Wed, 06 Aug 2003

Govt to request debt-swap facility at CGI meeting

Evi Mariani, The Jakarta Post, Jakarta

The government is seeking a debt reduction facility via a debt- swap mechanism at the upcoming Consultative Group on Indonesia (CGI) donors meeting.

"I'm collecting information from ministries on what can be possibly swapped for our (sovereign) debts," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti told reporters on Tuesday.

"We have already secured a debt-for-nature swap from Germany," he said. "Now, why don't we swap debt-for-poverty or debt-for- emissions?"

Dorodjatun was speaking on the sidelines of a meeting with other ministers and exporters to make preparations for the World Trade Organization ministerial conference in September in Cancun, Mexico.

"We will propose a debt swap to CGI and hope we can secure tens of millions of dollars," he said, without explaining the form of the swap or a schedule.

CGI, which is a grouping of the country's traditional donors, is slated to hold an annual meeting with the government in October this year to decide on the size of a fresh loan for Indonesia. The government says it still needs foreign loans to help finance next year's state budget deficit, projected at 1 percent of gross domestic product.

The government has been struggling hard to reduce its huge foreign debts of around US$70 billion. But since the country is not categorized as a highly indebted poor country, which would make it eligible for debt relief, the only possible scheme is through a debt-swap mechanism, experts have said.

Debt swaps are usually carried out to reduce debt by using the funds borrowed for financing certain programs that are of concern to the donors. As a consequence, a borrowing country does not have to repay a certain amount of the debt used for the program.

In March, the government secured a debt-for-nature swap facility worth $15 million from Germany. Reportedly, the facility is used for assisting water-related projects such as environmental conservation and food security programs.

The German government has long been assisting Indonesia, through funds channeled to several non-governmental organizations, in the provision of clean water and sanitation in poor areas.

Dorodjatun said that Indonesia was considering proposing a debt-for-emission swap facility to the donors. "Donor countries often criticize Indonesia, saying it pollutes the air through automobile emission," he said. "But now, let me ask in return, where did all the cars crowding our roads come from?"

So, he said, it would only be fair if the Indonesian government sought a debt-for-emission swap from countries producing automobiles.

However, Dorodjatun refused to comment when asked whether Indonesia would request such a facility from Japan, whose giant automakers like Toyota, Mitsubishi and Suzuki dominate the automotive market in Indonesia.

Japan is one of the country's largest foreign donors.