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4/21/2005 9:04 AM
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 The Asian Development Bank (ADB) plans a lending program to Indonesia of up to USD 519 million in 2005

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MANILA, PHILIPPINES (20 April 2005) - The Asian Development Bank (ADB) plans a lending program to Indonesia of up to USD 519 million in 2005 to provide strategic support to the Government in critical areas, according to the Country Strategy and Program (CSP) Update endorsed by ADB's Board of Directors.

ADB recently approved the first of the planned assistance for Indonesia in 2005, including USD 64.7 million in loans and a USD 16.5 million emergency assistance grant for a Community Water Services and Health Project. The project will provide clean water and sanitation facilities to about 1,500 communities of rural Indonesia, including tsunami-affected areas.

Five more projects amounting to about USD 454 million are proposed for road rehabilitation, aquaculture development, local government financing and governance, microfinance, and private sector financing of urban infrastructure.

These projects support ADB's program in the country, which promotes long-term economic growth, furthers regional cooperation, supports decentralization policies, and supports access to basic services.

ADB will also assist in the rehabilitation and reconstruction of areas devastated by the earthquake and tsunami that hit Aceh and North Sumatra on 26 December 2004.

A $300 million emergency assistance grant - ADB's biggest ever single grant - was approved earlier this month from its Asian Tsunami Fund to help the country's tsunami-related rehabilitation and reconstruction efforts.

ADB will further reallocate about USD 65 million in surplus funds from ongoing projects to tsunami-related assistance, and will expand the scope of projects already being processed to cover tsunami-affected areas.

About USD 13.5 million is programmed for 13 technical assistance grants to complement the lending program, particularly to provide support for improved governance and public policy.

"This is an important transition year for ADB's operations in Indonesia - a new Government has taken office, a new vision has been formulated, priorities have been established, and new approaches are being contemplated," says David Green, Country Director at ADB's Resident Mission in Indonesia.

"As Indonesia enters a new era of democratic and decentralized government, with promises and hopes for sustained higher levels of growth, the challenge for ADB is to remain relevant and responsive to the country's diverse development needs."

Indonesia saw 5.1% growth in real gross domestic product (GDP) in 2004, its fastest since 2001. Overall investments increased 11.3% year-on-year for the first three quarters of 2004, compared to 1.9% in 2003. International reserves, at USD 37.4 billion, are at their highest since the 1997 Asian financial crisis.

The country, however, still faces numerous challenges. Investments in infrastructure and agriculture are urgently needed, as well as more and better health and education services. Faster growth is necessary to absorb 2 to 3 million entrants to the labor force each year, and to reduce still widespread poverty. These problems are compounded by the country's vulnerability to natural disasters and armed conflict.

The Government recently approved its Medium Term Development Plan for 2005-2009, which emphasized policy and institutional reform, and promotes the active involvement of the private sector in infrastructure provision.

A new CSP will be formulated later this year based on the Government's strategic plans and lessons learned.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members, with 45 from the region.

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