Suharto dead but his crimes will live on for the people of Indonesia.  Australia must take responsibility for any role it had in supporting the former dictator.

In his 31 years as ruler of Indonesia, Suharto and his cronies embezzled an alleged USD15 - 31bn through corrupt dealings, kickbacks and spurious ‘charity projects’ and trusts.

Significant amounts of these stolen funds were taken from development loans provided by countries like Australia.

Indonesia is Australia’s largest borrower and closest neighbour. Over three decades of undemocratic military rule by Suharto, Australian extended millions in export credit finance to the regime.

We call for a full parliamentary audit of Australia’s past lending to Indonesia. It is imperative to determine whether funds that are still being repaid by Indonesia to Australia were part of the amounts stolen by former dictator Suharto. Jubilee Australia contends that loans not used to benefit the Indonesian people should be classified as illegitimate and cancelled immediately.

Suharto’s death represents a chance for Indonesia to move forward politically and ideologically from a dark past.  Until now, the people of Indonesia have not been given the chance to seek answers or recompense for the economic and social crimes that were a result of Suharto’s corruption.

Corruption is still a concern for Indonesian citizens today and is subject to strong civil society action. But this should in no way exonerate Australia. On the contrary, in the global flight against corruption, it is critical that Australia take responsibility for its role in supplying funds to a known dictator.

The ADB has been mired in a scandal of depleted credibility, broken promises and slipping standards since October last year, with the unveiling of a new, inferior draft of proposed changes to the Bank’s new Safeguard policies.

Australian advocacy NGOs including Jubilee Australia have been taking action against this most recent Bank scandal in 2008, in the wake of a visit to Australia by the ADB Safeguards team at the end of January.

The problem is this: on reporting that the ADB would be redrafting its policy, the Bank made guarantees to civil society organisations around the world that the changed Safeguards would not weaken existing standards regarding the protection of environments and people living in proposed project areas.

A draft released in June 2007 made it seem as though ADB were sticking to their word, according to Oxfam Australia and representatives from British NGO, the Forest People’s Project.

The June draft had been worked upon by 5 experts in the fields of environmental protection, indigenous relations and involuntary resettlement for two years and looked likely to be a policy that could satisfy at least some of the demands of civil society with regard to Bank program activities.

Between June and October, as a result of interventions from Bank management, the policy was redrafted, greatly diluting the policy and removing many of the checks and balances that would have made it effective.

Four of the five members of the original drafting team resigned from the project in disgust: contrary to previous Bank promises, the new “safeguards” policy was merely an aspirational spiel incorporating a lot of ‘development friendly’ speak but ultimately offering next to nothing in the way of protection to communities in project affected areas.

Although the policies were not appealing to people or environment, they were much nicer to borrowers – therein providing the crux of the issue.

As middle income countries such as China and India broaden their position as creditor nations, regional development banks like the ADB that are structured along traditional OECD principles of conditionality and creditor control are losing market space.

The ADB is having a hard time finding relevance in the changing regional economy, and its panicked management are desperately looking to business mores rather than development needs to restructure its operations. Although Bank rhetoric from President and Board rejects this, the new Safeguards policy clearly demonstrates that the ADB is putting its own survival ahead of the fight against poverty, economic and environmental marginalisation in developing countries.

Civil society organisations across the Asia Pacific, and most recently here in Australia have refused the ADB’s invitation to consult on the October safeguards draft.

While the Bank has referred to the disengagement as a ‘boycott’, Oxfam Australia explains that this is not representative of their motives. In actuality, CSOs have simply decided not to consult with the Bank until there is something worthwhile to consult about. As the current draft does not meet the minimum standards that the ADB set for itself – not to weaken existing policy – civil society have decided not to meet Bank representatives until this problem is redressed.

Kevin Rudd has promised to make government more transparent and accountable. This is a change Jubilee Australia has been strongly calling for.

When it comes to Australian loans to poor countries, there is a dangerous level of secrecy.

During Suharto’s 31 year military dictatorship in Indonesia, our government, primarily through EFIC direct loans, extended over $1 billion in finance to the regime.

Today, Indonesia’s debt bill to Australia stands at $1.18 billion. This foreign debt isn’t being repaid by Suharto and his cronies who pocketed most of it. It is being repaid by the current citizens of Indonesia.

