Indonesia has prioritized infrastructure development in its medium-term development plan, or Rencana Pembangunan Jangka Menengah 2010-2014 (RPJM), and allocated increased resources to infrastructure projects in its 2010 and 2012 budgets. It is also receiving significant funding for a variety of infrastructure projects and other development priorities from multilateral development banks, primarily the World Bank and Asian Development Bank (ADB). American firms can participate in projects funded by these institutions. Information on projects and procedures is available through U.S. Commercial Service officers assigned to each multilateral development bank as well as commercial officers in individual countries.

World Bank

The World Bank Group is a multilateral lending agency consisting of five closely related institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Center for Settlement of Investment Disputes (ICSID). The World Bank provides concessional loans to developing countries to help reduce poverty and to finance investments that contribute to economic growth.

As of December 31, 2009, the World Bank’s active financing portfolio in Indonesia comprised of 32 projects with total commitments of $5.98 billion. These lending commitments were made for roads, energy, education, health, irrigation and rural development. In 2009, the World Bank approved the new 2009 – 2012 Country Partnership Strategy (CPS) for Indonesia and increased lending to $4.2 billion from $2 billion annually. It includes the $2 billion in financing to help Indonesia overcome the global economic crisis. The World Bank also manages about $779 million of the complex reconstruction and rehabilitation from the Aceh and Nias and the Java Multi-Donor Trust Funds through a portfolio of 26 projects.

In November 2010, the World Bank approved the Seventh Development Policy Loan for Indonesia totaling $600 million (a loan to support government reform efforts to improve the investment climate, strengthen public financial management and governance and enhance policy alleviation and service delivery efforts), and also approved the Fourth Infrastructure Development Policy Loan totaling $200 million to increase the level and effectiveness of infrastructure financing by addressing financing directly provided by the national government, incentives for sub-national governments to improve infrastructure delivery, and the policy environment for private infrastructure investment.

The World Bank support of Indonesia’s infrastructure priorities in its medium-term development strategy includes a substantial program of investment lending, including energy (focus primarily on clean and renewable energy technologies), roads (strengthening fiduciary, operational and management capacities of local counterparts and improve the pace of implementation in ongoing projects), and urban infrastructure, such as low income housing, water supply (such as flood mitigation and dam operations improvement), and sanitation (focus on building capacity to plan system integration for centralized, community and household sanitation, and make long-term financing available for sanitation infrastructure development).

–The International Bank for Reconstruction and Development (IBRD)

The IBRD provides funding for creditworthy developing countries with relatively high per capita income, as well as technical assistance and policy advice. Loans are made only to governments or to agencies that can obtain a government guarantee. The IBRD also provides partial risk or partial credit guarantees (with a counter-guarantee from their government) to private lenders on development projects. Opportunities exist for U.S. companies to supply goods and services in connection with these loans.

— The International Development Association (IDA) provides assistance on concessional terms to the poorest developing countries that are not sufficiently creditworthy for IBRD financing. As a middle-income country, Indonesia has graduated from IDA. Its access to IDA ceased in June 2008.

— The International Finance Corporation (IFC) is an affiliate of the World Bank that provides project financing for private investment in developing countries. IFC offers long-term loans and equity investments, as well as other financing services. Unlike the IBRD and IDA, the IFC does not require government guarantees. IFC has a committed investment portfolio of $695 million in Indonesia, of which 57 percent is invested in financial markets projects, 24 percent in agribusiness and 17 percent in manufacturing. Currently, IFC committed $960 million to various sector such as mining, manufacture, stock market, agribusiness, finance, technology and education. IFC expects to invest about $300 million annually in Indonesia in priority sectors of finance, infrastructure and commodity-based supply chains. U.S. companies seeking investment funds should contact the IFC directly.

