KAU - "government has no sense of urgency"

Down to Earth No 68   February 2006

Indonesia's Anti-Debt Coalition (KAU) has accused the Indonesian government of lacking any sense of urgency in its post-tsunami reconstruction work. In a statement issued exactly one year after the disaster struck, KAU criticised the government of President Susilo Bambang Yudhoyono for failing to seize opportunities to reduce Indonesia's debt. The group also pointed to the slow pace of spending on rehabilitation and raised questions over how public donations were being used.

KAU's statement says the Indonesian government failed to make use of the momentum created in the aftermath of December 2004 tsunami. Soon after the disaster, the German and British governments offered Indonesia debt repayment postponement and the opportunity for debt relief - reducing both capital and interest payments on the amount owed.

Indonesia's total external debt stood at US$135bn at the time of the tsunami, most of which was owed by the government. The amount owed to the UK was US$1.76 billion (see DTE 64 - debt & also DTE 64 - debt to UK).

KAU says the government neglected the opportunity to negotiate a debt reduction or debt cancellation at its meetings with the Paris Club - the grouping of Indonesia's creditors that meets to agree on debt rescheduling. KAU says Jakarta could at least have proposed debt cancellation amounting to the damage and losses caused by the tsunami estimated at Rp 46.56 trillion (around US$4.6 billion).

Instead, what came out of the Paris Club meetings was merely a deferment of payments on debts payable in 2005, which amounted to US$2.7 billion. Under an agreement signed May 10th, Indonesia will need to start repaying the capital and interest payments on this amount by December 2006. According to the World Bank, Indonesia gained US$350 million by not paying interest on the deferred amount. However, KAU argues that rather than easing the debt burden, the deal actually stores up more debt for later, thus increasing the debt burden. New and reallocated debts amounting US$500 million, agreed at the meeting of the CGI creditor group, will make matters worse, asserts KAU.

KAU also accuses the Indonesian government of not having the capacity to manage the existing grant aid, amounting to US$4.1 billion. "If it had made use of this large amount of grant aid, the government wouldn't have needed to take on more debt to finance rehabilitation and reconstruction projects."

These, according to national planning agency, Bappenas, amount to 48.7 trillion or around US$5.4 billion. The government could have used domestic sources of aid to make this up to the $4.1 billion required, argues KAU.

Public donations
KAU also questions the whereabouts of the public money raised through collection posts. These amount to Rp1.21 trillion (US$134 million) according to Indonesia's Supreme Audit Agency (BKK). KAU says that a large portion of the government-run collection posts have not yet reported to the BPK and questions the continued use of billions of Rupiah from these funds, after the emergency and relief phase of the government post-tsunami work was officially ended in late March.

The statement highlights the slow payments from allocated funds to the state-owned companies and agencies carrying out various kinds of work including clearing the debris, repairing roads and bridges, building temporary housing and for operational costs of hospitals. Implementation of internationally-funded projects such as repairing or rebuilding schools agreed with the government's education department have also been slow. In July 2005, for example, the education minister reported that only 335 schools from a total of 2,323 schools destroyed in Aceh and Nias had been rebuilt.

KAU's statement concludes:

"From this analysis it is very clear that the government has no sense of urgency in its reconstruction programme in the tsunami-hit region. The government has also given no indication that it has the will to speed up the recovery process in the disaster zone. This attitude has meant the people of Aceh and Nias are suffering for longer as a result of government inaction. At the same time, the government has plunged the Indonesian nation deeper into debt, which itself breeds poverty."

(KAU Statement, 26/Dec/05. For more information on the Paris Club see the DTE factsheet).