AIIB Approves $692m Loan to Fund Infrastructure Projects in Indonesia

The Asian Infrastructure Investment Bank (AIIB) said in a statement on Tuesday (28/08) that its board of directors had approved a $691.5 million loan to the Indonesian government to fund four infrastructure projects. (Antara Photo/Dewi Fajriani)

By : Sarah Yuniarni | on 11:04 PM August 29, 2018
Category : Business, Banking/Finance

Jakarta. The Asian Infrastructure Investment Bank said in a statement on Tuesday (28/08) that its board of directors had approved a $691.5 million loan to the Indonesian government to fund four infrastructure projects.

The loan is expected to improve accessibility and help spur growth, with $250 million earmarked for an irrigation project, $125 million for a dam improvement project, $216.5 million for a slum improvement project in 154 cities and $100 million for regional infrastructure development, such as flood management and sanitation.

Indonesia has so far received 13 percent of the total lending of $5.34 billion the AIIB has agreed to provide to its 87 member countries, making it the second-largest recipient of funding from the Beijing-headquartered multilateral development bank after China.

However, according to the Committee for Acceleration of Priority Infrastructure Delivery (KPPIP), which was established as the coordinating agency to address infrastructure bottlenecks in the country, Indonesia still needs an additional $368.9 billion to support infrastructure development under the current administration.

The AIIB said Southeast Asia's largest economy still needs to spend more on infrastructure, as the country's total investment in such development is equivalent to only about 3 percent to 4 percent of gross national product. In comparison, regional rivals Thailand and Vietnam invest between 7 percent and 8 percent of their GDP on infrastructure development.

The AIIB and the London-headquartered Financial Times held a dialogue on infrastructure development in Jakarta on Tuesday, with investor concerns, investment risks and private-sector funding among the topics that were covered.

Laurel Ostfield, head of communications and development at the AIIB, said in the statement that insufficient spending was slowing down Indonesia's efforts to revamp infrastructure and that the bank was committed to offer "innovative solutions" that would help the country obtain funding from other development banks, as well as the private sector.

The AIIB arranges loans for Indonesia through standalone and co-financing schemes with other financial institutions, such as the Asian Development Bank, European Investment Bank and International Finance Corporation.

Mandalika Tourism Development

The AIIB is currently also considering a $260 million loan to fund the Mandalika tourism development on Lombok Island in West Nusa Tenggara. The lender will announce its decision next month.

The government had requested the loan long before a series of powerful earthquakes rocked the island early in August.

The loan was intended to fund the construction of roads and water management and drainage systems to boost tourism.

Show More

 
MORE NEWS