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ADB agrees to extend $500 million loan to Indonesia

The Asian Development Bank (ADB) has agreed to extend US$500 million in loans to Indonesia to boost public-private cooperation in financing infrastructure projects.

The bank agreed to extend the loan after the Indonesian government implemented a series of economic policy packages to reduce investment constraints, ADB Director for Indonesia Steven Tabor said in a written statement released on Wednesday.

“The 12 economic reform packages issued since September 2015 underscore the government’s desire to dramatically improve the investment climate,” he said.

The loan, which is ADB’s second under the Stepping up Investments for Growth Acceleration Program, will be complemented by co-financing of $224.6 million equivalent from Germany’s KfW Bankengruppe. KfW provided parallel financing of $245 million for the first stage of the program.

Cumbersome regulations and high costs of setting up and doing business have hindered new investment, with Indonesia ranking 109th out of 189 countries in a 2016 World Bank report on ease of doing business, well below regional neighbors, he said.

Meanwhile, Rabin Hattari, Public Management Economist at ADB’s Southeast Asia Department, said Indonesia needs to create new engines of growth to return to a path of higher and more inclusive growth.

“Private investment will be critical to fostering a more diverse and resilient economy,” he said.

The first phase of the government’s reform program saw the setting of higher foreign equity ceilings in land transport, shipping and management of ports, the establishment of a dedicated office to formulate land acquisition policy, and the development of a framework for e-procurement.

The second phase of reforms has taken further steps to ease restrictions on investment, streamline processes for starting and operating a business, and widen the remit for PPPs.

The third phase of the program to be carried out from July 2016 to June 2018 will see further measures to expand evidence-based reforms, improve ease-of-doing business, strengthen PPPs, and enhance the governments e-procurement system.

Source: ANTARA News