Govt asks ADB to ease terms on US$600m loan package

Berni K Moestafa, The Jakarta Post, Jakarta

A US$600 million loan package from the Asian Development Bank (ADB) is at stake, as the government falls behind in meeting the bank's loan conditions, according to a government official.

Deputy to the Coordinating Minister for Economy, Syafruddin A. Temenggung said on Monday the government had asked ADB to ease the conditions it could not meet on time.

"Right now, the government is asking the ADB to change the conditions (for disbursement) to something the government can achieve," Syafruddin was quoted as saying by Reuters.

According to him, the government needs ADB's funds by December to help fill this year's gapping state budget deficit.

ADB's loans will help finance projects covering financial reforms, community development, electricity and industrial competitiveness and development of small and medium size enterprises.

However, the bank has tied its $600 million loans with terms that may not be realized by the year's end.

Among them is the deliberation of new laws concerning money laundering and investment.

While a bill on money laundering is being discussed by legislators, the one on investment has yet to be submitted.

Other requirements were the introduction of new incentives and loosening of trade barriers for foreign investors.

Syafruddin said that little progress had been made on meeting these conditions.

The ADB expects to disburse some $1 billion in loans this year, of which most would go into poverty alleviation projects.

The bank said earlier the funds were part of ADB's loan pledged during last year's meeting of the Consultative Group on Indonesia (CGI).

The ADB has committed loans of between $600 million to $1.2 billion annually until 2004. However, the high range of the lending depends on the government's progress in meeting reform programs.

Another lender, the World Bank, has emphasized Indonesia's battle with corruption as a yardstick to review the continuation of its loans.