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Regional Economic Development (RED) Programme 1
Regional Economic Development (RED) Programme
Approach, Achievements and Lessons Learnt in Nusa Tenggara Barat (NTB)

2 Approach, Achievements and Lessons Learnt in Nusa Tenggara Barat (NTB)

Table of Content
1. Development Challenge and Programme Objective 5
2. Programme Approach and Focus of Interventions 7
3. Overview of Results and Achievements 11
4. Outlook and Lessons Learnt 15

5Regional Economic Development (RED) Programme
Since 2004, the Regional Economic Development (RED) Programme is a
cooperation between the Indonesian Ministry for National Development Planning
(BAPPENAS) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ),
working on behalf of the German Federal Ministry for Economic Cooperation and
Development (BMZ) with a co-financing of the Australian Department of Foreign
Affairs and Trade (DFAT). RED complements the efforts of the Indonesian government
in fostering sustainable economic growth. With a comprehensive approach using
different instruments for the promotion of economic development involving the public
and private sector, the programme aims to strengthen the competitiveness of selected
sectors and regions and thus contribute to employment creation and income generation
in Small and Medium Enterprises (SMEs).
As an emerging economy and member of the G20 countries, Indonesia is one of the
most influential economies in the region. In previous years, the country has shown
macro-economic stability and achieved robust yearly growth rates of around 6%
which is however based to a large extent on an unsustainable use of natural resources.
Furthermore, pronounced regional disparities, especially between the dynamic provinces
in Java and remote parts of the country, continue to hamper a broad poverty-oriented
Development Challenge
and Program Objective1

and environmentally sustainable growth strategy. Up to now, only few public and private
stakeholders at local and provincial level are able to develop and implement coherent
measures of regional promotion of economic development independently. This is made
more difficult by an insufficient degree of vertical and horizontal coordination between
government institutions at national and regional level in planning, budgeting, and
implementing strategic interventions.
In order to address these core problems, the main objective of RED is to improve the
framework conditions, sector programmes as well as planning and implementation
processes for regional economic development at the national and regional level, taking
into account aspects of green economic development.
RED is working with a number of tools and instruments for economic promotion –
both for sector support as well as for improving the business enabling environment
– which are implemented in an integrated way according to the specific context of the
different locations.
After starting in 2004 with the development and testing of RED instruments in Solo
Raya, in the final programme phase RED works at the national level, in three project
locations in Central Java, West Kalimantan and Nusa Tenggara Barat (NTB) as well as
supporting the National LRED Coordination Team (TKPED) in facilitating LRED
approaches in additional 9 pilot regions across Indonesia.

With the RED Programme entering a new phase from 2011 to 2014,
West Nusa Tenggara or Nusa Tenggara Barat (NTB) was selected together with as the
third pilot region. At the same time NTB was also selected as pilot region for BAPPENAS
approach under the National LRED Coordination Team – TKPED (Tim Koordinasi
Pengembangan Ekonomi Daerah). The main rationale was to replicate RED Approach
already developed and implemented in Central Java and West Kalimantan but now
under the national coordination approach. The main thrust of the programme was on
developing regional economic development of West Nusa Tenggara through promotion,
marketing and branding of Lombok Island.
Under TKPED the two commodities of Jewelry in Mataram City and Pottery in West
Lombok had been pre-selected in order to improve the coordination between support
activities from different line ministries at the national level with programmes from the
provincial and district government as well as with other stakeholders from the private
sector and the civil society. RED as a joint programme of BAPPENAS and GIZ strongly
supported the development of these clusters and facilitated the coordination under
TKPED. In addition, under the objective and indicator framework of RED, other
LRED Instruments for increasing the regional competitiveness were developed with
Program Approach and
Focus of Interventions2

local partners. In 2013, with the integration of a Green Economy approach, Sustainable
Tourism Development was chosen as a sector with strong linkages to the handicraft sectors
as well as with other local suppliers.
As shown in the figure above, the cornerstone of the RED approach in NTB was the
development of the Pottery and Jewelry Value Chain under TKPED. The starting point
for both clusters was a Regional Strategizing process, based on a comprehensive value chain
analysis a series of public private dialogue workshops as well as the use of COMPASS,
an assessment and strategy development tool. The regional strategizing process helped
to reflect on the current conditions, to create a common understanding among the
stakeholders and to help identify relevant areas of intervention. The result was a value
chain upgrading strategy or Master Plan outlining the strategic priorities as well as a joint
operational and budget plan or Financial Matrix coordinating the support activities and
budget contributions from all key stakeholders involved. A Public-Private-Dialogue Forum
was established for coordinating the implementation of the Master Plan and to provide a
platform for continuous exchange and learning. Apart from the facilitation through the
RED team in NTB, BAPPENAS played a very active role in steering and monitoring the
whole process through trainings and capacity building, regular field and monitoring visits
as well as joint trainings and exchange meetings with the other 9 TKPED pilot regions.
cross-sectoral/bee
Income Generation and Poverty Reduction for the Population
Gender Sensitivity & Environmental Friendliness
Territorial & Sectoral Competitiveness
Investment
Promotion
OSS (Mataram City+ Forum)
Regional Marketing /IDC RIA
RED VISION
sectoral approach
Value Chain Pottery Value Chain Jewelry
Green Tourism
Entrepreneurship
Link Farmers to Tourism Industry
Directional/Orientation
PPD
(Coodination)
Figure: RED Approach in NTB, 2011-2014

