March 31, 2009
(1) Improving the investment climate through enhanced economic infrastructures and higher education
With the target of promoting economic growth and expanding employment opportunities, the Indonesian government announced comprehensive policy package in June 2007 based on improving the investment climate and reforming the financial sector, as well as promoting infrastructure development and enhancing micro, small and medium enterprises. This was supplemented in August 2007 with an Economic Partnership Agreement between the two countries to coordinate mutual trade, investment and services. However, traffic congestion in the Jakarta metropolitan area, demand pressure on the electrical power supply and a lack of human resources with a higher education still pose a significant problem for Indonesia's investment climate.
These Japanese ODA loans are being provided to support a diverse range of projects for improving Indonesia's investment climate. These include the Construction of Jakarta Mass Rapid Transit Project (I) to mitigate severe traffic congestion by constructing a mass rapid transit system in the Jakarta metropolitan area, the Engineering Services for Java-Sumatra Interconnection Transmission Line Project to build new transmission lines connecting the islands of Java and Sumatra to alleviate the tight supply and demand for power and improve power supply reliability, and the Development of Bandung Institute of Technology (III) to assist higher educational institutions for increased education-industry collaboration.
(2) Support for adaptation measures to address the adverse effects of climate change
Indonesia has been experiencing changes in its rainfall pattern thought to be caused by global warming. Over the last 10 years, these changes have resulted in some 50 floods, causing three million disaster victims and 1.6 billion dollars in total damages, making flooding the primary disaster risk in Indonesia. This flood damage is one of the factors which represent not only a material loss of houses, but also socioeconomic losses in the form of stagnant economic activity and increased poverty that may cause retardation of the sustainability of economic development in Indonesia. These Japanese ODA loans are being provided to enhance Indonesia's flood prevention capabilities and water source management in key regional cities damaged by frequent floods. Urban Flood Control System Improvement in Selected Cities will be provided to support river and flood control infrastructure improvements as well as bolstering the capacity of the river basin management offices with implementation to include measures for climate change adaptation. In addition, support will also be given to the Countermeasure for Sediment in Wonogiri Multipurpose Dam Reservoir (I) project to ensure regional water sources by applying anti-sedimentation measures to the Wonogiri multipurpose dam in central Java's upper Solo River Basin.