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Innovation, partnerships and funding: insights from Palladium's Indonesia country director

This post, originally authored by Lisa Cornish on 17th March 2017, is republished with permission from Devex.

For the past four years, Oliver Mathieson has been sitting at the center of donor programs as Palladium’s Indonesian country manager. Credit:

Palladium is one of the globe's largest organizations working to support bilateral donors in managing, implementing and monitoring aid programs. In Indonesia, the company supports programs for major donors, including Australia’s Department of Foreign Affairs and Trade, the United States Agency for International Development and the U.K.’s Department for International Development.

For the past four years, Oliver Mathieson has been sitting at the center of these donors’ programs as Palladium’s Indonesian country manager. During that same period, global aid programming has shifted enormously. He sat down with Devex to discuss how programs have evolved in Indonesia, why the private sector is a key partner and what challenges remain. Our conversation below has been edited for clarity and length.

Can you explain Palladium’s work in Indonesia and its importance to the organization?

Indonesia is very representative of Palladium. It’s one of the largest countries of operation for the company, and we’ve been here for about 30 years. Our work in Indonesia reflects our global business in many ways.

A large part of it is working for large donor agencies, including DFAT, USAID and DfID, which globally are our three biggest clients. All three are here in Indonesia.

We currently have 13 large donor-funded projects in agriculture, health, education, research, environment and natural resource management across the entire Indonesian archipelago.

Indonesia is an interesting country for a firm like us, for its size, its wealth and the scale of poverty as well. It’s a very big country, with 17,000 islands and a government [that] has been decentralized. Doing anything here to have an impact on large numbers is logistically a very big task. Indonesia’s problems and challenges are more magnified than any other country I have worked in.
With our bilateral clients, we help them work with the government and private sector to try and find ways to leverage resources and technical assistance to have scale, and make an impact in a large and challenging country like this. Innovation is important.

What is your role in managing the priorities of the various donors to ensure there is no overlap or repeated effort?

The donor community here is relatively small. Official development assistance in Indonesia as a percentage of gross national income is very small — it's less than 1 percent. Our donor clients are pretty good at coordinating and trying to avoid duplication or overlap.

But part of my job within our portfolio of work is to leverage, to the best of our ability, our resources and donor investment across projects to avoid any duplication. It’s never going to be perfect, but I think it works relatively well.
I think in Indonesia the challenges are at such scale that you don’t see competition or territoriality that may be seen in smaller countries with larger donor investment and influence.

The four years you have been in Indonesia have been a period of dramatic change within the aid community globally. What are some of the biggest shifts you have seen in development programs and investment in Indonesia?

The Australian aid program’s level of investment was growing significantly and then was reduced by a degree. This resulted in a reconceptualization of how Australian partners in Indonesia utilize resources within the country.
There is a focus by our bilateral donor agency clients on forming deep and lasting partnerships with Indonesia. They want to find ways to help support and accelerate reforms coming from the government and become better aligned with government priorities, allowing them to respond flexibly to areas of government where they see a common interest to support.

As a result of this common interest, there are more programs coming out that reflect these links. With DFAT, it is a facility style structure, where there is less of a long term plan with set goals. Instead, they broadly support initiatives of the government and private sector to add value to key areas within Indonesia. Within a country like Indonesia, this is a great thing.

In Indonesia, there is also a stronger focus on tech: access to technical excellence and partnerships between international institutions and Indonesia. But the biggest shift in the past four years, and one that is closely aligned with what Palladium is about, is a shift toward looking at how the private sector can be brought in to tackle challenges for which the public sector alone cannot deliver solutions.

Some of the donor funded projects we now have are very innovative, and are about looking to crystalize private investment and participation in ways that donor programs four or five years ago didn’t. That for me is exciting and a good use of taxpayer’s money.

How do you go about seeking private sector partners within aid programs?

There are a number of different ways we go about it. We work directly with businesses in Indonesia outside of the work that is funded by development agencies, helping them identify ways they can compete and grow by having a wider awareness of their role in society. This includes working with companies on corporate strategies, helping them to see ways to sell products to poorer segments of society and innovating their supply chain to help them grow and become more competitive, while having a positive impact on society.

