China, RI sign first ever loan agreement
Dadan Wijaksana, The Jakarta Post, Jakarta
China agreed on Tuesday to lend Indonesia US$400 million, the first time it has ever done so, to help finance the development of several Indonesian infrastructure projects.
It is unclear what the loan, the signing of which was witnessed by Minister of Finance Boediono and China's Ambassador to Indonesia Lu Shu Min, will be used for.
However, an official at the National Development Planning Agency (Bappenas) indicated that part of the funds might be used to finance electricity projects in Sumatra, the development of railways by state-owned rail company PT Kereta Api Indonesia (KAI) in Java, or to import buses for public transportation.
"The funds may be used for the construction of a power plant in (North Sumatra's town of) Sibolga, or a double-track train railway between Cirebon and Kroya, or the procurement of 1,500 buses. We'll see," Koensatwanto Inpasihar said.
He said this was China's first loan facility for Indonesia.
"Previously, China has pledged financial support to Indonesia, but that was in the form of grants. So, as far as the loan commitment is concerned, the recent signing was the first time," he said, adding that the grants amounted to about 50 million yuan.
The loan itself has a 15-year tenor including a seven-year grace period, with the annual interest standing at three-percent.
The commitment has come at a time when the cash-strapped government is desperately seeking support from foreign lenders, especially now that economic fall-out seems inevitable following the Bali bombings.
The deal is only a month away from when the government is expected to ask for significant loans from its major creditor nations under the Consultative Group on Indonesia (CGI).
The CGI groups together the country's 32 major creditors, including 21 countries and 11 multilateral lenders such as the World Bank and the Asian Development Bank (ADB).
China is not a member of the CGI.
In the upcoming CGI meeting, scheduled for January, Indonesia is seeking Rp 29 trillion (about $3.1 billion) in new loans from the creditors.
That includes a Rp 10.6 trillion stimulus package planned to be injected into the economy as part of the government's efforts to ease the impact of the Bali attack.
Through the package, the government plans to stimulate the economy by increasing development spending on crucial projects throughout the country, in hopes of keeping the economic wheels moving, thereby creating more jobs.
Based on the state budget, Rp 65.1 trillion has been set aside for development spending next year.
Boediono said the signing of the loan deal with China was a follow-up to a visit by President Megawati Soekarnoputri to China last March.
But what was more important, he said, was the loan reflected China's intention to help Indonesia's economy recover from the prolonged crisis.