Indonesia Boosting Productivity through Human Capital Development Program-Subprogram 2 - Projects

OBJECTIVE

The Program aims to enhance labor productivity through human capital development to support an accelerated economic recovery from the coronavirus disease (COVID-19) pandemic.

DESCRIPTION

This proposed Program will provide a policy-based loan under the COVID-19 Crisis Recovery Facility of the Bank and will be co-financed with the Asian Development Bank (ADB).

The government’s Vision of Indonesia 2045 and National Medium-Term Development Plan (RPJMN) 2020-2024 focus on human capital development as a critical driver of long-run economic growth, which underpins the transition to an upper middle-income country. The RPJMN is complemented by the National Strategy to Accelerate Stunting Prevention, 2017–2021, which aims to prevent child stunting caused by malnutrition in as many as 2 million children. The proposed program is centered on the RPJMN's human capital development strategy, incorporating reforms in educational attainment, skill development, and social protection and public health systems improvement.

The proposed Program will support three reform areas: (i) Reform Area 1 - Strengthened policies to finance and monitor the implementation of the Sustainable Development Goals (SDGs). This reform area focuses on the overall monitoring and implementation of SDGs, including at the local level, as well as health program financing (budget allocation and fiscal transfers) to meet SDG targets such as universal health coverage; (ii) Reform Area 2 - Improved educational attainment and skills development. This reform area focuses on educational and skills development outcomes; and (iii) Reform Area 3 - Enhanced social protection and public health systems. This reform area aims to improve human capital development through interventions in social protection and health.

ENVIRONMENTAL AND SOCIAL INFORMATION

The Program will be co-financed with ADB as the lead cofinancier, and the Program’s Environmental and Social (E&S) risks and impacts have been assessed in accordance with ADB’s SPS applicable to PBL. AIIB’s Environmental and Social Policy (ESP) was designed to apply to investment projects and has no provisions for its application to PBL operations. Therefore, as permitted by the decision of the Board of Directors set forth in the Decisions to Support the Facility, AIIB will apply the provisions of ADB’s SPS to this PBL in lieu of the ESP. This will provide for a harmonized approach to addressing the E&S risks and impacts of the Program.

Based on the E&S assessments carried out according to the SPS requirements, no adverse impacts have been identified in respect of involuntary resettlement, Indigenous Peoples or the environment. Therefore, ADB has categorized the Program as Category C for involuntary resettlement, Indigenous Peoples, and environment. An E&S risk assessment on the policy matrix was also undertaken, along with E&S due diligence to confirm no outstanding E&S issues remain and to provide guidance on the E&S aspects for future reforms of state-owned enterprises.