MCC’s Indonesia Compact Promotes Growth and Development


SEATTLE — The Millennium Challenge Corporation (MCC) is an independent agency of the U.S. government with the mission of alleviating global poverty. Since its formation in 2004, MCC has distributed Compact Grants worth up to $11.2 billion to 27 eligible countries that are committed to good governance, economic freedom and investing in their citizens.

MCC follows the principle of country-led solutions and country-led implementations. This means that each country that receives a Compact Grant has the discretion and authority to identify the major barriers of economic growth in its own country, develop effective solutions and implement the necessary programs that will lead to economic growth.

Indonesia and the United States Have Long Been Strategic Partners

Indonesia is home to more than 260 million people and is fairly unique in composition. An archipelago made up of more than 17,000 islands, Indonesia is the fourth most populous country in the world and approximately 41 million people in Indonesia live below the international poverty line of $1.25 a day.

Indonesia also serves as a key strategic partner with the U.S. in advancing stability and economic opportunities in Southeast Asia. Assistance and support of Indonesia’s development as a stable democracy enhances not only Indonesia’s economy and quality of life but also contributes to its regional security and global economic growth. Which is precisely why the U.S. has made tremendous contributions to Indonesia’s development through the MCC’s Indonesia Compact.

MCC’s Indonesia Compact Sees Results

While Indonesia has the largest economy in Southeast Asia, its economic growth has been largely hampered by various challenges that affect how resources–natural, human and financial–are developed and utilized. According to the MCC, barriers such as ineffective government processes, poor national resource management, inadequate energy access and poor human development have all contributed to the lack of economic growth in Indonesia.

MCC’s Indonesia Compact was designed to reduce poverty through economic growth while adhering to the government of Indonesia’s priorities in moving the country forward. Signed in 2011 and implemented in 2013, the five-year MCC Compact with Indonesia officially closed in April 2018 and has achieved tremendous success through its three major projects.

Community-Based Health and Nutrition to Reduce Stunting Project

In 2011, more than one-third of Indonesian children under the age of five were chronically malnourished, which resulted in the stunting of their physical and cognitive growth. Stunting has significant long-term effects on a child’s potential for learning and earning later in life.

This project built on the progress of an already existing program and piloted a new approach that combined interventions in healthcare, sanitation and nutrition. It was aimed at preventing and reducing chronic childhood malnutrition by improving the capacity of health service workers, strengthening health and education efforts and shaping a national conversation on the importance of adequate nutrition and sanitation.

By the end of the Compact, the implementation of this project led to the revision of seven Ministry of Health technical guidelines, nutritional efforts reaching a total of two million toddlers and more than 30,000 health workers trained in nutrition, sanitation and monitoring/evaluation. This project even succeeded in strengthening the government’s commitment to handling stunting and resulted in a national campaign that has reached more than 48 million people.

Procurement Modernization Project

Government procurement or delivery of goods and services to the Indonesian people accounts for more than $42 billion in expenditures each year, which is a significant portion of the national budget. Efficient and effective public procurement is an important strategic public sector function and a quality of good governance.

Prior to the Compact, Indonesia had no public procurement professionals. This caused Indonesia’s public procurement system to be vulnerable to financial fraud, waste and abuse, which resulted in significant losses of funds and a reduction in the quality of goods and services.

This project has introduced an innovative digital system and new methods to help the government of Indonesia more efficiently procure goods and services. It not only improved the effectiveness of government spending but also established a professional procurement workforce that will be able to continue driving procurement innovations into the future. More than 500 procurement professionals are being trained in modern procurement and management skills.

Green Prosperity Project

Before the Compact was implemented, one in seven villages in Indonesia lacked access to reliable and affordable electricity and many more relied on expensive and dirty diesel generation. Many Indonesians were also practicing unsustainable land use methods, which had an adverse effect on the quality of the natural assets that people rely on for their livelihoods.

This project was designed to increase productivity and reduce the reliance on fossil fuels by funding renewable energy efforts, lowering energy costs, reducing land-based greenhouse gas emissions and improving land use practices and management of natural resources.

Today, Indonesian green project activities are together leveraging about $40 million in private sector investments. Collaboration within the private sector, which ranges from large, international businesses to small household farmers, is absolutely critical in creating long-term economic growth in Indonesia.

Through the MCC’s Indonesia Compact, two of the world’s largest democracies, the United States and Indonesia, were able to form a strategic partnership based on shared values and a commitment to expanding cooperation on issues of peace, stability and economic prosperity. The Indonesia Compact and its tremendous success serve as a strong foundation that the government of Indonesia will be able to build on to help millions of Indonesians lead healthier, more economically secure lives.

– Lolontika Hoque

Photo: Flickr


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