JAKARTA: The Asian Development Bank (ADB) will boost lending to Indonesia to about US$10 billion within the next five years to finance the country’s infrastructure projects.
The Japan-backed bank will increase loans to Indonesia from the $740 million annually received from 2010 to 2014 to $2 billion per year or $10 billion over the next five years, annouced ADB president Takehiko Nakao in Jakarta on Friday.
The news was delivered after ADB president Nakao and his entourage met with President Joko “Jokowi” Widodo at the State Palace.
Jokowi was accompanied in the meeting by National Development Planning Board (Bappenas) chief Sofyan Djalil and Finance Minister Bambang Brodjonegoro.
It was the second time that Jokowi and Nakao had met, their first meeting occurring in January 2015.
The ADB’s new loan commitment comes months after Indonesia joined the China-backed Asian Infrastructure Investment Bank (AIIB), which is also expected to provide loans for Indonesia’s infrastructure projects.
Last year, the ADB provided a total of $1.67 billion in loans to the country, which included a $400
million policy-based loan to promote financial market development and financial inclusion, another $400 million policy-based loan to develop the energy sector, and the bank’s first results-based loan of $600 million to support upgrading Sumatra’s power transmission and distribution networks.
In a press conference, Nakao dismissed rumors of a supposed rivalry between ADB and AIIB.
Nakao — who previously served as Japan’s vice minister of finance for international affairs — said that the two multilateral organizations were actually working together to identify one or two projects to co-finance, possibly to be approved in the second quarter.
The ADB’s membership currently comprises 67 members. At the end of 2014, Japan controlled the bank’s largest subscribed capital and voting power with 15.7 percent and 12.8 percent, respectively.
Indonesia, on the other side, had 5.1 percent and 4.4 percent, while China had 6.5 percent and 5.5 percent.
Data from the ADB shows that Indonesia has so far received $32 billion in sovereign and non-sovereign loans, $437 million in technical assistance and $430 million in grants.
The situation is different at the AIIB, with China controlling the largest stake with 30 percent of all 57 members. Indonesia itself holds 3.4 percent.
Indonesia has not obtained any loans from the 57-member AIIB, but is in the process of proposing financing for six infrastructure projects, with an estimated total value of $2 billion.
Despite downplaying the competition, Nakao did express his contentment at seeing the current administration’s willingness to borrow from the ADB.
“I want to make it clear that previously the Indonesian government was a little bit reluctant to borrow from the ADB or international institutions, but I think to use diversified resources to finance investment in addition to tax revenue, private sector, PPP [public private partnership] and so on, is very good and they are using us as a diversified funding resource.”
He put emphasis on the ADB’s wide variety of lending instruments and “flexible approach”, which were also promised by AIIB president-designate Jin Liqun during his visit to Jakarta in last November.
Separately, Sofyan and Coordinating Economic Minister Darmin Nasution said that the new ADB loan commitment with a coupon of less than 2 percent would work in Indonesia’s favor.
“Don’t worry. If people compete, it will be good for us,” said Darmin.
Meanwhile, both Samuel Asset Management economist Lana Soelistianingsih and Standard Chartered Bank Indonesia economist Aldian Taloputra said that Indonesia could benefit from the tight competition between Japan and China as it would open way for competitive loan pricing.