In October this year, Australia’s Right to Know released an audit prepared by Irene Moss, a former NSW ombudsman, which states: “Many of the mechanisms that are so vital to a well-functioning democracy are beginning to wear thin” and that “...[there are many] areas of general access to information where governments should be more open and accountable.”1

Australia’s export credit agency is EFIC (Export Finance and Insurance Corporation). EFIC supports domestic businesses entering the ‘risky’ markets of the developing world. By lending money to poor countries EFIC enables them to buy the goods and services of Australian exporters. This process is the main way poor countries are today generating massive foreign debts.

To get to the bottom of this, the government would either need to agree to undertake a parliamentary audit of their loan portfolio, or open for public scrutiny the details of loan contracts. Yet neither is on the cards. All dealings of EFIC, even those undertaken in the ‘national interest’ account, are protected by ‘commercial in confidence’ and exempt from Freedom of Information legislation.

As alluded to in Australia’s Right to Know, it is alarming that there is no clear requirement to weigh public interest considerations against the protection of business interests within Australian Freedom of Information legislation.2 Effectively, the FoI exemptions override the Australian people’s right to know how our government is spending our taxes, and in this case, what sort of deals our money is financing in developing countries.

Since Suharto’s fall, civil society movements in Indonesia have been reasserting their rights, limiting the power of the army and restoring some democratic freedoms. But they are hampered by this huge and unpayable debt.

Wealthy nations are free to select their climate change policies in alignment with their economic wellbeing and wealth, yet our neighbours in the Pacific stand on the brink of dispossession. This really begs the question - why should these people bear the immediate consequences of the developed worlds actions?

On Tuesday 18 December, The Australian Conservation Foundation and Jubilee Australia hosted an evening of presentations by several climate change refugees from the Kiribati, Torres Strait and Carterets Islands in the Pacific, on their return from the climate change discussions in Bali. The speakers brought not only a sense of urgency but also a human face to our understanding of the climate change issue.

“We are only beginning to see the tip of the iceberg of what climate change means to us”, said a speaker from Kirrabati. The Republic is comprised of 33 coral atolls which are only 2-3 meters above sea level. One day, Kiribati will disappear.

These people feel the strongest effects of climate change. Their homes are among the most vulnerable in the world. A representative from the Torres Strait Islands expressed the fear of losing her culture, identity for future generations of her people. When reflecting on the discussions in Bali she said, “We feel it on the ground as they’re talking up there.”

Another speaker, representing her people from the Carterets Island’s, voiced the hopelessness of the situation. She asked, “What is the future of the children on a drowning island? The only solution at this stage seems to be relocation.”

What emerged from the passionate and empowered speeches was a sense of immediacy. The urgency was clear when the speakers, referring to the much debated emissions targets set for 2020 and 2050, said “by then, these people are gone, they are below sea level”.

The conferences at Bali were positive, but for these people the oceans have already made inroads into their islands: erosion is rife, and food and fresh water supplies are under threat. They are experiencing the most devastating affects of a global problem.

“It’s hard when people ask us to propose solutions to the climate change problem when we did not even contribute to it”. This remark captures the unjust burden that people in the Pacific Islands bear.

The feelings of frustration and genuine fear for the homelands, culture and future generations was articulated with incredible passion by a softly spoken youth named Clare from Kiribati. When asked to speak of her experience at Bali, she spoke of the compassion and conviction of the youth attending the conferences. In Bali, Clare’s courageous sharing had brought a depth of emotion to the discussion that inspired everyone to claim ownership of the problem rather than passively accept it.

Wealthy nations are free to select their climate change policies in alignment with their economic wellbeing and wealth, yet our neighbours in the Pacific stand on the brink of dispossession. This really begs the question - why should these people bear the immediate consequences of the developed worlds actions?

The speakers from the Pacific ‘cut to the bone’ by sharing their experiences, and were able to attract incredible attention at the Bali Climate Change conference. They overcame cultural differences, timidity and language barriers to reveal the urgent need for action, not just discussion. The fire in their bellies was contagious, infectious and moving.

