Govt vows to win debt-for-nature scheme
Govt vows to win debt-for-nature scheme
JAKARTA (JP): The government has vowed to pursue a debt-for-
nature-and-development swap with foreign creditors to ease
pressure on the state budget from debt-servicing and to benefit
the environment.
A meeting of ministers under the Coordinating Minister for
People's Welfare on Wednesday decided to go on with the
initiative, which was taken as a novel approach to acquire
additional funds for the country's development, in particular
environmental protection.
Environmental activists applauded the idea, which had been
offered by the United States and Germany.
State Minister for Environment Nabiel Makarim said that there
would be intensive discussions with the economic ministries
before proceeding with negotiations with foreign creditors.
Nabiel said he had appointed several officials and experts to
handle the program.
"The percentage of the debt-swap compared to the total amount
of our bilateral debt with the creditor is small in nature, but
it will certainly make a significant impact to spending on
development.
"I consider this mechanism a way to bring environmental issues
toward the mainstream of development," he told journalists after
the coordination meeting hosted by his office.
The debt-swap is an international finance mechanism, which is
aimed at decreasing the debtors' foreign debt by replacing it
with the debtors' commitment to uphold social development and
nature conservation programs.
Under a binding agreement, the creditor will cut the debtor's
debt but the debtor has to provide their own funds of a similar
amount with an agreed percentage of the debt-swap and use it for
development-related activities.
In 2002 budget, he said, Indonesia had to expend some Rp 130
trillion (some US$13.6 billion), or about 44 percent of the state
revenue, to repay the maturing sovereign debt. In comparison, the
funding allocation for development programs was only Rp 47.1
trillion.
The U.S. offers a debt-swap mechanism for countries with
tropical forests through the Tropical Forest Conservation Act and
provides $200 million for all participants, where debtors each
obtain a 40-percent cut from the agreed amount of debt under the
swap.
Germany, he said, also offered a debt cut of DM 50 million
(some $22.9 million) through the debt-for-sustainable-development
mechanism with Indonesia, which was expected to be effective
later this year or early next year at the latest.
Environmentalist Elfian Effendi, an appointed special advisor
to Nabiel's office, said that creditors would certainly supervise
the implementation of the deal under a multi-stakeholder
committee that would be set up afterward.
Nabiel said that compensation from the debt-swap would first
go to the Ministry of Forestry for reforestation projects, as
most of the country's forests had already been damaged by illegal
logging and forest fires. (bby)