The World Bank has approved two significant investments for a total blended finance package of $2.128 billion to create jobs, boost economic growth, and improve clean energy access across Indonesia.
These projects are the first in support of the Indonesian Government's goal of reaching high-income status by 2045.
The policy reform program, a $1.5 billion investment, will strengthen Indonesia's financial sector by expanding digital financial services, removing credit infrastructure constraints, expanding capital markets, and adjusting to climate and natural disaster risks.
It will also remove obstacles to procuring renewable energy technologies by reducing local content requirements, aligning industrial estates policies with international good practice standards, and implementing land value capture mechanisms to attract private capital into infrastructure development.
The blended finance program for Sustainable Least-Cost Electrification-2 (ISLE-2) will enable energy access to 3.5 million people and generate 540 MW of solar and wind power, reducing power generation costs by at least 8% and greenhouse gas emissions by 10% in Kalimantan and Sumatra regions.
“The reforms and investments we are supporting with this blended finance package of over $2 billion will help implement key government priorities and advance the Bank’s own goals to create jobs and advance energy access in one of the largest and most dynamic economies,” said Manuela Ferro, World Bank Vice President, East Asia and the Pacific. “Through blended finance instruments, the World Bank and partners will also help mobilize an additional US$345 million in private investments to finance solar and wind project, as part of a World Bank Regional Energy program to create national and regional resilient and interconnected energy grids.”
Indonesia has enjoyed years of strong growth and adept fiscal management, even during COVID and in the context of slowing global demand. The new government’s plans to invest in human capital, ensuring all Indonesians have access to electricity, and implementing financial sector reforms are being supported by the World Bank through knowledge and financing. The government is also establishing a deregulation committee that could unlock innovative financing approaches to attract private capital at scale.
With the ISLE-2 Project, the World Bank continues to support Indonesia in achieving universal access to electricity in a least cost manner. “With over 3.5 million people gaining access to electricity, the operation is projected to catalyze improved livelihoods and creation of more and better jobs—including through electrification of female-headed enterprises,” added Carolyn Turk, Division Director for Indonesia and Timor-Leste.-TradeArabia News Service