It appears that the UN climate talks in Bali have not produced adequate results on several key points central to the climate change debate. Aside from the disputes surrounding deep emissions cuts, there was also disagreement over the transfer of clean technology from developed to developing countries.

Jubilee Australia is concerned with the unwillingness of wealthy countries to share the benefits of clean technology with poorer nations, and calls attention to the hypocrisy of international condemnation placed on developing countries who can’t afford the new technologies.

New clean technologies are owned by private companies in wealthy nations who have safeguarded their profits through technology patents. Developing countries rely on access to this technology. They lack the financial capacity to develop technologies, strategies or protection measures of their own. Yet the cost of the technology places a major financial burden on the already limited economic capacity of poorer nations.

Further, many of these countries are already repaying significant debts to International Financial Institutions and private creditors in the wealthy nations.

 This cycle of greed and corporate welfare not only exasperates the climate crisis, but also perpetuates the inequalities in the international economy that disadvantage poor countries. These unjust and uncooperative measures serve the economic purposes of wealthy nations and ultimately fail to see the grave global consequences of the environmental crisis.

Issues at the heart of our ‘Under the Influence’ report were in the news again this week, with Greenpeace UK releasing a damning report into expansion of palm oil production in Indonesia.

Palm oil is cheap to produce, easy to transport and, as such, is widely used. It’s a favourite of commercial and processed food manufacturers, a key ingredient in treats such as Tim Tams and Pringles, and in staples like margarine and cream cheese. More recently, palm oil has been earmarked as a potential biofuel, leading to soaring demand as international consumers look for alternative, sustainable energy sources to replace depleting fossil fuel stocks. Alternative: certainly; sustainable: no. Especially not with the current ‘take-no-prisoners’ approach to production in Asia Pacific!

Jubilee Australia’s report showed how export governed structural adjustment programs from international lending institutions pushed Indonesia and Papua New Guinea into widespread expansion of oil palm plantations and refineries.  Greenpeace has linked this back to importer and consumer appetites in wealthy countries.  Giant companies are looking to minimise production costs so they can pass savings onto customers and shareholders, while consumers are encouraged to buy climate peace of mind through switching to biofuel without changing energy consumption habits. This has pushed the oil palm boom, which has impinged on valuable tropical forest and peat land, releasing tons upon tons of carbon emissions and making a dangerous – and growing – impact on climate change.

Global leaders are preparing to meet in Bali in December for the most important international summit on climate change since Kyoto.  These reports are a timely reminder that climate must be fully recognised as a social justice issue which demands real, partnered action before it’s too late.

The Heavily Indebted Poor Country initiative (HIPC) – the scheme through which rich lending nations extended some debt relief to the most indebted poor countries - resulted in much self-congratulation from wealthy contributors who praised their great generosity. 

Yet for many of the poorest nations, there has been far less cause for celebrating HIPC.  Zambia is a prime example of how impoverished countries have been betrayed by promises of effective debt relief.

The Heavily Indebted Poor Country initiative (HIPC) – the scheme through which rich lending nations extended some debt relief to the most indebted poor countries - resulted in much self-congratulation from wealthy contributors who praised their great generosity. 

Yet for many of the poorest nations, there has been far less cause for celebrating HIPC.  Zambia is a prime example of how impoverished countries have been betrayed by promises of effective debt relief.

Zambia’s involvement with HIPC

1 out of every 10 Zambians lives with AIDS, while 600,000 children have been orphaned by the pandemic, and life expectancy has fallen from 54 years in the mid-80s to 37 years now.

Zambia paid a heavy price to qualify for debt relief under HIPC. The African country endured years of austerity and Structural Adjustment Programs overseen by the World Bank and the IMF. In 2004, for example, the Zambian Ministry of Finance, in order to stay on side with the IMF, forced the Education Minister to cancel the wage increases and ban the hiring of new teachers, despite class sizes of over 100 pupils and a shortage of 9000 teachers.

After so many sacrifices, the Zambian government had reason to expect that graduating from HIPC in 2005 would bring some rewards. Debt relief, the IMF promised, would reduce Zambia’s debt service obligations from 7% of GDP to 1.7%.

