Mitigating Measures Risks Mitigation Measures

Repeated or major external shocks (e.g., disasters and pandemics) severely impact the economy

The program will strengthen disaster resilience and improve the response to, prevention and mitigation of COVID-19 and future pandemics.

Staff constraints at the national and subnational government levels

Technical assistance from ADB (footnote 30) will provide support, and ADB and the executing and implementing agencies will monitor reform progress regularly.

Weak fiscal resilience of subnational governments to disasters triggered by natural hazards

Technical assistance from ADB (footnote 30) will strengthen the public financial management capacities of subnational governments, including fiscal transfers, and improve the identification and valuation of subnational government assets.

Public financial management is weak and lacks transparency

The post-program partnership framework of ADB’s policy-based operations will improve the capacity of government agencies to ensure accountability in public expenditures.

ADB = Asian Development Bank, COVID-19 = coronavirus disease. Source: Asian Development Bank.

IV. ASSURANCES AND CONDITIONS

32. The government has assured ADB that implementation of the program shall conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the loan agreement. No disbursement shall be made under the loan agreement unless ADB is satisfied that a qualifying disaster event or pre-agreed health-related trigger has occurred or that the conditions for the deferred disbursement option have been met.

V. RECOMMENDATION 33. I am satisfied that the proposed policy-based loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan of $500,000,000 to the Republic of Indonesia for the Disaster Resilience Improvement Program, from ADB’s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 15 years, including a grace period of 3 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board.

Masatsugu Asakawa President

1 September 2020

44 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

Appendix 1 13

DESIGN AND MONITORING FRAMEWORK

Country’s Overarching Development Objective Disaster and climate resilience enhanced, and health services improved, including advancement toward universal health coverage (RPJMN, 2020–2024)a

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting

Mechanisms Risks

Effect of the Reform Disaster resilience and pandemic response of institutions and communities strengthened, and financial preparedness for disasters and pandemics improved

By September 2023: a. Investment in disaster risk management in the state budget increased to 1.00% of the state budget (2019 baseline: 0.04% of the state budget) b. At least 14 subnational government budgets climate tagged (2020 baseline: 4) c. At least 5 national government agency budgets climate and gender tagged (2020 baseline: 2) d. National roadmap on COVID-19 vaccine development prepared (2020 baseline: COVID-19 vaccine development roadmap did not exist) e. At least 6 gender-responsive river basin flood risk management plans prepared (2020 baseline: None) f. Regional COVID-19-related surveillance reporting protocols developed (2020 baseline: Regional reporting for COVID-19 did not exist) g. Early warning to the public issued by relevant government agency 4 minutes after a disaster (2019 baseline: 5 minutes)

a. BAPPENAS website and RPJMN reports b. MOF and subnational government annual reports c. MOF and national agency annual reports d. MOH roadmap and website e. MPWH flood risk management plans and website f. MOH annual regional surveillance reports g. BAPPENAS website and government agency reports

Repeated or major external shocks (e.g., disasters, pandemics, and economic downturns) severely impact the economy

Reform Areas 1. Policy and institutional arrangements for disaster risk management and health-related emergencies, including social protection

Prior Actions By July 2020 1.1 RPJMN, 2020–2024, including gender commitments,b adopted (2019 baseline: Targets not included in RPJMN 2015–2019)

1.1 BAPPENAS website

14 Appendix 1

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting

Mechanisms Risks

2. Resilience of physical assets to disaster and climate risks 3. Disaster risk and pandemic response financing

1.2 Task Force for the Acceleration of the Handling of COVID-19, including participation by the MOWECP, established. (2019 baseline: Not applicable) 1.3 New protocols and guidelines addressing women’s health (including gender-based violence and breastfeeding) during disasters, including the COVID-19 pandemic, issued. (2019 baseline: Not applicable) 1.4 COVID-19 national laboratory network decree adopted (2019 baseline: Not applicable) 2.1 MPWH disaster committee decree revised to include gender-responsive accessibility requirementsc (2019 baseline: Previous version of disaster committee decree) 2.2 National asset management inventory system projects for river and water supply infrastructure launched, and 136 community-based disaster management organizations (with women holding approximately 20% of managerial positions) in two provinces, established (2018 baseline: Not applicable) 3.1 Scope of state-owned asset indemnity insurance scheme expanded to two additional government agencies (2019 baseline: Only one agency committed to insurance scheme) 3.2 Social assistance support under the COVID-19 response

1.2 BNPB decree and MOWECP website 1.3 MOWECP guidelines on website 1.4 MOH decree and website 2.1 MPWH decree and website 2.2 MPWH biannual report 3.1 Official commitment letters from two additional agencies: LKPP and BPKP 3.2 MOF fiscal stimulus package

