MANILA, PHILIPPINES – The Asian Development Bank (ADB) is providing a $400 million loan to help Indonesia put in place regulations and infrastructure needed to drive faster and more inclusive growth.
"Weak transport connectivity and poor logistics are weighing on growth and the country's ability to reduce regional development gaps and poverty rates," said James Nugent, Director General of ADB's Southeast Asia Department. "The loan supports policy reforms that will help unlock obstacles to scaled up investments in this sector."
After booming in recent years, Indonesia's economy has started to slow down due to slower than expected recovery of the country's exports. In addition to external economic developments, substantial infrastructure gaps, such as deteriorating roads, congested ports, weak logistics systems, and an underdeveloped interisland transport system, all weigh on growth prospects. These shortcomings have caused higher transport and logistics costs, unbalanced regional development, and limited integration of Indonesia's manufacturing sector into international production networks.
The policy-based loan from ADB covers the second phase of a program which aims to strengthen regulatory frameworks for transport and logistics, increase investments in the transport sector, boost domestic connectivity, and enhance international connectivity by making the country's ports more efficient in handling traffic and trade volumes.
Another key goal is to improve interisland links between poorer eastern parts of the country with growth centers and markets in the west, resulting in more economic opportunities and reduced poverty.
ADB's loan from ordinary capital resources will be supported by cofinancing, with $300 million from World Bank, $200 million from Japan International Cooperation Agency, and $100 million from Agence Française de Développement.