organised by
International NGO Forum on Indonesian Development (INFID)
in co-operation with:
Comité pour la Démocratie en Indonésie, Plate-forme "Dette & Développement", Centre Lebret Eurodad, 11.11.11, Erlassjahr.de, IMBAS, United Evangelical Mission, Global Ministries UCN
Indonesia House, Jubilee Netherlands, Jubilee Research at NEF,
Ford Foundation (USA)

Joint NGO Statement on the Paris Club III for Indonesia

Five years after the Asian financial crisis hit Indonesia in 1997, its debt burden - both domestic and external - has become completely unsustainable. This year the Government of Indonesia is for the third time seeking a rescheduling of its external sovereign debt falling due between April 2002 and December 2003, amounting to some US$5,5 bn. In the previous two Paris Club agreements, Indonesia received only rescheduling targeting short term liquidity problems, which failed to provide a lasting solution to Indonesia´s debt overhang.

The results of the upcoming round of negotiations will have to be measured against four criteria. 

• Will the treatment provide a long lasting solution to Indonesia´s debt problem, or will it merely provide short term relief? The only way to overcome the debt overhang, which is a key impediment to renewed investment and growth in Indonesia, would be a sizeable reduction in the stock of debt. 
• Will aspects of human development, as stated in the Millennium Goals and the Monterrey Consensus, become guiding principles in the decisions of the Paris Club? Will creditors be prepared to provide the Indonesian government with a genuine incentive for internal reform by securing the means necessary for a genuine poverty reduction effort? 
• Current policies of the Paris Club are based on the IMF and World Bank´s unrealistic and overly optimistic projections, which have been proven wrong by recent developments in Indonesia's economy. Will these assumptions be reviewed and corrected to allow for a realistic and sober assessment of political and economic situation in Indonesia?
• Will Paris Club members agree to become part of a comprehensive solution to Indonesia´s debt problem, involving multilateral and private creditors as well as other bilaterals? Rather than trying (once again) to impose their own frameworks on the debtor and other creditors, Paris Club members should submit themselves to an independent process of arbitration based on international insolvency principles. 
  

If these four criteria are not accommodated, the new round of negotiations will be no more successful than the previous ones, undermining any prospect of Indonesia ever breaking free of the straight-jacket of the Paris Club. It is clear that the Paris Club can conduct a stock of debt treatment if the political will to do so exists. The treatment of Yugoslavia´s debts is just the most recent case in point. 

Considering these facts, and the ensuing analysis, we urge all the parties involved in the Paris Club negotiations on Indonesia to seriously consider the following issues:

1. A speedy and comprehensive economic recovery must not be postponed any longer. The people of Indonesia can no longer wait for jobs, for price stability, and for reasonable fees for schooling and health services. We have repeatedly urged the Government of Indonesia to declare the necessity of broader and deeper debt relief, to allow for a start of the economic recovery, and to provide the government with the necessary means for poverty eradication including the functioning of the legal system, law enforcement, judicial and legal reform and the promotion and protection of human rights. Given the dramatic rise in costs to refinance the internal banking system from 2004 onwards, Indonesia is clearly in need of a stock treatment of her debt. The Paris Club´s own Naples terms could provide a reference point for meaningful relief. 

2. Paris Club members should address the legitimacy of the debt incurred during the regime of the Suharto regime . The World Bank has already admitted that at least 30% of their lending has been corrupted during this period. It is neither just nor acceptable that successor governments and the Indonesian people should be charged with these odious and criminal shares of the debt burden.

3. If Paris Club members once again fail to provide meaningful relief, the Indonesian government should take the initiative to escape from the eternal and futile cycle of flow restructurings. Mediation, as applied to Indonesia in 1969, brings the potential of bringing about a truly sustainable solution to the best of all involved. 


Paris, 08.04.2002