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.