Appendix 1 15

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting

Mechanisms Risks

package increased by 113%, with 40% earmarked for programs targeting women (March 2020 baseline: $6.3 billion)

reports

Budget Support

ADB: $500,000,000 (loan)

ADB = Asian Development Bank, BAPPENAS = Badan Perencanaan Pembangunan Nasional (National Development Planning Agency), BNPB = Badan Nasional Penanggulangan Bencana (National Board for Disaster Management), BPKP = Badan Pengawasan Keuangan dan Pembangunan (National Government Internal Auditor), COVID-19 = coronavirus disease, GDP = gross domestic product, LKPP = Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah (National Public Procurement Agency), MOF = Ministry of Finance, MOH = Ministry of Health, MOWECP = Ministry of Women's Empowerment and Child Protection, MPWH = Ministry of Public Works and Housing, RPJMN = Rencana Pembangunan Jangka Menengah Nasional (National Medium-Term Development Plan). a BAPPENAS. 2019. Rencana Pembangunan Jangka Menengah Nasional, 2020–2024. Jakarta. b The gender commitments include the following: (i) institutional strengthening to promote the protection of women's

rights in emergency situations and special conditions; (ii) services to empower women in emergency situations and special conditions; (iii) guidelines to enhance the resilience of women to disasters; and (iv) communication, information, and education materials to enhance the resilience of women to disasters disseminated through various media.

c In this context, gender-responsive refers to the inclusion of specific actions that address the needs, experiences, and opportunities of women and girls in post-disaster settings regarding access to clean water, safe sanitation, and secure shelter.

Source: ADB.

16 Appendix 2

LIST OF LINKED DOCUMENTS

http://www.adb.org/Documents/RRPs/?id=54117-001-3

1. Loan Agreement

2. Sector Assessment (Summary): Public Sector Management (Disaster Risk Management)

3. Contribution to the ADB Results Framework

4. Development Coordination

5. Country Economic Indicators

6. International Monetary Fund Assessment Letter

7. Summary Poverty Reduction and Social Strategy

8. Risk Assessment and Risk Management Plan

9. List of Ineligible Items

Supplementary Documents

10. Climate Change Assessment

11. Program Impact Assessment

12. Sector Assessment (Summary): Health

13. A comparison between Health Reforms Supported in the Contingent Disaster Financing loan, Disaster Resilience Improvement Program and the Countercyclical Support Facility Loans, COVID-19 Active Response and Expenditure Support Program

14. Regional Cooperation and Integration for Disaster Resilience

Appendix 3 17

DEVELOPMENT POLICY LETTER

18 Appendix 3

Appendix 3 19

20 Appendix 3

Appendix 4 21

POLICY MATRIX

Prior Actions Accomplished by July 2020 Post-Program Partnership Framework Targets from September 2020–September 2023

Reform area 1: Policy and institutional arrangements for disaster risk management and health-related emergencies, including social protection

1. To improve disaster resilience and climate change adaptation policymaking and coordination, the government adopted its National Medium-Term Development Plan, Rencana Pembangunan Jangka Menengah Nasional (RPJMN) 2020–2024, which identifies specific climate resilience and disaster risk management goals, indicators, and targets, and gender commitments,a at national and subnational levels. (BAPPENAS)

2. To enable informed climate change adaptation policy

decisions and prioritize climate investments, the government introduced its climate budget tagging policy at subnational level, and 4 subnational governments initiated climate budget tagging. (MOF Fiscal Policy Agency, MOF DG Fiscal Balance, MOHA)

3. To implement the government’s efforts to prevent and

mitigate the COVID-19 pandemic and future pandemics, MOH adopted Decree no. 214, Decree no. 216, and Circular no. 234 of 2020, establishing a national laboratory network and increasing the number of laboratories for testing. (MOH)

4. To promote effective coordination of the government’s response and its gender-sensitive efforts to prevent and mitigate the COVID-19 pandemic at national and subnational levels in the medium term, the government

1. To better track climate change investment and spending and strengthen public financial management: (i) 10 additional subnational governments will climate- and gender-tag their budgets; and (ii) the government will adopt its DRR-tagging policy to track the DRR expenditures of national government agencies. (MOF Fiscal Policy Agency, MOF DG Fiscal Balance, MOEF, MOHA)

2. To support a comprehensive assessment that estimates damage and losses and identifies the needs of the affected population following disasters, the government will develop additional PDNA tools for urban areas. (BNPB)

