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Overall Trends in Foreign Aid for the Health Sector
Major Contributors
Donor Partnerships
Overall Trends in Foreign Aid for the Health Sector
Foreign assistance has been an important source of funds for the public
sector in Indonesia. During the mid-1990s, public sector finances were
becoming less dependent on foreign assistance. However, following the
1997 economic crisis, the government has had extensive recourse to such
funds to fill the gap between decreasing local revenues and increasing
public expenditure. It was predicted that 25% of public expenditure in
the fiscal year 1998/1999 would be financed by foreign assistance.
External support for the health sector in Indonesia follows a similar
pattern, as shown in Table 1 below.
Major Contributors
In general, there has been a shift away from bilateral agencies towards
multilateral agencies, especially the World Bank and the Asian Development
Bank, with a consequent shift from grants to loans. The exception to this
was a large contribution from the Government of Japan during 1990-1994.
Trends in foreign assistance are presented in Figure 1 below.
Support to the health sector has been mostly classical project support.
There have been at least 13 sources of funds from foreign agencies, but
the majority of this aid -particularly from bilateral donors - has been
for investment (infrastructure), without due consideration of the recurrent
cost implications of operations and maintenance. Insufficient attention
has been paid to system improvements to increase the efficiency and effectiveness
of service delivery.
Development bank funds have been used to support high priority areas,
such as child health, water supply, family planning, nutrition and safe
motherhood. Since a USAID project in the 1970s, donors have supported
provincial health projects with the objective of increasing the capacity
of local staff to manage health programmes. This has recently developed
into a series of provincial projects aimed at decentralisation, a pattern
likely to increase as donors deal directly with local government for their
projects. There is currently a World Bank assisted project on strengthening
the district and provincial health systems for the provinces of Yogyakarta
and Lampung. It is now preparing a second provincial health systems project.
Following this lead, the ADB has also recently proposed similar projects
for 7 provinces. Other donors like AusAID too are planning similar provincial/district
health systems projects. Specific disease control programmes like TB are
also being funded by donors.
The economic crisis has led to another change in the form of foreign
assistance, especially funds from the ADB and the IMF. Increasingly loans
are being negotiated and disbursed on the basis of implementation of agreed
health sector policies.
Such funds are flexible and minimise administrative procedures associated
with traditional projects. They can also be disbursed swiftly to meet
the financial requirements of a crisis.
Donor Partnerships
Polio eradication efforts have demonstrated both the feasibility, and
the benefits, of donors acting in concert. But, in general, the large
number of donor-assisted projects and activities has made it difficult
to coordinate and synchronise work between donors and the government.
Government has often resolved problems of different donor interests and
project requirements by assigning particular provinces to individual donor
agencies. The result has too often been poor communication between projects,
duplication of effort and repetition of mistakes.
The 1997 crisis brought donors in the health sector together with a sense
of urgency to ensure better coordination and improve the implementation
of projects in order to minimise the impact of the crisis on health. The
political mandate for radical and rapid decentralisation gave further
impetus to partnership. Major donors agreed that decentralisation was
both a threat to the existing health system and an opportunity to make
significant changes - an opportunity which could be jeopardised by multiple
and uncoordinated donor initiatives.
Hence in late 1999 the Partnership for Health was created as a forum
for the major donor and technical health agencies to discuss and focus
their efforts to support improvement in the health sector. The group has
facilitated the establishment of the Minister of Health's Policy Advisory
Group, to advise the Minister on policy issues and options for health
system changes. Since the Group is supported by two technical staff from
WHO, the Organization is well-placed to play an influential role.
While effective donor coordination entails transaction costs and the
possibility of delay or complication in project design, nonetheless the
potential benefits are great.
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