ADB Approves USD500 Million for Indonesia's Investment Reforms

The Asian Development Bank (ADB) has approved the release of a USD500 million loan to Indonesia following the roll out of agreed policy reforms to reduce barriers to investment and encourage more public-private partnerships (PPPs), which are needed to foster the development of the private sector and increase its participation in infrastructure projects.

    The loan, which is ADB’s second under the Stepping up Investments for Growth Acceleration Program, will be complemented by financing of $224.6 million equivalent from Germany’s KfW Bankengruppe. KfW provided parallel financing of USD245 million for the first stage of the program, ADB press release said today.

    "Indonesia has been taking significant steps to improve the investment environment including removing barriers to PPPs and stripping away regulatory red tape," said Steven Tabor, Country Director at ADB’s Indonesia Resident Mission. "The 12 economic reform packages issued since September 2015 underscore the government’s desire to dramatically improve the investment climate." Cumbersome regulations and high costs of setting up and doing business have hindered new investment, with Indonesia ranking 109th out of 189 countries in a 2016 World Bank report for ease of doing business, well below regional neighbors.

    The first phase of the government’s reform program saw the setting of higher foreign equity ceilings in land transport, shipping and management of ports, the establishment of a dedicated office to formulate land acquisition policy, and the development of a framework for e-procurement.

    The second phase of reforms has taken further steps to ease restrictions on investment, streamline processes for starting and operating a business, and widen the remit for PPPs.

    The third phase of the program to be carried out from July 2016 to June 2018 will see further measures to expand evidence-based reforms, improve ease-of-doing business, strengthen PPPs, and enhance the government’s e-procurement system.