Indonesia has received a US$400 million loan from the Asian Development Bank (ADB) to help improve the Southeast Asian country’s logistics and transport sector, especially its port system, as the deteriorating infrastructure has had an impact on economic growth.
“Weak transport connectivity and poor logistics are weighing on growth and the country’s ability to reduce regional development gaps and poverty rates,” said James Nugent, director general of ADB’s Southeast Asia Department. “The loan supports policy reforms that will help unlock obstacles to scaled up investments in this sector.”
The ADB noted the slowdown in Indonesia’s economy after booming in recent years due to slower than expected recovery of the country’s exports.
Also a factor for the slower growth rate is the poor state of infrastructure, manifested by deteriorating roads, congested ports, weak logistics systems, and an underdeveloped inter-island transport system.
These shortcomings have caused higher transport and logistics costs, unbalanced regional development, and limited integration of Indonesia’s manufacturing sector into international production networks, said the regional development bank.
The policy-based loan from ADB aims to strengthen regulatory frameworks for transport and logistics, increase investments in the transport sector, boost domestic connectivity, and enhance international connectivity by making the country’s ports more efficient in handling traffic and trade volumes.
Another key goal is to improve inter-island links between poorer eastern parts of the country with growth centers and markets in the west, resulting in more economic opportunities.