The Hon. Alexander Downer, MP
The Hon. Alexander Downer, MP
 FORMER MINISTER FOR FOREIGN AFFAIRS, AUSTRALIA

Joint Ministerial Statement

Australia - Indonesia

Australia
Indonesia

17 March 2005

Australia Indonesia Partnership for Reconstruction and Development - Joint Ministerial Statement

Introduction

Australian and Indonesian Ministers held the inaugural Australia Indonesia Partnership for Reconstruction and Development (AIPRD) Joint Commission meeting today in Canberra.

Ministers noted that the AIPRD is an historic opportunity to bring our two countries and peoples closer together to assist Indonesia's recovery from the devastating loss of life and economic damage inflicted by the tsunami of 26 December 2004.

The Joint Commission is overseen by the Prime Minister of Australia and the President of the Republic of Indonesia and its membership comprises, on the Australian side, the Hon. Alexander Downer, Minister for Foreign Affairs and the Hon. Peter Costello, Treasurer, and on the Indonesian side, HE Dr Hassan Wirajuda, Minister for Foreign Affairs, HE Dr Jusuf Anwar, Minister for Finance, and HE Dr Sri Mulyani Indrawati, State Minister of National Development Planning and Chair of the National Planning Board (BAPPENAS).

This statement sets out the agreed outcomes of the meeting.

Objectives of the Partnership

The AIPRD's primary objective is to support Indonesia's reconstruction and development efforts, both in and beyond tsunami-affected areas, through sustained cooperation focused on the Indonesian Government's programs of reform, with an emphasis on economic and social development.

Guiding Principles of the Partnership

In pursuing this objective, the two countries will work together in a spirit of genuine partnership that will:

Ministers agreed that before the next Joint Commission meeting Australian and Indonesian officials will develop a draft partnership framework to guide the process of joint identification of priority activities for funding under the AIPRD.

Governance of the Joint Commission

Ministers confirmed that the Joint Commission will be the peak decision-making body of the Partnership and that the Commission's work will be jointly overseen by the Heads of Government of Australia and Indonesia.

Membership of the Commission will comprise the Foreign Ministers of both Australia and Indonesia, as well as economic ministers from each country.

The principal mandate of the Joint Commission will be to set broad strategic directions for the Partnership. It will also establish key priorities for funding, determine and review an annual work programme and agree major activities.

Decision making within the Commission will operate on the basis of consensus.

Meetings of the Commission will be held at least annually or at the request of either Head of Government and will be preceded, where required, by Senior Officials' meetings.

An Exchange of Letters between relevant Commission ministers will be required where a major new activity is proposed between Commission meetings.

Other inter-sessional work relating to implementation will be taken forward by agreement at Senior Officials' level.

Early Priorities for Funding

Ministers confirmed that projects under the Partnership will be financed through a $500 million grant assistance programme, which will be managed in accordance with the existing General Agreement on Development Cooperation between Australia and Indonesia, and a $500 million concessional loan program.1

The Joint Commission agreed to start work immediately on the following high priority activities, including activities aimed at supporting urgent rehabilitation work in Aceh province.

Rebuilding the hospital and restoring health and education services and local government services in Aceh

To assist the early rehabilitation of essential public services in Aceh, Ministers have agreed to allocate up to $50 million to projects to repair hospital infrastructure, to restore health and education services and to restore local government services. This funding will assist local institutions to resume operations, meet on-going humanitarian needs and plan for longer-term reconstruction work. The centrepiece of this assistance will be work to rehabilitate the Zainoel Abidin Hospital in Banda Aceh, where Australian medical and surgical teams have worked since the 26 December tsunami disaster.

The Indonesian Ministers briefed the meeting on the rules, regulations and procedures for the granting of access to Indonesia, including to the tsunami-affected areas.

Disaster preparedness and post-disaster rehabilitation and reconstruction:

Recognising the significant levels of damage caused by earthquakes and landslides in late 2004, Ministers have also agreed to allocate up to $5m under the Partnership to provide urgent rehabilitation assistance to other areas of Indonesia, outside Aceh.

Ministers also agreed to allocate up to $10m to programs to further develop Indonesia's own systems for managing and responding to the impact of natural disasters, including through support to build the disaster response capacities of local organisations and a closer partnership between Indonesia's disaster coordination authority, BAKORNAS and Australia's disaster management authority, Emergency Management Australia (EMA).

Government Partnerships Fund

Looking ahead to Indonesia's broader needs to manage national programs of economic and public sector reform, Ministers have also agreed to allocate up to $50m over five years under a new Government Partnerships Fund to support the exchange of skills, knowledge and expertise between Australian Government agencies and their Indonesian Government counterparts.

Grants

A $500 million grant program will be managed in accordance with the existing General Agreement on Development Cooperation between Australia and Indonesia.

Loan Framework

The key objectives and principles that will underpin the use of loans funds are as follows.

The AIPRD loan framework will be to support Indonesia's reconstruction and development efforts.

The sectoral and geographic focus of the loan programme will be agreed by the Joint Commission, taking account of Indonesia's needs and opportunities for sustained cooperation.

Loan funds of up to $500 million will be provided by the Australian Government to the Indonesian Government under the AIPRD.

Loan programme terms and conditions are based on zero interest for up to 40 years with no repayment of principal for 10 years. Loan funds are to be repaid in annual instalments from year 11 to 40: repayments will take place at the rate of 2 per cent per annum in years 11 to 20 and 4 per cent per annum in years 21 to 40.

The Joint Commission will consider and endorse proposals for loans under the AIPRD Loan Framework, as proposed by the Australian and/or Indonesian Governments, consistent with the broad strategic directions for the Partnership.

The AIPRD loan programme will be undertaken consistent with the Objectives, Principles and Guidelines previously outlined and with international best practice. This is to ensure transparency and accountability, competitive tendering and procurement practices. Relevant international conventions, such as those developed by the OECD, will also be taken into account.

Further detail regarding loan programme features, management and implementation will be addressed in a Heads of Agreement to be agreed between the Governments of Australia and Indonesia.

Individual project loan agreements will be negotiated on a case by case basis following finalisation of the Heads of Agreement.

Joint Management and Procurement Arrangements

Ministers noted that, consistent with the principles of partnership underlying the AIPRD, joint management arrangements will be developed for activities implemented under both the loan and the grant components. Arrangements for joint management of grants will involve the inclusion of Indonesian officials in project design processes, tender processes, and in project management and monitoring.

Ministers agreed that Australian, Indonesian and New Zealand companies would be eligible to compete for projects funded under the Partnership's grant and loan programs.

An Australian or New Zealand firm is defined as an organisation carrying on business in Australia or New Zealand.

An Indonesian firm is defined as an entity carrying on business in Indonesia, established in accordance with Indonesian laws and regulations, which, in the case of an incorporated company, has majority Indonesian local ownership/shareholding.

The Hon Alexander Downer MP
Minister for Foreign Affairs, Australia

HE Dr Hassan Wirajuda
Minister for Foreign Affairs, Republic of Indonesia

The Hon Peter Costello MP
Treasurer, Australia

HE Dr Sri Mulyani Indrawati
State Minister of National Development Planning and Chair of the National Planning Board (BAPPENAS), Republic of Indonesia

Canberra, 17 March 2005

All references to dollars ($) in the Statement are to Australian Dollars.

Inquiries: Chris Kenny (Mr Downer's office) 02 62777 500


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