Indonesia's 'odious' arms debt to the UK

Down to Earth No 64  2005

Indonesia owes around US$1.76 billion to the British government. While it is true that this represents just a small fraction of the overall external debt of US$132 billion, it is still a significant sum, far outstripping, for example, the $96 million that the UK government has pledged to the tsunami aid effort.

Most of Indonesia's debt to the UK (US$1.408bn) is in the form of export credit facilities, owed to Britain's Export Credit Guarantee Department (ECGD). The ECGD underwrites Indonesian contracts with private UK companies. And a large portion of this export credit debt - amounting to over half the total debt - is for defence contracts (see table 3).

This means that public funds in Indonesia - which could be used for health, education, emergency relief and other beneficial purposes - are paying for weapons, which are used to suppress political opposition in Indonesia. In Aceh, where this UK-made equipment has been deployed, local people suffer the double impact of violence at the hands of the military and poverty thanks to Indonesia's huge debt burden.

Campaigners argue that this kind of debt is considered 'odious' because the money has been used for internal repression and to strengthen the hand of an authoritarian regime, rather than for the good of the state as a whole (see for definition of the term).

In 2002, the International NGO Forum on Indonesian Development (INFID) and Jubilee Research launched a campaign to find an independent solution for Indonesia's massive debt problem. The organisations argued that it was deeply unjust that Indonesia's creditors "who acted rashly and irresponsibly in running up the debt...should now dictate terms of repayment that penalise the most vulnerable sections of the community in a country they have effectively helped to bankrupt." The campaign urged that a "consultative body under a neutral mediator be appointed to take stock of Indonesia's debt burden, and suggest that a solution based on an independent assessment of the situation be adopted in place of the present Paris Club plan."

Jubilee Research, a group based in Britain, also called for a review of the portion of UK debt directly related to the sale of military equipment: "We consider this unethical and unproductive debt to be odious, and suggest its immediate cancellation by the British government." (see

Three years on, the tsunami disaster has brought Indonesia's unsustainable debt under the global spotlight. Down to Earth has written to the British government calling for cancellation of Indonesia's debt to the UK, drawing attention to the fact that much of the debt consists of money owed for arms sales. The letter also called on Britain to stop supplying defence equipment to Indonesia or providing export credit for arms sales.


Jets and tanks

Britain's continuing supply of defence equipment to Indonesia is the little-publicised flipside of UK aid for tsunami victims in Aceh. It sits uncomfortably with the British government's wish to project a pro-poor image internationally. Here are some of the elements of the odious debt relationship:

The defence equipment for which Indonesia still owes funding to the UK includes: Hawk jets (£382.7 million) and Scorpion and Stormer Vehicles (£80.7 million). The last payment for these debts as agreed with the Paris Club is June 2021(Hansard 13/Jan -

Through the Paris Club, Indonesian debt has been rescheduled under three agreements. The last payment is due in June 2021 (Hansard 13/Jan).

This equipment was deployed by the Indonesian forces in Aceh during the 2003-2004 period of martial law when the military launched an all-out war on GAM. This breached Indonesian assurances that British equipment would not be used for offensive or counter-insurgency purposes.

Tapol, the Indonesia Human Rights Campaign, argues that Britain is breaking UK and EU export control laws which state that licences for arms sales should be refused if there is a clear risk of the equipment being used for internal repression (Tapol Bulletin 175:8).

Britain continues to sell arms to Indonesia - in 2003 licences for sales worth £12.5 million were approved. The equipment is mainly spare parts for the jets, tanks and armoured vehicles sold to the Suharto regime - despite repeated use of this equipment in East Timor, West Papua and other conflict areas, in addition to Aceh.

In October 2002, the British government lifted the ban on Indonesia deploying the equipment in Aceh and removed a requirement for Indonesia to notify the UK in advance of any possible deployment - but this relaxing of conditions only became known eight months later. The same year, Britain authorised a 20-fold increase in the value of arms sales to Jakarta. (See Tapol Bulletin 175:8.)

There is high-level corruption involved too. Last year it was revealed that UK arms manufacturer Alvis had paid a £16.5 million bribe to Suharto's daughter in order to secure contracts worth £160 million with Indonesia in 1995 and 1996 to supply Scorpion armoured fighting vehicles (Guardian 7/Dec/04).

Aguswandi, an Acehnese human rights defender working with Tapol, said the Alvis corruption allegations further strengthened the case for a freeze on British arms sales to Indonesia. "This immoral and corrupt trade will do nothing to promote democracy or development in the country. It will only serve to intensify the conflict, poverty and the abuse of human rights" (Tapol press release 8/Nov/04).


Tackling poverty?

On the international stage, Britain is keen to promote its commitment to tackling poverty. In the CGI creditor group, Britain co-chairs a working group on poverty reduction. Yet, by maintaining an unjust debt relationship with Indonesia, which includes inflated prices for arms, Britain remains part of the poverty problem.


Table 3: Indonesia's debt to UK

Type of debt Amount Date Source
Bilateral ODA $355.4 million Dec 2003 Bank Indonesia website
Export Credit 

- of which 
arms related



Nov 2004 Hansard 10/Jan/05
TOTAL $1,763.4m -




INFID - International NGO Forum 
on Indonesian Development
Anti-Debt Coalition - Koalisi Anti-Utang
Jubilee Research
Jubilee South
Odious Debts
World Bank