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Press Releases

March 31, 2009

JICA Signed Japanese ODA Loan Agreements with Indonesia
-Support of Efforts to Improve the Investment Climate and Enact Climate Change Adaptation Measures-

  • 1. Today, JICA (President Sadako Ogata) signed an agreement with the Republic of Indonesia to provide Japanese ODA loans of up to 71.245 billion yen for a total of five projects. Added to the climate change program loan provided last September and the Development Policy Loan (V) and the Infrastructure Reform Sector Development Program (II) signed on March 24, the overall total of ODA loans offered to Indonesia in FY2008 amounts to 120.599 billion yen.
  • 2. Indonesia's economic growth rate exceeded 6.3 percent in the first half of 2008, supported by steady domestic consumption and private investment. However, this economic growth slowed during the second half of the year due to the global financial crisis. Since last September, the crisis has also led to temporary closures of the stock market rising costs for issuing government bonds, and depreciation of the rupiah. As those adverse impacts spread throughout the financial market, there is a concern that the growth may further hampered in 2009. Along with decisive financial policy, continued reforms to improve the investment climate are therefore critical to maintain sustained economic growth and create employment opportunities.
  • 3. Another issue facing Indonesia is noticeable changes in its annual rainfall pattern that appear to be a result of global warming. In particular, the risk of climate change is predicted to rise in the region Indonesia lying south of the equator, resulting in a lengthened dry season with decreased rainfall and a shortened rainy season with more torrential rains. It is feared that climate changes in the future pose a serious threat to sustained development in Indonesia, with more violent and frequent disasters leading to stagnation in economic activity, increased poverty and other socioeconomic losses.
  • 4. These Japanese ODA loans are for projects that address these issues by improving the investment climate through enhanced economic infrastructure as well as supporting human resource development and climate change adaptation measures. JICA extends assistance with not only the loans for these projects but also loans for policy and institutional reform, including a climate change program loan, the Development Policy Loan (V) and a loan for the Reform Sector Development Program (II). Technical cooperation support is also being provided for policy planning as well as institutional development and its operation. With these comprehensive measures, JICA assistance aims at ensuring sustained economic growth and strengthening climate change adaptation measures in Indonesia going forward.
  • 5. Details of the Japanese ODA loans are provided below.

    (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.

(For further details, click here.)


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