ADB approves $350m loan to RI

ADB approves $350m loan to RI

Agence France-Presse, Jakarta

The Asian Development Bank (ADB) said Thursday it has approved
the disbursement of a US$350 million loan to Indonesia after the
passage of a law to counter money-laundering.

The loan is the final tranche of a $1.4 billion program to
fund reforms in financial governance.

ADB director general for Southeast Asia K.H. Moinuddin said in
a statement that Indonesia had made "good progress" in financial
sector restructuring but faces many challenges in further
strengthening financial and corporate governance.

Improvements to financial and corporate governance, "as well
as improving the integrity and efficiency of the judicial
system," were essential prerequisites for regaining investor
confidence and achieving economic recovery, Moinuddin said.

The program was set up in June 1998 in the aftermath of the
Asian financial crisis. The first tranche of $550 million was
disbursed in June 1998 and the second tranche of $500 million in
January 1999.

The release of the final tranche was initially delayed by
social and political upheaval and later by parliament's delay in
passing the anti-money laundering bill, the ADB said.

Indonesia's shaky judicial system is a major deterrent to
foreign investors.

Canada has strongly protested at a court's recent decision to
declare Manulife Indonesia bankrupt over non-payment of a
dividend even though the local unit of the Canadian insurance
giant is fully solvent.

Approved foreign investment in Indonesia plunged by almost 60
percent in the first five months of this year compared with the
same period last year. The head of a state investment agency has
said the unpredictable legal system was partly to blame.