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.