We also have a platform in Indonesia with the government called Indonesia Mampu. This is a partnership with the National Team for the Acceleration of Poverty Reduction, a government agency that sits under the Vice President’s office. We are working to help the government and businesses to understand ways partnerships can tackle major societal problems in Indonesia. This is not funded by donors. It is something we are doing in partnership with the government.

There is a third way we work with businesses here. We get contracted to provide training, technical support and research for businesses that helps advise on shared value business approaches.

Within our international development portfolio work, we have programs working with a range of businesses. One DFAT-funded program called PRISMA, Promoting Rural Incomes through Support to Market in Agriculture, has been an inspired investment, enabling agriculture in eastern Indonesia. It has exceeded expectations and is on track to support 300,000 smallholder farmers to improve their incomes by at least 30 percent through a range of services — training, finance, seeds, etc. We currently have 47 large firms we are working with to improve their businesses while improving the national economy.

Do donor governments working in Indonesia have differences in programs and priorities within the country?

Sectorally, there are differences. DFAT has withdrawn from health here, but that is an area that USAID has a strong focus on — infectious diseases and maternal health are priority areas.

Education is an area where donors have shifted away from building primary schools and primary education support toward more strategic investment in Indonesia. USAID, for example, focuses on higher education, research and workforce development.

In the governance space, DFAT is still quite strong. Economic governance, sub-national governance, empowering civil society — while this is an area USAID has retreated from.

Norway is investing a lot in [preventing] deforestation and mitigating the effects of palm oil [production]. I can speak less about the Japanese, Germans and others, who also have aid programs operating in Indonesia.

You are working with USAID on aid programs and they are expecting budget cuts under the new U.S. administration. How would you work with the donor and recipient country to transition USAID projects operating in Indonesia, if needed?

At this stage, it is too early to know what is going to happen to the State Department’s budget, including the nature of cuts and where they are going to happen. I have no insight into that. We will hear in due course as things develop.

But we are a partner of the Australian government here and AusAID, which has now been merged into DFAT, went through reform and a reduction in budget. When this happened, we went through all the work we were doing together very closely, to try and identify areas for savings and efficiencies.

When these things happen, it is very difficult for our clients. We have to be supportive and help be a part of the solution and not the problem. We work in partnership with them to reprioritize programs and look for efficiencies, and we will take the lead from USAID if that does happen and help them to reduce resource levels while still maintaining high impact.

In many areas, USAID is wanting to move to increased private sector partnership on funding. They are about to launch a maternal health program in Indonesia and a major component of it is leveraging private capital investment. USAID are already moving down this road, and if budget cuts are fast tracked, then this is something Indonesia would be prepared for.

For many Indonesia-based businesses, this change is a good thing. They gain new knowledge and expertise through these partnerships, which can create new opportunities for them. It can be better than capital investment.

What are the major development challenges that you believe need to be tackled within Indonesia?

Maternal health in Indonesia is way behind where it should be for a country with the per capita GDP it has. Childhood stunting is also very bad here. The impact of this on lifelong expectations, capabilities and productivity of children growing up and contributing to society is quite profound.

There are also interesting areas around electrification and helping remote communities get access to electricity and energy. There are opportunities to significantly impact livelihoods.

Workforce development is a major constraint in Indonesia. Efforts are focused on helping to create systems that better equip people entering the workforce or can upskill those in the workforce, to grow the economy. The challenge is that many of the government responsibilities associated with this lie in different areas.

The government has yet to be able to tackle hard nut issues such as these. I would hope and believe there is intention from our donor partners and the private sector to try and help Indonesia catch up on areas it is behind with.

What programs is Palladium working on in Indonesia that you believe will make a big impact on the country?

I am very excited about the programs, partnerships and opportunities that are coming out of Indonesia Mampu. We have now got momentum behind this, and there are new challenges to tackle, which we are discussing with the government.

There are a range of new opportunities for collaborations between business and the government. For me it is exciting to have businesses that are keen to work with this model and are proactive partners with government. This creates great opportunities for what can be achieved in Indonesia from 2017 and beyond.