In a written statement on Wednesday (June 29, 2016) the Asian Development Bank (ADB) director for Indonesia, Steven Tabor, announced the institution’s decision to extend USD 500 million in loans to Indonesia.
The loan is part of the Stepping up Investments for Growth Acceleration Program and aims at boosting public-private cooperation in financing infrastructure projects. According to Tabor, the decision was made based on Indonesia’s current policy reforms reducing investment constraints. The twelve economic reform packages issued by the country’s government since September 2015 underscore Indonesia’s desire to dramatically improve the investment climate, Tabor explained.
Nevertheless Tabor also pointed out that Indonesia is still ranking 109th out of 189 countries in the 2016 World Bank report on ease of doing business due to hindrances in investments such as cumbersome regulations and high costs of setting up and doing business. Public Management Economist Rabin Hattari of ADB’s Southeast Asia Department pointed out, that Indonesia needs to create new engines of growth to return to a path of higher and more inclusive growth. He sees private investment as crucial part to build up a more diverse and resilient economy.
The ADB loan to Indonesia will be complemented by co-financing of USD 224.6 million equivalents from Germany’s KfW Bankengruppe. Both institutions’ funds are already the second loans granted to Indonesia under the government’s reform program to increase investments to accelerate growth. The first phase saw the setting of higher foreign equity ceilings in land transportation, 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 has taken further steps to ease restrictions in investment, streamline processes for starting and operation businesses and widen the remit for PPPs. The third phase of the program will see further measures to expand evidence-based reforms, improve ease-of-doing business, strengthen PPPs and enhance the governments’ e-procurement system. It is to be carried out from July 2016 to June 2018.