The Development Challenge
Indonesia, home to the world's fourth-largest population, faces stubbornly high rates of communicable diseases and a steep rise in non-communicable diseases. While the country has made gains in several key health outcome areas, it continues to lag behind its regional and economic peers. The COVID-19 pandemic deepened existing disparities in health care access and quality and triggered the country’s worst economic crisis since the 1990s. Sweeping health sector reforms culminated in Indonesia’s ambitious Health System Transformation Agenda (HSTA). Launched in 2022, the HSTA aims to establish a well-structured, well-staffed, and well-equipped public health system that integrates and standardizes all levels of public health facilities and laboratories across Indonesia’s 6,500 inhabited islands for its 281 million inhabitants.
The Project
The Indonesian Ministry of Health sought knowledge and financial support in implementing the HSTA on an accelerated timeline, which led to the Indonesia Health Systems Strengthening (HSS) Project. Approved by the World Bank Board in December 2023, the project consolidates resources from multiple development partners to help Indonesia achieve universal and equitable availability and sustainable use of medical and laboratory equipment nationwide.
This US$4 billion initiative brings together four multilateral development banks (MDBs), with the Asian Infrastructure Investment Bank (AIIB, US$1 billion), the Asian Development Bank (ADB, US$ 650 million), and the World Bank (US$1.5 billion) as joint co-financiers, while the Islamic Development Bank (IsDB) provides parallel co-financing of US$ 846 million. The World Bank plays a coordinating role among these partners. HSS is not only the largest MDB project in Indonesia’s history, but it is the largest World Bank investment in the health sector globally, the largest co-investment by MDBs in the human development sector, and the largest medical equipment procurement program under any MDB financing globally.
Results and Impact
By pooling financing from multiple MDBs, HSS addresses health equipment gaps that have long constrained sustainable service delivery in Indonesia’s health sector at scale. Designed for affordability and to meet the needs of remote areas, HSS ensures that over 300,000 community health posts, 10,000 primary health centers, and 560 hospitals have the equipment, staff skills, utilities, and record-keeping in place to deliver quality health care.
A series of innovations on medical equipment procurement under HSS builds on global lessons and best practices to help Indonesia achieve universal health coverage through equitable access, increased availability and sustainable use of this equipment nationwide. All four MDBs are fully aligned behind this objective, exemplified by the joint application of unprecedented procurement innovations. The scale and scope of financing, which was created by MDB co-financing, combined with extensive vendor engagement processes, have attracted leading industry players and created strong support for pioneering technical design and implementation approaches. HSS also realizes cost savings in procuring medical equipment efficiently, transparently, while being fully aligned with World Bank procurement guidelines. These design innovations include large-scale, centralized procurement through the Ministry of Health to improve efficiencies, leverage economies of scale, and ensure affordability and consistency in recurrent costs and maintenance contracts. This approach secures the long-term functionality of medical equipment, even in remote areas. Conversely, the rollout of equipment is staggered to ensure that remote areas, which may require more time to prepare for new equipment, are ready.
Role of Co-financing
This project is a model of MDB coordination and innovation to deliver greater impact and scale for clients. During the six months it took to prepare HSS, the four co-financing MDBs aligned their operations and requirements and developed a unified communication channel to minimize the administrative burden on the Indonesian Ministry of Health as the project’s implementing agency.
The World Bank and AIIB used their existing Co-financing Framework Agreement to enable AIIB alignment with World Bank rules and regulations. The ADB and World Bank also drew on their existing Procurement Framework Agreement and Project Implementation Agreement, as well as a supplemental agreement they created and signed on core non-procurement aspects of project implementation and fiduciary arrangements. This full-fledged coordination approach between the World Bank and ADB for HSS has been formalized with the recently approved Full Mutual Reliance Framework. These existing framework agreements allowed streamlined procurement preparations and enabled consolidation of resources to procure large medical equipment, fully aligned with the World Bank procurement guidelines. This project offers a unique, but replicable, precedent on how MDBs can collectively think big and enact solutions to some of the world’s greatest challenges.