Indonesia and ADB

ADB's Work in Indonesia

Indonesia was a founding member of the Asian Development Bank (ADB) in 1966. Today, the country is ADB’s sixth largest shareholder and one of its largest sovereign borrowers.

Indonesia has made remarkable development strides in the 21st century, including sustained economic growth and significant reductions in poverty. An upper middle-income country, Indonesia aspires to be a high-income country by 2045, while avoiding the middle-income trap. The country’s progress is, however, at risk of reversal because of the impacts of the coronavirus disease (COVID-19) pandemic on lives and livelihoods. Public health measures and expanded social and economic assistance are among the near-term priorities. Then, as part of a sustainable economic recovery, Indonesia must overcome its longstanding development challenges, including developing human capital, boosting competitiveness, managing climate change and disaster risks, and achieving environmental sustainability. ADB operations in Indonesia are guided by the country partnership strategy covering 2020–2024, which aims to support inclusive, competitive, and sustainable development.

Since 1966, ADB has committed sovereign and nonsovereign loans, grants, and technical assistance totaling $43.37 billion for Indonesia.

Downtown Jakarta, Indonesia.

In April 2020, ADB committed $1.5 billion of countercyclical support for Indonesia under the COVID-19 Active Response and Expenditure Support Program. The program supports the management of the COVID-19 outbreak and mitigation of the socioeconomic damages caused by pandemic-related restrictions. As part of program implementation, a country engagement framework has been established between ADB and the government, private sector, and civil society that focuses on policy dialogue, monitoring, and reporting of the government’s countercyclical strategy and measures.

Indonesia has 40% of the world's geothermal resources. Developing it will help meet its target of reducing 30% CO2 emissions by 2030.

In August 2020, ADB committed $300 million to support the expansion of Indonesia’s geothermal generating capacity to contribute to the sustainability, resiliency, and sufficiency of the electricity system. The loan provided funding to commission an additional 110 megawatts of power in Central and West Java.

In September 2020, ADB committed $500 million to support reforms in disaster risk management and health services, helping manage the fiscal risks from future disasters caused by natural hazards and pandemics. The reforms will strengthen the resilience of Indonesian institutions and communities and reinforce the government’s response to future pandemics.

In December 2020, ADB committed $600 million of results-based lending to provide sustainable, equitable, and reliable access to electricity for people in Kalimantan, Maluku, and Papua. On top of strengthening and expanding the power distribution network, the program aims to increase the use of renewable energy, strengthen institutional capacity, and enhance monitoring for social impact and gender inclusion in the State Electricity Corporation’s operations.

Also in December 2020, ADB committed $500 million of policy-based lending to support the government’s ongoing efforts to enhance financial inclusion in Indonesia. This includes access to finance by micro, small, and medium-sized enterprises (MSMEs) and marginalized groups including women and youth.

Electronics engineering students of Batam State Polytechnic design their own printed circuit boards at one of the campus' numerous electronics labs

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments in loans and equity investments from ADB’s own funds in 2020 amounted to $1.4 billion for 38 transactions in economic and social infrastructure, finance sector, and agribusiness.

ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2020, ADB mobilized $1.9 billion of long-term project cofinancing and $3.3 billion of cofinancing through its Trade and Supply Chain Finance Program and Microfinance Program. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $14.3 billion as of 31 December 2020.

In 2020, commitments from ADB’s own funds amounted to $15 million for a dairy farmer support and food security project in Indonesia. Total outstanding balances and commitments of ADB’s nonsovereign transactions in the country as of 31 December 2020 was $1.3 billion, representing 9% of ADB’s total nonsovereign portfolio.

Financing Partnerships

Financing partnerships enable ADB’s financing partners, governments or their agencies, multilateral financing institutions, and commercial organizations to participate in financing ADB projects. The additional funds are provided in the form of loans and grants, technical assistance, and other nonsovereign cofinancing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee cofinancing, and cofinancing for transactions under ADB’s Trade and Supply Chain Finance Program and Microfinance Program.

ADB began cofinancing operations in Indonesia in 1973. Since then, sovereign cofinancing commitments for Indonesia have amounted to $10.71 billion for 56 investment projects and $233.85 million for 120 technical assistance projects. Nonsovereign cofinancing for Indonesia has amounted to $7.26 billion for 20 investment projects and $0.95 million for two technical assistance projects.

In 2020, Indonesia received a total of $3.2 billion loan cofinancing from the Government of Australia, the Asian Infrastructure Investment Bank, the Clean Technology Fund, the Japan International Cooperation Agency, and Kreditanstalt für Wiederaufbau for three investment projects; and $6 million grant cofinancing from the Asian Clean Energy Fund and the Japan Fund for Poverty Reduction for one investment project.

A summary of projects with cofinancing is available at Cofinancing: Indonesia.

Operational Challenges

Delayed economic recovery beyond the COVID-19 pandemic may jeopardize Indonesia’s ability to achieve its National Medium-Term Development Plan for 2020–2024, including green growth targets. A lack of coordination among government ministries and between central and subnational government levels, combined with capacity gaps that could be accentuated by the pandemic, may affect ADB project preparation and implementation.

ADB and the government have reinforced measures to strengthen project preparation and implementation by addressing systemic issues and taking into account the need to make adjustments under COVID-19 protocols.

Future Directions

ADB operations in Indonesia are guided by the new country partnership strategy covering 2020–2024, which aims to support inclusive, competitive, and sustainable development. The strategy is geared toward helping Indonesia emerge stronger from the COVID-19 pandemic by focusing on three strategic pathways: improving well-being, accelerating economic recovery, and strengthening resilience.

The ASEAN Infrastructure Fund is a financing vehicle created to support green and inclusive infrastructure in Southeast Asia.

ADB investments will advance gender equity and social inclusion, strengthen governance and institutions, promote digitalization and technological transformation, enhance local and regional economic development, extend regional cooperation and integration, and support attainment of the SDGs.

ADB will leverage its financing by attracting private sector investment, catalyzing official cofinancing, and applying innovative financing approaches. It will also maximize synergies between sovereign and nonsovereign operations, including the promotion of public–private partnerships in Indonesia.