'Debt-for-nature swaps questionable'

M. Taufiqurrahman, The Jakarta Post, Jakarta

The absence of clear-cut domestic regulations sanctioning the debt-for-nature-swap (DNS) scheme has hampered the way for its full-fledged implementation, a non-governmental organization says.

The Kehati biodiversity foundation said Thursday that there were neither ministries nor government agencies authorized to manage and hold responsibility for the implementation of the swap scheme.

Indonesia has been seeking to swap bilateral debts with nature conservation, under which money allocated to pay foreign loans would be redirected to paying conservation initiatives.

Agung Purnomo of Kehati said the absence of a single agency had resulted in frustrating rivalries among government agencies in the dragging negotiation process and became major constraint for the implementation of the DNS in the country.

Agung also said the absence of such a rigorous institution had deterred conservation investors from joining the fray.

"The existing task force on debt-for-nature swap does not have the mechanism to register conservation investors and is incapable of providing up-to-date information on the debt swap implementation," Agung said in a seminar here.

A DNS is the cancellation of debts, particularly foreign debts, in exchange for a commitment to mobilize domestic financing for the conservation of natural resources or the environment.

Indonesia's external debts currently stand at US$73 billion.

Past experiences also showed that an agreed upon DNS was not implemented due to turbulent political and economic environment.

Between March 1999 and January 2002, the pursuance of the scheme was stalled because the country had to undergo three changes of presidents and four coordinating ministers for the economy.

Thus far, only one debt-swap scheme that has been implemented in the country. The DM50 million worth scheme was initiated by the German government and aimed at improving the country's education.

The German government has also offered the Indonesian government a DNS worth US$400 million for conservation of what was once a peat land in Kalimantan.

Starting in 1998, Kehati along with other conservation organizations World Wildlife Fund, Conservation International and TMC Nature Conservancy had promoted the application of DNS scheme for Indonesia.

Currently, Kehati is negotiating for the purchase of the country's external debt at a discount from the English government with funding raised from donor governments or private donors. The English government had laid down conditions that Indonesian debt could only be bought by a third party.

In April 2003, Kehati expected to buy back Indonesian debts with 80 percent of discount, but the English authority rejected the proposal. Last February, Kehati lowered the discount rate ro 32.5 percent, but to no avail.

If approved, Kehati had planned to sell the debt to the government with up to 15 percent discount. The margin from the sale would then be devoted to conserving the environment.