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Frequently Asked Question
ADB is working closely with the Government of Indonesia and other development partners, including the World Bank, United Nations, and Japan Bank for International Cooperation, on assessing the most effective ways to assist people affected by the 27 May earthquake.
ADB has initially offered US$10 million in immediate grant assistance and $50 million in concessional loans, for a total of $60 million, to help meet the rehabilitation and reconstruction needs.
ADB has put together an immediate response team, comprising experts from various sectors, and will take part in a joint Government-donor mission to the affected areas on 6-7 June 2006.
The Government of Indonesia, through the National Development Planning Agency (Bappenas), will lead the damage and loss assessment process. The Indonesia government has convened a series of meetings since the earthquake, and the joint Government-donor teams are setting priorities and dividing responsibilities for assistance beyond the initial rescue and relief efforts, such as ensuring adequate provision of housing and utilities.
ADB has long experience in several sectors in the affected areas, including roads, flood management systems, and hospitals. ADB has an ongoing road rehabilitation project in the area, for example, as well as a project to provide housing and community infrastructure support.
Source : The Asian Development Bank
The poor are the hardest hit by the lack of infrastructure. Roads in poor condition keep people in poverty by denying their access to economic opportunities. Nearly one out of five rural villages in Indonesia is inaccessible for part of the year.
The Indonesian Government estimates that the country needs about $65 billion in infrastructure investments over the next five years, with $25 billion to be met by the Government budget, $14 billion by domestic banks, insurance and pension funds; $10 billion by development partners, and $16 billion by private sector investors.
The ADB program will assist Indonesia in improving the policies, laws and institutions that are needed to attract large scale private sector infrastructure investments. It will also help streamline the infrastructure responsibilities of the national and local governments.
“The public sector alone cannot meet the investment needs. The private sector has to be brought in. But private investors look for a level playing field between the public and private sectors, clarity of regulatory framework, and transparency in the bidding process,” says Ramesh Subramaniam, ADB Principal Economist based at its office in Jakarta. “The program supports the Government in implementing reforms in these important areas.”
The program is planned to be undertaken as a cluster of three subprograms, the first of which is backed by a loan of $400 million from ADB's ordinary capital resources. This has a 15-year term, including a grace period of three years, with interest determined in accordance with ADB's LIBOR-based lending facility.
Support under each of the two subsequent subprograms up to 2010 will be determined based on needs, as well as progress made.
One of the most critical constraints to infrastructure development is the lack of adequate project preparation. Besides the $400 million loan, the program also includes a loan of $26.5 million equivalent from ADB’s concessional Asian Development Fund to help the Government establish a project development facility to prepare infrastructure projects well, make them bankable, and bid them out in a transparent manner.
The concessional loan has a 32-year term, including a grace period of eight years. Interest is charged at 1% per annum during the grace period and 1.5% per annum subsequently.
A further $2 million grant from ADB will support the Government in implementing a risk management framework under IRSDP.
BAPPENAS, the National Development Planning Agency, will be the executing agency for the program.
ADB's Board of Directors recently endorsed a four-year country strategy for Indonesia that proposed about $3.36 billion in loans and another $47.6 million in grants. ADB’s assistance will be focused on infrastructure development, improving the financial sector, supporting government decentralization, accelerating the achievement of the Millennium Development Goals (MDGs), and environmental protection.
Source : Asian Development Bank
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