A number of agreed activities under the Master Plan have been directly supported by
RED or mostly through cost sharing arrangements with other partners. These include e.g.
trainings on new designs and product diversification, development of entrepreneurship
skills like bookkeeping, quality control and marketing, introduction of new technologies
and resource-efficiency measures, support for linking the local producers to international
buyers.
To complement the TKPED support for clusters a set of LRED Instruments targeting
the improvement of the Business Enabling Environment have been jointly developed in
close collaboration with the local partners. For improving the service quality in business
and licensing and Investment Promotion, the Provincial Investment Coordination Board
(BPMD) established a One-Stop Service (OSS) Forum involving all regional offices
which was formalized by Governor’s Decree. The main objective is to provide a joint
vision and operational framework and to enhance the coordination and consultation
among the OSS offices. A joint work plan on key topics like harmonization of
regulations, the institutional set up and authority delegation, technical and operational
capacities and standardization of procedures, quality of information and services was
agreed and implemented through the 9 OSS districts. Together with the University
of Mataram, the methodology and use of Regulatory Impact Assessment (RIA) was
promoted through the Forum. For supporting and facilitating the OSS Forum, RED
worked in close collaboration with GIZ Programme on Good Governance (DeCGG).
OSS Impact – Integration of Investment Services in the OSS office
Apart from local regulations, licensing procedures and investment services, the
perception of a region by external parties through Regional Marketing and Branding
is very important. Despite receiving a lot of attention as one of the most potential
tourism destinations in Indonesia, Lombok is still often perceived as ‘the sister of Bali’
or in a positive sense ‘like Bali twenty years ago’. Obviously, it makes still a lot of sense
to tap the vast tourism potential next door, but in order to step out of the shadow of
Bali it is crucial for Lombok to develop – and to communicate – its own, unique profile
and brand. For tourism development, but also beyond, from a broader perspective of
Investment Promotion. Based on the positive experience in Solo Raya and Central
Java, stakeholders like the Provincial Investment Board (BPMD), the Lombok Hotel
Association, the new Tourism Development Board and other partners including local
media agreed to join forces and to set up a Regional Marketing Team for Lombok. The
main objective was to create a common vision and understanding within and beyond
the working team and support the implementation of a joint action plan through the
development of brand proposals for Lombok as a sustainable tourism destination or to
support the creation and development of the National Geopark Rinjani, Lombok as
core sustainability brand, to be recognized by the Global Geopark Network, under the
umbrella of UNESCO.

With additional funding for the integration of Green Economy into the RED
Approach, Green or Sustainable Tourism Development was identified in late 2012 as
a sector with high relevance for the local economy as well as a good opportunity for a
more environmental friendly growth. As part of the overall RED approach in NTB, a
number of activities have been initiated with the long-term goal to develop Lombok as
a sustainable tourism destination model that can be replicated and adapted elsewhere
in Indonesia under a partnership of local partners, BAPPENAS and the Ministry of
Tourism.
After initial awareness raising and improving the public-private-dialogue through a
Tourism Forum, RED supported the Tourism Board in integrating a green tourism
perspective into the Long-Term Tourism Development Plan (RIPPARDA) 2015-
2019 for the NTB Province. In order to translate this public policy framework into a
pragmatic action plan, RED is currently facilitating the development of the Sustainable
Tourism Master Plan for Lombok supported by a 5-year work plan owned by local
partners from both the public and the private sector. The Master Plan will also take into
account international sustainability standards such as the Global Sustainable Tourism
Council (GSTC) standards for hotels, tour operators and tourism destinations.
In order to prove that sustainability measures also make sense from a business
perspective, a Resource-efficiency Programme for small and medium-sized hotels has
been introduced in collaboration with the Mataram University (UNRAM) and the
Lombok Hotel and Restaurant Association (PHRI). Based on individual assessments, a
pragmatic action plan was drafted addressing easy to implement measures for cost saving
and sustainability improvement. The measures like reducing energy consumption and
waste generation are implemented and monitored by a ‘green team’ in each hotel and
supported by periodic coaching.
Closely related to the TKPED support for the clusters in Banyumulek and Sekarbela,
local producer groups have been assisted to develop into Green Tourism Villages based
on their handicraft products. This initiative was developed under a Public-Private-
Partnership including Panorama Tour and Travel helping to develop and market an
attractive tourism package and the Ministry of Cooperatives and SMEs (MoCSME)
providing funding for the necessary development of basic tourism infrastructure.
Last but not least, as part of a delegated cooperation between DFAT (formerly AusAID)
and GIZ, RED helped to link local vegetable producers with hotels and restaurants of
the Lombok based tourism industry. After a brief assessment of the demand and supply
side, a first meeting between the Lombok Hotel Association (LHA) and local producers
in the first half of 2014 encouraged all parties to jointly work on this initiative which
will continue beyond the end of current RED programme. GIZ RED also completed
a study in NTT and Sumbawa to portray the constraints and opportunities in sea and
land transportation for value chain development.

