ADB Loans US$500 Million, Supports Indonesia's Investment Reform  

TEMPO.CO, Jakarta - The Asian Development Bank (ADB) has approved the release of a $500 million loan to Indonesia following the roll out of agreed policy reforms to reduce barriers to investment and encourage more public-private partnerships [PPPs], which are needed to encourage the development of the private sector and increase its participation in infrastructure projects.

"Indonesia has been taking significant steps to improve the investment environment including removing barriers to PPPs and stripping away regulatory red tape," said ADB’s Indonesia Resident Mission Director, Steven Tebour - referring to 12 economic deregulation packages that has been rolled out since September 2016, which ADB sees as reflective of the government's aim to improve Indonesia's investment climate.

Indonesia currently ranks 109th out of the 189 countries surveyed in a 2016's World Bank's report on the ease of doing business - far below its' regional neighbours, which could be attributed to cumbersome regulatory restrictions, which increases the costs of setting up and operating a business in the country.

The government's attempt to improve its' investment climate can be separated into three different phases - the first of which has allowed increased foreign involvement and equity ceilings in land transport, shipping and management of ports, as well as the establishment of a dedicated office to formulate land acquisition policy, and the development of a framework for e-procurement.

The second phase of reforms saw the government took steps to further ease restrictions on investment, streamline processes for starting and operating a business, and widen the scope for public-private partnerships. Meanwhile, the third phase of the reforms - which is to be carried out from July 2016 to June 2018 - will see further measures to expand evidence-based reforms, improve ease-of-doing business, strengthen PPPs, and enhance the government’s e-procurement system.

"Indonesia needs to create new engines of growth to return to a path of higher and more inclusive growth," said Rabin Hattari, Public Management Economist at ADB’s Southeast Asia Department. "Private investment will be critical to fostering a more diverse and resilient economy."

The loan, which is ADB’s second under the Stepping up Investments for Growth Acceleration Program, will be complemented by co-financing of $224.6 million equivalent from Germany’s KfW Bankengruppe. KfW provided parallel financing of $245 million for the first stage of the program.

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