ADB backs Indonesia’s infra sector with $100m loan

The development bank hopes the loan will catalyse private investment in the country’s infrastructure sector, which faces a funding gap of $70bn per year.

The Asian Development Bank said in a statement that it has approved a $100 million intermediary loan to the government of Indonesia, as it aims to catalyse private investment in infrastructure projects in the country.

“There are limited sources of long-term finance for infrastructure investment [in Indonesia], a gap which the ADB project will seek to fill,” Yurendra Basnett, the multilateral organisation’s country economist for Indonesia, told Infrastructure Investor.

In its statement, the ADB said the loan, which it refers to the Leveraging Private Infrastructure Investment Project, would help Indonesia fulfil infrastructure investment needs that are estimated to amount to more than $70 billion per year.

Basnett said in the statement that the assistance “is anticipated to leverage a multiple of the loan amount in the form of additional private sector investments in important infrastructure projects and in doing so help deliver value for money to the government”.

The government will on-lend the ADB loan proceeds to PT Indonesia Infrastructure Finance  through PT Sarana Multi Infrastruktur, a state-owned infrastructure financier and a shareholder of IIF. According to the IIF website, other shareholders in the firm – which provides infrastructure financing, guarantees and advisory services in connection with local projects – include the ADB, the World Bank’s International Finance Corporation, Japan’s SMBC and Germany´s KfW.

Basnett declined to comment on the structure of the deal.

According to the statement, the IIF, with the assistance of the ADB, will lend on commercial terms to infrastructure projects, while adhering to IIF’s and ADB’s standards and guidelines. The loan will support projects in health, renewable energy, telecommunication and transport sectors.

Basnett said eligibility criteria will include projects’ financial viability and compliance with social and environmental safeguards.

SMI and IIF did not reply to requests for comment.