NGOs call on donors to give Indonesia debt relief

JAKARTA (JP): Non-governmental organizations (NGOs) urged the World Bank and other donor institutions on Monday to reduce Indonesia's sovereign debt by at least 30 percent.

The executive secretary of the International NGO Forum on Indonesian Development (INFID), Binny Buchori, said it was impossible for Indonesia to emerge from the devastating economic crisis without debt relief.

"It's unfair, even amoral, if the people of Indonesia must pay and carry the burden of a sovereign debt corrupted and embezzled by an autocratic leader who was not elected through an honest and democratic election," she said during a discussion on sovereign debt attended by World Bank, government and central bank officials.

She said some 30 percent of the country's sovereign debt had been embezzled during the 32-year rule of former president Soeharto.

Binny called the embezzled foreign loans a criminal debt.

She said the World Bank and other donor institutions must bear some responsibility for the embezzlement of foreign loans because it occurred under their noses.

"Donor institutions like the World Bank have turned a blind eye to the corruption because they're afraid to offend Indonesia," Binny said.

"We don't want to be included in the HIPC (highly indebted poor country) category. International donors must admit the criminal debt so there can be a debt reduction," she said.

The World Bank has insisted that Indonesia can qualify for debt relief only after it has been categorized HIPC.

However, noted activist Emmy Hafild said if Indonesia was included in the HIPC category, the country would never rebound.

"Our country is in a transition toward democracy. If the debt service ratio is too high, there will be nothing much left for social welfare and to develop a grassroots economy, and the transition to democracy will fail," she said.

"This is a solid reason (for debt relief)," she added.

Indonesia's sovereign debt currently stands at around US$70 billion.

The government has refused to seek debt relief on the grounds that such a move would damage creditor confidence in the country. The government instead recently asked the Paris Club of creditor nations to reschedule $6 billion in debt due in the 2000/2001 and 2001/2002 fiscal years.

The Paris Club is expected to convene to discuss the government's proposal after Indonesia's presidential election, which is scheduled for Oct. 20.

The Paris Club agreed in September last year to reschedule for between 11 and 20 years $4.2 billion in debt which was to mature in March 2000.

"Debt rescheduling is not enough to solve Indonesia's debt problem.

"It's just a mechanism to extend debt payments to the next generation," Binny said.

She said Indonesia's foreign debt problem was reflected in the 1998 debt service ratio against exports, which reached 52 percent, meaning that more than half of the country's export revenue was used to repay foreign debt.

"The international creditors must share Indonesia's debt burden," she said.

Binny said INFID would push the new government to negotiate with the World Bank and other creditors to reduce the country's debt.

But Jusuf Faisal, a top economic adviser with the National Awakening Party (PKB), one of Indonesia's largest political parties, warned that seeking debt relief could cause international donors to stop lending to the country for at least three years. "Are we ready for such a risk. This is the dilemma."

Jusuf said NGOs and economists must give the new government input on how to take advantage of the country's economy to overcome the debt problem.

He also said the newly installed People's Consultative Assembly would issue guidelines to prevent the next government from excessively borrowing from foreign donors.

Meanwhile, other activists said Indonesia must take the extreme step of unilaterally declaring a debt moratorium.

"Let's stop the elegant talk; I've had enough of it," one of the activists, Farida, said.

"My view is that we should just declare a debt moratorium," said Roem Topatimasang, another activist who has recently written two books on the issue of debt, including The Crime of Foreign Debt and Reforming the World Bank.

Noted economist Sri Mulyani warned of retaliation from the international community if Indonesia were to take such an extreme measure.

"I agree that international creditors must also share the (debt) burden, but it doesn't mean that we don't pay our debts," she said.

She said it would be better for the next government to discuss debt relief with donors.

"But first we need a credible government," she said, pointing out that since the present government was part of the corruption of the past it did not have the credibility to negotiate a debt relief settlement. (rei)