More local infrastructure projects developed by the Asian Development Bank (ADB) will soon utilize government systems in what the bank’s top executive describes as “the most fundamental shift” in its operations in Indonesia.
Tendering or procurement methods for infrastructure projects financed by the bank will now utilize government-designed methods, instead of ADB’s system of work, said the new ADB country director for Indonesia, Steven R. Tabor.
Tabor, an analyst who has advised the Indonesian government for 30 years, noted the advancement of governance and bureaucratic reforms in Indonesia could be better than many perceive.
“When we look at the systems in place, they are actually quite good,” he said in an interview at his Jakarta office on Monday.
“Your environmental standard in Amdal [environmental impact analysis] is actually better than ADB’s system, while the country’s e-procurement system is one of the best procurement systems in Asia Pacific,” noted Tabor.
Criticism of multilateral organizations normally center on their intervention in or excess authority over the projects that they fund, as they get to choose the materials, design or approaches to complete the projects.
In the case of ADB, however, Tabor said the bank would soon be less involved in a project’s design or in the procurement of its materials, as it had trust in the government and its e-procurement system to do the jobs.
It would be “the most important shift” for ADB in its operations in Indonesia, he noted.
Over the past seven years, the ADB has provided approximately US$700 million annually in lending support for Indonesia. This year, the bank plans to double its capital support to $1.5 billion, before increasing to at least $2.5 billion in the next three years, Tabor said.
ADB is not the only multinational lender to have boosted its investment plans in Indonesia, as the country seeks to plug the infrastructure shortfall to boost growth. Earlier this year, World Bank president Jim Yong Kim offered President Joko “Jokowi” Widodo an opportunity to tap as much as $12 billion over the next three years to finance infrastructure projects.
Additional capital for infrastructure projects will also come from the China-led Asian Infrastructure Investment Bank (AIIB), which is expected to be fully operational next year.
The Indonesian government is AIIB’s eighth-biggest donor, contributing $672.1 million over five years for its membership in the AIIB.
Japan, which declined the opportunity to join the AIIB, is the biggest shareholder in the ADB and there appears to be rivalry between the two banks, as well as with the US-based World Bank, in tapping infrastructure projects in the region.
However, Tabor shrugged off the suggestion, saying there was huge demand for infrastructure financing in the region, and in Indonesia in particular.
“Even if we triple the amount of lending here, we could only provide a small amount compared to the country’s needs,” he said. “We welcome with open arms this new Asian Infrastructure Investment Bank because there’s simply so much to do.”
The ADB recently revised down its annual growth outlook for Indonesia this year to 5 percent from the previous 5.2 percent, as sluggish government spending and weak exports continue to weigh on growth.
ADB’s prediction is less upbeat than the government’s 5.7 percent target in the 2015 state budget. However, it is still a tad higher than its peers the World Bank and the International Monetary Fund (IMF), both of which forecast the economy will grow a mere 4.7 percent this year.
