Japan, ADB commit $470m for infrastructure

Japan, ADB commit $470m for infrastructure

The Jakarta Post, Jakarta

The Japanese government and the Asian Development Bank (ADB) have
separately committed additional loans totaling US$470 million to
help Indonesia improve its infrastructure.

Japan's Ambassador to Indonesia Yutaka Iimura said on Thursday
Japan would provide $420 million in total loans next year to help
Indonesia finance its infrastructure development plan, which is
expected to require between $10 and $15 billion in funds.

The loans are expected to be formally agreed upon and
disbursed within the next six months, Iimura said, and will be
used to speed up the completion of 50 major infrastructure
projects in the power generation, road and railway sectors, which
are seen as essential to boost Indonesia's economic growth.

"We hope improving the infrastructure facilities will help
stimulate Indonesia's economic growth," the ambassador said.

Bilaterally and through the Consultative Group on Indonesia,
Japan provides an average of $1 billion in development loans each
year to Indonesia. It recently raised the interest rate on its
loans to 1.5 percent from 1.3 percent, effective next year,
although it will maintain the 10-year grace period and 30-year
maturity term for the loans.

Meanwhile, the ADB has approved $50 million in loans to
support Indonesia's rural infrastructure development program in
some 1,800 selected poor and isolated villages in East Java, East
Nusa Tenggara, South Sulawesi and Southeast Sulawesi.

The loans, the Manila-based bank said in a statement released
on Thursday, will finance the construction and repair of village
roads, bridges, irrigation systems, drainage works, sanitation
systems and water supplies, with the help of community
organizations.

"The project's community-driven approach will help develop a
sense of ownership among communities, which will reflect not only
in the quality of the work carried out but also the long-term
sustainability through upkeep and maintenance," the project's
economist, Muhammad Ehsan Khan, said.

The total cost of the project is estimated at $60.82 million,
of which the Indonesian government will pay $5.96 million and the
beneficiaries $4.85 million.

The government will borrow the money and disburse the funds to
the selected villages on a grant basis, with each participating
village eligible for a grant of up to $25,000. Larger or more
developed villages may be considered for further grants based on
the use of their first grants.

The loan will come from ADB's concessional Asian Development
Fund and has a 32-year term, including a grace period of eight
years. The interest rate will be 1 percent during the grace
period and 1.5 percent afterward.

The Ministry of Public Works' Directorate General of Human
Settlements will be the executing agency for the project, which
is part of the government's fuel subsidy reduction compensation
program.