Indonesia - Research and Innovation in Science and Technology Project

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB5871 Project Name Research and Innovation in Science and Technology (RISET) Region EAST ASIA AND PACIFIC Sector General Education Sector Project ID P121842 Borrower(s) REPUBLIC OF INDONESIA Implementing Agency Republic of Indonesia The State Ministry of Research and Technology Contact Person: Mr. Carunia Mulya Firdausy Telephone No.:(62 21) 3102062 Fax No.: (62 21) 310 2046 Email:dep-dm@ristek.go.id Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared May 14, 2010 Estimated Date of Appraisal Authorization January 2011 Estimated Date of Board Approval March 2011 1. Key development issues and rationale for Bank involvement Indonesia has re-emerged after the Asian financial crisis with increasing regional and global standing. Despite the recent global economic slump, Indonesia continues posting significant growth, and the national economy is expected to grow by 5.5 percent in 2010 and by 6 percent in 2011. Building on its existing economic and political stability, Indonesia today has the opportunity to create a virtuous cycle of sustainable and inclusive growth. But new engines of growth are needed to capture such opportunity. Currently, Indonesia is failing to keep up with other emerging economies in terms of export sophistication and the knowledge economy. High- technology exports only account for 11 percent of manufacturing exports, far from the 31 percent average in East Asia, 30 percent in China or 52 percent in Malaysia and the Philippines. Indonesia ranks 103 out of 146 countries in the Knowledge Economy Index, also lagging behind its neighbors. To step up the income ladder, Indonesia will need to shift the sources of exports/products competiveness from commodities and natural resources and low cost production to high value added products in the future. The preparation of this shift will first need to build the overall innovation capacity for the country, including human resources, infrastructure, and most importantly, an enabling policy framework for the national innovation system. In a recent speech the president of the Republic of Indonesia highlighted the importance of innovation for the country for its long term growth, making it a priority for his second term of presidency. To support this vision, the