Through the cooperation with our partners in implementing the
different LRED instruments under the TKPED and the Green RED approach outlined
above, the programme was able to significantly contribute to the following results, even
in a relatively short time period from 2011 to 2014.
TKPED - better coordination resulted in better services and better results
• Better needs-orientation, transparency and responsiveness, leverage of resources, etc.
• Links to international buyers
Business enabling environment
Greening the tourism value chain – some foundations laid
RAD-GRK
Lessons learnt
• TKPED beyond planning and coordination, clear objectives and don’t forget the
focus on business perspective and provide room for BDS
• Importance of close networks and common objectives (study trip)
• Synergies through complementing resources and innovative cost sharing
arrangements demand-orientation
• PPP a good example to combine the strength and weaknesses of the public and
private sector
Overview of Results
and Achievements3

1. Governor or District Heads Decrees have been issued for the establishment of the
Regional Tourism Stakeholder Forum to strengthen the tourism sector in NTB.
This achievement was the foundation to building the guidelines for the sectoral and
territorial coordination in initiating the Sustainable Tourism Master Plan (STMP)
for Lombok as the pilot project. The plan has enabled improved regional branding
and marketing material.
2. Implementation of a pilot project between farmers and hotels for several vegetable
products in 2014 has improved the relationships between farmer groups, suppliers
and hotels and created a multi-stakeholder forum.
This has resulted in contract agreement between hotel-suppliers and farmers to
provide daily hotel-market information to farmers. The contract has brought 100
Lombok farmers from Mataram City and West Lombok and 4 well known hotels in
the vegetable value chain.
3. Operational savings in electrical and water consumption in hotels and restaurants
reached up to 5% – 10% with 20 hotels committed to the resource efficiency
implementation for their daily operations.
4. Value chain, linked to international buyers. For pottery cluster, the project has
received orders from foreign buyers, such as Sara Home, reflecting its success.
5. For Jewelry, RED brought in John Hardy, an international Indonesian-based jewelry
brand, who is lending supporting in terms of marketing, design and developing a
Lombok brand. This is a good example of bringing in private sector players to play a
role in RED initiatives.

6. RED developed other instruments to support these clusters which go beyond the
individual clusters. These include OSS and regional marketing which is a mix
between product development and tourism and investment promotion.
7. In tourism, RED supported the local district in developing a long-term government
strategy, by starting a private-public dialogue between government and local tourism
stakeholders. RED also established a resource efficiency program with six hotels
as participants. Since 2014, RED has partnered with the Ministry of Tourism to
promote Lombok as a destination for sustainable tourism development. One of the
main outcomes of this initiative will be the development of a Sustainable Tourism
Master Plan for Lombok where the private sector will also be involved in the
implementation. The action plan will be finalized towards the end of the year.
8. In the sector study, the sea and inland transportations studies in NTT and Sumbawa
have provided recommendations on how to tackle constraints and opportunities for
DFAT to take necessary actions with the stakeholders in short, medium and long
term period.
The box below are several testimonies as concrete examples on how the support of the
RED Programme benefitted local SMEs as the key target group and important actor for
LRED in Nusa Tenggara Barat.
Pak Ismail (sitting, in white shirt) is a pottery designer
at Pasar Seni, Banyumulek, Lombok. After receiving
technical supports from RED in financial management,
entrepreneurship, and product development, he is able
to manage the cash flow better, make and sell new
products. “This is a few examples that I received from
RED support which is applicable to my pottery business”,
said pak Ismail. “My sales and income have increased by
10%. I’m also able to manage time better and increase
business networking”. He still needs the support on
market information. A few challenges: competing with
cheaper products from other regions, their different
designs and attractive packaging, which he will follow.
Pottery Designer

