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Recent Issues Regarding Indonesian Government Subsidiary Offshore Loans to Regions

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  • Robert A. Simanjuntak

Abstract

The Government of Indonesia and various international lenders have recently developed a number of programs and projects for the financing of local capital investments and related support activities in the form of grants and loans to relevant regional governments/enterprises. Some of these programs/projects have been agreed upon and become effective. However, implementation has been delayed, partly because the envisaged regional loan and grant arrangements, which reflect the rules of the lenders, are not consistent with the provisions of Law 25 and its supporting regulations. To resolve these problems, the Minister of Finance issued Decree No 35/KMK.07/2003 regarding On-lending and On-granting of Foreign Loans to Regions. However, as most multilateral agencies suggest, the implementation of this decree still requires the development of detailed practical rules and procedures for the central government processing of individual loan and grant proposals. This paper attempts to clarify some of the most urgent issues in the decree: (i) classification of projects; (ii) classification of regions; (iii) evaluation of the percentages of regional government counterpart funds for grant basis; (iv) currency issues; and (v) terms and conditions of loans.

Suggested Citation

  • Robert A. Simanjuntak, 2004. "Recent Issues Regarding Indonesian Government Subsidiary Offshore Loans to Regions," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 52, pages 143-185, August.
    • Handle: RePEc:lpe:efijnl:200409
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    Keywords

    Regional development-Financing-Offshore loans-Regulations-Indonesia;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other

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