JAKARTA (TheInsiderStories) — The Asian Development Bank (ADB) has approved a US$100 million financial intermediary loan to Indonesia, to help catalyze private sector investments in infrastructure projects, said the agency today (10/22).
“The loan will help mobilize private sector investments to develop and finance much-needed infrastructure projects,” said ADB Country Director for Indonesia Winfried F. Wicklein in an official statement on Tuesday.
He continued, ADB’ assistance will help close the financing gap in Indonesia and raise the quality and standards of infrastructure projects. The Fund rated, quality infrastructure is critical to more inclusive growth in Indonesia, requiring infrastructure services to support a modern, competitive middle-income economy and provide basic services to its people.
Indonesia’ infrastructure financing gap remains significant, with annual investment needs estimated to be more than $70 billion, said the Bank. Accelerating infrastructure development is a development priority of the Indonesian government.
Under the Leveraging Private Infrastructure Investment Project, the government will on lend the ADB loan proceeds to PT Indonesia Infrastructure Finance (IIF), through PT Sarana Multi Infrastruktur, a state enterprise. Both companies are important institutions in Indonesia’ infrastructure financing landscape that provide project finance, advisory services, guarantees, and project development support to infrastructure projects.
With ADB’ assistance, IIF will lend at commercial terms to infrastructure projects adhering to the institution’ and ADB’ standards and guidelines. The loan will support projects in health, renewable energy, telecommunication and transportation sectors.
“ADB’ assistance is anticipated to leverage a multiple of the loan amount in the form of additional private sector investments in important infrastructure projects and in doing so help deliver value for money to the government,” said ADB Country Economist Mr. Yurendra Basnett.
Last May, Indonesian government has received an fresh funding from the ADB worth of $2.6 billion to support strategic infrastructure projects during 2019. In 2018, ADB committed $3.9 billion to 19 projects in the archipelago.
According to Southeast Asia Director General Ramesh Subramaniam said one of the biggest projects targeted by ADB was the construction of two power plants, one of which was $600 million to build a power plant in Papua.
“The loan with the same value will be used to finance the gas power plant construction project in cooperation with PT Perusahaan Listrik Negara through the negotiation process in July-August,” he said.
ADB has also prepared a credit facility worth $100 million to be channeled to PT Indonesia Infrastructure Finance (IIF), he added. The loan will be used to improve Palu’ infrastructure such as roads, water sanitation and irrigation facilities which were destroyed due to the phenomenon of soil liquefaction.
Beside, Indonesia also submitted an emergency assistance loan with the Emergency Assistance Loan for Rehabilitation and Reconstruction (EARR) scheme to the ADB worth $297.91 million for the post-earthquake and tsunami rehabilitation and reconstruction project in Central Sulawesi.
It said, the loan will be divided into two projects which will be carried out by the public works and public housing ministry and the ministry of transportation.
“A loan of $188.16 million was proposed to finance the rehabilitation and reconstruction of social infrastructure and water resources, while loans for port and airport transportation infrastructure projects are worth $109.75 million,” he said.
Currently, he said, the loan proposal is being prepared by the Indonesian government and awaiting approval from the Ministry of Finance. In the near future, it expects to immediately be proposed and negotiated with the ADB.
“We will look for a more programmed approach in accordance with the core sector and government priorities to ensure a long-term prosperity partnership,” he said.
Moreover, the Indonesian government and ADB representatives in Indonesia are trying to formulate a Country Partnership Strategy (CPS) 2020-2024 and Country Operation Business Plan (COBP) 2020-2022. COBP consists of a pipeline of various projects from various sectors that reflect government needs based on priority sectors in the National Medium Term Development Plan.
In this COBP, he explained, the main sectors of the project were the energy sector (37 percent of total loans), public management (20 percent), finance (11 percent), and agriculture and natural resources (11 percent).
The other sectors in the COBP platform are urban water and service sectors (7 percent), education (6 percent), transportation (5 percent), and social protection (3 percent). In the period 2020 – 2022, average project loans had a share of around 57 percent of the total pipeline, policy-based loans of 24 percent, and result-based loans of 18 percent.
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