Post-tsunami deal on debt swap signed

Zakki P. Hakim, The Jakarta Post, Jakarta

Italy and Indonesia agreed on Wednesday to swap some of Jakarta's debt for the reconstruction of tsunami-affected areas in northern Sumatra and poverty alleviation programs.

Italian Foreign Minister Margherita Boniver and Indonesian Minister of Foreign Affairs Hassan Wirayuda signed the debt-to- development swap worth US$24.2 million and 5.7 million euros.

Under the deal, the two governments will set up a "management committee". Indonesia will be represented on the committee by the Office of the Coordinating Minister for the Economy, while Italy will be represented by the Italian Embassy in Jakarta.

The joint committee will be responsible for monitoring the transparency and accountability of the projects.

Mahendra Siregar, deputy to the coordinating minister for international economic cooperation, said the deal would allow the government to allocate funds to rebuild Aceh and North Sumatra, while at the same time reducing Indonesia's foreign debt.

The two countries will later sign an agreement on which rehabilitation projects should be prioritized.

The projects, Mahendra added, would depend on the reconstruction blueprint for Aceh currently being drawn up by the National Development Planning Agency (Bappenas).

The deal is a follow-up on Hassan's visit to Rome in January to drum up post-tsunami aid.

The agreement signed on Wednesday is also based on the April 2002 Paris Club III agreement on debt swaps, as well as a memorandum of understanding between Indonesia and Italy on debt rescheduling signed in early December last year.

Mahendra hopes the debt swap will encourage other creditor countries to consider similar agreements with Indonesia.

Earlier, Germany swapped a total of 48.5 million euros of Indonesia's debt for education projects, and some 50 million euros for environmental projects.

Jakarta is also in talks with the British government to finalize a deal to swap some of its debt for a project that would provide Indonesia with up to 1,000 public buses.

Only recently, the government began talks with France on swapping some $65 million of Indonesia's debt for investments.