U.S. offers RI debt-for-nature swap

Abdul Khalik, The Jakarta Post, Jakarta

The United States has agreed to include Indonesia in a debt-for-nature swap that will involve US$19.6 million of the country's debt to the U.S. being used to finance tropical forest conservation programs.

The U.S. Embassy here said in a statement that under the Tropical Forest Conservation Act (TFCA), a portion of Indonesia's debt could be reduced and re-directed to finance conservation of the country's tropical forest, considered as one of the world's largest and most diverse.

"The U.S. Treasury Department will provide a provisional allocation of $19.6 million for the treatment of eligible debt. Initial discussions toward an agreement are expected to begin in the coming weeks," the embassy said.

It added that once concluded, the swap package for Indonesia would be one of the largest under the TFCA.

Indonesian Forestry Minister M.S. Kaban welcomed the U.S. announcement as a beginning of a bold measure to conserve the country's forest.

"This is good news," he said during a meeting with representatives from the U.S. Embassy.

The embassy said the U.S. government welcomed Indonesia's participation in the program as it recognized the country's forests as some of the most significant and biologically diverse in the world.

Foreign Ministry director for American affairs Harry Purwanto also hailed the announcement, saying Indonesia's proposal for the debt swap had paid off.

"We submitted proposals for debt swaps to several countries, and the proposal to the U.S. was one them. We hope more countries agree to our proposals," he told The Jakarta Post.

With outstanding sovereign foreign debt of $74.1 billion, Indonesia must pay around $7.8 billion a year on the interest and principal.

The embassy said that to date, 11 countries in Africa, Asia, and Latin America had entered into debt-for-nature agreements under the TFCA.

"These agreements will generate more than $135 million to conserve important tropical forest in these countries over the course of 10 to 25 years," it said.

The embassy said the program might be expanded to include coral reefs, often referred to as the rain forest of the sea.

This year, the Indonesian government has earmarked Rp 4.1 trillion ($454 million) from the Forestry Ministry's rehabilitation fund and the state budget to rehabilitate damaged forest throughout the country.

Many have warned of the rapid destruction of Indonesia's forests. Greenpeace recently applied to the Guinness Book of World Records to have Indonesia included in its 2008 edition for having had the fastest rate of deforestation in the world between 2000 and 2005.

Indonesia is estimated to have lost 72 percent of its approximately 123.35 million hectares of ancient rain forest, and half of what remains is threatened by commercial logging, frequent forest fires and land clearance for palm oil plantations.