Seizing the momentum<\/p>\n
It was really good move on the part of the government to send
\na special team led by Foreign Minister Hassan Wirayuda to Europe
\nlast week to follow up the initiatives by the governments of
\nGermany, France, Italy and Britain, on debt moratorium to help
\nIndonesia cope with the Dec. 26 earthquake and tsunami in
\nnorthern Sumatra. The effort, as Hassan said yesterday, was like
\nhammering the iron while it is still hot, riding on the momentum
\nof international sympathy for Indonesia and seizing upon the
\nmassive humanitarian gestures.<\/p>\n
There is nothing to regret, even though the team only got a
\nfirm pledge of US$350 million in debt relief from the Paris Club
\nof 19 sovereign creditors. As the mission was only an initial
\nexploration of what creditors would be willing to give Indonesia,
\nthe outcome is already quite encouraging, especially as the Paris
\nClub's rules of operation require consensus decisions. Moreover,
\nthe debt relief was obtained without any conditions.<\/p>\n
Indonesia should indeed turn down any offer of assistance that
\nis tied to the normal terms and conditions that the Paris Club
\nimposes on debtors in financial crisis. We are not in a financial
\ncrisis, nor in an economic crisis. The government has never made
\nany official request for debt moratorium. It only responded to
\nthe initiatives of several major sovereign creditors with regard
\nto the natural disaster in northern Sumatra. We also know that
\nthere have been several precedents whereby the Paris Club waived
\nits standing operating procedures to help natural disaster-hit
\ncountries such as Haiti and Kosovo.<\/p>\n
It is also understandable, however, that the Paris Club
\nmeeting last Wednesday decided on a moratorium only for
\nIndonesian debt payments due over the next three months, which
\namounts to some $350 million. Since the debt scheme is tied to
\nthe disaster in northern Sumatra, it is sensible and logical that
\ncreditors wait until a final, comprehensive assessment of the
\ndevastation is made, along with its economic impact and estimated
\nfinancial requirements for the reconstruction of Aceh.<\/p>\n
The team took other important initiatives, not only exploring
\ndebt moratorium and grants, but also other possible aid schemes
\nsuch as debt swaps (for projects in Aceh), soft loans and even
\nassistance through trading opportunities. The team's exploration
\nof preferential tariffs for Indonesian products is quite
\nstrategic because of the multiplier effects and sustainable
\nimpact of trade on the economy.<\/p>\n
Even new debts such as the $390 million offered by the French
\ngovernment as a soft loan -- repayable within 30 years with a 10-
\nyear grace period and annual interest of only 1 percent -- could
\nbe a good option. Such a loan, for example, could be used to
\nrestructure old debts that carry higher interest and shorter
\nmaturity. Whatever avenue that is effective in cutting our debt,
\nor does not add to future debt payments should be utilized.<\/p>\n
All the aid or debt schemes mentioned above are very relevant
\nand should be explored further because what the government is now
\nseeking is no longer funds for emergency relief. Rather, it is
\nfor financing the rehabilitation of Aceh, that could take at
\nleast five years, and for reconstruction, that could take more
\nthan seven years.<\/p>\n
The annual meeting of Indonesia's creditor consortium (the
\nConsultative Group on Indonesia, CGI) that begins here today is
\nanother good forum to follow up on what Hassan's team started in
\nits exploratory talks in several European cities last week. After
\nall, most major Paris Club creditors are also members of CGI.
\nAnother mission to Europe by the finance and trade ministers with
\nmore concrete aid proposals will keep the momentum of creditor
\nand mass media attention on Aceh before the agenda of
\ninternational interests moves elsewhere.<\/p>\n
More important, though, is that the government and the World
\nBank accelerate the assessment of damage in the northern part of
\nSumatra so that projects for rehabilitation and reconstruction
\ncan immediately be designed and offered to creditors for
\nfinancing.<\/p>\n
The government, however, is well advised to realize that the
\nmanagement of and accountability for the huge amount of emergency
\naid that has been flowing to Aceh over the past three weeks will
\nvery much determine any further assistance from major creditors
\nfor Aceh's rehabilitation and reconstruction.<\/p>\n
The outpouring of international sympathy should not lull the
\ngovernment into complacency. Experience in other countries has
\nshown that debt relief is always tied to a comprehensive
\ndevelopment strategy that hinges on good governance, building
\nstrong institutions and promoting growth.<\/p>\n
Further down the line, this means continued implementation of
\nthe series of key economic reforms, including sound macro-
\neconomic policies that underpin the creation of a sound legal
\nsystem, the establishment of a reliable and accountable financial
\nsystem, and the fostering of self-sustaining private sector
\ndevelopment.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/seizing-the-momentum-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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