James Massola and Karuni Rompies, Jakarta – The Indonesian government is pressing ahead with plans to launch an overseas aid program for the first time, with plans to set aside $1 billion in an endowment fund by 2021 and distribute about $60 million annually to needy nations in the Pacific.
Gross national income is only about $5800 per person annually and more than 72 million people (out of a population of nearly 270 million) still live below the $4.60 per day poverty line, according to the World Bank.
Indonesia itself still receives hundreds of millions in development assistance annually from nations including Japan, Australia, China, the United States and Singapore and the World Bank.
Confirmation that an "Indo-Aid" agency will be set up, after first being flagged in 2018, reflects the country's membership of the G20 group of wealthy nations, the growing size of its middle class and projections that it could be the world's fifth-largest economy by 2030.
The creation of the aid program raises questions about whether Indonesia should focus on raising the living standards of all its citizens – particularly those who live in poorer, rural areas.
The focus on the Pacific underscores the growing contest for economic and political influence in that region – including from Australia, the United States, China, Japan and New Zealand – as highlighted in a recent Lowy Institute paper.
Indonesia will be the second largest overall recipient of Australia's $4 billion aid budget in 2019-20, receiving $298.5 million for education, infrastructure, agriculture and governance programs. Australia is the fourth largest aid donor to Indonesia.
Papua New Guinea was the single largest recipient of Australian aid, with $607 million.
The director-general for public diplomacy in Indonesia's foreign ministry Cecep Herawan said on Monday the agency was being formed because "we project that we will have much better economic growth, we are projecting that Indonesia will become one of the world's five top economies".
"For instance for this year we have seven programs for five countries in the Pacific, they are Nauru, Tuvalu, Solomon Islands, Kiribati and Fiji."
Some aid had also been dispersed to the Philippines and Myanmar, Cecep said, but Indonesia's priorities were the Pacific and south Asia.
South-east Asia project director at the Lowy Institute Ben Bland said it was not surprising that – even as it continued to receive aid – Indonesia was forming its own aid program to help less well-off nations and welcomed the development.
He said Indonesia still needed assistance in technical areas and with expertise and that "it [aid] is not just about money".He suggested three primary reasons for the decision to begin an aid program.
"The first is a genuine desire to share some of Indonesia's experiences as a developing country that has transitioned from military rule to a relatively vibrant democracy," he said.
"Second, there is a desire to show that Indonesia has arrived as an influential country, it's a big player in the world, and it's successful enough to give largesse to other countries. There is a question as to whether this is the best use of its money when it faces challenges like stunting [in children's growth]."
"Third, it could be around Indonesian influence in the Pacific, and trying to win more support from Pacific nations, some of whom support the Papuan independence movement."
The World Bank estimates that approximately one in three children under the age of five in Indonesia suffer from stunting, which impairs brain development.
Australian National University development policy expert Stephen Howes suggested Indonesia wanted to dampen support for Papuan independence among the Pacific island nations.
Professor Howes said countries including China and India had become aid donors while still receiving aid in the past.
"It can be hard to explain domestically why you are giving aid to someone when they are giving to someone else," he added, "but there is still a compelling reason to provide significant aid to Indonesia."
"Nearly all Indonesians are poor by Australian standards."
The Department of Foreign Affairs noted in its most recent portfolio budget statement that "Indonesia's success is of fundamental importance to Australia" and that much of the program's focus is on improving governance, to enable economic growth, and promoting fairness and human development.
The Department of Foreign Affairs was contacted for comment about Australia's aid budget in Indonesia.