Ibu Sriyanim is the Head of Women Cooperative
in Banyumulek, NTB. After receiving technical
support from RED program, she claimed that most
beneficial assistance from GIZ RED is coaching
on her cooperative business improvement. “The
financial management training has now enable me
to keep good and neat bookkeeping, cash flow and
business administration”, she said. “My ability to
manage, separate the revenue and expenses have
resulted in an increase in my business profit (net
income) from Rp. 134,000 in 2011 to Rp. 3,500,000
in 2012”. The significant increase is mainly due to
large export orders in 2012. “Key success factors
in sustaining the growth are ability to maintain
members’ discipline and willingness to work
together based on his/her tasks”. The increase in
staff capabilities had also supported the increase
in profits. Challenges: lack of capital and how to
maintain staff (members) responsibilities in paying
their financial contributions to the cooperative.
Head of Woman Cooperative
Jewelry Maker
Bapak H. Fauzi, jewelry maker and business owner
in Sekarbela, Mataram. After receiving RED support
in product promotions, business networking and
buyers meeting, “I am able to increase relationship
with clients and the local government. GIZ RED
supports has also increased my production volume,
sales and income by approximately 20%”, said
Pak Fauzi. GIZ RED has applied good practices in:
facilitating meeting with stakeholders, training,
increasing trainees’ performance, and providing
information to wider market. He said that: “GIZ RED
is able to identify real problems and offer right
solutions that the beneficiaries needed”. Challenges
ahead: to compete with cheaper, low quality or fake
products.

The RED approach in NTB has already achieved significant results and is
well placed to also sustain its impact after the end of the current RED Programme by
the end of 2014. The partners will continue to implement the tools and instruments
developed and fine-tuned by RED interventions.
Based on the ample experiences of the project, the main lessons learned include:
For the TKPED commodities, there are some good success stories. The challenge
now is to replicate this approach to other areas and clusters without too much further
investment. The programme must be upscaled and replicated effectively.
For the business enabling environment, RED undertook a lot of capacity building and
facilitation activities between the various forums. But it did not touch the key issues
affecting the business enabling environment. As such, our partners need to play a bigger
role as one lesson learned is that there need to be continued push to ensure sustainability.
There also need to be more focus on the implementation on the value chain development
rather than on just capacity building (supply side). The demand (buyers, traders) side
Outlook and Lessons Learnt
4

should also be included in the programme and linked to secure or balance the supply
and demand.
On the capacity building to government officials, to overcome the problems from
the frequent relocation of trainees, future GIZ RED training programme should
include staffs from human resources training division to sustain the application or
replications (training) of GIZ RED instruments or best practices to other trainees.
For tourism, there is a huge challenge to develop an overall vision for NTB. The
government and tourism stakeholders must decide on their market, whether they want
to attract international tourists or specifically target Islamic tourism from the Middle
East.
Also in terms of developing the Tourism Masterplan, issues such as waste management,
education and greater engagement with local communities need to be studied closely.
These are long-term tasks that will continue beyond the RED programme but there are
still some questions on the cost benefit ratio given the need for significant investments
and support.
Recommendations
It is important that for the continued economic development of Lombok, with 3 million
inhabitants, the programme should be expanded beyond just the two clusters. More
sectors and business units must be incorporated into the programme for to have lasting
impact and poverty reduction.
The RED approach must therefore be replicated in other sectors, such as corn, seaweed
and cattle which have been targeted by the local and national governments. The tools
designed and transportation studies prepared by RED can be used to boost growth in
these sectors.
For the tourism value chain, the programme should continue with a stronger focus on
the implementation of the instruments. RED’s target group is SMEs so our support for
tourism development was not focused on the overall economy but on the green tourism
side of the equation. Tourism development is important for this cluster because for the
two clusters, most of their clients are tourists. From tourism development, came another
link, which is helping local farmers supply to the local tourism industry.
RED has just begun enabling greater facilitation between the two sectors and the
programme will continue in the next stage.

Last but not least, we would like to thank all our partners as well as the beneficiaries
and other stakeholders for the excellent collaboration in the past 10 years. Without
their efforts the achievements would not have been possible. We would also like to
thank the partners from NTB for their openness and collaboration in sharing their very
valuable experiences and lessons learnt with other regions across Indonesia, which was
an important basis for the replication and upscaling of the LRED approach under the
RED Programme. We hope that this fruitful exchange of experiences and joint learning
will continue in the future – with GIZ – but even more important with all the other
parties committed to local and regional economic development in in NTB and in the
whole of Indonesia.

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