Jakarta, January 27, 2005

The Netherlands represents the Presidency of the European Union in Indonesia on behalf of Luxemburg. It wishes to commend the Government of Indonesia and the World Bank for the excellent arrangements, particularly during a period, which is extremely busy as a result of the dreadful tragedy caused by the Tsunami in Aceh and North Sumatra.

The European Union values the close partnership with Indonesia. This partnership covers intensive co-operation and dialogue in all areas of relevance to Indonesia and the EU. Our political dialogue has been intensified in particular since the recent EU Troika last October. The presence of both the EU Presidency and the European Commission at the highest possible level during the Tsunami Summit hosted by president Yudhoyono on 6 January, testifies to the importance the EU attaches to developments in ASEAN.

The European Union wishes to offer its condolences to the Government of Indonesia and the bereft families of the many victims of the Tsunami disaster of 26 December. The EU and its citizens have offered the largest share of aid to the relief, rehabilitation and reconstruction efforts in the region following the Tsunami with a € 1.5 billion of government and agency pledges, a proposal for a further € 1 billion from the European Investment Bank for post-Tsunami reconstruction projects and a very substantial amount of private donations. Pending the unfolding of ongoing relief operations, results of needs assessments and the different governments’ requests, it can be expected that a substantial share of this aid will benefit Indonesia (see also separate chart distributed by the European Commission).

In Indonesia’s hardest-hit Aceh province, humanitarian relief operations are already ongoing with a number of EU Member States providing civil protection, military and civilian logistical support and emergency assistance. The EC humanitarian office (ECHO) is also implementing projects in the area.

This European response only confirms our key role in Indonesia’s development assistance, with 20% of the total ODA disbursements and cumulative commitments for on-going and pipeline EU projects of € 1,5 billion (IDR 17 trillion) in 2003. The EU Blue Book on development assistance to Indonesia provides detailed information on this. It provides a good basis for enhanced co-operation and co-ordination between all involved stakeholders, including other donors and institutions.

The EU recognises that democracy, political and economic stability have been further strengthened in 2004. The EU congratulates people and government of Indonesia on the successful and peaceful conduct of legislative and Presidential elections in 2004. The EU is confident that these elections will further strengthen Indonesia’s democratisation process.

Progress has also been achieved in macro-economic stability, in spite of the destabilising effects of the terrorist attack in 2004. Inflation remains low, economic growth is approaching pre-crisis levels, the government’s budget deficit is low and the Rupiah is stable. This stability is essential for Indonesia to create an environment in which domestic and foreign investment will resume. Nonetheless, many challenges remain for Indonesia to be able to sustain sufficient economic growth for long term poverty alleviation. Challenges remain mostly in governance and in restoring a conducive investment climate, through institutional reforms, through consolidation and deepening of decentralisation, through drastic anti-corruption measures and through justice reform.

The new government has rightly prioritised investment. In this context, it will be important to attract more investment by improving the transparency and predictability of doing business in Indonesia, particularly with regard to taxation, customs, labour and investment policy. As co-chair of the Working Group on Improvement of the Investment Climate, the EU is encouraged by willingness of GoI to work together on this important area. In particular the EU wishes to welcome the announcement made by Coordinating minister for Economic Affairs Bakrie recently, that the government intends to bring back the time for issuing business licences for foreign companies to 30 days and would like to see the system changed from approval to registration.

The Infrastructure Summit will give an extra boost to the investment climate in Indonesia. Given the earthquake and Tsunami and their aftermath a special focus was rightly targeted on Aceh and North Sumatra during this Infrastructure Summit.

The EU notes with particular interest the governance reform agenda, especially on the issues of decentralisation and justice sector reform. The EU re-states its willingness to support the implementation of all reform measures. Progress in the implementation of the so-called Blue prints of the Supreme Court is encouraging in particular, the lead taken by the SC. Furthermore the EU wishes to welcome progress made in the field of security and development with particular regard to the work done in the CGI working group on security sector reform and the formalisation of its terms of reference.

The EU welcomes the political importance attached to the eradication of corruption as part of the 100 days agenda as well as for the next 5 years. In this regard, the implementation of a National Action Plan Against Corruption is critical. Progress with respect to the Anti Corruption Commission and Anti Corruption Court is welcomed and the EU encourages donor support for the Police and the Attorney General’s Office in their battle against corruption.

The EU welcomes the focus of the GOI on continuing poverty alleviation, and welcomes that progress is made on the way to reaching MDG’s in 2015. However, a lot of work still needs to be done to achieve those targets in as many as possible parts of Indonesia. Particularly a challenge is posed by parts of Eastern Indonesia, where extra efforts need to be undertaken to push forward development.

The EU would like to commend the GOI on the finalisation of the Mid-Term Development Plan and the progress made on the PRSP and looks forward to in depth discussion during this CGI. Both the Mid-Term Development Plan and the PRSP will provide very useful guidance in the priority setting the Government of Indonesia is seeking in order to realise sustainable economic growth and continued poverty alleviation and eradication. The fact that more funds will be made available by the GOI for education, health and water and sanitation is very encouraging in that respect.

In this regard the EU would like to propose to take stock and discuss periodically the progress made in reaching the Millennium Development Goals on the basis of the two above mentioned documents, preferably in following CGI and Mid-Term CGI meetings. The EU looks forward to hear the Government of Indonesia’s response to this.

The rapid pace of deforestation in Indonesia needs to be halted and reversed. The EU welcomes the new government’s commitment to combat illegal logging and is prepared to continue its assistance to Indonesia in this area of concern with financial and technical resources, where needed and effective.

Debt relief is becoming an increasingly important instrument of financial support to Indonesia. Several EU countries have already engaged in bilateral debt relief. In the present context of the Tsunami aftermath the Paris Club decided to offer a temporary moratorium to affected countries.

Now, more than ever, it is important that crucial linkages are established between effective and poverty alleviation, sustainable economic growth, improvement of the investment climate and progress in the field of governance.

The EU confirms that it will support Indonesia in its continuing efforts for the development of a stable, united, democratic, peaceful and prosperous Indonesia.