Indonesia proposed a new loan to Asian Infrastructure Investment Bank with worth US$500 million - Photo by PLN

JAKARTA (TheInsiderStories) – Indonesia has submitted a new loan to Asian Infrastructure Investment Bank (AIIB) with worth US$500 million, said the official on Thursday (08/29). So far the Bank formed by China has been invested in five projects with total costs $939.9 million.

The loan guaranteed by Indonesian government its expecting will close in February 2024.

Based on the AIIB data, the funds will use to develop East Java & Bali Power Distribution owned by PT Perusahaan Listrik Negara (PLN). The project part of the company’ Electricity Business Plan during 2019 – 2028, consisting of the construction of 17,000 kilometers of medium-voltage distribution lines and of 1,500 MVA of medium-voltage distribution transformers.

Recently, the Asian Infrastructure Investment Bank offered an alternative financing on local currency for Indonesia, Thailand, Turkey, India and Russia, to avoid the volatile foreign exchange market. It said, the launch of local currency financing will begin this month.

AIIB’ President Jin Liqun revealed the decision was born to meet the economic needs of the developing countries. The China-based bank said, frequently American President Donald Trump imposing financial sanctions on other countries and created a volatility in the market.

According to Chinese economists, the trade protectionism and financial hegemony of the Trump administration undermined the international reputation of the greenback. While, Federal Reserve’ move to further cut interest rates will also weaken the position of the US dollar as the dominant international currency.

AIIB now has 100 approved members after its Board of Governors supported the applications of three African countries. The milestone was reached with the addition of Benin, Djibouti and Rwanda during the Bank’ annual meeting in Luxembourg on July 13.

“AIIB members collectively account for 78 percent of the world’s population and 63 percent of global GDP. With the backing of all of our members, we are building a lean, clean, and green institution that can help to support their sustainable development,“ said Liqun.

New estimates by the African Development Bank suggest that Africa’s infrastructure needs amount to $170 billion a year, with a financing gap in the range $108 billion. AIIB and the African Development Bank signed an agreement in April 2018 to enhance collaboration in developing programs, co-financing, and other forms of financial assistance, knowledge and staff exchanges.

AIIB was created by 57 founding members as a multilateral institution focused on supporting sustainable development through infrastructure. That another 43 members have joined in the last three years is recognition that AIIB has established itself as part of the rules-based international system, with strong governance and high international standards.

AIIB‘ inaugural projects ranged from a slum upgrading project in Indonesia to a new pipeline linking gas fields in Azerbaijan to markets in southern Europe, via Turkey. To date, 45 projects in 18 member countries totaling $8.5 billion have been approved.

In Indonesia, five projects has funded by AIIB are Modernization of Strategic Irrigation and Urgent Rehabilitation Projects worth $248.4 million. Then, Project Dam Operational and Safety Improvement Projects worth $125 million.

Third is the Regional Infrastructure Development Fund Project with an investment value of $100 million. Fourth National Slum Area Improvement Project of $216.5 million and the fifth Tourism and Urban Mandalika Infrastructure Project worth $248.4 million.

Written by Marcel Gual, Email: theinsiderstories@gmail.com