KfW -- A long-standing partner of Indonesia
KfW -- A long-standing partner of Indonesia
By Dr. Gert Vogt
Kreditanstalt fuer Wiederaufbau (KfW) was founded by law in 1948 as a corporation under public law domiciled in Frankfurt am Main. Its functions are those of a promotional bank for the domestic economy and a development bank for developing countries. KfW is owned by the Federal Republic of Germany and its Federal States. With a balance sheet total of about DM 290 billion, it counts among Germany's large banks.
German Financial Cooperation with Indonesia
Under the Financial Cooperation of the Federal Republic of Germany with developing countries, KfW finances investments and project-related advisory services on behalf of the German Federal Government for the expansion of social and economic infrastructure, industry and for improving the protection of the environment and natural resources.
KfW also supports economic and sector reforms in developing countries. Commitments under Financial Cooperation today represent roughly one-third of the entire official development cooperation of the Federal Republic of Germany.
Indonesia is one of the most important partner countries of Financial Cooperation. Since the beginning of development cooperation in 1961, almost DM 4 billion in loans and grants have been committed under Financial Cooperation for the implementation of more than 120 projects.
Its current priority sectors are transport (railroads, ports/maritime transport), energy, health care and drinking water supply, protection of the environment and natural resources and education.
Export and Project Financing
In the field of export and project financing, KfW provides medium and long-term loans for the export of German capital goods. The bank has developed a specific know-how in complex and large project finance structures as well as in the transportation sector (ships, aircraft, infrastructure).
In Indonesia, it has been active for more than 35 years in this field. Loan agreements with Indonesian borrowers amount to a total volume of approximately DM 10 billion. The majority of the loans were provided for the promotion of industry and environmental technology, power and energy, telecommunications and raw materials extraction as well as in the transportation sector.
In ship financing, for example, KfW looks back to a long- lasting and successful cooperation between Indonesia and Germany. With commitments of about DM 2.3 billion, mostly granted under sovereign risk to the government, Indonesia is one of KfW's most important partners in this sector.
The largest and very successful project in this cooperation is the delivery and financing of a fleet of now 20 passenger vessels. All the vessels -- with total order value of DM 1.8 billion -- were ordered in Germany and financed by long-term loans from KfW.
Besides the passenger vessels KfW has also financed some gas tankers, container vessels and dredgers for Indonesia.
Promotion of Direct Investment
In the framework of its extensive financing commitment to German small and medium sized enterprises (SMEs), KfW also promotes direct investment of German SMEs in Indonesia and investments of German-Indonesian SME joint-ventures by special credit schemes. It offers long-term financing at favorable conditions and hereby is assuming 50 percent of the credit risks.
In case of investments with strong environmental impacts, KfW is ready to support the financing at even more attractive conditions, and also for bigger enterprises. A special example of a German direct investment in Indonesia is the German Center for Industry and Trade in Bumi Serpong Damai, often known as German House, which focuses especially on SMEs from Germany that want to enter into business in Indonesia. KfW has financed this investment through an attractive long-term loan.
KfW's Special Support for overcoming the Current Crisis
As an immediate response to the current economic crisis in Indonesia, KfW is preparing rehabilitation and recovery measures under sector-based, fast-disbursing Financial Cooperation programs for the transportation, energy and health sectors.
These programs, which concentrate on maintaining the operation of already existing facilities, will be an important contribution to job creation and economic recovery and to maintaining basic social services for the population.
In addition, two commercial credit lines amounting to DM 300 million were concluded in July 1998 between KfW and the Indonesia Ministry of Finance following a Memorandum of Understanding signed in February 1998 between the Ministers of Finance of Indonesia and Germany.
One credit line is a framework agreement for DM 250 million which facilitates imports of German capital goods to Indonesia. It is focusing primarily on the private sector and enables Indonesian enterprises to cover their import needs.
The prime objective of the second loan facility of DM 50 million, is to support commercially sound Indonesian SMEs by funding medium to long-term investment loans as well as loans to bridge short-term liquidity gaps. This loan facility is not tied to German exports but can be used by the SMEs for purchases from any origin, including Indonesia itself.
In order to support and facilitate the cooperation with its Indonesian partners, KfW opened an office in Jakarta in June 1998. This testifies also to the prominent role of Indonesia as a partner of KfW.
Another recent event also demonstrates the long-standing relationship between Indonesia and Kreditanstalt fuer Wiederaufbau. On Sept. 23, 1998, it organized at KfW in Frankfurt the conference Indonesia Today in order to bring Indonesian and German businesspeople together.
Prof. Dr. Ir. Rahardi Ramelan, Minister of Industry and Trade of Indonesia, who was accompanied by Government officials and more than 30 Indonesian businesspeople, gave a clear picture of the present economic and social situation in Indonesia and the political and economic reforms that have so far been undertaken by the Indonesian Government.
Dr. Gnter Rexrodt, Federal Minister of Economics of Germany, underscored the importance of Indonesia for the development of the Southeast Asia area and ensured Indonesia the partnership of Germany in these difficult days.
KfW is still confident in the strategies of Indonesia and it is very much willing to support its partners in these difficult days. However, political stability will be the precondition for regaining trust and therewith further foreign investment.
Dr. Gert Vogt is KfW's Chairman of the Board of Managing Directors.
Any questions, recommendations and comments concerning KfW's operation with Indonesia please forward to:
KfW-office Jakarta
Dr. Christine Heimburger
Skyline Building, 8th floor
Jl. M.H. Thamrin No. 9
Jakarta 10340
Tel. (021) 327875
Fax. (021) 3148438