Despite these optimistic projections, instead of funds available for Zambia to spend on anti-poverty measures increasing post HIPC, they actually fell by 0.8% of GDP. Why did this happen? One reason is a general trend toward declining Official Development Assistance contributions by donor countries. Another reason is the IMF’s obsession with low inflation and restrictive fiscal policies. The IMF in 2005 obliged Zambia to limit deficit spending to just 0.6% of GDP! What HIPC debt relief supposedly gave the country in terms of new spending power, foreign donors and IMF-imposed conditionality were taking away.

For the average Zambian, these interventions by the IMF meant devastating consequences. For example, the Government was prevented from employing the additional health workers needed to deal with the adult HIV prevalence rate of 17%. Even agencies such as UN International Children’s Fund and World Health Organisation found it difficult to transfer funds to pay health care workers because of IMF restrictions.

Vulture Fund Attacks

As if Zambia didn’t have enough problems to tackle with its foreign accounts, in 2006 it was attacked by an unscrupulous ‘vulture fund’. Vulture funds are private companies that buy up foreign debt at low prices from creditors who don’t expect ever to receive full payment and want to cut their losses. The vultures then take the debtor government to court demanding payments that are many times larger than what the vultures actually spent to acquire the debt.

The vulture fund Donegal, run by US billionaire Michael Sheehan, bought about US$40 million worth of Zambian debt from Romania in 1999 for just US$3.2 million. Then the private company sued Zambia in a British court demanding more than $55 million in payments. This amount was equivalent to all the debt relief that Zambia received in 2006!

Compounding the injustice, according to an advisor to Zambia’s President, the original loan was not even legitimate in the first place because it was tainted by fraud.

In April 2007, the British High Court rejected the fund’s claim for full payment, but still awarded Donegal US$15.5 million – one-third of Zambia’s total debt relief savings for 2007.

In the wake of this evidence, Creditor nations, including Australia, cannot regard HIPC as the be all and end all of debt relief.  The initiative can only be seen as a starting point, the effectiveness of which has been severely compromised by the harmful and tunnel-visioned interventions of the IMF.

In solidarity with social justice advocates from around the world, Jubilee Australia contests that the global debt crisis is far from over. The debt crisis demands much greater attention than restructures and structural adjustments, which have proven to be ineffective and even detrimental.  We remain steadfast in our demands for cancellation of low-income country debts without policy conditions attached.

This article is based on finding in the KAIROS Policy Briefing Paper by John Dillon.

One of the primary bases on which we declare debt to be illegitimate is when the debt is incurred to finance an ill-conceived development project. The citizens of poor countries suffer twice. They miss out on receiving any ‘development’ benefits from the loaned money in the first place, and they continue to miss out because their governments’ spend enormous proportions of their budget servicing the illegitimate debt.

One clear example of such illegitimate debt is the incinerator loan by the Austrian government to the Philippines. This debt was incurred to finance an ill-conceived development project which posed harm to the Filipino people, and severe harm to the environment.

In 1996 the Austrian government provided as a loan to the Philippines government medical waste incinerators for 26 public hospitals to “help” in the proper disposal of medical waste. But the incinerators were clearly obsolete and in fact had been banned in Austria because they were highly pollutive.

The incinerators were brought to the Philippines in 1997 by the Austrian supplier. An emission test conducted by the Philippine Department of Health and World Health Organisation showed that the incinerators emitted unconscionable amounts of pollutants, in one case exceeding the Philippine environmental standards by 870 times.

In 2003, all 26 incinerators were put out of use to comply with the provision of the Philippines Clean Air Act of 1999 banning the use of medical waste incinerators.

Despite this, the Philippine government continues to pay over US$2 million a year to the Austrian government for the medical waste project. Payments in 2007 equal the amount that will be spent by the Department of Health on all local health programs and the prevention of emerging diseases.

Two to three poor Filipino patients share one hospital bed in many government hospitals, and seven out of ten Filipinos die especially in rural areas without seeing a doctor or health worker. The annual US$2 million debt service could have been used to reduce child mortality, avert maternal deaths, combat TB, malaria and other diseases, expand health, purchase medicines and hospital beds, hire additional health workers, and so on.

This toxic debt is unacceptable. Campaigners in the Philippines have initiated a petition to urge the Philippine and Austrian Governments to invalidate the loan. Jubilee Australia has signed the petition.