MANILA, PHILIPPINES - The Asian Development Bank (ADB) will provide a $200 million loan to Indonesia for an ongoing program designed to remove obstacles to infrastructure investment.
ADB's Board of Directors approved the loan for the third and final phase of the Infrastructure Reform Sector Development Program. It follows earlier assistance of $680 million to support government actions aimed at addressing constraints to investment, and to encourage greater private sector participation.
"The goal of the program is to improve the climate for infrastructure investment, resulting in more financing from both public and private sectors, which will aid the government's efforts to boost growth and lower poverty through economic and employment opportunities," said Anthony Jude, Director in ADB's Southeast Asia Department.
The program, which began in 2006, has focused on both sector and cross-sector reforms including measures to encourage public-private-partnerships (PPPs), viewed as crucial for Indonesia to meet its infrastructure investment requirements. The estimated investment for 2009-2014 is about $140 billion. While investment has picked up markedly since the Asian financial crisis of 1997 to 1998, it is still not enough to support the Government of Indonesia's goal of achieving annual growth exceeding 6%.
The third phase incorporates a broad range of policy reforms covering regulatory changes affecting the transport, energy, water and telecommunications sectors, and the development of a legal framework for PPP projects.
"The program has played an important role in developing an enabling environment for PPPs, including establishing financing mechanisms, and a number of PPP projects in the transport, energy and water sectors have now been initiated," said Mr. Jude.
The reforms, over time, will also help reduce the government's fiscal burden by allowing it to gradually reduce and remove fuel subsidies, and recover costs in all infrastructure sectors.
The loan from ADB's ordinary capital resources has a 15-year term, with a 3-year grace period and an annual interest rate determined in accordance with ADB's LIBOR-based lending facility. Indonesia's National Development Planning Agency, BAPPENAS, is the executing agency for the program.