Indonesia and the United States Sign USD 698 Million Infrastructure and Finance Compact

May 2023

Indonesian Minister of Finance Sri Mulyani Indrawati and US Secretary of the Treasury Janet Yellen have signed the Indonesia Infrastructure and Finance Compact, amounting to USD 698 million. The Compact is a bilateral agreement between the Government of Indonesia and the United States government’s Millennium Challenge Corporation (MCC), spanning a duration of five years. It entails a financial commitment of USD 649 million from the United States and USD 49 million from the Indonesian government.

The main focus of the compact will be to enhance Indonesia’s infrastructure financing, with a specific emphasis on transportation and logistics infrastructure, as well as improving access to finance for micro, small, and medium enterprises (MSMEs). Given Indonesia’s ongoing investment in manufacturing and commodity-based exports, there is a growing demand for well-developed infrastructure to facilitate the transportation of workers and goods.

According to Secretary Yellen, the compact will also provide assistance to Indonesia’s Just Energy Transition Partnership and the construction of climate-resilient infrastructure, adhering to the standards set forth by the Partnership for Global Infrastructure and Investment (PGII). The PGII was jointly announced by the presidents of both countries at the G20 Leaders’ Summit.

Micro, small, and medium enterprises (MSMEs) employ nearly 97% of Indonesia’s workforce and make up around 62% of its GDP. Additionally, with its vast archipelago of 17,000 islands, Indonesia faces significant infrastructure requirements. However, limited private sector investment hinders the efficient transportation of goods to untapped markets and restricts the ability of citizens to actively engage in the global marketplace.

(Sources: Tempo, Antaranews, MCC)

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