'Debt-for-nature swaps questionable'

'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.