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MErvDRANIUM OF UNDERSTANDING BE'IWEEN

THE GOVERNMENI' OF THE REPUBLIC OF INOONESIA
AND

THE GOVERNMENI' OF THE UNITED STATES OF AMERICA
ON THE USE OF THE SALES PROCEEDS OF CCMMJDITIES UNDER
THE PL 480 TITLE I AGREEMENI' OF JUNE 16, 1987
AS AMENDED ON SEPTEMBER 3, 1987
AND OCTOBER 30, 1987
WHEREAS , an Agree.rrent was signed on June 16, 1987 and arrended on
September 3 and October 30, 1987 between the Governrrent of the
Republic of Indonesia and the Government of the United States of
.Arrerica for the sale of agricultural comnodities under PL 480 Title
I, arrounting to US$31,5 million, herein referred to as "the Agreement";
WHEREAS, in accordance with the Agreement , the Government of the
Republic of Indonesia agreed to undertake self-help measures for
agricultural developrent , rural developrent, nutrition, health and
population planning , in a manner designed to increase the access of
the poor in Indonesia to an adequate, nutritious and stable food
supply,

and also to adequate health and population planning
facilities;
WHEREAS , two types of activitie s ｾｲ･＠
identifie d in the Agreement
as self-help measures for which the Governrrent of the Republi c of
Indonesia agreed to provide adequate financial, technical and
managerial resources for their implementation;
WHEREAS FURTHER , as specified in the Agreed Minutes to the Agreement
signed on June 16, 1987, and to its arrendrrents signed on September
3, and October 30 , 1987, the Representative s of the Government of
the \:. _iced States of .Arrerica and the Government of the Republic of
Ind,...,r:'.)sia 'WOuld c.."'-..::nplete work on a Meirorandum of Understanding (MOU),
covering the se lf-help measures or activities to be carried out under
the Agreement;
NCM THEREFORE , the Parties agree to the following:
1.

Agriculture and Rural Sector Support Program

Objectives:

To support a policy agenda of the Governrrent of Indonesia
which includes;
( 1) the creation of the conditions conducive t o
expanding and diversifying the agricultural sector, ( 2) planning for
the initiation of steps to expand and improve the efficiency of
dcmestic financial markets, and (3) the identification of alternative
management strategies to im;'rove etficienc"
in the Ministries of
Agriculture and Finance.
Ben chrrarks :
The Departments of Agricult ure and Finance will s t rive
to unde rtake the following self-help meas ures in support of t hese
obje ctive s by the e nd of I ndonesian Fiscal Ye ar 89/90.

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Objective ( 1), pranote agricultural diversification, related agro
processing and rrore optimal use of resources through increased
efficiency and stronger participation by the private sector:
Benhmarks:

( i)

establish input and output prices at levels that encourage both
efficient and expanded production of secondary crops;

(ii) reduce transportation and licensing costs associated with food
and export crops processing and trade, thereby stimulating
demand for and production of processed agricultural product;
Objective ( 2), expand and increase the efficiency of financial
markets thereby increasing capital for investrrent:
Benchmarks:
( i)

expand banking services at unsubsidized cost levels, including
the maintenance of market-oriented interest rates and the
drafting and introducing of legislation per:mitting the expansion
and extension of services to both urban and rural areas;

(ii) pranote

scherres that will help rrobilize funds for capital
markets, thereby providing additional resources for investrrent,
including the drafting and introduction of legislation providing
a legal frarrework for establishrrent of an effective pension
and insurance administration;

Objective ( 3), introduce institutional refonns required: (a) to
improve planning and implerrentation of policies and programs airred
at agricultural diversification, and (b) to improve rnanagerrent of
policy changes related to dorrestic resource rrobilization.
Benchmarks:
( i)

Within MRD (Agency for Agriculture Research and Developrent)
establish a staff planning unit to review coom:xlity mandates
and propose alternative approaches, develop a rnanagerrent
information system to rronitor research performance, and implerrent organizational changes required to improve managerrent and
staff performance;

(ii) Agricultural Planning: Establish a 'WOrking group to provide

recoomendat ions on ways to improve the planning, rnanagerrent
and administration functions in the Departrrent of Agriculture;
prepare an analysis of international markets for selected
agricultural ccmnodities; prepare a plan to carry out environrrental
impact
assessments
throughout
the
Departrrent of
Agriculture;

... -

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(iii)Departrrent of Finance: Establish units responsible for developrrent and supervision of the pension and insurance industries:
develop ｲ｡ｮｾ＠
plans and training programs for Departrrent
of Finance Officials responsible for pension and insurance
administration.

In conjunction with the agreed policy objectives, the Program will
provide resources for agreed expenditure levels for selected budget
categories of the Departrrent of Finance and the Departrrent of
Agriculture budgets consistent with these policy objectives.
US$21. 315 million will be attributed fran sales proceeds under this
Agreerrent to the Secretary General's off ice, the Directorate General
of Food Crops, the Agency for Agricultural Research and Developrent,
and the Agency for Agricultural, &lucation, Training and Extension
within the Departrrent of Agriculture over the period, !FY 87 / 88,
88/89 and 89/90 to support those self-help rreasures being carried
out under its direction. Additional Agencies within the Departrrent
of Agriculture may also receive funds based on a review of need by
AID and the GO!.
US$1. 5 million will be attributed fran sales proceeds under this
agreerrent to the Secretary General's Office, the Directorate General
of Monetary Affairs and the Office of &lucation and Training within
the Departrrent of Finance over the period, !FY 87 / 88, 88/89 and !FY
89 /90 to cover the costs in support of these self-help rreasures being
carried out under its direction.
2.

The Expanded Program on Irrmunization

Objective:
To provide for the increased demand for imnunization
against viral diseases such as diphteria, rreasles, polio, tetanus
as ｾＱ＠
as tuberculosis which is a result of the Governrrent of Indonesia's successful extension of the Expanded Program on Irrmunization.
The continuous supply of required vaccines is a necessity for the
long-term viability of the Program. Sales proceeds fran the Agreerrent
will be used to supplerrent funds carmitted for the local procurerrent
of BCG, DPT, Dr, and 'IT vaccines.
Benchmarks:
The Ministry of Health intends to take the following
steps to irrplerrent this self-help rreasure:
a. October 1987 / March 1988: The Ministry of Health guarantees the
availability of bacterial vaccines through negotiated contract
with the rranufacturer. Provincial cold roans receive vaccine
directly fran the rranufacturer.
b. April 1988/March 1989: The Ministry of Health guarantees the

availability of bacterial vaccines through negotiated contract
with the rranufacturer. Provincial cold roans receive vaccine
directly fran the rranufacturer.

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c. April 1989/March 1990: The Ministry of Health guarantees the
availability of bacterial vaccines through negotiated contract
with the manufacturer. Provincial cold roans receive vaccine
directly fran the manufacturer.
US$2. 7 million of the sales proceeds under the Agreement will be
attributed to the Departrrent of Health, Directorate General for
Carrnunicable Disease Control and Environrrental Health, Directorate
of Epidemiology and Irrmunization over the period, IFY 1988/89 and
IFY 1989/90.
IN WITNESS
WHEREOF, the Representatives of the Parties, duly
authorized for the purpose, have signed this Memorandum of Understanding.
DONE in Jakarta, in duplicate, on this Fourth day of January, 1988.

Signed
For the Governrrent of the
Republic of Indonesia

Signed
For the Governrrent of the
United States of Arrerica