Indonesia is a priority country for the German Development Cooperation (GDC). Due to its regional importance it belongs to the so-called anchor countries. Since the beginning of the German-Indonesian cooperation in the 1950s, Germany has been assisting Indonesia in the following areas:

• Poverty reduction
• Economic growth, with a special emphasis on the development of the private sector
• Protection of natural ressources
• Decentralisation
• Administrative reform
• Further development in the sector of Good Governance

In doing so, the German-Indonesian Cooperation is following the guidelines of a globally sustainable development considering three core issues:

• Productive economic growth
  
  
• Social equality
  
  
• Economic sustainability
  
  

The German Development Cooperation is aligned with the Millenium Development Goals of the United Nations and the strategies of other partner countries to fight poverty. Based on the Paris Agenda, Germany supports the coordination process between the international donor community and the Indonesian government.

During the government negotiations on 2nd October 2007 in Bonn, the German and the Indonesian governments agreed to focus the GDC-portfolio on three priority areas:

     1. Climate change

     2. Private sector development

     3. Good Governance/Decentralisation

Throughout the negotiations Germany committed to some EUR 86 million, including support to fight avian flu and consultancy in the health sector.

Climate Change
Germany supports Indonesia in implementing its national climate action plan. The German Development Cooperation focuses mainly on Nature and Climate Protection, City Traffic Emission Reduction and Forest and Climate Protection. Activities in the sub-sector of Forest and Climate Protection are tied to GDC’s longterm experiences of former forest management projects in Indonesia. In this connection, German Development Cooperation supports the implementation of the forest management reform, the preparation of a future Post-Kyoto Protocol, and the establishment of new concepts for nature conservation, through incentive systems for emission reduction such as Reduced Emission from Deforestation and Degradation (REDD). In the sectors Natural and Climate Protection and City Traffic Emission Reduction, the Indonesian government will receive support to achieve its long term strategy of carbon-reduced development. Additionally, GDC supports capacity building of executive managers for the development of global and sustainable solution statements.

Private Sector Development
Another major concern of GDC in terms of the Millenium Development Goals is the promotion of a socially balanced economic growth in order to allow as many people as possible to actively participate in the economic life. A basic requirement therefore is a competitive private sector and a the access of a broad part of the population to more education. A sufficient supply of qualified manpower plays an important role in the competitiveness of businesses. Germany’s contribution in Indonesia therefore focuses on the private sector development as well as vocational training prioritizing on the support of small and medium-size enterprises.

Good Governance / Decentralization
Decentralization and democratization play key roles in development, since gradually the old authority structures are being replaced by more participative processes. German Development Cooperation has provided support to the Indonesian Government in crucial aspects of the decentralization process and the creation of a new legal framework. Also, capacity building is provided in order to improve the administration skills of the local government officials. The main focus lies on the improvement and efficient set-up of public services.

The adjustment of GDC’s priority areas accommodates Indonesia’s changing role – within global and regional contexts.

To reduce Indonesia’s debt burden, Germany and Indonesia have agreed on a number of debt conversion programmes. Germany was the first donor country to offer debt swaps and thereby significantly contributed to the debt reduction of the Indonesian society. So far five programmes of debt swaps have been implemented.

After the devastating Tsunami of 26th December 2004 in the Aceh and Nias Provinces, the German government provided huge additional funds for reconstruction of the affected areas. The extensive reconstruction programme ended in 2009. The main focus had been on the reconstruction of settlements, the rebuilding of the vocational training sector as well as the support for local administration and health services, and the facilitation of economic activities.