Japan rules out debt haircut possibility
By Fabiola Desy Unidjaja and Kornelius Purba
TOKYO (JP): Japanese Prime Minister Junichiro Koizumi told visiting President Megawati Soekarnoputri here on Thursday that Japan could under no circumstances accede to a request for debt relief as this would run contrary to Japanese law.
Koizumi told the President that he fully understood Indonesia's economic difficulties, and expressed his government's readiness to reduce Indonesia's heavy debt burden through its contribution as a member of the Paris Club of creditors nations, State Secretary/Cabinet Secretary Bambang Kesowo disclosed after the meeting.
"If possible, let's not talk about a debt haircut. Japanese law does not permit any such debt relief mechanism," Bambang quoted Koizumi as telling Megawati.
Bambang said that during the two leaders' talks the President did not raise the debt relief issue.
Top Indonesian officials, including Vice President Hamzah Haz and Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti, have openly voiced their preference for debt relief from Indonesia's creditors because the country's debt of US$150 billion, including $70 billion in sovereign loans, is too onerous a burden for the new government.
The Paris Club has agreed to reschedule debts worth $4.2 billion, including $2.4 billion from Japan. The Paris Club is expected to further reschedule $5.8 billion of Indonesian debt due to mature in March next year. Japan's share is about $2.7 billion.
During the meeting, Koizumi also asked about the future of four Japanese megaprojects in Indonesia, although he did not specifically mention their names.
Separately, Minister of State Enterprises Laksamana Sukardi noted that even though Japan by law does not allow debt relief, the debt restructuring agreed on constituted de facto relief.
"In Japan, there is a law which prohibits the extending of debt relief. Only debt restructuring is permitted. But in reality, restructuring also entails debt relief. It's just that we cannot use the term as it is taboo here," Laksamana said at a joint press conference with Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti and Minister of Foreign Affairs Hassan Wirayuda.
Laksamana also disclosed that the government would find a solution for the four problematic Japanese projects next month. Teams from both Japan and Indonesia would meet in Jakarta next Monday to finalize resolution mechanisms.
"The principle underlying these resolutions will be burden sharing. We emphasize that there should be equal treatment as between debt and equity conversion," Laksamana said.
Meanwhile, in his address at a dinner welcoming the President, Koizumi pointed out that although both Japan and Indonesia were facing severe economic hardship, his government was prepared to continue helping Indonesia.
Megawati smiled broadly when Koizumi ended his prepared speech with the Indonesian words: "Terimakasih banyak (Thank you very much)". The President herself delivered an off-the-cuff speech.
Her husband Taufik Kiemas did not accompany her to the dinner as Koizumi is a divorcee. Liberal Democratic Party (LDP) Secretary-General Taku Yamasaki was seated to her right.
Knowing that most of his Indonesian guests were Muslim, the host did not provide wine for the toast with water being used instead. Megawati leaves for Jakarta on Sunday.