The Asian Development Bank (ADB) has approved the release of a US$500 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 cofinancing of US$224.6 million equivalent from KfW Bankengruppe. KfW provided parallel financing of US$245 million for the first stage of the program.

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.

Steven Tabor, Country Director at ADB’s Indonesia Resident Mission, said:

“Indonesia has been taking significant steps to improve the investment environment including removing barriers to PPPs and stripping away regulatory red tape. The 12 economic reform packages issued since September 2015 underscore the government’s desire to dramatically improve the investment climate.”    

Rabin Hattari, Public Management Economist at ADB’s Southeast Asia Department, said:

“Indonesia needs to create new engines of growth to return to a path of higher and more inclusive growth,”“Private investment will be critical to fostering a more diverse and resilient economy.” 

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.