3. To strengthen testing capacity, build human resource

capacity in the national laboratory network, and monitor the intensity and spread of pandemics, the government will implement its nationwide gender-responsive testing policy, which includes surveillance measures, and prepare a draft national roadmap on COVID-19 vaccine development. (MOH DG Disease Control and Prevention, MOH DG Health Research and Development, MOH DG Pharmaceutical and Medical Devices)

4. To strengthen pandemic and epidemic preparedness, the

government will prepare investment plans to incorporate the cost of priority interventions for health emergencies to be financed in every budget cycle and map the

22 Appendix 4

Prior Actions Accomplished by July 2020 Post-Program Partnership Framework Targets from September 2020–September 2023

established the Task Force for the Acceleration of the Handling of COVID-19 (Presidential Decree No. 7 of 2020) on 13 March 2020, as amended on 20 March (Presidential Decree No. 9 of 2020)b and on 13 April (Presidential Decree No. 12 of 2020), which also declared COVID-19 as a non-natural national disaster. (BNPB)

5. To reduce the vulnerability of women, children, the elderly and migrant workers during the COVID-19 pandemic, the government: (i) allocated $19.5 million for referral services to female survivors of intimate partner violence and to children in need of special protection; and (ii) strengthened its provision of essential services to these groups by developing and implementing: (a) gender-sensitive guidelines for protection of the elderly during the COVID-19 pandemic; (b) specific protection guidelines for women with disabilities during the COVID-19 pandemic; (c) protocols for handling cases of violence against women during the COVID-19 pandemic; (d) a guide to breastfeeding during the COVID-19 pandemic; and (e) cross-sectoral protocols for the protection of women migrant workers during the COVID-19 pandemic. (MOWECP)

6. To support women in the workplace during the COVID-19 pandemic and beyond, the MOWECP issued Regulation No. 1 of 2020, which outlines procedures for the protection of female workers. (MOWECP)

7. To strengthen pandemic and epidemic reporting capacity

across government agencies, the government issued guidelines for a single reporting system, integrating disaggregated data from hospitals, provinces, and the Centre for Data and Information. (MOH Centre for Data and Information)

interventions to expected results in the near- to medium-term. (MOH Bureau of Planning, MOH Centre for Health Crisis)

5. To strengthen regional cooperation on pandemic response, in line with its commitments within ASEAN, the government will develop national protocols and procedures for timely and transparent reporting of COVID-19-related surveillance information to the appropriate mechanism in ASEAN. (MOH)

Appendix 4 23

Prior Actions Accomplished by July 2020 Post-Program Partnership Framework Targets from September 2020–September 2023

8. To standardize testing protocols and processes, the government issued guidelines to hospitals and the rest of the health system for testing and treatment for COVID-19, future pandemics, and disease outbreaks. (MOH DG Disease Control and Prevention)

Reform area 2: Resilience of physical assets to disaster and climate risks 9. To promote effective coordination within MPWH and across

government agencies involved in disaster response, and protection of vulnerable groups following disasters, including access to clean water, sanitation, and temporary shelter facilities, MPWH revised its Disaster Committee decree (Keputusan Menteri PUPR No.1176/KPTS/M/2019) and assigned key personnel and task forces to critical disaster response roles such as Chief of the Disaster Committee, Disaster Task Force Secretary, and resource coordination for highways and provinces. (MPWH)

10. To account for and enhance disaster and climate resilience

of water resource infrastructure, the government signed an MOU to launch projects, completed key project milestones to develop the national asset management inventory and upgrade information system platforms for river and water supply infrastructure, and established 136 community-based disaster management organizations in two provinces with women holding approximately 20% of managerial positions. (MPWH DG Water Resources)

6. To ensure the gender responsiveness of MPWH Decree No. 1176/ KPTS/M/2019 in disaster response planning and implementation, the government will assess, using checklists, the accessibility of sanitation facilities, clean water, and temporary and permanent housing to women, senior, and disabled citizens affected by disasters. (MPWH).

7. To enable MPWH Disaster Committee’s timely and

effective response to disasters, MPWH will upgrade its Disaster Response Management System to integrate location-specific data on public infrastructure as well as MPWH’s staff, equipment, and material availability with information on impacted infrastructure and population. (MPWH Centre for Data and Information).

