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Background

The goal of the Australia Indonesia Partnership for Economic Governance (AIPEG) is to support strong, sustainable and inclusive economic growth. To achieve that goal, AIPEG supports Indonesia to strengthen economic institutions, manage public finances and promote effective markets to underpin growth and development.

Australia and Indonesia have been working together on economic governance since the major financial crisis of the late 1990s. Over that time, the Indonesian economy has grown from the 12th to 8th largest economy in the world. High growth also rapidly reduced poverty from 23% in 1999 to 11% of the population in 2016. Indonesia’s strong economic growth taps into a variety of drivers:

  • Urbanisation is very rapid and that also increases growth and dynamism.
  • Education, especially at the university level, is rising, building a foundation for sustained growth.
  • Indonesia is rich in natural resources and commodities.
  • Half of Indonesia’s population is under thirty and is therefore a growing consumer base and workforce.

Indonesia became a middle-income country in 2004 and aims to reach high income status by 2025. However, in recent years, Indonesia has not been realizing its full economic potential. Indonesia also has a growing imbalance between state spending and revenue, an underdeveloped financial sector and high inequality. Significant economic policy changes are needed to spark greater job creation and more inclusive growth.

AIPEG supports Indonesia’s efforts in tackling these challenges through a partnership between the Government of Australia (Department of Foreign Affairs and Trade) and the Government of Indonesia (Coordinating Ministry for Economic Affairs). The program is delivered by SMEC International and reflects Australia’s commitment to Indonesia’s growth and development.

Goal and Objectives

AIPEG’s goal is to support strong, sustainable and inclusive growth in Indonesia. As a foundation, sound macroeconomic settings are key to Indonesia’s success. Against this backdrop, AIPEG also looks to support smart, productivity-enhancing reforms in economic policy and institutions.

AIPEG’s support to the Indonesian government is framed with three key objectives:

  • Macroeconomic stability.
  • Efficient and equitable use of public resources.
  • Well-functioning markets.

AIPEG also strengthens partnerships between the governments of Australia and Indonesia in the area of economic management.

AIPEG works with a range of Indonesian government agencies including the Coordinating Ministry for Economic Affairs (Kemenko Bidang Perekonomian), Ministry of Finance, Ministry of Trade, Ministry for National Development Planning (Bappenas), Financial Services Authority (OJK) and Investment Coordinating Board (BKPM).