[Kabar-indonesia] ADB offers RI $4 billion in loans and grants

[Joyo at aol.com]

The Jakarta Post
Wednesday, November 1, 2006

Development bank offers RI $4 billion in loans and grants

Andi Haswidi, The Jakarta Post, Jakarta

The Asian Development Bank (ADB) has unveiled a four-year
lending plan called the Indonesia Country Strategy and
Program (CSP), with US$4 billion in loans and grants being
set aside for the 2006-2009 period to help the country
achieve sustainable growth and enhance social development.

"The government is on the right track with its reform
program and the ADB stands ready to offer its full support,"
ADB vice president C. Lawrence Greenwood Jr. told reporters
Tuesday.

The plan includes $3.82 billion in loans and $47.6 million
in grants that will focus on infrastructure development,
improving the financial sector, supporting decentralization,
and accelerating efforts related to the achievement of the
Millennium Development Goals (MDG) and environmental
protection.

The ADB's assessment identified a number of constraints on
development in Indonesia that the CSP aims to help the
government address.

These constraints included the absence of stable and
consistent legal and regulatory environments, the
proliferation of local taxes and ordinances, low
infrastructure provision, relatively small capital markets
and non-bank financial institutions, uncertainty regarding
the administrative hierarchy, and weak capacities at the
local level.

"Non-banking sectors such as insurance and pension funds are
important for a country like Indonesia as they provide long-
term savings that are required for infrastructure
investment," Greenwood said of the role that could be played
by the country's non-bank financial sector as a source of
financing.

On Nov. 1-3, the government will hold the Infrastructure
Conference and Exhibition 2006 with the aim of attracting
investors to put their money into its infrastructure
projects.

Assuming that the government succeeds in attracting
investors, ADB principal economist Ramesh Subramaniam said
that Indonesia's economic growth could average 7 percent
between 2006-2009.

"This is an exciting time for us because the government has
decided to increase development spending. Of the $4 billion
in loans, around $1 billion would be allocated to support
the government's infrastructure program," Greenwood said.

An ADB report shows that its active Indonesia portfolio in
2006 saw total new loans of $2.7 billion for 37 projects.
This compared with over $1.6 billion for 32 projects that
failed to be disbursed between 2003 and 2005.
"The situation regarding undisbursed loans has actually
improved dramatically in the last four to five years here in
Indonesia in terms of ADB involvement," Greenwood said.

"The $1.6 billion, I don't think it's a bad number. Keep in
mind that as we approve loans, the projects usually take 6
to 7 years to actually accomplish."

When asked about the growing skepticism in some quarters on
the efficiency of international financial institutions, such
as the ADB, Greenwood said the ADB was not concerned about
improving its image, but rather would focus on delivering
more effective programs.

"Less about improving our image and more about doing the
right thing for Indonesian," he said.

If taken up by Indonesia, the loans would have an eight-year
grace period and carry a 32-year maturity profile.

Apart from providing loans, the ADB extended some $300
million in grants for Aceh and Nias after the tsunami
disaster, and another $10 million for the victims of the
recent Central Java and Yogyakarta earthquake.

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Joyo Indonesia News Service
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