Mon, 15 Aug 1994

Soeharto wants comprehensive debt solution

JAKARTA (JP): President Soeharto called over the weekend for a comprehensive and final solution for dealing with the crippling debt of developing countries.

Speaking at the opening of a three-day ministerial meeting of the Non-Aligned Movement (NAM), Soeharto said that many developing countries are still facing major debt burdens even though the international community has had the opportunity to build a more peaceful, prosperous and equitable world order.

Soeharto, NAM's current chairman, said that the positive development made in international politics and East-West relationship have not been followed by commensurable efforts in the economic field, or by efforts to improve the North-South relationship.

At present, the world economy is bound by a new and veiled form of protection, low commodity prices, declining flow of funds, insufficient technological access and heavy debt servicing, he told the meeting which was attended by senior officials of 31 least developed countries, mostly from Africa. It was also attended by representatives of international financial institutions.

The meeting, which is scheduled to end today, will hear the Indonesia's experience in reorganizing its foreign debt and in managing its economy.

It will also discuss the recommendations of the Movement's ad hoc advisory group on debts, changes in the international debt policy and on the 70 percent reduction in the debt burden of least developed nations.

Soeharto's economic advisors -- Widjojo Nitisastro, Ali Wardhana, Radius Prawiro, Suhadi Mangkusuwondo and Emil Salim -- are among the speakers.


As the NAM chairman, Soeharto has taken various steps to persuade the Group of Seven (G-7) industrialized nations to adopt an appropriate approach in dealing with trade, investment and strategy for debt solution.

"The initiative of the Non-Aligned Movement to take a constructive approach in solving common problems has had a positive response from the G-7, as reflected by the Tokyo Summit Economic Declaration," he said.

Soeharto said that before the Summit of the G-7 was held in Naples, Italy last July, he had also reminded the G-7 about the debt issue. "As a result, the G-7 declared that they are inclined to reduce the debt stock and increase the concessions to countries suffering from specific difficulties.

Indonesia, which has foreign loans of around US$90 billion, has been widely recognized for its success in managing its huge debts.

Indonesia, as a country that once had a bitter experience as a debtor nation, is keen on sharing its experience with other NAM members, Soeharto told the meeting, also attended by a representative of the UN Secretary General.

"We hope that our experience in solving the debt problem can contribute to the process of finding a comprehensive and permanent solution to the debt problems of developing countries," Soeharto added.

NAM, during its summit meeting here in September 1992, set up an advisory group of experts to accommodate the concern about the crippling debt problem raised by the Movement's leaders in the summit.

The group, headed by Gamani Corea of Sri Lanka, has recommended a number of approaches for dealing with the debt crisis facing the least developed nations.

Debt reduction

The advisory group, in its report presented by its chairman during the opening of the meeting, called for a reduction of debt of low and lower-middle income heavily indebted nations by 70 percent on the average.

Corea said that the debt reduction would have to be applied to all three major classes of creditors; bilateral official creditors, private sector lenders and multilateral creditors.

He said that the severe difficulties that many developing countries faced in servicing their debt resulted in the persistent accumulation of arrears. Despite repeated scheduling, many developing countries have not been able to meet debt service obligation fully and on time for several years.

In 1992, there were at least 58 heavily indebted countries, of which 32 were classified as least developed countries. The actual arrears of the 32 countries were much larger than the 20 percent threshold: 91 percent were in arrears exceeding 50 percent of the loans, half had arrears exceeding 86.7 percent, and 39 percent had arrears in excess of 90 percent.

Corea said that the total long term debt of those countries in 1992 amounted to US$247.6 billion, 26 percent of which was owed to multilateral financial institutions, 49 percent to governments and their agencies and 24 percent to the private creditors.

Of the 58 countries in 1992, 35 had a level of per capita income ranging from $60 to $650.

"Their income levels worsened over time as many experienced negative growth," Corea said.(hen)