The Jakarta Post

April 16, 2009

Government told to renegotiate German loans for warships

by Novan Iman Santosa

The government should declare void a German government loan to procure 39 used warships, as it constitutes an odious debt, a workshop held at the International NGO Forum on Indonesian Development (Infid) concluded Wednesday.

Infid executive director Donatus K. Marut told The Jakarta Post, on the sidelines of the workshop, that the loan did not fulfill its contractual requirements.

"There is a German law prohibiting the sales of arms intended for use in a conflict.

"Indonesia, at the time of the sale, was experiencing internal conflicts in Aceh, East Timor and Papua."

Donatus also said the loan contract clearly stated the warships should not be used in any military operations but only to protect coastal and commercial shipping lanes as well as to combat smuggling.

He added the loan was unfair to the Indonesian people.

"The Indonesian government should open a negotiation with the German to scrap this odious debt.

"The government should take the initiative to negotiate the matter."

Several German civic groups, such as the Westphalian Church and Erlassjahr, also opposed the debt and have called for its annulment.

Odious debt can be defined as a debt that does not best serve a borrowing nation and its people but instead is used for military aggression or internal oppression.

According to a 2007 Infid study, Indonesia acquired the warships from the former East Germany fleet in 1993 for US$442.8 million.

The sale, strongly supported by then state minister for research and technology B.J. Habibie, was supported by a $200 million loan from the German government's credit agency Kreditanstalt fuer Wiederaufbau (KfW) and brokered by a German firm, Ferrostaal.

In addition, the deal was insured for a total of US$466 million by Hermes AG, the German export credit agency.

The study's researcher, George Junus Aditjondro, described the 39 warships as useless and suggested the funds be used to improve the welfare of poor fishermen.

Meanwhile, defense expert from the University of Indonesia, Andi Widjajanto, said the procurement of the 39 warships was actually relatively inexpensive.

"But the costs to repair, modify and maintain the warships to be seaworthy were very expensive," he told the Post.

"It is better to dump all aging warships and buy new ones, instead of trying to maintain old machines.

"The question is, are we willing to have such a huge gap in our weaponry system?"

--

The Jakarta Globe Thursday, November 27, 2008

Lawmakers Question Govt Over 1993 Warship Debt

Markus Junianto Sihaloho

The government came under pressure Wednesday to address a foreign debt from a 1993 purchase of 39 former East German warships.

The Suharto administration in 1993 signed a $466 million loan agreement with the German government to buy the 39 warships, many of which were in poor repair.

Members of the House of Representatives' commission on defense and foreign affairs, Andreas Hugo Pareira and Jeffrey Massie, urged the government to file a diplomatic note urging the German Government to erase the debt immediately.

Andreas, of the Indonesian Democratic Party of Struggle, or PDI-P, said the many parties involved in the procurement should be summoned to clarify the matter because the debt was a burden upon all Indonesians.

Jeffrey Massie, from the Prosperous Peace Party, or PDS, said an investigation should be launched to uncover all aspects of the purchase, including the current amount of the debt, which neither representative knew. Masssie said the deal was made during former President Suharto's New Order regime and no details had been made public.

Donatus Klaudius Marut, executive director of the International NGO Forum on Indonesian Development, said on Wednesday that the contract for the purchase of the ships contravened the 1969 Vienna Convention on the validity of bilateral contracts.

"So the contract is purely invalid, and we [Indonesia] have the right to ask for a wiping out of the full amount of the debt," he said.