Here’s how much to World Bank is giving Indonesia to jump-start its economy

JAKARTA – Indonesia is receiving further funding from the World Bank to help restart the economy.

The World Bank’s Executive Board of Directors approved a loan of US$800 million earlier this week.

As stated by the World Bank in their official press conference, this loan is granted in order to support Indonesia’s investment and trade policy reforms, as well as help Indonesia in speeding up its economy’s recovery and development.

High barriers to investment and trade have limited Indonesia’s ability to attract export – oriented foreign direct investments and reduce its capability to integrate with the global economy.

This issue is said to cause relatively high prices in the country. Such limitations also slow down the growth rate of the manufacturing and non-commodity sectors.

The situation has also caused Indonesia to only be able to create low productivity jobs in the commodity and service sectors in the last few decades. In such conditions, the wages of workers in Indonesia also remain relatively low compared to neighboring South East Asian countries.

To further compound the country’s economic woes, the pandemic caused Indonesia to experience its first recession in over two decades. This amplifies the challenges already faced by the economy to expand to more sophisticated and technologically-related sectors in order to create better paying jobs with higher worker productivity.

“We are moving forward with an ambitious reform program to attract investment and increase Indonesia’s economic competitiveness. These reforms have the potential to support the transformation of the economy away from commodities and towards higher value-added sectors. This could provide a much-needed boost to the post-pandemic economic recovery,” explained Satu Kahkonen, World Bank’s Head Representative for Indonesia and Timor-Leste.

The World Bank conducts a development policy operation program that is composed of two pillars. The first is to carry out development which aims to accelerate investment. Its method is to open up more sectors to be made available to private investment, especially foreign direct investment.

This is with the aim of bringing more highly skilled professionals to the job market and pushing for private investment in the renewable energy sector.

The World Bank will support trade policy reforms to improve competitiveness in the market as well as stimulate economic recovery. The aim is to increase access and affordability to basic food commodities and other raw materials, as well as to facilitate access to manufacturing plants.

The expected surge in investment will be triggered by reforms which require careful environmental management. The World Bank will work with other development partners to assist the Indonesian government strengthen environmental management efforts across all sectors to promote sustainability.