Urip Hudiono, The Jakarta Post, Jakarta
The government has in the end agreed to accept Japan's offer of a new US$1 billion yen loan package to support Indonesian development this year, but will continue to negotiate the terms and conditions of the projects that the loans are intended to help finance.
""We will continue to discuss and finalize the details of the planned projects,"" State Minister for National Development Planning Paskah Suzetta told reporters Thursday.
While confirming the decision to accept the loan offer, Paskah said the government would continue negotiations on the Indonesian request that the projects employ at least 70 percent local consultancy content, and at least 40 percent local product content.
""We would like to see more of the projects being untied ones,"" he said.
Coordinating Minister for the Economy Boediono had earlier indicated that Indonesia should avoid rejecting the offer, although he said that the final decision would be up to Paskah.
The state minister's decision came after the Japanese ambassador, Yutaka Iimura, requested a response to the offer by not later than March 31, which marks the end of Japan's fiscal year. He also said that he hoped a definitive decision would be made by Thursday (March 9) to allow Japan time to post the loans as official development aid allocations in its budget.
Japan plans to help finance nine infrastructure projects with the new loan package, including the construction of a subway line in Jakarta.
Last year, Japan committed 114.83 billion (some $1.07 billion) through the Consultative Group on Indonesia (CGI) to help finance eight major infrastructure projects, aside from grants for the tsunami-stricken Aceh province.
This year, however, a new interest rate of 1.5 percent, up from 1.3 percent previously, will be applied to a number of loans on consideration that Indonesia's gross domestic product has increased to such an extent that Indonesia is now classified as a lower-to-middle-income bracket country.
Although the new rates will only apply to three general term projects, with the others all being preferential term projects with lower interest rates of between 0.4 and 0.75 percent, the issue had proven to be a constraint on the negotiations, besides the local content issue and a lack of preparedness on the Indonesian side for implementation of some of the projects.
The government hopes to raise Rp 35.11 trillion ($3.7 billion) from foreign loans to help cover this year's budget deficit, which is expected to reach Rp 22.4 trillion.
Indonesia's debt stock currently stands at US$61.04 billion, the Finance Ministry said, with the country having to allocate Rp 63 trillion for repayment of debt principal this year alone.
This has raised concern and criticism from the public that Indonesia may never be able to escape its debt trap, with many urging the government to reduce its future foreign borrowing.
Finance Minister Sri Mulyani Indrawati said that Indonesia may repay its $7.8 billion debt to the International Monetary Fund ahead of schedule. Meanwhile, as the negotiations on Japan's new loan offer appeared to stutter, Paskah said Indonesia might seek out lower cost foreign lenders, including China.
