LEAD: NGO steps up calls for debt reduction for Indonesia

Asian Economic News, Oct 23, 2000

TOKYO, Oct. 16 Kyodo

(EDS: UPDATING WITH QUOTES FROM ENVIRONMENTALISTS)

Indonesia's creditors should offer debt reductions to bear part of the responsibility for the past misuse of funds and help Indonesia out of its economic, political and social crisis, representatives of an international nongovernmental organization (NGO) on Indonesian issues said Monday.

Creditors turned a blind eye to indications that a considerably high portion of foreign loans was corruptly misused by former President Suharto's government during his 32-year tenure and kept providing money, Binny Buchori, executive secretary of the International NGO Forum on Indonesian Development (INFID), told reporters in Tokyo.

''We believe that the misuse of funds and the huge debt burden cannot be only blamed on the Indonesian people. In the mechanism of administering the funds, the lenders should share responsibility by canceling projects, giving debt reductions and supporting investigations into the past misuse of funds,'' she said.

According to the group, Indonesia's foreign debts shot up from $54 billion in 1997 to $142 billion this year, equivalent to 86% of its gross domestic product.

The group said there are indications that as much as 30% of loans from the World Bank alone were diverted from their original purposes.

Revrisond Baswir, an INFID board member, said the Indonesian government has not called for a debt reduction ''because once it does, it's like bankruptcy -- you lose international credibility and the cost of that is greater than the benefits.''

He also said there are people -- business people from lending countries and Indonesians working with them -- who prefer that Indonesia keeps borrowing and creating projects for them.

But to repay foreign debts, Indonesia inevitably cuts education and social welfare spending, the group charged, saying the cuts affect the poor far more than the rich.

Among creditor countries, Japan is the largest donor, with its aid loans accounting for about 60% of Jakarta's bilateral debts, according to INFID.

The Jakarta-based INFID consists of NGOs from a group of countries, including Japan, the United States and Australia.

Meanwhile, in a separate press conference, the London-based Environmental Investigation Agency (EIA), called on the donors to put strict conditions to Indonesia in relations to forestry loans as the country has been regarded as failing to stop illegal logging as it promised in the Consultative Group on Indonesia (CGI) meeting in Jakarta in February.

In the February gathering, the government committed itself to imposing strong measures against illegal loggers, especially those operating within the national parks.

''Strict conditions must be attached to forestry loans and grants, because we do not believe that a political will in the government exists to deal with the issue,'' senior EIA campaigner Faith Doherty told journalists.

She said it is not easy to urge such conditions because Japan, the largest donor in the CGI, ''is opposed to conditionality'' but hopes still exists as they get enormous support from the European Union and elsewhere.

Since August last year, the EIA has carried out investigations and campaigns to stop illegal logging in Indonesian forests, with the focus on the Tanjung Puting National Park in Central Kalimantan Province which shelters the endangered orangutan, Asia's only great ape.

In the middle of this year, the EIA met President Abdurrahman Wahid and Attorney General Marzuki Darusman to ask them to act against illegal logging that not only endangers the forest but also the orangutans.

''But logging in Tanjung Puting is continuing and the activities are getting worse,'' Hapsoro, an environmentalist with the Telapak Indonesia, the EIA's local partner NGO, told the news conference.

''The local government authorities have released a new ruling that legalizes illegal logging, so everybody can take and sell the logs no matter whether they come from legal or illegal sources,'' he added.

Estimates of illegal logging in Indonesia suggest that 70% of timber supplied to the country's industry comes from illegal logging and one and a half million hectares of forest have been cleared every year for the past 15 years.

The World Bank has said that if the illegal logging continues, the forests in Central Kalimantan could disappear by 2010.

Thirteen countries, including Indonesia, and eight organizations such as the World Bank are to meet Tuesday and Wednesday to review the debt issue and social and economic development projects.

Some Indonesian NGOs, including INFID and the EIA will send representatives to the meeting as observers.