Final project evaluation : Indonesia development studies project

The project was extremely successful, significantly improving economic policy in Indonesia in a cost-effective manner; a rough estimate places the project's benefits at $492 million vs. a cost of $21 million. Specifically, DSP improved the productivity of the GOI's National Development Planning Agency (BAPPENAS) in making sound economic policy decisions. For example, an economic model has improved BAPPENAS' capability to ensure consistency among macro aggregates and improved overall GOI decisionmaking on macroeconomic, particularly budget, issues. Policy advice and short-term studies armed policymakers with sounder bases for decisions. There are difficulties in identifying specific impacts, but policy areas where the project provided input that seems to have improved (or prevented deterioration of) GOI policy include trade, regional development, allocation of INPRES funds, regulation of foreign investment, health and education policy, and rural credit reform. Also, DSP has significantly improved the quality of the factual basis for policy decisions, leading to improved policies. The DSP's most unique contribution has been to improve the quality of statistics. The GOI, other donors, economic researchers, and the private sector all have benefitted from the "informational public goods" created by this aspect of the project. The linkage between producers and consumers of statistics encouraged better statistics production. The TA provided under the project appears to have been unusually productive. Reasons for this include: the high quality of BAPPENAS counterparts, due to advanced training in the United States; strong BAPPENAS input and management; strong sense of purpose by advisors; triangular interaction between DSP, USAID and BAPPENAS; effective means for developing good relationships between long-term advisors and BAPPENAS staff; and effective project management by USAID. The quality of USAID-provided experts and the confidence placed in them by host government officials were the keys to success of the DSP advisors. The size of the resident team (4-6 people) was appropriate. The project also contributed to the effectiveness of the rest of the USAID portfolio by putting the Mission's Economic Policy Support Office (EPSO) in closer touch with economic policy issues, contributing to USAID's ability to design an appropriate mission strategy; providing EPSO staff and mission management with opportunities to work closely with senior BAPPENAS staff, thereby creating opportunities for policy dialogue and greater responsiveness to key GOI needs; and providing linkages to BAPPENAS in the technical sectors where USAID had projects, thereby strengthening USAID links to policy formation in those sectors. Lessons learned are as follows: (1) Economic advice can have a high payoff for USAID missions; long-term advisors who can gain the confidence of economic policymakers are important to this result. (2) Economic advice need not be linked to external resources or to conditionality to be effective; indeed, some of the project's effectiveness resulted from the perception that the advice was objective and independent of other donor goals. (3) Improving the quality of government economic statistics is a neglected area for donor assistance that can have important economic payoffs. (4) USAID Missions should be cautious in supporting large economic models intended to help host government policymaking in that they require a good deal of technical input and data. Simple models are preferred; if need be, these can gradually be made more sophisticated.