8. To improve flood risk management and investment in

resilient infrastructure across national government agencies, cities, municipalities, and provinces, the government will prepare gender-responsive flood risk management plans for 6 river basins. (MPWH DG Water Resources)

9. To enhance earthquake resilience of government

infrastructure and to reduce the impact of natural hazards, the government will (i) finalize the legal process to adopt proposed standards for seismic loading (SNI 1726) under the building code for hospitals, universities,

24 Appendix 4

Prior Actions Accomplished by July 2020 Post-Program Partnership Framework Targets from September 2020–September 2023

and other government buildings; (ii) finalize the legal process to adopt proposed standards for reinforced concrete structural design (SNI 2847); and (iii) revise its technical standards for earthquake resilience of irrigation infrastructure. (MPWH DG Water Resources)

10. To improve the effectiveness of disaster recovery, the

government will develop a manual, which defines standards for building recovery procedures relative to each type of natural hazard experienced in the country. (BNPB, MPWH DG Human Settlements)

11. To improve the timeliness of recovery and reconstruction of national highways and bridges, the government will develop a comprehensive road information system, which records live information on disasters such as landslides, floods, and earthquakes; and will develop a gender-responsive emergency road response plan. (MPWH DG Highways)

Reform area 3: Disaster risk and pandemic response financing 11. Following the successful implementation of the state-

owned asset indemnity insurance pilot project to insure MOF assets against disasters, the government expanded the scope of the public asset insurance program to include assets of two additional government agencies: the National Public Procurement Agency (Lembaga Kebijakan Pengembangan Barang/Jasa Pemerintah) and the National Government Internal Auditor (Badan Pengawasan Keuangan dan Pembangunan). (MOF DG Public Asset Management)

12. To strengthen the fiscal resilience of subnational governments to disasters triggered by natural hazards such as floods, earthquakes, tsunamis, and droughts, and to eventually provide sustainable and efficient disaster risk financing mechanisms for timely, well-targeted, and transparent post-disaster recovery and reconstruction, the government will enhance the capacity of subnational governments to administer public assets and manage fiscal transfers for post-disaster response, starting with identification and valuation of assets at replacement value. (MOF DG Public Asset Management, MOHA)

Appendix 4 25

Prior Actions Accomplished by July 2020 Post-Program Partnership Framework Targets from September 2020–September 2023

12. To support COVID-19 relief and recovery efforts, and to address the ongoing adverse impacts of the COVID-19 pandemic on vulnerable segments of society including women in particular, the government: (i) relaxed the state budget deficit policy, which allows the fiscal deficit limit to exceed 3% of GDP for 3 fiscal years; and (ii) on 30 June 2020, more than doubled the size of its social assistance program by $7.1 billion, to $13.4 billion,c including: $2.9 billion for the Kartu Sembako food assistance program, 96% of whose beneficiaries are women, 16% of whom are heads of household; and $2.5 billion for the Family Hope Program, at least 90% of whose beneficiaries are women. (MOF)

ASEAN = Association of Southeast Asian Nations, BAPPENAS = Badan Perencanaan Pembangunan Nasional (National Development Planning Agency), BNPB = Badan Nasional Penanggulangan Bencana (National Board for Disaster Management), COVID-19 = coronavirus disease, DG = Directorate General, DRR = disaster risk reduction, GDP = gross domestic product, MOEF = Ministry of Environment and Forestry, MOF = Ministry of Finance, MOH = Ministry of Health, MOHA = Ministry of Home Affairs, MOU = memorandum of understanding, MOWECP = Ministry of Women Empowerment and Child Protection, MPWH = Ministry of Public Works and Highway, PDNA = post-disaster needs assessment, RPJMN = Rencana Pembangunan Jangka Menengah Nasional (National Medium-Term Development Plan), SNI = Standar Nasional Indonesia (Indonesian National Standard). a The gender commitments include: (i) institutional strengthening to ensure the protection of women's rights in emergency situations and special conditions; (ii) services

to empower women in emergency situations and special conditions; (iii) guidelines to enhance the resilience of women to disasters; and, (iv) communication, information, and education materials to enhance the resilience of women to disasters disseminated through various media.

b On 20 July 2020, Presidential Regulation No. 82/2020 was issued, replacing Presidential Decrees No. 7 and No. 9 of 2020. Presidential Regulation No. 82/2020 established the Committee for the Handling of COVID-19 and National Economic Recovery which consists of the: (i) Policy Committee; (ii) Task Force for the Acceleration of the Handling of COVID-19; and (iii) Task Force for the National Economic Recovery and Transformation.

c At the time of the Board consideration of the CARES Program, the overall fiscal stimulus package was $32.4 billion. Subsequently, the government took the new policy decision to considerably expand the social assistance program by 113% (from $6.3 billion to $13.4 billion), and also increased the health and economic assistance programs to a total of $32.3 billion, taking the stimulus package to $45.7 billion.