RI, Germany agree US$29.25m debt swap deal

RI, Germany agree US$29.25m debt swap deal

Tony Hotland, Jakarta

Acknowledging the success of two earlier debt swap deals, the
Germany government has announced that it will enter into a third
deal with Indonesia worth 25 million euros (US$29.25 million) for
environmental projects.

Germany's deputy minister for economic cooperation and
development, Uschi Eid, said that the German government was
pleased with the ongoing projects being implemented under the
first two debt swap deals.

"Our government is also interested in stronger and more
effective cooperation to protect the natural resources of
Indonesia. That's why the third deal is dedicated to the
environmental field," she told a press conference here on Friday.

Eid was on a five-day visit to Indonesia. She met with several
non-governmental organizations (NGOs) and economic ministers, and
also visited a number of Indonesian-German projects.

The third deal has yet to be officially signed, but
discussions about what type of environmental projects will be
involved are currently underway with the Ministry of Forestry and
the Office of the State Minister for the Environment.

Debt swaps are usually carried out to reduce a country's debt
by requiring the debtor to spend a specified amount of the
original debt on financing certain programs that are of concern
to the donors. As a consequence, the borrowing country does not
have to repay the amount of the debt that is used for these
programs.

Under the Indonesian-German debt swap scheme, Germany will
write off a certain amount of debt after Indonesia spends 50
percent of the renounced amount in rupiah on projects that have
been agreed by both governments.

Indonesia owes up to 1 billion euros to Germany.

The two countries signed the first debt swap deal worth 25.6
million euros in December 2000 for education projects. As a
consequence, Indonesia must spend 12.8 million euros to build and
equip 511 learning resource centers in 17 provinces to enhance
the quality of teacher training in the basic sciences. These
projects are nearing completion.

The second deal, involving 23 million euros, was arranged in
October 2002. The two governments agreed to dedicate the deal to
improving primary and secondary education in eastern Indonesia by
building 100 new schools. The building of the schools is
currently underway and is expected to be completed by 2006.
Indonesia is obliged to invest 11.5 million euros.

No debt from the first two deals has been written off yet.

The implementation of all the projects under the debt swap
deals is monitored German development bank KfW's branch in
Jakarta.

Also on Friday, KfW signed two agreements with the Ministry of
Finance. The first agreement involves a disbursement of nine
million euros in a soft loan and one million euros in grant aid
for the purpose of improving industrial pollution control.

The second one deals with the provision of a five million euro
grant by KfW to support nationwide campaigns, training, and
grassroots work in preventing the spread of HIV/AIDS.