Paris Club diplomacy mission accomplished: Hassan

Ivy Susanti, The Jakarta Post, Jakarta

Minister of Foreign Affairs Hassan Wirayuda said on Monday that his team had accomplished its mission to negotiate debt relief in last week's Paris Club meeting as well as mobilizing support for grants and debt swaps.

The team met with leaders from four countries of the United Kingdom, France, Germany and Italy prior to the forum.

"We (Indonesia and the four European countries) not only talked about a debt moratorium, we also discussed wider schemes that were proposed (by analysts, experts) in Indonesia," Hassan told a press conference here.

"We reached an understanding that we would follow up our discussion on the moratorium. At this point, I thought it was not realistic to talk about the amount of the debt moratorium and so on. In the end, the amount would depend on the World Bank's assessment, although we agreed on terms and conditions for the moratorium."

Nineteen creditor countries grouped in the Paris Club announced an immediate debt repayment reprieve for countries devastated by the recent Asian tsunami disaster, including Indonesia, pending a full assessment from the World Bank and the International Monetary Fund on their reconstruction and financing needs, scheduled to be completed in three months. The Paris Club will consider the necessary steps after that.

Criticism has been leveled at the delegation, saying it failed in diplomatic efforts and that the government had not asked for enough debt relief to rebuild Aceh.

Hassan said Germany, France and Italy agreed on debt swaps or an increase in their grants. Germany has offered 500 million euros (US$650 million) to affected countries, comprising of grants and soft loans. German is considering raising the percentage of their grants, he added.

Italy has agreed to convert 30 million euros of Indonesia's debt this year to finance certain projects -- including the reconstruction of Aceh. "Italy also offered the same amount to be converted in 2006," Hassan said.

France has offered 300 million euros in soft loans with 1 percent interest with a 10-year grace period. The donor country refused to convert the loan into a grant since it had to revise its annual budget. "But one third of the loans will be in effect a grant," Hassan said.

He added that the European Union was considering granting a tariff reduction and lifting trade barriers for certain goods from Indonesia. The EU will make the decision on July 1 and Minister of Trade Mari Elka Pangestu will hold a discussion with related EU ministries.

"France has supported the special treatment for Indonesian textiles and is willing to consider other commodities like shrimp and fish products," Hassan said.

He also said that Germany would help Indonesia develop a tsunami early warning system across the archipelago, apart from the planned system in the Indian Ocean, by sending its geologists to an international conference on early warning systems in Indonesia next month.