NGOs call on donors to give Indonesia debt relief

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)