— The Multilateral Investment Guarantee Agency (MIGA) promotes the flow of foreign direct investment among member countries by insuring investments against noncommercial (political) risk and by providing promotional and advisory services to help member countries create an attractive investment climate. Indonesia is a member of MIGA. U.S. companies seeking investment guarantees should contact MIGA.

Asian Development Bank

Indonesia was a founding member of the ADB in 1966 and, by the end of 2009, had received 303 loans amounting to $25.7 billion, and 504 technical assistance (TA) projects amounting to $282.9 million. Measured by loan approvals, Indonesia is ADB’s largest client, and its second largest recipient of TA support. Indonesia graduated from eligibility for Asian Development Fund resources at the end of 2008 and will be reclassified from January 1, 2009 as a borrower eligible for only ADB Ordinary Capital Resources. ADB has allocated indicative Ordinary Capital Resources (OCR) for Indonesia’s public sector lending operations of $2.64 billion for 2011–2013, or $880 million per year. ADB provides a mix of program loans to support policy and investment loans. Priority areas for project financing are consistent with the Government of Indonesia’s medium-term strategy and include the following: water resource management, infrastructure (energy with an emphasis on clean energy and energy efficiency, road transportation, and water supply and sanitation), education (vocational and higher education), audit and procurement, and community-driven development for targeted poverty reduction.

Indicative lending products in 2011 include Flood Management in Selected River Basins, Geothermal, Java-Bali 500 kV Power Transmission Crossing, PNPM Mandiri Community Driven Development, Polytechnics Development, Climate Change Programs, Support for State Audit Reform and Procurement and Second Local Government Finance and Governance Reform Program. ADB tenders are generally conducted based on international competitive bidding standards.

Islamic Development Bank

The Islamic Development Bank (IDB) seeks to foster the economic development and social progress of member countries and Muslim communities through participation in equity capital and grant loans for projects, as well as providing other types of financial assistance. The IDB has an active program in Indonesia.

The U.S. Export-Import Bank

The mission of the Export-Import Bank of the United States (Exim) is to assist in financing the export of U.S. goods and services to international markets. Exim provides export credit insurance, loan guarantees and project and structured finance for U.S. exporters and foreign buyers of U.S. goods and services.

On January 12, 2009, the GOI enacted the new Aviation Law. The new law implements the provisions of the Cape Town Convention on International interests in mobile aircraft equipment. This treaty provides a system of registration and recovery that assures lenders protection of their interests. With the new legislation Exim will be able to proceed in financing aircraft sold and leased to Indonesian companies. In FY 2009 and 2010, Exim Bank has authorized almost $1 billion in financing to support the export of up to 30 Boeing 737-800ER aircraft to Lion Air, a private-sector airline in Indonesia.

On June 2010, Exim Bank has pre-approved 11 banks in Indonesia to receive financing as part of the banking facilities amounting to $1 billion to support US exports to Indonesia. The bank facility will support U.S. exports to Indonesia on short, medium and long repayment terms. Both public-sector and private-sector borrowers are eligible. Please refer to Exim’s “country limitation schedule (CLS)” for current program coverage in Indonesia.

Overseas Private Investment Corporation (OPIC)

The Overseas Private Investment Corporation plays an important role in helping U.S. firms reach expanding markets. OPIC assists American investors through four principal activities:

• financing of businesses through loans and loan guarantees;
• supporting private investment funds;
• insuring investments against a broad range of political risks; and
• engaging in outreach activities designed to inform the American business community of investment opportunities overseas.

Investors are urged to contact OPIC directly for up-to-date information concerning availability of OPIC services in Indonesia. (See Chapter 9 for contact information.)

Project financing is crucial in successfully capturing business in Indonesia, especially for engineering services, project management or “big-ticket” purchases. American companies often compete with third country companies offering concessionary financing through soft loans, so it is vital to offer the best financial terms commercially available. Grant assistance available through the Trade and Development Agency (see website below) can be used to offset government financing offered by the Government of Japan, European Union members, and others.