Employment-Intensive Investment in Indonesia

Web page | 10 December 2014

Current EIIP Involvement

Current EIIP Projects in Indonesia
• Capacity building for local resource-based road works in selected districts in NAD and NIAS. Total budget: 11,403,275
• Creating jobs: capacity building for local resource-based road works in selected districts of Aceh and Nias (Phase III). Total budget: 1,873,000
• Nias Island Rural Access Capacity Building Project (Nias-RACBP). Total budget: 15,999,946
• RACBP Partner Agency Costs (for the Supervision and Administration of Contribution for Nias-RACBP). Total budget: 453,000
• Green Livlihood Access for Central Kalimantan’s Inclusive Environmental Response to Climate Change (GLACIER). Total budget: 1,398,517

Historical Information

ILO work in Indonesia on local-resource intensive rural infrastructure started in 1993 with the management of a World Bank-financed district roads project, aiming to upgrade labour-based methods already in use in Indonesia. Focussing on four pilot districts in two provinces, the project successfully developed and introduced improved techniques, supervision and organization for labour-based construction and improvement and maintenance of local roads.

Developing instruments and tools to assess employment impact
In 1996, research was done after the process and implementation of Integrated Rural Accessibility Planning (IRAP) in Indonesia through some demonstration projects. Results of these preliminary activities showed that IRAP is indeed an important potential planning tool for improving rural infrastructure in Indonesia. However it was also deemed unlikely that IRAP could be adopted as a new rural planning tool in Indonesia since the state was still too centrally organized and an officially approved participatory rural development planning process already existed. This all changed in January, 2001, with the new decentralization act.

The main objective of this project was to demonstrate and test the use of IRAP procedures in two pilot districts, Bantul in Yogyakarta (Central Java) and Kutai in East Kalimantan (Borneo). The experiences and outputs should be used to develop guidelines and training materials that were specific for Indonesia.

As a reply to world-wide economic crisis, the Indonesian government launched a comprehensive fiscal stimulus package, with public infrastructure investment as one of its key components. The Indonesian government was interested in the impact of public spending on employment, and its cost-effectiveness, not only with regard to the fiscal stimulus package, but also withtheir regular expenditures (budgeting process, infrastructure investment and public works programmes).

At the request of the Coordinating Ministry for Economic Affairs (CMEA), Employment Intensive Investment Programme (EIIP) undertook a fact-finding mission to evaluate the need and the options for the development of an analytical tool to evaluate the impact of public investment (in particular infrastructure investment) in employment, including different technological choices (labour intensity).

The objective of the project was to strengthen the capacity of government institutions, related institutions and universities, to analyse, through simulations, the possible impact of various public investment options on Indonesia’s labour market. 

At the end of the project the Government should have a flexible and user-friendly tool at its disposal and should be able to use it on a regular basis, in order to make effective decisions on policy options during the budgeting process, MTDP, special initiatives (e.g. fiscal stimulus package), etc., with regards to:

• Optimizing the employment impact of public investment (or other public policies, e.g. industrial, agricultural policies) and the national budget in general;
• Effectively targeting specific groups of workers (e.g. by gender, age groups, skill level);
• Effectively targeting specific types of jobs and methods of production (e.g. capital versus labour-intensive methods).

The EIIP has assisted the Government of Indonesia in the development of an employment impact assessment tool, a Dynamic Social Accounting Matrix (DySAM), which included disaggregated information on the construction sector and an employment satellite account with details on the labour market. The tool was then applied by the Government to better understand the impact of the fiscal stimulus package 2009, with special focus on infrastructure investments on employment.

Employment and Investment Policies
From 1999 to 2001, the Employment Intensive Investment Programme (EIIP) of the ILO through the ASIST Asia-Pacific Programme (ASIST-AP) worked in Indonesia to develop a national programme for sustainable rural infrastructure development. The overall objective of ASIST-AP's work in Indonesia was to create decent employment and alleviate poverty through sustainable rural infrastructure works. For this reason, the Programme intended to collaborate with the Government and the country's main donors to influence their infrastructure investment programmes in favour of employment creation and poverty alleviation and at no additional cost to these investment programmes.

ASIST-AP assisted in the conduct of a series of participatory workshops at the national and local level to explore priorities and strategies for using sustainable rural infrastructure development to create employment and alleviate poverty in Indonesia.

At the national level, ASIST-AP worked with KIMPRASWIL, BAPPENAS, the Ministry of Home Affairs and the Coordinating Ministry for Economic Affairs (CMEA) to develop a "nation-wide programme to mainstream labour-based technology in the country's public investment programmes" and to draft a "sustainable rural infrastructure for employment creation and poverty alleviation strategy".

