The United States and the Government of Indonesia have initiated a substantial partnership by investing $649 million to tackle a major obstacle to Indonesia’s economic growth: the expensive and underdeveloped financial system. The groundbreaking Indonesia Infrastructure and Finance Compact will primarily focus on enhancing infrastructure financing, particularly in the transport and logistics sector, and increasing access to finance for micro-, small- and medium-sized enterprises (MSMEs).
Indonesia’s vast archipelago of over 17,000 islands has significant infrastructure needs, yet limited commercial investment has hindered progress, leading to goods being unable to reach new markets and preventing Indonesians from fully engaging in the global marketplace. Moreover, Indonesia’s MSMEs, which are the main contributors to economic activity and jobs for the majority of Indonesians, often have restricted access to loans and capital, especially those businesses owned by women.
The Indonesia Infrastructure and Finance Compact aims to address these issues through three projects: Advancing Transport and Logistics Accessibility Services Project (ATLAS), Financial Markets Development Project (FMDP), and Access to Finance for Women-owned/Micro-, Small and Medium Enterprises Project (MSME Finance Project).
The ATLAS Project will collaborate with provincial and municipal governments in five provinces to focus on infrastructure planning and preparation, making transport services more accessible, generating time savings for commuters, and reducing traffic congestion and emissions. It also aims to support Indonesia’s climate change mitigation and adaptation plans, with a strong emphasis on net zero transportation infrastructure projects.
The FMD Project aims to work with lenders and the private sector to leverage grant financing and de-risk high-quality infrastructure projects, addressing the need for investment, estimated at $1.5 trillion dollars, across Indonesia. This includes reaching financial close on approximately 10 pioneering transactions, featuring subnational debt instruments and green bonds, to create opportunities for new lenders and make markets more competitive.
The MSME Finance Project aims to provide support for MSME growth and address specific barriers faced by women entrepreneurs by offering business capacity training and technical assistance to improve credit worthiness and investment readiness. The project will also pilot a gender-inclusive finance facility to increase loans issued to women-owned MSMEs and strengthen overall government financial and technical data on MSMEs.
The Millennium Challenge Corporation, an independent U.S. government agency established in 2004, spearheads this initiative. It focuses on reducing global poverty through economic growth by providing time-limited grants and assistance to countries that meet rigorous standards for good governance, fighting corruption, and respecting democratic rights.
This groundbreaking partnership between the United States and Indonesia in the Indonesia Infrastructure and Finance Compact marks a significant step towards addressing the critical infrastructure and finance needs in Indonesia. With a clear focus on enhancing transportation and logistics infrastructure and creating greater opportunities for MSMEs, this collaboration is set to pave the way for sustained economic growth and development in Indonesia.
For more information about this impactful partnership and potential business or job opportunities, please visit: https://www.mcc.gov/work-with-us.
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