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