At the local level, ASIST-AP worked in collaboration with the Gadjah Mada University with 2 Kabupaten (regencies) to support the country's decentralization process, in particular with rural infrastructure development. This work was done under an IRAP demonstration project.
Increasing capacity and capabilities

Taking advantage of the process of decentralization that would entrust the Kabupaten governments with more responsibilities in the field of infrastructure development, human resource development and socio-economic development, the Gadjah Mada University and EIIP/ASIST-AP took this opportunity to assist in the decentralization efforts. By strengthening the capacity at the local level to identify, design, implement and maintain infrastructure priorities, knowledge would be gained about the structure, functioning and responsibilities of local governments that would be useful for the replication of IRAP in other parts of Indonesia.

A series of orientation workshops and training were conducted during the last months of 2001 to introduce IRAP to local counterpart staff and train them in data-collection, road inventory, and mapping activities. A regional workshop was held in early March 2002 to introduce procedures for prioritisation. This workshop was attended by a number of representatives from other Kabupaten that have shown interest in the approach.
For the establishment of a Rural Infrastructure Coordination Forum, the EIIP/ASIST-AP organised two workshops on the role of Rural Infrastructure Development in employment creation and poverty alleviation.

Held in November 2001, the first workshop was on Labour-based Technology and intended to explore priorities and strategies for using infrastructure development to create employment and alleviate poverty in Indonesia. The workshop identified areas for ILO's assistance at the national level in developing strategies and programmes for resource-intensive public works and at the national agencies in the transfer of certain responsibilities to the local governments.

The second workshop titled "High-level Consultation Meeting on Rural Infrastructure Development in the context of Employment Creation and Poverty Alleviation" was held in Jakarta on February 2002 to review the work done earlier on strategy development and the results of the different stakeholder's workshops at national and local level. Over 50 senior government officials representing 15 ministries attended the meeting.

Adapting to climate change and crises
From its early emergency response activities, the ILO’s Tsunami Response programme has grown into a full-fledged integrated development programme centred on relevant parts of ILO’s core mandate. The focus is on “Getting people back to work, empowering the socially disadvantaged, and recovering the Acehnese and Nias economy”. The programme is built on the principles of local ownership, sustainable and equitable socioeconomic development, and institutional capacity building, the starting point being the needs of the people and their communities. The ILO Programme aims to leave behind sustainable institutions and enhanced capacities of partners.

From 2005 to 2008, the Aceh-Nias Tsunami Response Programme utilized the ILO’s international expertise on employment to address immediate and development concerns regarding employment issues. Growing out of a series of early steps after the tsunami, its development was based on inter-agency work on damage assessment and strategic planning for emergency response, rehabilitation, and reconstruction, which then served as inputs for the overall framework for recovery and reconstruction.

During the recovery and reconstruction phases, the ILO implemented an integrated programme to promote employment and livelihoods which addressed key lines of work in the areas of employment services, rural infrastructure, prevention of child labour, skills building, local economic development, and enterprise development for women and youth. The programme was implemented in partnership with UN agencies, international and national organizations.

At the end of the programme, District Public Works in Aceh Besar, Bireuen, Pidie, Nias and Nias Selatan, together with small-scale contractors, implemented the local resource-based infrastructure work in the rehabilitation of 118 km of rural roads, generating 210,000 worker days. Gradual improvements were made in the hiring of women in the road sector.

Enhancing local level access, planning and community capacity
Following the devastating tsunami of December 2004 and the major earthquake of March 2005, causing severe damages on Nias Islands and a tremendous loss of lives and livelihood opportunities as well as resulting in extensive and major damage to roads and other infrastructure, the EIIP launched a project in NAD and NIAS to facilitate the rehabilitation and improvement of the rural road network through the use of employment-intensive approaches.

Prior to the tsunami and the earthquake, many roads in the road network were in a poor condition due to a lack of maintenance. In this context, an integrated project was formulated that sought to contribute to economic recovery by improving road connectivity, providing local employment opportunities, building skills among the workers and contractors involved in road works, and strengthening local capacities in the use of employment-intensive local resource-based (LRB) road construction and maintenance methods.

The project’s basic exit strategy sought to strengthen operational capacities for planning, budgeting, programming and implementing activities related to the maintenance of the rural road network in Aceh Province, particularly through the use of employment-intensive local resource-based methods. The project supported the identification and application of options for increasing resource mobilization for the village road network and put in place effective models for the maintenance of village-level infrastructure.

The project was achieved in the two phases. The phase I of the project covered the districts of Aceh Besar, Pidie, Bireuen, Nias and Nias-Selatan. It included a major, demand-driven, capacity building component, which was strongly focused on the active involvement of communities and gave special emphasis to the inclusion of women. In 2008, the Project entered into a phase II in order to expand the capacity of district governments and small contractors to implement LRB road works.

In September 2010 Phase II was extended until June 2011 and was approved for the provision of technical assistance to put in place a basic exit strategy.

In the framework of these activities, and focused on the recovery and reconstruction activities on the Nias Islands, another project is taking place for the construction works, training and capacity building. The project, jointly executed by the ILO and the Ministry of Disadvantaged Regions, seeks to support local governments to improve rural transport networks through training programmes for local contractors and communities in the rehabilitation of 100 kms of all-weather roads and motorcycles trails, 25 bridges and 47 cultural heritage sites in 20 sub-districts.